OFFICIAL STATEMENT NEW ISSUE - FULL BOOK-ENTRY NOT RATED In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel, based on existing statutes, regulations, rulings and court decisions and assuming, among other matters, compliance with certain covenants, amounts treated as interest on the Bonds are excluded from gross income for federal income tax purposes, and are exempt from personal income taxes by the State of California. In the opinion of Bond Counsel, 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 in calculating corporate alternative minimum taxable income. Bond Counsel expresses no opinion regarding any other federal income tax consequences relating to the ownership or disposition of, or the accrual or receipt of interest on, the Series A (1996) Bonds. See "TAX MATTERS" herein. $1,385,000 COMMUNITY FACILITIES DISTRICT NO. 93-1 (1-205 Parcel GL-17) City of Tracy, San Joaquin County, California Special Tax Bonds, Series A (1996) Dated: November 1, 1996 Due: September 1, as shown below The Community Facilities District No. 93-1 (I-205 Parcel GL-17), City of Tracy, San Joaquin County, California, Special Tax Bonds, Series A (1996) (the "Bonds") are being issued by the City of Tracy by and through its Community Facilities District No. 93-1 (I-205 Parcel GL-17) (the "District"). The Bonds are being issued and delivered to (i) finance the construction of public facilities of benefit to the District (see "THE PROJECT"), (ii) fund The Reserve Account, (iii) capitalize interest, and (iv) finance the cost of the transaction. The Bonds are authorized to be issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Sections 53311 et seq. of the Government Code of the State of California), and pursuant to a Fiscal Agent Agreement (the ''.Agreement"), dated as of September 1, 1996, by and between the City of Tracy (the "City") and First Trust of California, N.A., as fiscal agent (the "Fiscal Agent"). The Bonds are payable from a certain annual Special Tax (as defined herein) to be levied on and collected from the taxable land within the District. The Special Tax is to be levied according to the rate and method of apportionment approved by the City Council of the City and the qualified electors within the District. See "SECURITY FOR THE BONDS" and ''.APPENDIX C- RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX" herein. The Bonds are issuable in fully registered form and when issued will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"). Individual purchases may be made in principal amounts of $5,000 and integral multiples thereof and will be in book-entry form only. Purchasers of Bonds will not receive certificates representing their beneficial ownership of the Bonds but will receive credit balances on the books of their respective nominees. The Bonds will not be transferable or exchangeable except for transfer to another nominee of DTC or as otherwise described herein. Interest on the Bonds will be payable on March 1, 1997 and semiannually thereafter on each March 1 and September 1. Principal of and interest on the Bonds will be paid by the Fiscal Agent to DTC for subsequent disbursement to DTC Participants who will remit such payments to the beneficial owners of the Bonds. See "THE BONDS - General Provisions" herein. The Bonds are subject to optional and mandatory redemption prior to maturity as more fully described herein. THE BONDS ARE SPECIAL OBLIGATIONS OF THE CITY AND THE DISTRICT PAYABLE SOLELY FROM AND SECURED SOLELY BY THE SPECIAL TAXES. THE BONDS ARE NOT A DEBT OR LIABILITY OF THE CITY, THE DISTRICT, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISIONS THEREOF OTHER THAN THE CITY AND THE DISTRICT TO THE LIMITED EXTENT DESCRIBED HEREIN, AND NEITHER THE FAITH AND CREDIT OF THE CITY, THE DISTRICT, THE STATE OR ANY OF ITS POLITICAL SUBDIVISIONS ARE PLEDGED TO THE PAYMENT OF PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE BONDS AND NEITHER THE DISTRICT, THE CITY, THE STATE NOR ANY OF ITS POLITICAL SUBDIVISIONS IS LIABLE THEREFOR, NOR IN ANY EVENT SHALL THE BONDS OR ANY INTEREST OR REDEMPTION PREMIUM THEREUNDER BE PAYABLE OUT OF ANY FUNDS OR PROPERTIES OTHER THAN THOSE OF THE DISTRICT AS SET FORTH IN THE AGREEMENT. MATURITY SCHEDULE $375,000 SERIAL BONDS Maturity Principal Interest Maturity Principal Interest (September 1) Amount Rates Yield (September 1) Amount Rates Yield 1999 $20,000 5.75% 4.75% 2006 $30,000 5.75% 5.70% 2000 20,000 5.75 5.00 2007 30,000 5.75 5.80 2001 25,000 5.75 5.15 2008 35,000 5.80 5.90 2002 25,000 5.75 5.30 2009 35,000 5.90 5.90 2003 25,000 5.75 5.40 2010 35,000 6.00 6.00 2004 25,000 5.75 5.50 2011 40,000 6.00 6.00 2005 30,000 5.75 5.60 $1,010,000 6.30% TERM BONDS DUE SEPTEMBER 1, 2026 - PRICE 100% (PLUS ACCRUED INTEREST)

The cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision on the Bonds. The Bonds will be sold pursuant to competitive bidding and awarded on November 4, 1996, as set forth in the Notice of Sale dated October 29, 1996, at a net interest rate of6.3413 percent. The Bonds are offered when, as and ifissued and accepted by the Purchaser, subject to approval as to their legality by Orrick, Herrington & Sutcliffe LLP, San Francisco, California, Bond Counsel, and subject to certain other conditions. It is anticipated that the Bonds in book-entry form will be available for delivery in New York, New York on or about November 5, 1996.

Dated: November 4, 1996 No dealer, broker, salesperson or other person has been authorized by the City of Tracy or the Financial Advisor to give any infonnation or to make any representations other than those contained herein and, ifgiven or made, such other infonnation or representation must not be relied upon as having been authorized by the City or the Financial Advisor. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. This 9fficial Statement is not to be construed as a contract with the purchasers of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as a representation of fact. The infonnation set forth herein has been obtained from official sources which are believed to be reliable but it is not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the Financial Advisor. The information and expressions of opinions herein are subject to change without notice and neither delivery of this qfficial Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City since the date hereof All summaries of the Fiscal Agent Agreement or other documents, are made subject to the provisions of such documents respectively and do not purport to be complete statements of any or all of such provisions. This Official Statement is submitted in connection with the sale of the Bonds referred to herein and may not be r~produced or used, in whole or in part, for any other purpose.

TABLE OF CONTENTS Page Page INTRODUCTION ...... 1 SPECIAL RISK FACTORS 17 The District ...... 1 Concentration of Property Ownership ...... 17 Source of Payment for the Bonds ...... 1 Failure or Inability to Complete Proposed Description of the Bonds ...... 2 Development on a Timely Basis ...... 18 Tax Exemption ...... 2 Competing Development ...... 18 Professionals Involved in the Offering ...... 2 Earthquakes ...... 18 The City of Tracy ...... 3 Endangered Species ...... 19 Continuing Disclosure ...... 3 Hazardous Substances ...... 19 Summaries of Documents ...... 3 Direct and Overlapping Public Indebtedness ...... 19 THE PROJECT ...... 3 Land Values ...... 20 Collection of Special Tax ...... 20 ESTIMATED SOURCES AND USES OF FUNDS .. . 4 Maximum Annual Special Tax Rates ...... 20 THE BONDS ...... 4 Bankruptcy and Foreclosure Delays ...... 21 General ...... 4 No Acceleration Provision ...... 21 Redemption ...... 5 Loss of Tax Exemption ...... 22 Notice of Redemption ...... 5 Absence of Secondary Market for the Bonds ...... 22 Selection of Bonds for Redemption ...... 6 Constitutional Limitations on Taxation and Effect of Notice of Redemption ...... 6 Appropriations ...... 22 Purchase of Bonds ...... 6 Proposition 62 ...... 23 Transfer and Exchange of Bonds ...... 6 Ballot Initiatives ...... 23 Additional Bonds ...... 7 Right to Vote on Taxes Initiative ...... 23 Bonds Mutilated, Lost, Destroyed or Stolen ...... 8 CONTINUING DISCLOSURE ...... 24 Book-Entry System ...... 8 Discontinuance of Book-Entry System ...... 9 CERTAIN LEGAL MATTERS ...... 24 SECURITY FOR THE BONDS ...... 10 ENFORCEABILITY OF REMEDIES ...... 24 Special Tax ...... 10 NOT RATED ...... 24 Rate and Method of Apportionment of Special Tax . . 10 LITIGATION ...... 24 Debt Service Schedule and Debt Service Coverage . . 11 Appraised Value ...... 12 TAX MATTERS ...... 24 Direct and Overlapping Indebtedness ...... 13 MISCELLANEOUS ...... 25 Delinquent Payments of Special Tax; Covenant for APPENDIX A - CERTAIN INFORMATION Foreclosure ...... 13 RELATING TO THE CITY OF County of San Joaquin Tax Loss Reserve Fund (Teeter TRACY ...... A-1 Plan) ...... 14 APPENDIX B - APPRAISAL ...... B-1 Reserve Account ...... 15 APPENDIX C - RATE AND METHOD OF THE DISTRICT ...... 15 APPORTIONMENT OF SPECIAL Introduction ...... 15 TAX ...... C-1 Formation ...... 15 APPENDIX D - SUMMARY OF PRINCIPAL Development ...... 15 LEGAL DOCUMENTS ...... D-1 The Developers ...... 16 APPENDIX E - FORM OF OPINION OF BOND Environmental Review ...... 16 COUNSEL ...... E-1 Consent Judgment and Decree ...... 16 APPENDIX F -· CONTINUING DISCLOSURE CERTIFICATE ...... F-1

( i) SUMMARY STATEMENT THIS SUMMARY STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION INCLUDED AND REFERRED TO ELSEWHERE IN THIS OFFICIAL STATEMENT, WHICH INCLUDES THE APPENDICES HERETO. THE OFFERING OF THE BONDS TO POTENTIAL INVESTORS IS MADE ONLY BY MEANS OF THE ENTIRE OFFI­ CIAL STATEMENT, INCLUDING ALL SUCH APPENDICES. Purpose The Bonds are being issued and delivered for the purpose of financing the construction of public facilities of benefit to the District, funding a reserve account, capitalizing interest, and paying costs of issuance of the Bonds. See "THE PROJECT" herein. Security for the Bonds The Bonds are limited obligations of the District payable from and secured solely from Special Taxes (as defined herein) and other amounts held under the Agreement as more fully described herein. Neither the faith and credit nor the taxing power of the City of Tracy, the County of San Joaquin, the State of California or any political subdivision thereof is pledged to the payment of the Bonds. Except for the Special Taxes, no other revenues or taxes are pledged to the payment of the Bonds. See "SECURITY FOR THE BONDS." See also "THE DISTRICT," ''APPENDIX A - RATE AND METHOD OF APPOR­ TIONMENT OF SPECIAL TAX" herein for additional information. Form of Bonds The Bonds are being issued and delivered as fully registered Bonds, registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York ("DTC"), and will be available to actual purchasers of the Bonds in denominations of $5,000 or any integral multiple thereof, under the book-entry system maintained by DTC Participants, all as further described under the heading "THE BONDS - Book-Entry System." Redemption The Bonds are subject to optional and mandatory sinking fund redemption as more fully described herein. See "THE BONDS - Redemption" herein. The District Pursuant to the Act, on March 2, 1993, the City Council of the City of Tracy adopted a resolution to form the District, to authorize the levy of a special tax on the taxable property within the District and to incur bonded indebtedness in an aggregate principal amount not to exceed $5,000,000, within the District for the purpose of financing the acquisition, construction and equipping of certain public improvements to serve the area within the District. For more informa­ tion, see "INTRODUCTION - The District," "THE BONDS - General" and "THE DISTRICT" herein.

(ii) CITY OF TRACY

MAYOR AND CITY COUNCIL

Dan Bilbrey, Mayor Brent Ives, Mayor Pro Tern Barbara Matthews, Council Member Mark Stroup, Council Member Les Serpa, Council Member

CITY OFFICIALS

Fred Diaz, City Manager Susan K Thorpe, Assistant City Manager Zane Johnston, Finance Manager Ray McCray, City Treasurer Debra Corbett, City Attorney Sharon Smith, City Clerk

PROFESSIONAL SERVICES

Bond Counsel

Orrick, Herrington & Sutcliffe LLP San Francisco, Califomia

Financial Advisor

Seidler-Fitzgerald Public Finance Los Angeles, California

Special Tax Consultant

MuniFinancial Temecula, California

Fiscal Agent First Trust of California, N.A. San Francisco, California

( iii) OFFICIAL STATEMENT $1,385,000 COMMUNITY FACILITIES DISTRICT NO. 93-1 (1-205 Parcel GL-17) City of Tracy, San Joaquin County, California Special Tax Bonds, Series A (1996)

INTRODUCTION The purpose of this Official Statement, which included the cover page, the table of contents and the attached appendices ( collectively, the "Official Statement"), is to provide certain information concerning the issuance of the Community Facilities District No 93-1 (I-205 Parcel GL-17), City of Tracy, San Joaquin County, California, Special Tax Bonds, Series A (1996) (the "Bonds"). The proceeds of the Bonds will be used to finance the construction of public facilities in the District (See "THE PROJECT") fund The Reserve Account securing the Bonds, capitalize interest, and pay costs of issuance of the Bonds. The Bonds are authorized to be issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Sections 53311 et seq. of the Government Code of the State of California) (the ''Act"), and pursuant to a Fiscal Agent Agreement, dated as of September 1, 1996 (the "Agreement"), by and between the City of Tracy (the "City"), acting for the City of Tracy Community Facilities District No. 93-1 (the "District"), and First Trust of California, National Association as fiscal agent (the "Fiscal Agent"). This introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement and the documents summarized or described herein. A full review should be made of the entire Official Statement. The sale and delivery of Bonds to potential investors is made only by means of the entire Official Statement. All capitalized terms used in this Official Statement and not defined shall have the meaning set forth in APPENDIX D - "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - Definitions" herein. The District The District was formed and the Bonds are being issued pursuant to the Act. The Act 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. Any local agency (as defined in the Act) may establish a community facilities district to provide for and finance the cost of eligible public facilities and services. The legislative body of the local agency which forms a community facilities district acts for the district. Subject to approval by two-thirds of the votes cast at an election and compliance with the other provisions of the Act, a local agency may issue bonds by and through a community facilities district and may levy and collect a special tax within such district to repay such indebtedness. Source of Payment for the Bonds The Bonds are special obligations of the District. The Bonds are payable solely from and secured by Special Taxes of the District, whether as a result of scheduled payments or prepayments or remedial proceedings taken in the event of a default thereon. See "SECURITY FOR THE BONDS" herein. The City has established a Reserve Account pursuant to the Agreement. The Reserve Account will be funded from proceeds of the Bonds in the initial amount of $108,350. The Reserve Account will be available and will be used as described herein in the section captioned "SECURITY FOR THE BONDS - Reserve Account." THE BONDS ARE SPECIAL OBLIGATIONS OF THE CITY AND THE DISTRICT PAYABLE SOLELY FROM AND SECURED SOLELY BY THE SPECIAL TAXES PLEDGED THEREFOR IN THE AGREEMENT. THE BONDS ARE NOT A DEBT OR LIABILITY OF THE CITY, THE STATE OR ANY

1 POLITICAL SUBDMSIONS THEREOF OTHER THAN THE CITY BY AND THROUGH THE DIS­ TRICT TO THE LIMITED EXTENT DESCRIBED HEREIN, AND NEITHER THE FAITH AND CREDIT OF THE DISTRICT, THE CITY, THE STATE OR ANY OF ITS POLITICAL SUBDMSIONS ARE PLEDGED TO THE PAYMENT OF PRINCIPAL OF, PREMIUM, IF ANY, OR THE INTEREST ON THE BONDS AND NEITHER THE CITY, THE STATE NOR ANY OF ITS POLITICAL SUBDIVISIONS IS LIABLE THEREFOR, NOR IN ANY EVENT SHALL THE BONDS OR ANY INTEREST OR REDEMP­ TION PREMIUM THEREUNDER BE PAYABLE OUT OF ANY FUNDS OR PROPERTIES OTHER THAN THOSE AS SET FORTH IN THE INDENTURE. Description of the Bonds The Bonds will be issued and delivered as fully registered Bonds, registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York ("DTC"), and will be available to actual purchasers of the Bonds (the "Beneficial Owners") in the denominations of $5,000 or any integral multiple thereof, under the book-entry system maintained by DTC, only through brokers and dealers who are or act through DTC Participants as described herein. Beneficial Owners will not be entitled to receive physical delivery of the Bonds. In the event that the book-entry-only system described herein is no longer used with respect to the Bonds, the Bonds will be registered and transferred in accordance with the Indenture. See "Book-Entry System" herein. Principal of, premium, if any, and interest on the Bonds is payable by the Fiscal Agent to DTC. Disbursement of such payments to DTC Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Owners is the responsibility of DTC Participants. In the event that the book­ entry-only system is no longer used with respect to the Bonds, the Beneficial Owners will become the registered owners of the Bonds and will be paid principal and interest by the Fiscal Agent, all as described herein. See "Book-Entry System" herein. The Bonds are subject to optional, mandatory and mandatory sinking fund redemption as described herein. For a more complete descriptions of the Bonds and the basic documentation pursuant to which they are being sold and delivered, see "THE BONDS" and Appendix D - "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS" herein. Tax Exemption In the opinion of Bond Counsel, under existing law, the interest on the Bonds is exempt from personal income taxes of the State of California and, assuming compliance with the tax covenants described herein, is excluded from gross income for Federal income tax purposes and is not a specific preference item for purposes of the Federal alternative minimum tax. See, however, "TAX EXEMPTION" herein regarding certain other tax considerations. Set forth in Appendix E is the opinion of Bond Counsel expected to be delivered in connection with the issuance of the Bonds. For a more complete discussion of such opinion and certain other tax consequences incident to the ownership of the Bonds, including certain exceptions to the tax treatment of interest, see "TAX MATTERS" herein. Professionals Involved in the Offering First Trust of California, San Francisco, California, will act as Fiscal Agent under the Agreement. All proceedings in connection with the issuance and delivery of the Bonds are subject to the approval of Orrick, Herrington & Sutcliffe LLP, San Francisco, California, Bond Counsel, except that Bond Counsel undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement. Seidler-Fitzgerald Public Finance, Los Angeles, California, is acting as Financial Advisor in connection with the Bonds. Certain legal matters will be passed on for the City by Debra E. Corbett, as City Attorney. Other professional services have been performed by MuniFinancial, Inc., Temecula, California, as Community Facilities District Administrator. The City of Tracy For a brief description of the City, see APPENDIX A - "CERTAIN INFORMATION RELATING TO THE CITY OF TRACY."

2 Continuing Disclosure The District has agreed to provide, or cause to be provided, to each nationally recognized municipal securities information repository and any public or private repository or entity designated by the State as a state repository for purposes of Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission ( each, a "Repository") certain annual financial information and operating data and, in a timely manner, notice of certain material events. These covenants have been made in order to assist the Purchaser in complying with SEC Rule 15c2-12(b )(5). See APPENDIX F -"CONTINUING DISCLOSURE CERTIFI­ CATE" herein for a description of the specific nature of the annual report and notices of material events and a summary description of the terms of the continuing disclosure agreement pursuant to which such reports are to be made. Summaries of Documents There follows in this Official Statement descriptions of the District, the Bonds, the Agreement, the City, and certain other documents. The descriptions and summaries of documents herein do not purport to be comprehensive or definitive, and reference is made to each such document for the complete details of all its respective terms and conditions. All statements herein with respect to such documents are qualified in their entirety by reference to each such document for the complete details of all of their respective terms and conditions. All statements herein with respect to certain rights and remedies are qualified by reference to laws and principles of equity relating to or affecting creditors' rights generally. Terms not defined herein shall have the meanings set forth in the Agreement. Definitions of certain terms used herein are set forth in APPENDIX D - "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - Definitions." Copies of the Agreement are available for inspection during business hours at the corporate trust offices of the Fiscal Agent in San Francisco, California. The information and expressions of opinion herein speak only as of the date of this Official Statement and are subject to change without notice. Neither delivery of this Official Statement nor any sale made hereunder nor any future use of this Official Statement shall, under any circumstances, create any implica­ tion that there has been no change in the affairs of the City or the District since the date hereof. All financial and other information presented in this Official Statement has been provided by the City from its records, except for information expressly attributed to other sources. The presentation of informa­ tion, including tables of receipts by the City from Special Taxes, is intended to show recent historic information and is not intended to indicate future or continuing trends in the financial or other affairs of the City. No representation is made that past experience, as it might be shown by such financial and other information, will necessarily continue or be repeated in the future.

THE PROJECT The proceeds of the Bonds will contribute toward the financing of any portion of the following improvements required in the I-205 Corridor Specific Plan as determined by the City: shared participation in the construction of street "thoroughfare" improvements, consisting of street grading, pavement base, pavement, curbs and gutters, medians, street lights, traffic striping and signing, street landscaping, landscape irrigation, intersection street improvements and signalization; expansion of sanitary sewer treatment facili­ ties, sanitary sewer collection mains, together with all necessary fittings and appurtenances; construction of expansion of water supply facilities and acquisition of new water sources; and street storm drainage; the construction of street "frontage" improvements on Grant Line Road, consisting of pavement base, pave­ ment, curb and gutter, street light, traffic striping and signing, landscaping, landscape irrigation; the payment of fee for the relocation of a portion of the habitat of the Swainson Hawk and the payment of fee for construction of a Fire Station facility and facilities in the City's Public Works Capital program; together with all necessary easements and land acquisitions. Although nothing may be financed by the proceeds of the Bonds which is not described above, it is expressly declared that the Bond proceeds will not be sufficient to complete all of the facilities listed.

3 ESTIMATED SOURCES AND USES OF FUNDS The anticipated sources and uses of funds relating to the Bonds are as follows: Sources of Funds: Principal Amount of the Bonds ...... $1,385,000.00 Accrued Interest ...... 949.44 Total Sources $1,385,949.44

Use..!" of Funds: Deposit to Acquisition Account...... $1,013,132.00 Deposit to capitalized interest account...... 137,438.32 Deposit to Reserve Account ...... 108,350.00 Accrued Interest ...... 949.44 Costs of Issuance(l) ...... 126,079.68 Total Uses ...... $1,385,949.44

(1) Includes Financial Advisor fees, Bond Counsel fees, Bond and Official Statement printing, initial fees and expenses of the Fiscal Agent, and Underwriter's Discount of $27,700.

THE BONDS General The Bonds will be issued in the aggregate amount of $1,385,000, will be dated November 1, 1996, will bear interest at the rates per annum set forth on the inside front cover hereof payable semiannually on March 1 and September 1 commencing March 1, 1997, and will mature on the dates and in the amounts set forth on the inside front cover hereof. The Bonds will be issued only as one fully registered Bond for each maturity of each series, in the name of Cede & Co. as nominee for The Depository Trust Company, New York, New York ("DTC"), as registered owner of all the Bonds. See "Book-Entry Only System" below. The Bonds will be issued in the denomination of $5,000 each or any integral multiple thereof. Ownership may be changed only upon the registration books maintained by the Fiscal Agent as provided in the Agreement. See "THE BONDS - Transfer and Exchange of Bonds." Interest on the Bonds shall be payable from the Interest Payment Date next preceding the date of authentication thereof unless (i) a Bond is authenticated on or before an Interest Payment Date and after the close: of business on the 15th day of the month preceding that Interest Payment Date ( a "Record Date"), in which event it shall bear interests from such Interest Payment Date, (ii) a Bond is authenticated on or before the first Record Date, in which event interest thereon shall be payable from the date of the Bonds, or ( iii) interest on any Bond is in default as of the date of authentication thereof, in which event interest thereon shall be payable from the date to which interest has been paid in full, payable on each Interest Payment Date. Interest shall be paid on each Interest Payment Date to the persons in whose names the ownership of the Bonds are registered on the Registration Books at the close of business on the immediately preceding Record Date, except as provided below. Interest on any Bond which is not punctually paid or duly provided for on any Interest Payment Date shall be payable ( on such date when there is sufficient money for the payment thereof) to the Person in whose name the ownership of such Bond is registered on the Registration Books at the close of business on a special Record Date to be established by the Fiscal Agent for the payment of such defaulted interest to be fixed by such Fiscal Agent, notice of which shall be given to such Owner not less than ten (10) days prior to such special Record Date. Interest shall be paid by check mailed by first class mail, postage prepaid, on each Interest Payment Date to the Bond Owners at their respective addresses shown on the Registration Books as of the close of business on the preceding Record Date, except that in the case of an owner of $1,000,000 or more of principal amount of Bonds outstanding, payment will be made, at the owner's option, by wire transfer of immediately available funds according to written institutions provided by such owner to the Fiscal Agent by the Record Date for such Interest Payment Date.

4 The principal of the Bonds shall be payable in lawful money of the United States of America only upon presentation and surrender thereof at the Office of the Fiscal Agent. Redemption Optional Redemption The Bonds maturing on or after September 1, 2007 shall be subject to optional redemption in whole on any date, or in part on any Interest Payment Date, prior to maturity. Bonds so called for redemption shall be redeemed at a redemption price for each redeemed Bond based upon the principal amount thereof ( accrued interest to the redemption date is mailed separately) at the following redemption prices: Redemption Dates Redemption Price September 1, 2006 and March 1, 2007 ...... 102% September 1, 2007 and March 1, 2008 ...... 101 September 1, 2008 and thereafter ...... 100 In addition, until September 1, 2006, the Bonds or any portion of them in the amount of $5,000 or any integral multiple thereof may be similarly called before maturity and redeemed at the option of the City on any interest payment date from the proceeds of property owner prepayments of the Special Tax Obligation at a price of 103% of the principal amount to be redeemed. Mandatory Sinking Fund Redemption The Bonds which constitute Term Bonds shall also be subject to mandatory redemption in part by lot, at a Redemption Price equal to one hundred percent (100%) of the principal amount thereof to be redeemed without premium, in the aggregate respective principal amounts and on September 1 in the respective years as set forth in the following table: Sinking Fund Redemption Date Principal Amount (September 1) To Be Redeemed 2012 $ 40,000 2013 45,000 2014 45,000 2015 50,000 2016 55,000 2017 55,000 2018 60,000 2019 65,000 2020 70,000 2021 75,000 2022 80,000 2023 85,000 2024 90,000 2025 95,000 2026 100,000 Notice of Redemption The Fiscal Agent on behalf and at the expense of the City shall mail (by first class mail) notice of any redemption to the respective Owners of any Bonds designated for redemption at their respective addresses appearing on the Registration Books, and to the Securities Repositories, at least thirty (30) but not more than sixty (60) days prior to the date fixed for redemption. Each notice of redemption shall state the date of such notice, the Bonds to be redeemed, the date of issue of such Bonds, the redemption date, the redemp­ tion price, the place or places of redemption (including the name and appropriate address or addresses of the Fiscal Agent), the CUSIP number (if any) of the maturity or maturities, and if less than all of any such maturity, the numbers of the Bonds of such maturity to be redeemed, and, in the case of Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed, and shall give notice, as is provided in the Fiscal Agent Agreement, that further interest on such Bonds or the portions

5 thereof redeemed will not accrue from and after the redemption date and shall require that such Bonds be surrendered at the address or addresses of the Fiscal Agent so designated. The notice shall also state that upon presentation of a Bond to be redeemed in part there will be issued, in lieu of the unredeemed portion of principal, a new Bond or Bonds of the same maturity date of authorized denominations equal in aggregate principal amount to the unredeemed portion. Neither the failure to receive any notice so mailed, nor any defect in such notice, shall affect the sufficiency of the proceedings for the redemption of the Bonds or the cessation of accrual of interest thereon from and after the date fixed for redemption. Selection of Bonds for Redemption For optional redemptions, if less than all of the Bonds outstanding are to be redeemed at any one time, Bonds shall be selected for redemption ( and mandatory term bond redemption payments shall be credited accordingly) in one of the following ways as shall be determined by the City Finance Director: (a) The Bonds of the latest maturity date or dates shall be redeemed prior to or simultaneously with the redemption of any Bonds maturing prior thereto; or (b) Bonds shall be selected for redemption in such a fashion as to maintain, as nearly as possible, level annual debt service (this shall be the required method for redemptions from the proceeds of property owner prepayments of the Special Tax Obligation). If less than all of the outstanding Bonds of any one maturity are to be redeemed at any one time, Bonds or portions thereof in integral multiples of $5,000 to be redeemed shall be determined by lot by the Fiscal Agent. Upon surrender of any Bonds redeemed in part only, the City shall execute and the Fiscal Agent shall authenticate and deliver to the Owner thereof, at the expense of the City, a new Bond or Bonds of authorized denominations of the same series equal in aggregate principal amount representing the unredeemed portion of the Bonds surrendered. Effect of Notice of Redemption From and after the redemption date, the Bonds, or portions thereof so designated for redemption, shall be deemed to be no longer outstanding, and such Bonds or portions thereof will cease to bear further interest. In addition, no owner of any of such Bonds, or portions thereof so designated for redemption, shall be entitled to any of the benefits of the Agreement or to any other rights, except with respect to payment of the redemption price and interest accrued to the redemption date from the amounts made available to the Fiscal Agent. Purchase of Bonds In lieu of optional or mandatory redemption of the Term Bonds, amounts held by the Fiscal Agent for such redemption shall, at the request of the District received by the Fiscal Agent prior to the selection of Bonds for redemption, be applied by the Fiscal Agent to the purchase of Bonds at public or private sale as and when and at such prices (including brokerage, accrued interest and other charges) as the District may in its discretion direct, but not to exceed the Redemption Price which would be payable if such Bonds were redeemed. The aggregate principal amount of Bonds of the same Series and maturity purchased in lieu of redemption shall not exceed the aggregate principal amount of Bonds of such Series and maturity which would otherwise be subject to such redemption. Any Bonds so purchased in lieu of redemption shall be treated as if such Bonds were redeemed for all purposes. Transfer and Exchange of Bonds Any Bond may, in accordance with its terms, be transferred or exchanged on the books of the Fiscal Agent by the person in whose name it is registered, in person or by his duly authorized attorney, upon payment by the Bondholder requesting such transfer or exchange of any tax or other governmental charge, or transfer fee imposed by the Fiscal Agent, required to be paid with respect to such transfer or exchange and upon surrender of such Bond for cancellation accompanied by delivery of a duly executed written instrument of transfer or exchange in a form approved by the Fiscal Agent. Whenever any Bond or Bonds shall be surrendered for transfer or exchange, the City shall execute and the Fiscal Agent shall authenticate and

6 deliver a new Bond or Bonds of the same maturity date and of authorized denominations for the same aggregate principal amount, except that neither the City nor the Fiscal Agent shall be required (i) to transfer or exchange any Bonds during the fifteen-day period prior to the selection of any Bonds for redemption under the Fiscal Agent Agreement, or (ii) to transfer or exchange any Bond which has been selected for redemption in whole or in part, except the unredeemed portion of such Bond selected for redemption in part, from and after the day that such Bond has been selected for redemption in whole or in part under the Fiscal Agent Agreement. Additional Bonds The City may issue no additional bonds on parity with the Bonds by and through its CFD 93-1 subject to all of the following conditions being satisfied: (a) the issuance of additional bonds will have been provided for by a supplemental fiscal agent agreement providing for the form, execution and issuance of bonds ("supplemental agreement") consistent with the Act and which, in addition, is either consistent with the Agreement, or does not adversely affect the rights and interests of Bondholders under the Agreement; (b) the City shall be in compliance with the Agreement and any supplemental agreements; ( c) the City shall cause the increase in the amount of the Reserve Requirement occasioned by the issuance of the additional bonds to be made available to the Reserve Account from the proceeds of such additional bonds; ( d) the City shall have made findings in the supplemental agreement, based upon a certificate of the City's special tax consultant filed with the City, that (1) the special tax proceeds that would be available to the City, if the special tax were to be levied and collected at its maximum rate and amount on all Final Use Property within CFD 93-1 in each fiscal year during which any Bonds are to be outstanding, based upon land use categories in effect on the date of the closing of the additional bonds ( and taking into account the authorized escalation of the maximum special tax), shall be equal to at least one hundred and ten percent (110%) of the debt service requirements for such fiscal year on the outstanding Bonds plus all additional bonds of CFD 93-1 including those proposed to be issued under the supplemental agreement (this calculation must assume the maximum interest rate permitted under the applicable bond documentation on all variable rate bonds outstanding and to be issued); and (2) with respect to the period of time preceding the receipt of special tax proceeds as calculated above, the funds that would be available to the City if the special tax as most recently levied is fully collected, and funds from any other source identified in the certificate or supplemental agreement (including capitalized interest), shall be equal to at least one hundred percent (100%) of the interest and principal requirements due on all outstanding bonds of CFD 93-1, including the Bonds, during such period (if variable rate debt is outstanding or proposed, this calculation shall be based on the actual interest rate applicable during the relevant period); ( e) the City shall have made a finding in the new agreement or supplemental agreement that the fair market value of the land and then existing improvements subject to the special tax, as shown on the most recent secured roll of the County or by a current MAI appraisal, is at least three (3) time the sum of (1) the aggregate principal amount of all CFD 93-1 bonds (including the Bonds) then outstanding, plus (2) the aggregate principal amount of the additional bonds proposed to be issued, plus (3) the aggregate principal amount of all assessment district bonds then outstanding and payable from assess­ ments to be levied on parcels ofland subject to the special tax under CFD 93-1, plus (4) the proportion of the aggregate principal amount of other community facilities district bonds then outstanding which are payable from special taxes to be levied within the area of CFD 93-1. Provided, that nothing contained herein shall limit the issuance of any special tax bonds of CFD 93-1 if (1) the rights and claims of such bonds to the special tax revenues of CFD 93-1 and the funds and accounts established or described in the Agreement are in all respects subordinate to the rights and claims of the

7 Bonds, or (2) after the issuance and delivery of such special tax bonds, none of the Bonds shall be outstanding. Defeased Bonds, or Bonds in exchange for or in lieu of which other bonds have been delivered, shall not be considered outstanding. The Agreement imposes no obstacle to the refunding of the Bonds pursuant to the Act. Bonds Mutilated, Lost, Destroyed or Stolen If any Bond shall become mutilated, the City, at the expense of the Owner of said Bond, shall execute, and the Fiscal Agent shall thereupon authenticate and deliver, a new Bond of like tenor and Series in exchange and substitution for the Bond so mutilated, but only upon surrender to the Fiscal Agent of the Bond so mutilated. Every mutilated Bond so surrendered to the Fiscal Agent shall be canceled by it and delivered to, or upon the order of, the City. If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the' District and the Fiscal Agent and, if such evidence be satisfactory to them and indemnity satisfactory to them shall be given, the City, at the expense of the Owner, shall execute, and the Fiscal Agent shall thereupon authenticate and deliver, a new Bond of like tenor in lieu of and in replacement for the Bond so lost, destroyed or stolen ( or if any such Bond shall have matured or shall be about to mature, instead of issuing a replacement Bond, the Fiscal Agent may pay the same without surrender thereof). The City may require payment by the Owner of a sum not exceeding the actual cost of preparing each replacement Bond issued and of the expenses which may be incurred by the District and the Fiscal Agent. Book-Entry System DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-registered bonds registered in the name of Cede & Co. (DTC's partnership nominee). One fully-registered Bond will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17 A of the Securities Exchange Act of 1934. DTC holds securities that its participants (the "Participants") deposit with DTC. DTC also facilitates the settle­ ment among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trnst companies, clearing corporations, and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The Rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission. Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond ('':Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book­ entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The deposit of Bonds with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual

8 Beneficial Owners of the Bonds; 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 Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners, will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to Cede & Co. If less than all of the Bonds within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. will consent or vote with respect to the Bonds. Under its usual procedures, DTC mails an Omnibus Proxy to an 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 the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal, mandatory redemption and interest payments on the Bonds will be made to DTC. DTC's practice is to credit Direct Participants' accounts on payment dates in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payment on the date payable. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name" and will be the responsibility of such Participant and not of DTC, the Fiscal Agent, or the Authority subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the City or the Fiscal Agent, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. The City cannot and does not give any assurances that DTC, DTC Participants or others will distribute payments of principal, interest or premium with respect to the Bonds paid to DTC or its nominee as the registered owner, or will distribute any redemption notices or other notices, to the Beneficial Owners, or that they will do so on a timely basis or will serve and act in the manner described in this Official Statement. The City is not responsible or liable for the failure of DTC or any DTC Participant to make any payment or give any notice to a Beneficial Owner with respect to the Bonds or an error or delay relating thereto. The foregoing description of 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 interests in such 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. Discontinuance of Book-Entry System DTC may discontinue providing its services with respect to the Bonds at any time by giving notice to the Fiscal Agent and discharging its responsibilities with respect thereto under applicable law or the City may terminate participation in the system of book-entry transfers through DTC or any other securities depository at any time. In the event that the book-entry system is discontinued, the City will execute, and the Fiscal Agent will authenticate and make available for delivery, replacement Bonds in the form of registered bonds. In addition, the following provisions would apply: the principal of and redemption premium, if any, on the Bonds will be payable at the corporate trust office of the Fiscal Agent in San Francisco, California and interest on the Bonds will be payable by check mailed to the registered owner as of the close of business on the Record Date. See "General" above. Bonds will be transferable and exchangeable on the terms and conditions provided in the Agreement. See "THE BONDS - Transfer and Exchange of Bonds."

9 SECURITY FOR THE BONDS ' Special Tax The Bonds are payable from the Special Tax and from certain other funds deposited in the Redemption Account and the Reserve Account from the proceeds of the Bonds. The City covenants in the Agreement, beginning with calendar year 1997, and continuing so long as any Bonds are outstanding, annually to levy the Special Tax, subject to the limits of the Resolution of Formation, in an amount which will be at least sufficient, after making reasonable allowances for contingencies, errors in the levy and anticipated delin­ quencies, to pay principal and interest on the Bonds as they become due, to make the scheduled mandatory sinking fund payments, to pay all annual and current expenses of administering the District (the City will specify an estimate for the annual expenses in each levy), to cure any delinquencies in the payment of principal or interest on the Bonds which have occurred or (based on delinquencies in the payment of Special Taxes) will occur in the current fiscal year, and to replenish the Reserve Account to the Reserve Require­ ment (as defined below) as necessary (including in the replenishment charges against the Reserve Account which will be necessary in the future because of delinquencies in the payment of Special Taxes which have already taken place). The Special Taxes shall be levied and presented to the County of San Joaquin at such time and in such format as to enable the County tax collector to cause the Special Tax to appear annually on the secured property tax bills of the properties within the District which are subject to the Special Tax. The Special Tax is to be collected in the same manner as ordinary ad valorem taxes are collected, and, except as otherwise provided in the Agreement described under "Delinquent Payments of Special Tax; Covenant for Foreclosure" and in the Act, is to be subject to the same penalties and the same procedure, sale, and lien priority in case of delinquency as is provided for ad valorem property taxes. See "SPECIAL RISK FACTORS - Collection of Special Tax." The Special Tax is excepted from the tax rate limitation of California Constitution Article XIIIA pursuant to Section 4 thereof as a "Special Tax" authorized by a two-thirds vote of the qualified electors as set forth in the Act. The City has the power and is obligated to cause the levy and collection of the Special Tax in an amount determined according to a rate and method of apportionment of the Special Tax which the City Council and the qualified landowner electors within the District have approved. The Special Tax formula, subject to the maximum rates set forth therein, apportions the total debt service requirement (principal, interest, minimum sinking fund payments, and redemption premiums, if any), restoration of the Reserve Accounts (if required), current annual expenses, and other costs each year in the District among the taxable land in the District. For a description of the rates and method of apportionment of the Special Tax, see "APPENDIX B- RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX." Rate and Method of Apportionment of Special Tax The City Council has approved, and the qualified electors have approved by unanimous vote, the Rate and Method of Apportionment of Special Tax (the "Tax Formula") for the District set forth in Appendix C. The Tax Formula classifies property in the District as either Final Use Property or Undeveloped Property. Final Use Property is subject to the Special Tax; Undeveloped Property is not taxed. There are three "Original Parcels" in the District. They are parcels 1-A, 1-B, and 1-C as shown on the Amended Boundary Map of CFD No. 93-1, approved by the Council on March 2, 1993. Final Use Property is defined as all of an Original Parcel ( and all of its successor parcels) once a building permit has been obtained from the City for a structure anywhere on that Original Parcel, as well as all Property within the District once building permits have been obtained from the City for structures anywhere on two Original Parcels. Only Original Parcel 1-C is currently Final Use Property. For Final Use Property the maximum Special Tax rate for 1996-97 is $10,786 per acre. This rate will never be increased on Original Parcel 1-C and all of its successor parcels. The maximum Special Tax rate inflates for Original Parcels 1-A and 1-B at the same rate as Northern California Engineering News Record Construction Cost Index until such time as those parcels become subject to the Special Tax, at which point there will be no further increase in the maximum Special Tax on those parcels.

10 NEITHER THE FULL FAITH AND CREDIT NOR THE GENERAL TAXING POWER OF THE DISTRICT, THE CITY, THE STATE OF CALIFORNIA, OR ANY OTHER POLITICAL SUBDIVI- SION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OBLIGATIONS OF THE CITY OR THE DISTRICT BUT ARE LIMITED OBLIGATIONS OF THE CITY AND THE DISTRICT PAYABLE SOLELY FROM THE PROCEEDS OF THE SPECIAL TAX AUTHORIZED BY THE CITY COUNCIL AND THE QUALIFIED ELECTORS.

Debt Service Schedule and Debt Service Coverage The following is the scheduled debt service on the Bonds, without regard to any optional or mandatory redemption of the Bonds ( other than sinking fund redemptions).

CITY OF TRACY Community Facility District 93-1 Series 1996 Special Tax Bonds Semi-Annual Debt Service Date Principal Interest Period Total Date Principal Interest Period Total 3/1/97 28,483.33 28,483.33 3/1/12 31,815.00 31,815.00 9/1/97 42,725.00 42,725.00 9/1/12 40,000.00 31,815.00 71,815.00 3/1/98 42,725.00 42,725.00 3/1/13 30,555.00 30,555.00 9/1/98 42,725.00 42,725.00 9/1/13 45,000.00 30,555.00 75,555.00 3/1/99 42,725.00 42,725.00 3/1/14 29,137.50 29,137.50 9/1/99 20,000.00 42,725.00 62,725.00 9/1/14 45,000.00 29,137.50 74,137.50 3/1/0 42,150.00 42,150.00 3/1/15 27,720.00 27,720.00 9/1/0 20,000.00 42,150.00 62,150.00 9/1/15 50,000.00 27,720.00 77,720.00 3/1/1 41,575.00 41,575.00 3/1/16 26,145.00 26,145.00 9/1/1 25,000.00 41,575.00 66,575.00 9/1/16 55,000.00 26,145.00 81,145.00 3/1/2 40,856.25 40,856.25 3/1/17 24,412.50 24,412.50 9/1/2 25,000.00 40,856.25 65,856.25 9/1/17 55,000.00 24,412.50 79,412.50 3/1/3 40,137.50 40,137.50 3/1/18 22,680.00 22,680.00 9/1/3 25,000.00 40,137.50 65,137.50 9/1/18 60,000.00 22,680.00 82,680.00 3/1/4 39,418.75 39,418.75 3/1/19 20,790.00 20,790.00 9/1/4 25,000.00 39,418.75 64,418.75 9/1/19 65,000.00 20,790.00 85,790.00 3/1/5 38,700.00 38,700.00 3/1/20 18,742.50 18,742.50 9/1/5 30,000.00 38,700.00 68,700.00 9/1/20 70,000.00 18,742.50 88,742.50 3/1/6 37,837.50 37,837.50 3/1/21 16,537.50 16,537.50 9/1/6 30,000.00 37,837.50 67,837.50 9/1/21 75,000.00 16,537.50 91,537.50 3/1/7 36,975.00 36,975.00 3/1/22 14,175.00 14,175.00 9/1/7 30,000.00 36,975.00 66,975.00 9/1/22 80,000.00 14,175.00 94,175.00 3/1/8 36,112.50 36,112.50 3/1/23 11,655.00 11,655.00 9/1/8 35,000.00 36,112.50 71,112.50 9/1/23 85,000.00 11,655.00 96,655.00 3/1/9 35,097.50 35,097.50 3/1/24 8,977.50 8,977.50 9/1/9 35,000.00 35,097.50 70,097.50 9/1/24 90,000.00 8,977.50 98,977.50 3/1/10 34,065.00 34,065.00 3/1/25 6,142.50 6,142.50 9/1/10 35,000.00 34,065.00 69,065.00 9/1/25 95,000.00 6,142.50 101,142.50 3/1/11 33,015.00 33,015.00 3/1/26 3,150.00 3,150.00 9/1/11 40,000.00 33,015.00 73,015.00 9/1/26 100,000.00 3,150.00 103,150.00

11 PROJECTED DEBT SERVICE COVERAGE BASED ON MAXIMUM ANNUAL TAXES Year Ending Maximum Net Debt Net Year Ending Maximum Net Debt Net September.!, Special Tax Service (1) Coverage Revenue September 1 Special Tax Service (1) Coverage Revenue 1997 $168,477 $ - $168,477 2012 $168,477 $ 98,212 1.72 $ 70,265 1998 168,477 168,477 2013 168,477 100,693 1.67 67,785 1999 168,477 100,033 1.68 68,445 2014 168,477 97,857 1.72 70,620 2000 168,477 98,882 1.70 69,595 2015 168,477 100,023 1.68 68,455 2001 168,477 102,733 1.64 65,745 2016 168,477 101,873 1.65 66,605 2002 168,477 101,295 1.66 67,182 2017 168,477 98,408 1.71 70,070 2003 168,477 99,857 1.69 68,620 2018 168,477 99,942 1.69 68,535 2004 168,477 98,420 1.71 70,057 2019 168,477 101,163 1.67 67,315 2005 168,477 101,983 1.65 66,495 2020 168,477 102,067 1.65 66,410 2006 168,477 100,257 1.68 68,220 2021 168,477 102,658 1.64 65,820 2007 168,477 98,533 1.71 69,945 2022 168,477 102,933 1.64 65,545 2008 168,477 101,807 1.65 66,670 2023 168,477 102,892 1.64 65,585 2009 168,477 99,778 1.69 68,700 2024 168,477 102,538 1.64 65,940 2010 168,477 97,712 1.72 70,765 2025 168,477 101,867 1.65 66,610 2011 168,477 100,613 1.67 67,865 2028 168,477 441 381.82 168,036

(1) Debt service net of reserve fund earnings assumed at five percent. The amount of the Special Tax to be levied and collected in future years will be dependent upon the tax rates imposed, the area within each parcel and the level of delinquent Special Tax installments. Currently it is anticipated that development within the District will continue. See "THE DISTRICT -The Development" and "THE DISTRICT - The Developers". The actual level of development activity in the future will be dependent on a number of factors, including general economic conditions and future governmental policies. Appraised Value An appraisal (the "Appraisal") was prepared by Griffin and Way (the ':Appraiser"). The purpose of the Appraisal was to estimate the market value of the fee simple interest in the land in the District as of August 11, 1996. The Appraisal concluded, subject to certain assumptions and conditions, that the estimated fee simple interest market value of the parcels which make up the District, as if sold in bulk to a single purchaser, assuming that certain portions of the Project are completed, is $4,340,000. See ':APPENDIX B - THE APPRAISAL". There is no assurance that such real estate could be sold for a price sufficient to pay the principal of and interest on the Bonds in the event of default in payment of Special Taxes by the landowners within the District. See "SPECIAL RISK FACTORS - Land Values." Because most of the land within the District is partially improved but substantially undeveloped, the purchase of the Bonds involves significant risks which should be evaluated by prospective purchasers prior to reaching a decision to purchase any Bonds. See "SPECIAL RISK FACTORS" herein. The following table sets forth the appraised value of the parcels within the District, as determined by the Appraiser, and the estimated lien amount. The Special Tax burden is determined by provisions set forth in the Special Tax Formula. The information in the table takes into consideration the prepayment of all Special Taxes owed by the owners of lot 23 relating to the District prior to the sale of the Bonds. Further, the Special Tax burden and the Estimated Lien amount on the parcels imposed by Community Facility District 91-1 is shown here. The total value to lien for all debt imposed on the parcels in the District when the Bonds are issued is a ratio of 3:1. Community Estimated Value Facilities Lien Appraised To Districts Amount Value Lien CFD 93-1 $1,385,000 $4,340,000 3.13:1 CFD 91-1 57,257 4,340,000 75.8:1 Totals $1,442,257 $4,340,000 3:1

12 Direct and Overlapping Indebtedness Set forth below is a direct and overlapping debt report prepared by California Municipal Statistics, Inc. as of August 20, 1996. The debt report is included for general information purposes only. The District has not reviewed the debt report and makes no representations as to its completeness or accuracy.

CITY OF TRACY COMMUNITY FACILITIES DISTRICT NO. 93-1 DIRECT AND OVERLAPPING DEBT (as of August 20, 1996)

1995-96 Assessed Valuation: $191,861 DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 8/1/96 City of Tracy Community Facilities District No. 91-1 ...... 4.380 % $64,167 City of Tracy Community Facilities District No. 93-1 ...... 100. % $ - (1) TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT ...... $64,167

OVERLAPPING LEASE OBLIGATION DEBT: San Joaquin County Certificates of Participation ...... 0.0009% $ 1,811 San Joaquin Delta Community College District Certificates of Participation .. 0.0008 68 Tracy Joint Union High School District Certificates of Participation ...... 0.006 43 Tracy School District Certificates of Participation ...... 0.009 64 City of Tracy General Fund Obligations ...... 0.009 1,608 TOTAL OVERLAPPING LEASE OBLIGATION DEBT ...... $ 3,594 COMBINED TOTAL DEBT ...... $67,761

(1) Excludes Mello-Roos Act bonds to be sold. (2) Excludes tax and revenue anticipation notes, revenue, mortgage revenue and tax allocation bonds and non-bonded capital lease obligations. Ratios to Assessed Valuation: Direct Debt ...... % Total Direct and Overlapping Tax and Assessment Debt ...... 33.44% Combined Total Debt ...... 35.32% STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/95: $0 Source: California Municipal Statistics, Inc. Delinquent Payments of Special Tax; Covenant for Foreclosure Pursuant to the Act, in the event of any delinquency in the payment of the Special Tax, the City may order the institution of a superior court action to foreclose the lien therefor within specified time limits. In such an action the real property subject to the unpaid amount may be sold at judicial foreclosure sale. Such judicial foreclosure action is not mandatory. However, the City has covenanted for the benefit of the owners of the Bonds that the City Finance Manager will review the County's records in connection with the collection of the Special Tax not later than August 31 of each year to determine the amount of Special Tax collected in the prior fiscal year. In the event that the Teeter Plan is not applicable, or is abandoned or no longer in effect, for CPD 93-1, and if the amount of Special Tax collected for the prior fiscal year is less than ninety-five percent (95%) of the amount levied, then the City will, not later than the succeeding November 1, institute civil actions to foreclose the lien of special tax, and thereafter will vigorously prosecute the same to completion, against all parcels delinquent in the amount of $2,000 or more ( excluding penalties and interest).

13 The City will in any case institute civil actions to foreclose the lien of special tax, and thereafter will vigorously prosecute the same to completion, against all parcels delinquent in the amount of $10,000 or more ( excluding penalties and interest). The foregoing notwithstanding, the City may, in any particular case, elect to advance (from any available funds other than any Funds or Accounts established hereunder) the amount of any delinquency ( excluding penalties and statutory interest on the delinquency but including interest on the delinquent amount at the blended yield of the outstanding bonds from the date of delinquency) to the Special Tax Fund. In that event the City need not initiate the foreclosure action. In such a case, the City may reimburse itself, when the Special Tax is paid on the property, for the principal amount of its advance plus the statutory interest and penalties paid in respect of the delinquency. A judgment debtor (property owner) has 140 days from the date of service of the notice of levy in which to redeem the property to be sold. 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 six months of the date of sale. If, as a result of such an action, a foreclosure sale is set aside, the judgment is revived and the judgement creditor is entitled to interest on the revived judgment as if the sale had not been made. The constitutionality of the aforementioned statute, which repeals the former one-year redemption period, has not been tested; and there can be no assurance that, if tested, such legislation will be upheld. No assurances can be given that the real property subject to sale or foreclose will be sold or, if sold, that the proceeds of sale will be sufficient to pay any delinquent Special Tax installment. The Act does not require the City to purchase or otherwise acquire any lot or parcel of property sold if there is no other purchaser at such sale. County of San Joaquin Tax Loss Reserve Fund (Teeter Plan) General taxes, special taxes, tax increments and assessment installments are collected for the City and the District by the County of San Joaquin. The County recently adopted the procedure authorized under Section 4701-4717 of the California Revenue and Taxation Code (the "Teeter Plan"). Under the Teeter Plan, which applied for the first time to the 1993-94 Fiscal Year, the County maintains a County Tax Loss Reserve Fund for the purpose of paying each taxing entity 100% of the amounts of secured taxes levied (including tax increments) and 1915 Act assessments posted in the tax bill. As adopted by the County, the procedure does not apply to tax increments paid to the Agency. The County may unilaterally discontinue the Teeter Plan on a countywide basis with respect to one or more categories, including general taxes, special taxes or special assessment installments. The Teeter Plan may also be discontinued by petition of two-thirds of the participant taxing agencies. In the event that sales or foreclosures of property are necessary, there could be a delay in payments to owners of the Bonds (if the Reserve Account have first been depleted) pending such sales or the prosecution of such foreclosure proceedings and receipt by the City of the proceeds of sale. However, within the limits of the Special Tax, the City may adjust the Special Tax levied on all property within the District, subject to the Maximum Rates, to provide an amount required to pay interest on and principal of and minimum sinking fund payments for and redemption premiums, if any, on the Bonds, and the amount, if any, necessary to replenish the Reserve Account to an amount equal to the Reserve Requirement and to pay all current annual expenses. There is, however, no assurance that the Maximum Rates, or that collections of the Special Tax at such Maximum Rates, will be at all times sufficient to pay the amounts required to be paid by the Bond Indenture. See "SPECIAL RISK FACTORS - Maximum Annual Special Tax Rates". The Act provides that the Special Tax shall be subject to the same penalties and the same procedure, sale and lien priority in case of delinquency as is provided for ad valorem taxes. Property taxes on the secured roll are due in two installments, on November 1 and February 1 of each Fiscal Year. If unpaid, such taxes become delinquent on December 10 and April 10, respectively, and a 10 percent penalty attaches to any delinquent payment. Property on the secured roll with respect to which taxes are delinquent becomes tax defaulted on or about June 30 of the fiscal year. Such property may thereafter be

14 redeemed by payment of a penalty of 1.5 percent per month to the time of redemption, plus costs and a redemption fee. If taxes are unpaid for a period of five years or more, the property is deeded to the State and then is subject to sale by the State Treasurer. Reserve Account In order to further secure the payment of principal of, and interest on, the Bonds, the City initially is required, upon delivery of the Bonds, to deposit in the Reserve Account an amount equal to the Reserve Requirement. See "ESTIMATED SOURCES AND USES OF FUNDS." Thereafter, the City is required, subject to the limits on the levy of the Special Tax, to deposit and to maintain the Reserve Requirement in the Reserve Account at all times while any of the Bonds are outstanding. Amounts in the Reserve Account are to be used to pay debt service on the Bonds to the extent other monies are not available therefor or to redeem in full the remaining Bonds. The Reserve Requirement shall not exceed the lesser of: (i) maximum annual principal and interest requirements on all Bonds outstanding for that Series; (ii) 125% of the average annual principal and interest requirements on all Bonds outstanding for that Series and (iii) 10% of the original principal amount of the Bond for that Series. In this case, the Reserve Requirement is (i). The City may substitute a qualified Reserve Account Credit Investment for amounts held in the Reserve Account. See Appendix D - Summary of Principal Legal Documents."

THE DISTRICT Introduction The District is located in the northwestern portion of the City of Tracy, County of San Joaquin, California. The District is approximately a triangular-shaped property, bounded on the north by Grant Line Road, on the southeast by Interstate Highway 205, and on the west by undeveloped property. The District is composed of three parcels designated Original Parcel 1-A ("1-~'), Original Parcel 1-B ("1-B"), and Original Parcel ("1-C"). The total acreage for District parcels is approximately 47.9 acres. The 1-A and 1-B portions of the District are separated from the 1-C portion by the development of a Wal-Mart department store on a 13.5 acre parcel. The Bonds are secured by Special Taxes of the District which at this time are only to be imposed on 1-C. 1-C is 16.19 acres in size. Formation Pursuant to the Act, on January 19, 1993, the Council, acting for the District, adopted a resolution (the "Resolution of Intention") stating its intention to form the District, to authorize the levy of a special tax on the taxable property within the District and to incur bonded indebtedness within the District for the purpose of financing the acquisition, construction and equipping of certain public improvements to serve the area within the District. Subsequent to a noticed public hearing on March 2, 1993, the Council adopted Resolu­ tion Nos. 93-065 and 93-066 on March 2, 1993, ( collectively, the "Resolution of Formation") which estab­ lished the District, authorized the levy of a special tax within the District, determined the necessity to incur bonded indebtedness in an amount not to exceed $5,000,000 within the District and called an election within the District on the proposition of incurring bonded indebtedness, levying a special tax and setting an appropriations limit. On March 2, 1993, an election was held within the District in which the landowners eligible to vote approved the proposition authorizing the issuance of bonds in an amount not to exceed $5,000,000 to finance the acquisition, construction and equipping of certain public improvements within the District and the appropriations limit of $800,000 per year. Pursuant to a resolution adopted on August 20, 1996, the Council, acting for the District, authorized the issuance and delivery of the Bonds and approved the Fiscal Agent Agreement. The Bonds are being issued and delivered pursuant to the provisions of the Act and the Fiscal Agent Agreement. For more complete information, see "THE BONDS - General Provisions" herein. Development The Development represents the second phase of property that originally comprised 61.4 acres. The Property is zoned as a Planned Unit Development which allows for a large number of retail and commercial

15 uses. The Property is strategically situated at the junction of I-205 and Grant Line Road, which has served as a major regional thoroughfare for a number of years. The I-205 freeway connects Tracy to the Bay Area via I-580 and to the Central Valley via I-5 and Highway 99. I-205 is easily accessible in both directions from the Property. In fact, the easterly boundary of Parcel 1-C is adjacent to an entrance ramp to I-205. Grant Line Road is generally a well traveled, four to six lane arterial throughout Tracy; thus, the site is well situated to serve the populace of Tracy. The first phase of the Property, totaling 13.5 acres, was sold to Wal-Mart, has subsequently been developed and is now in operation as a Wal-Mart store. The second phase of development is Original Parcel 1--C comprising 16.2 acres and is located immediately to the east of the Wal-Mart store. A portion of Original Parcel 1-C, totaling .58 acres, is in escrow and will be developed as a Taco Bell Restaurant. This parcel is not part of the District. Of the remaining 15.6 acres, which will comprise the security for this bond issue, 2.2 acres was acquired by a developer who is currently constructing a Staples Office Supply Outlet. The Developers intend to sell the remaining Original Parcel 1-C acreage to retail users and build to suit developers and have currently engaged two brokerage houses to accomplish this. The Developers The following information regarding the ownership of the parcels within the District is included because it may be relevant to an informed evaluation of the Bonds and the security for the Bonds. This information should not be construed to suggest that the Bonds or the Special Tax will be personal obligations of the property owners. The parcels within the District are owned by the Dividend Development Corporation Money Purchase Pension Plan Liquidation Trust, Richard B. Oliver, Trustee; and the dividend Development Corporation Profit Sharing Plan Liquidation Trust, Richard B. Oliver, Trustee, these Trusts are collectively referred to as "Liquidating Trusts." The Liquidating Trusts were formed to administer and liquidate the assets of the qualified, employee benefit plans of Dividend Development Corporation for the plans' beneficiaries. The Trustee of the Liqui­ dating Trusts, Richard B. Oliver, and a Liquidating Trust Committee, comprised of plan beneficiaries, are responsible for the operations of the Liquidating Trusts. Under their guidance, the Liquidating Trusts have engaged brokerage firms and are actively marketing the Property to prospective retail and commercial users and build to suit developers. Collectively, Mr. Oliver and the individuals who comprise the Committee, have extensive experience and knowledge in real estate. Mr. Oliver has over thirty years of experience in acquiring, zoning and selling commercial and residential properties. Formerly a founder of Dividend Development Corporation, Mr. Oliver is an acknowledged authority in the field of land planning, acquisition and development. From 1972 through 1993, Mr. Oliver was responsible for all land acquisition, site planning and entitlement processing for Dividend Development Corporation. He is currently a founder and president of Dividend Homes, Inc., a real estate development company active in land zoning and residential development in Northern California. Environmental Review The City recertified previously approved Environmental Impact Reports simultaneously with its final action for the formation of the District and filed a Notice of Determination as required by California Environmental Quality Act ("CEQA"). The City believes that all necessary environmental action has been taken with respect to the formation of the District and the adoption of the City's General Plan and zoning for the area and that all statutory time periods for environmental challenges to those actions have run. It is likely that future discretionary approvals necessary to complete the Development will be subject to CEQA. Challenges such as discretionary approvals could slow the rate of development in the District. See "SPE­ CIAL RISK FACTORS - Failure or Inability of Complete Proposed Development on a Timely Basis." Consent Judgment and Decree There is a disclosed in the Preliminary Title Report for the property within the District of the existence of a Consent Judgment and Decree relating to property in 1-A. See ''Appendix B - Appraisal."

16 A Consent Judgment and Decree was ordered on June 30, 1993 in the case of Oliver v. Southern Pacific Transportation, et al. in which all parties agreed to the implementation of an adequate cost-effective remedy to effect the cleanup of an area in the southwest corner of the District. Investigations by expert consultants indicate that petroleum hydrocarbons characterized as weathered crude oil or weathered Bunker C have affected subsurface soil, apparently the result of releases from old pipelines. The area affected directly is in the south end of 1-A. In the Consent Judgment and Decree, the defendants agreed to perform a site assessment and, if necessary, develop a plan of remediation. Based upon their findings, no remediation was proposed. On October 11, 1996 the California Regional Water Quality Control Board concurred with the defendants' assessment and determined that no further investigation, remedial or removal action, or monitoring is required at this time. In the Consent Judgment and Decree the defendants also agreed to indemnify and hold harmless the plaintiffs and future purchasers of the affected property from any liability relating to the contamination or remediation of same.

SPECIAL RISK FACTORS The following is a discussion of certain risk factors which should be considered, in addition to other matters set forth herein, in evaluating the investment quality of the Bonds. The sole source of moneys to pay debt service on the Bonds is amounts derived from the payment of the Special Tax. Accordingly, the discussion of risks inherent in the purchase of the Bonds necessarily reflects risks associated with the payment by property owners of the Special Tax. This discussion does not purport to be comprehensive or definitive. The occurrence of one or more of the events discussed herein could adversely affect the ability or willingness of property owners in the District to pay their Special Taxes when due. Such failures to pay Special Taxes could result in a rapid depletion of the Reserve Fund and a default in payments of the principal of, and interest on, the Bonds. In addition, the occurrence of one or more of the events discussed herein could adversely affect the value of the property in the District. See "SPECIAL RISK FACTORS - Land Values". Concentration of Property Ownership The taxable property in the District is only partially developed (including certain infrastructure im­ provements and grading as described herein) and most of the property is owned by principal Developers discussed herein. See "THE DISTRICT-The Development" AND "THE DISTRICT-The Develop­ ers." Such concentration of ownership means that the timely payment of the Bonds is dependent upon the continued willingness and ability of the Developers to pay the Special Taxes when due. Until significant diversification of ownership occurs, the failure of the Developers or any such lot buyers to pay installments of the Special Taxes when due could result in the rapid and total depletion of the Reserve Fund with respect to the Bonds prior to reimbursement from delinquent collections or the sale or redemption of the property in connection with foreclosure proceedings and a failure to pay principal and interest on the Bonds. If additional delinquencies were to occur following depletion of the Reserve Fund, there would be a delay in payments to the Bondholders of principal of and interest on the Bonds. The City has covenanted under the Fiscal Agent Agreement for the benefit of the owners of the Bonds that the City, upon notice from the County Treasurer-Tax Collector of a delinquency in the payment of one or more installments of the Special Tax to initiate judicial foreclosure proceedings under certain conditions as more fully described above. See '~PENDIX D - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS and "SECURITY FOR THE BONDS - Delinquent Payments of Special Tax; Covenant for Foreclosure." Although the only asset of any owner of real property subject to the Special Tax securing Bonds is such real property, the overall financial condition of the owners may affect the owners willingness or ability to pay the assessments when due. For additional information concerning the Developers, see "THE DISTRICT - The Development" AND "THE DISTRICT - The Developers."

17 Failure or Inability to Complete Proposed Development on a Timely Basis A major risk to the Bondholders is that development in the District may be subject to unexpected delays, disruptions and changes which may affect the willingness and ability of the property owners to pay Special Taxes when due. For example, proposed development within the District may be adversely affected by unfavorable economic conditions, an inability of the Developers or future owners of the parcels to obtain financing, fluctuations in the real estate market or interest rates, unexpected increases in development costs, changes in federal, state or local government policies relating to the ownership of real estate, faster than expected depletion of existing water allocations (see "SPECIAL RISK FACTORS - Competing Develop­ ment"), or the appearance of previously unknown environmental impacts necessitating preparation of a supplemental environmental impact report (see "THE DISTRICT - The Development" AND "THE DISTRICT - The Developers"), and by other similar factors. A failure to complete the development as planned within the District would have the negative impacts discussed below. First, partially developed land is less valuable than developed land and provides less security for the Bonds (and therefore to the owners of the Bonds) should it be necessary for the District to foreclose on undeveloped property due to the nonpayment of Special Taxes. Moreover, failure to complete the develop­ ment on a timely basis could adversely affect the land values of those parcels which have been completed. Lower land values result in less security for the payment of principal of and interest on the Bonds and lower proceeds from any foreclosure sale necessitated by delinquencies in the payment of the Special Tax. Second, an inability to develop the land within the District as planned will reduce the expected diversity of ownership of land within the District, making the payment of debt service on the Bonds more dependent upon timely payment of the Special Taxes levied on the undeveloped property. Because of the concentration of property ownership, until sales are well underway, the timely payment of the Local Agency Bonds depends upon the willingness and ability of the Developers and any merchant developers to whom finished lots are sold to pay the Special Taxes levied on the undeveloped land when due. Furthermore, continued concentration of ownership increases the potential negative impact of a bankruptcy or other financial difficulty experienced by the Developers or a merchant developer who purchases finished lots from the Developers. See "SPECIAL RISK FACTORS - Bankruptcy and Foreclosure Delays" herein. Competing Development Retail activity in Tracy is centered in its Downtown area and along Eleventh Avenue, Tracy Boulevard and Grant Line Road. Most new retail activity has occurred on the west side of Tracy, the site of the majority of the residential growth in Tracy. This retail development has largely consisted of "neighborhood" centers which are anchored by a food market and drug store and which do not pose direct competition to the development in the District known as "The Tracy Marketplace." During 1994, an outlet mall was developed in the northeast quadrant of the City; and an auto mall is currently under construction within one-half mile of Tracy Marketplace. Neither of these specialty uses compete with the development in the district. In 1995 however, the West Valley Mall, "the Mall," was opened within one-half mile of Tracy Marketplace. This "super regional" center is situated on a 107 acre site and has a building footprint of approximately 983,000 square feet of which about 685,000 square feet has been constructed in the first phase of its development. This project is 85% leased and is anchored by Target, JC Penny and Gottschalks. The West Valley Mall directly competes with the Tracy Marketplace. Currently, the Mall is constructing three restaurants on its front pads. Four additional pad sites remain. These pads are currently being marketed under ground leases which, to some retailers, may represent an attractive alternative to the seven pads located at Tracy Marketplace. Additionally, the second phase of the Mall will compete with the four major pad sites available at Tracy Marketplace. These four parcels represent enough acreage to develop stores totaling approximately 75,000 square feet in size. Earthquakes The land within the District, like all California communities, may be subject to unpredictable seismic activity. The occurrence of seismic activity in the District could result in substantial damage to properties in the District which, in turn, could substantially reduce the value of such properties and could affect the ability or willingness of the property owners to pay their Special Taxes. The District is not located in any existing

18 special study zone delineated by the Chief of the Division of Mines and Geology of the State of California as an area of known active faults and is not otherwise known to be located within an area of any significant seismic activity. Endangered Species During recent years, there has been an increase in activity at the State and federal level related to the possible listing of certain plant and animal species found in California as endangered species. An increase in the number of endangered species is expected to curtail development in a number of areas. At present, land within the District is not known to be inhabited by any plant or animal species listed as threatened or endangered under either the State or federal endangered species acts or which either the California Fish and Game Commission or the United States Fish and Wildlife Service has proposed for addition to the respective endangered species list. Notwithstanding this fact, new species are proposed to be added to the State and federal protected lists on a regular basis. Any action by the State or federal governments to protect species located on or adjacent to the property within the District could negatively affect the Developers' ability to complete the development within the District as planned. This, in tum, could reduce the likelihood of timely payment of the Special Taxes and would likely reduce the value of the land the potential proceeds available at a foreclosure sale for delinquent Special Taxes. See "SPECIAL RISK FACTORS - Failure or Inability to Complete Proposed Development on a Timely Basis" and"- Land Values." Hazardous Substances While governmental taxes, assessments, and charges are a common claim against the value of a taxed parcel, other less common claims may be relevant. One of the most serious in terms of the potential reduction in the value that may be realized to pay the Special Tax is a claim with regard to hazardous substances. In general, the owners and operators of parcels within the District may be required by law to remedy conditions of the parcels related to the releases or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980, sometimes referred to as "CERCL~' 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 substances condition of a property whether or not the owner ( or operator) has anything to do with creating or handling the hazardous substance. The effect, therefore, should any parcel within the District be affected by a hazardous substance, would be to reduce the marketability and value of the parcel by the costs of remedying the condition, because the owner is obligated to remedy the condition. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling it. All of these possibilities could significantly affect the financial and legal ability of a property owner to develop the affected parcel or other parcels, as well as the value of the property that is realizable upon a delinquency and foreclosure. Direct and Overlapping Public Indebtedness The ability or willingness of an owner of land within the District to pay the Special Taxes could be affected by the existence of other taxes and assessments imposed upon the property. The lien for the Special Tax is co-equal to and independent of the lien for general property taxes, other special taxes, and certain special assessments. Thus the existence of general property taxes, other special taxes, and assessments may reduce the value to lien ratio of the affected parcels. For information concerning existing direct and overlapping public indebtedness within the District, see "SECURITY FOR THE BONDS - Direct and Overlapping Indebtedness." In addition, other public agencies whose boundaries overlap those of the District could, with or in some circumstances without the consent of the owners of the land within the District, impose additional taxes or assessment liens on the property within the District in order to finance public improvements to be located inside of or outside of the District. The District and the City may have no control over the ability of other public agencies to issue indebtedness secured by special taxes or assessments payable from all or a portion of the property within the District. In addition, the property owners within the District may, without the consent of knowledge of the City or the District, petition other public agencies to issue public indebtedness secured by special taxes or assessments. Any such special taxes would have a lien on such property on a parity with that securing the Special Tax and any such special assessments may have a lien on such property on a parity with that securing the Special Tax. The imposition of additional liens on a

19 parity with the Special Taxes could reduce the ability or willingness of the landowners to pay the Special Taxes and increases the possibility that foreclosure proceeds will not be adequate to pay delinquent Special Taxes or the principal of and interest on the Bonds when due. Land Values The value of taxable land within the District is a critical factor in determining the investment quality of the Bonds. If a property owner defaults in the payment of the Special Tax, the City's only remedy is to foreclose on the delinquent property in an attempt to obtain funds with which to pay the delinquent Special Tax. Land values could be adversely affected by economic factors beyond the District's control, such as relocation of employers out of the area, stricter land use regulations, the absence of water, or destruction of property caused by, among other eventualities, earthquake, flood or other natural disaster, or by environ­ mental pollution or contamination. Collection of Special Tax In order to pay debt service on the Bonds, it is necessary that the Special Taxes against taxable land within the District be paid in a timely manner. Should the Special Taxes not be timely paid, the District has established a Reserve Fund in the amount of the Reserve Requirement to pay debt service on the Bonds. See SECURITY FOR THE BONDS - Reserve Account." The Fiscal Agent Agreement and the Act provide that the Special Tax is to be collected in the same manner as ordinary ad valorem property taxes are collected and, except as provided in the special covenant for foreclosure described below and in the Act, is to be subject to the same penalties and the same procedure, sale, and lien priority in case of delinquency as is provided for ad valorem property taxes. See "SECURITY FOR THE BONDS - Delinquent Payments of Special Tax; Covenant for Foreclosure." Pursuant to the Act, in the event of any delinquency in the payment of the Special Tax, the City may order the institution of a superior court action to foreclose the lien therefor within specified time limits. In such an action, the real property subject to the unpaid amount may be sold at judicial foreclosure sale. Such judicial foreclosure action is not mandatory. However, the City has covenanted for the benefit of the owner of the Bonds that the City will initiate judicial foreclosure proceedings under certain conditions in the event of a delinquency in the payment of one or more installments of the Special Tax as more fully described herein. See "SECURITY FOR THE BONDS - Delinquent Payments of Special Tax; Covenant for Foreclosure." In the event that sales or foreclosures of property are necessary, there could be a delay in payments to owners of the Bonds pending such sales or the prosecution of foreclosure proceedings and receipt by the City of the proceeds of sale if the Reserve Account is depleted. See "SECURITY FOR THE BONDS - Delinquent Payments of Special Tax; Covenant for Foreclosure." Foreclosure is subject to court delays and the City is not required to bid at the foreclosure sale. The District may be unable to make full or timely payment of debt service on the Bonds. This could result if property owners fail to pay installments of the Special Tax when due, if the Reserve Account is depleted, or if the City is unable to sell foreclosed parcels for amounts sufficient to cover the delinquent installments of the Special Tax. Maximum Annual Special Tax Rates Within the limits of the Special Tax formula, the City may adjust the Special Tax levied on all property within the District to provide an amount required to pay interest on and principal of and minimum sinking fund payments for the Bonds, to replenish necessary reserves for the Bonds, and to pay all annual expenses. However, the amount of the Special Tax that may be levied against particular categories of property within the District is subject to the Maximum Annual Special Tax rates. In the event of delinquencies, there is no assurance that the imposition of the Maximum Annual Special Taxes on the various taxable parcels within the District will generate sufficient revenue to pay debt service on the Bonds. For information concerning the Special Tax Formula, see ''Appendix C - RATE AND METHOD OR APPORTIONMENT OF SPECIAL TAX."

20 Bankruptcy and Foreclosure Delays The payment of Special Taxes and the ability of the District to foreclose the lien of a delinquent unpaid Special Tax could be significantly limited by bankruptcy, insolvency, or other laws generally affecting creditors' rights or by the laws of the State relating to judicial foreclosure. In addition, the prosecution of a foreclosure action could be delayed due to crowded local court calendars or delays in the legal process. The various legal opinions 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, reorganization, insolvency or other similar laws affecting the rights of creditors generally. Although bankruptcy proceedings would not cause the Special Taxes to become extinguished, bank­ ruptcy of a property owner could result in a delay in prosecuting superior court foreclosure proceedings and could result in the possibility of delinquent Special Tax installments not being paid 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. To the extent that property in the District continues to be owned by a limited number of property owners, the chances are increased that the Reserve Account established for the Bonds could be fully depleted during any such delay in obtaining payment of delinquent Special Taxes. On July 30, 1992, the United States Court of Appeals for the Ninth Circuit issued its opinion in a bankruptcy case entitled In re Glasply Marine Industries. In that case, the court held that ad valorem property taxes levied by Snohomish County in the State of Washington after the date that the property owner filed a petition for bankruptcy were not entitled to priority over a secured creditor with a prior lien on the property. The court upheld the priority of unpaid taxes imposed after the filing of the bankruptcy petition as "administrative expenses" of the bankruptcy estate, payable after all secured creditors. As a result, the secured creditor was able to foreclose on the property and retain all of the proceeds of the sale except the amount of the pre-petition taxes. According to the court's ruling, as administrative expenses, post-petition taxes would have to be paid, assuming that the debtor has sufficient assets to do so. In certain circumstances, payment of such administra­ tive expenses may be allowed to be deferred. Once the property is transferred out of the bankruptcy estate ( through foreclosure or otherwise) it would at that time become subject to current ad valorem taxes. Glasply is controlling precedent on bankruptcy courts in the State of California. Pursuant to statute, the lien date for general ad valorem property taxes levied in the State of California is the March 1 preceding the fiscal year for which the taxes are levied. Therefore, under Glasply, a bankruptcy petition filing would prevent the lien for general ad valorem property taxes levied in subsequent fiscal years from attaching so long as property was a part of the estate in bankruptcy. Pursuant to Section 53328.3 of the Act, the lien of a Mello­ Roos special tax, unlike the lien for general ad valorem property taxes, attaches upon recordation of the notice of the special tax lien as provided for under the Act. The Notice of Special Tax Lien was recorded in the Official Records of the County on March 17, 1993 and the First Amendment was recorded on Septem­ ber 28, 1996. Thus, before applying Glasply to a bankruptcy situation involving special taxes rather than general ad valorem property taxes, a court would need to consider the differences in the statutory provisions for creation of the applicable tax lien. If a court were to apply Glasply to eliminate the priority as a secured claim of the special tax lien with respect to post petition levies of the Special Tax as against property owners within the District who file for bankruptcy, collections of the Special Tax from such property owners could be reduced. No Acceleration Provision The Bonds 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 Agreement. Pursuant to the Indenture, a bondholder is given the right for the equal benefit and protection of all bondholders similarly situated to pursue certain remedies described under '~PENDIX D - SUMMARY OF PRINCIPAL LEGAL DOC­ UMENTS." So long as the Bonds are in book-entry form, DTC will be the sole bondholder and will be entitled to exercise all rights and remedies of bondholders.

21 Loss of Tax Exemption As discussed under the caption "TAX MATTERS," interest on the Bonds might become ineluctable in gross income for purposes of federal income tax~tion retroactive to the date the Bonds were issued, as a result of future acts or omissions of the Authority in violation of its covenants in the Indenture. The Indenture does not contain a special redemption feature triggered by the occurrence of an event of taxability. As a result, if interest on the Bonds were to be ineluctable in gross income for purposes of federal income taxation, the Bonds would continue to remain outstanding until maturity unless earlier redeemed pursuant to optional or mandatory redemption or redemption upon prepayment of the Special Tax. See "THE BONDS - Redemption." Absence of Secondary Market for the Bonds No application has been made for a credit rating for the Bonds, and it is not known whether a credit rating could be secured in the future for the Bonds. There can be no assurance that there will ever be a secondary market for purchase or sale of the Bonds. From time to time there may be no market for them, depending upon prevailing market conditions, the financial condition or market position of firms who may make the secondary market, the financial condition and results of operations of the owners of property located within the boundaries of the District, and the extent of the proposed development of the parcels within the District. The Bonds should therefore be considered long-term investments in which funds are committed to maturity, subject to redemption prior to maturity as described herein. Constitutional Limitations on Taxation and Appropriations On June 6, 1978, California voters approved Proposition 13, a statewide initiative relating to the taxation of real property which added Article XIII A to the California Constitution. Article XIII A placed significant limits on the imposition of new ad valorem taxes, special taxes and transaction and sales taxes. Section 4 of Article XIII A permits cities, counties and special districts, by a two-thirds vote of the qualified electors of the district, to impose special taxes, except for ad valorem taxes on real property or a transaction tax or sales tax on the sale of real property. The Special Tax is a special tax approved by the voters within the District in accordance with the procedures set forth in Section 4 of Article XIII A. The District has not pledged any taxes other than the Special Taxes to the repayment of the Bonds and, given the limitations on ad valorem property taxes imposed by Article XIII A, does not expect any ad valorem taxes to be available to repay the Bonds. Article XIII A does permit the levy of ad valorem property taxes and the imposition of special assessments to pay interest and redemption charges on any bonded indebtedness for the acquisition or improvement of real property approved on or after July 1, 1978 by two-thirds of the votes cast by voters voting at the election for the taxes or assessment. Were the voters to approve indebtedness payable from ad valorem taxes, those taxes would be on a parity with the Special Taxes. See "SPECIAL RISK FACTORS - Direct and Overlapping Public Indebtedness" herein. State and local government agencies in California as well as the State of California are subject to annual "appropriation limits" imposed by Article XIII B of the State Constitution. Article XIII B prohibits government agencies and the State from spending "appropriations subject to limitation" in excess of the appropriations limit imposed. ''Appropriations subject to limitation" are authorizations to spend "proceeds of taxes," which consist of tax revenues, certain state subventions and certain other funds, including proceeds from regulatory licenses, user charges or other fees to the extent that such proceeds exceed "the cost reasonably borne by such entity in providing the regulation, product or service." No limit is imposed on appropriations of funds which are not "proceeds of taxes," such as appropriations for debt service on indebtedness existing or authorized before January 1, 1979, or subsequently authorized by the voters, appropriations required to comply with mandates of courts or the federal government, reasonable user charges or fees and certain other nontax funds. Since the Bonds constitute indebtedness authorized by the voters within the District, the District does not intend to treat the Special Taxes as "appropriations subject to limitation."

22 Proposition 62 Proposition 62 was adopted by the voters at the November 4, 1986, general election which (a) requires that any new or higher taxes for general governmental purposes imposed by local governmental entities be approved by a two-thirds vote of the governmental entity's legislative body and by a majority vote of the voters of the governmental entity voting in an election on the tax, (b) requires that any special tax ( defined as taxes levied for other than general governmental purposes) imposed by a local government entity be approved by a two-thirds vote of the voters of the governmental entity voting in an election on the tax, ( c) restricts the use of revenues from a special tax to the purposes or the service for which the special tax was imposed, ( d) prohibits the imposition of ad valorem taxes on real property by local governmental entities except as permitted by Article XIII A of the California Constitution, ( e) prohibits the imposition of transaction taxes and sales taxes on the sale of real property by local governmental entities, and (f) requires that any tax imposed by a local governmental entity on or after August 1, 1985, by ratified by a majority vote of the voters voting in an election on the tax within two years of the adoption of the initiative or be terminated by November 15, 1988. On September 28, 1995, the California Supreme Court, in the case of Santa Clara County Local Transportation Authority v. Guardino, upheld the constitutionality of Proposition 62. A petition for rehearing was filed on October 13, 1995 with the California Supreme Court. In this case, the Court held that a county-wide sales tax of one-half of one percent was a special tax that, under Section 53722 of the Government Code, required a two-thirds voter approval. Because the tax received an affirmative vote of only 54.1 %, this special tax was found to be invalid. Ballot Initiatives Article XIII A, Article XIII Band Proposition 62 were adopted pursuant to measures qualified for the ballot pursuant to California's constitutional initiative process. 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. The adoption of any such initiative might place limitations on the ability of the State, the City or local districts to increase revenues or to increase appropriations or on the ability of the landowners to complete the Developments. See "SPECIAL RISK FACTORS - Failure or Inability to Complete Proposed Development on a Timely Basis" herein. Right to Vote on Taxes Initiative On June 28, 1996, the California Secretary of State announced that an initiative to amend the California Constitution, circulated as the "Right to Vote on Taxes Act," was certified to appear on the November 5, 1996 ballot. The official ballot title is: "Proposition 218 - Voter Approval for Local Government Taxes - Limitation on Fees, Assessments, and Charges - Initiative Constitutional Amendment." Proposition 218, among other things, would extend the initiative power to reducing or repealing local taxes, assessments, fees and charges. The City is unable to predict whether Proposition 218 will be approved by the voters, how it will be interpreted in any case, or whether and to what extent Proposition 218 may be held to be constitutional under the Constitution of the United States. In view of the presence of Proposition 218 on the November 5, 1996 Statewide ballot, Bond counsel has qualified its opinion that the Fiscal Agent Agreement, including its covenant in Section 5.3 to annually levy the Special Tax in specified amounts, constitutes a valid and binding obligation of the City. Bond counsel has opined that the Section 5.3 covenant would be protected from abrogation under the proposed initiative power contained in Proposition 218 by the Contract Impairment Clause of the Constitution of the United States at least to the extent necessary to enable the City to make timely payment of principal and interest on the Bonds, but not necessarily to the full extent of Section 5.3.

23 CONTINUING DISCLOSURE The City has covenanted for the benefit of owners of the Bonds to provide certain financial information and operating data relating to the property within the District by not later than December 1 in each year commencing December 1, 1997 (the "Annual Report") and to provide notices of the occurrence of certain enumerated events, if deemed by the City to be material. The Annual Report and the notices of material events will be filed by the Fiscal Agent on behalf of the City with each Nationally Recognized Municipal Securities Information Repository. The specific nature of the information to be contained in the Annual Report or the notices of material events is summarized in 'hlPENDIX D - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - Continuing Disclosure Agreement." These covenants have been made in order to assist the Underwriter in complying with Securities Exchange Commission Rule 15c2-12(b)(5).

CERTAIN LEGAL MATTERS The validity of the Bonds and certain other legal matters are subject to the approving opinion of Orrick, Herrington & Sutcliffe LLP, San Francisco, California, Bond Counsel. A complete copy of the proposed form of Bond Counsel's opinion with respect to the Bonds is set forth in Appendix E to this Official Statement. Copies of such opinion will be available at the time of delivery of the Bonds. The fees of Bond Counsel are contingent upon the sale and delivery of the Bonds. Bond Counsel undertakes no responsibility for the necessary completeness or fairness of this Official Statement.

ENFORCEABILITY OF REMEDIES The remedies available to the registered owners of the Bonds upon an event of default under the Indenture and any other document described herein are in many respects dependent upon regulatory and judicial actions which 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. The various legal opinions to be delivered concurrently with the delivery 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.

NOT RATED The City did not independently apply for a rating on the Bonds.

LITIGATION There is no litigation pending or, to the City's knowledge, threatened in any way to restrain or enjoin the issuance, execution or delivery of the Bonds, to contest the validity of the Bonds, the Indentures. In the opinion of the City there are no lawsuits or claims pending against the City which will materially affect the District's finances so as to impair its ability to pay the principal of, premium (if any) and interest on the Bonds when due.

TAX MATTERS In the opinion of Orrick, Herrington & Sutcliffe, San Francisco, California, Bond Counsel, subject, however to the qualifications set forth below, under existing law, the interest on the Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; provided however, that for the purpose of computing the alternative minimum tax imposed on corporations ( as defined for federal income tax purposes), such interest is taken into account in determining certain income and earnings. The opinions set forth in the preceding paragraph are subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986 (the "Code") that must be satisfied subsequent to the issuance of the Bonds in order that such interest be, or continue to be, excluded from gross income for

24 federal income tax purposes. The City has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of such interest in gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds. Bond Counsel expresses no opinion regarding other federal tax consequences arising with respect to the Bonds. In the further opinion of Bond Counsel, interest on the Bonds is exempt from California personal income taxes.

MISCELLANEOUS The quotations from, and summaries and explanations of the Agreement, the Bonds and other statutes and documents contained herein do not purport to be complete, and reference is made to such documents and statutes for full complete statements of their provisions. This Official Statement is submitted only in connection with the sale of the Bonds by the City. All estimates, assumptions, statistical information and other statements contained herein, while taken from sources considered reliable, are not guaranteed by the Underwriter, or the City. The information contained herein shall not be construed as representing all conditions affecting the District and the City. The execution and delivery of this Official Statement have been duly authorized by the City.

CITY OF TRACY

By: Isl Zane Johnston ~~~~~~~~~~~~~~~~~~- Fin an ce Manager

25 [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX A

CITY FINANCIAL INFORMATION AND ECONOMIC DATA

CITY OF TRACY The following information relating to the City of Tracy and the County of San Joaquin, California is supplied solely for purposes of information. Neither the City nor the County is obligated in any manner to pay principal of or interest on the Bonds or to cure any delinquency or default on the Bonds. General The City is a general law city and has the council-manager form of government with the Mayor elected for a two-year term and the four-member council is elected for four-year overlapping terms. The position of City Manager is filled by appointment of the Council to serve as administrator of the staff and to carry out the policies of the Council. Population The following table shows the population by year for the City of Tracy, the County of San Joaquin, and the State of California.

POPULATION Year City of County of State of (as of 12/31) Tracy San Joaquin California 1992 ...... 37,950 503,400 31,552,000 1993 ...... 40,500 514,500 31,961,000 1994 ...... 42,100 521,500 32,000,000 1995 ...... 43,568 512,871 32,344,000 1996 ...... 44,904 529,286 32,362,300

Sources: State of California Department of Finance - Demographic Research Unit; Sales and Marketing Management Survey of Buying Power.

A-1 Building Permits The valuation of building permits issued in the' City exceeded $93 million in 1993 and $74 million in 1994. As a result of a backlog of demand created pursuant to a building moratorium. A six month building permit moratorium was imposed in April 1987 and lifted in October 1987.

CITY OF TRACY BUILDING PERMITS

Fiscal Year Ending Building Permit June 30 Valuation (000) Building Permits 1991 5,918 507 1992 85,526 2,059 1993 93,933 1,961 1994 74,114 1,965

Source: Tracy Community Development Department. Climate The City enjoys a mild climate. Average temperatures range from 45 degrees in the winter to 88 degrees in the summer. Precipitation averages 15 inches per year, with most rainfall occurring from December through April.

A-2 Employment The civilian labor force in the County of San Joaquin increased to an annual average of 242,900 in 1995, up 0.2 percent from the 1994 average 242,500. The following table presents employment figures for the years 1991 through 1995 for the County, the State of California and the United States.

LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT Yearly Average for Years 1991 through 1995

Civilian Unemployment Year and Area Labor Force Employment Unemployment Rate 1991 San Joaquin County ...... 203,800 179,400 24,400 12.0 California ...... 14,833,000 13,714,000 1,119,400 7.5 United States ...... 125,303,000 116,877,000 8,426,000 6.7 1992 San Joaquin County ...... 213,000 182,500 30,500 14.3 California ...... 15,187,000 13,805,000 1,382,000 9.1 United States ...... 127,437,000 117,737,000 9,700,000 7.6 1993 San Joaquin County ...... 240,800 208,800 32,000 13.3 California ...... 15,260,000 13,853,000 1,407,000 9.2 United States ...... 128,040,000 119,306,000 8,734,000 6.8 1994 San Joaquin County ...... 242,500 212,600 29,900 12.3 California ...... 15,471,000 14,141,000 1,330,000 8.6 United States ...... 131,155,000 123,775,000 7,380,000 5.6 1995 San Joaquin County ...... 242,900 213,100 29,800 12.3 California ...... 15,415,500 14,205,900 1,209,600 7.8 United States ...... 132,304,000 124,900,000 7,404,000 5.6

Source: State of California Employment Development Department.

A-3 The following table presents the major private employers, their business and number of employees in the Tracy area.

CITY OF TRACY MAJOR EMPLOYERS

Employer 'Iype of Business Employees Defense Distribution Region West Military Supplies 1,600 Safeway Distribution Center 900 Tracy Public Schools Education 789 H.J. Heinz Company Food Processing 521 Owens-Illinois Glass Container Glass Containers 500 Leprino Foods Cheese 286 Wal-Ma.rt Retail 271 City of Tracy Governmental 250 Tracy Community Memorial Hospital Medical Care 231 Inland, Inc. Cardboard Manufacturer 203 The Inland Corporation Cardboard Containers 203 Yellow Freight Break Bulk Facility 203 Orchard Supply Hardware Distribution Center 177 Ameron Pipe Company Cement Pipes 175 Orthopedic Technologies Orthopedic Devices Manufacturer 165 Holly Sugar Food Processing 138 All Pure Chemical Pool Chlorine 100 Stewart Walker Plastic Boat Manufacturer 88 Market Wholesale Distribution Center 61 D-R Good Transportation 60 Celatex Corp. Insulation Panel Manufacturer 39 U.S. Cold Storage Frozen Food Distributor 27

Source: Tracy Chamber of Commerce and City of Tracy Finance Division.

A-4 Income Personal income information is not available for the City. The City makes no representation that the following information is representative of the City. However, in the County of San Joaquin between 1992 and 1996 the median household effective buying income decreased 2.5 percent compared to 6.5 percent decrease for the State and a 0.5 percent increase for the nation. The following table summarizes the total effective buying income and the median household effective buying income for the County, the State and the nation over the past five years.

COUNTY OF SAN JOAQUIN PERSONAL INCOME Calendar Years 1992 through 1996

Total Effective Median Household Buying Income Effective Year and Area (OOO's Omitted) Buying Income 1992 County of San Joaquin ...... 6,294,426 31,867 California ...... 490, 749,649 36,943 United States ...... 3,728,967,043 32,073 1993 County of San Joaquin ...... 6,502,479 32,460 California ...... 509,152,677 37,686 United States ...... 3,916,947,023 33,178 1994 County of San Joaquin ...... 6,796,443 33,793 California ...... 528,958,745 39,330 United States ...... 4,169,724,052 35,056 1995 County of San Joaquin ...... 7,197,681 35,470 California ...... 552,07 4,838 40,969 United States ...... 4,436,178,724 37,070 1996 County of San Joaquin ...... 6,494,646 31,057 California ...... 477,640,503 34,533 United States ...... 3,964,285, 118 32,238

Source: Sales & Marketing Management Survey of Buying Power.

A-5 Commercial Activity A summary of taxable transactions in the City for the last five years is presented in the following table.

CITY OF TRACY Taxable Transactions For Years 1991-1995 ($000)

1991 1992 1993 1994 1995 Apparel Stores ...... $ 3,653 $ 3,612 $ 3,904 $ 6,738 $ 16,148 General Merchandise ...... 13,501 13,917 20,086 31,975 40,735 Drug Stores ...... 12,738 13,653 11,629 10,336 9,554 Food Stores ...... 23,848 28,165 28,406 32,160 31,356 Packaged Liquor Stores ...... 1,440 1,588 1,642 1,644 2,197 Eating and Drinking Places ...... 26,763 27,345 28,049 31,110 33,142 Home Furnishings/Appliances ...... 3,930 4,530 3,869 4,170 5,732 Building Materials & Farm Imp...... 11,136 15,488 14,988 15,536 17,393 Auto Dealers & Auto Supplies ...... 34,032 30,481 34,863 43,643 43,623 Service Stations ...... 24,081 24,949 23,374 26,136 27,480 Other Retail Stores ...... 9,817 10,134 11,925 15,546 22,540

Retail Stores Totals O o o O O O O O O O O O o o O O O Io O 164,999 173,862 182,735 218,994 249,903 All Other Outlets ...... 32,361 30,053 32,608 31,703 42,283 Total All Outlets ...... $197,360 $203,915 $215,343 $250,697 $292,186

Source: California State Board of Equalization. Education The Tracy School District operates nine elementary schools (grades K-5), and three middle schools (grades 6-8). The Tracy Joint Unified High School District operates one (1) high school and one (1) continuation high school program, and one (1) adult school. Assessed Valuations and Tax Collections Pursuant to the Act and the Bond Indenture, the unpaid assessments will be collected in the same manner and at the same time as ad valorem property taxes are collected and shall be subject to the same lien priority in the case of delinquency as is provided for ad valorem property taxes. The historical assessed valuation and delinquency information set forth below concerning the City as a whole and the County as a whole is not necessarily reflective of the District. NEITHER THE FULL FAITH AND CREDIT NOR THE GENERAL TAXING POWER OF THE DISTRICT, THE CITY, THE STATE OF CALIFORNIA, OR ANY OTHER POLITICAL SUBDIVI­ SION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OBLIGATIONS OF THE CITY OR THE DISTRICT BUT ARE LIMITED OBLIGATIONS OF THE CITY AND DISTRICT PAYABLE SOLELY FROM THE ASSESSMENTS. The assessed valuation of property in the City is established by the County Assessor, except for public utility property which is assessed by the State Board of Equalization. Assessed valuations are reported at 100% of the "full value" of the property, as defined in Article XIIIA of the California Constitution. Certain classes of property, such as churches, colleges, not-for-profit hospitals, and charitable institu­ tions, are exempt from property taxation and do not appear on the tax rolls. No reimbursement is made by the State for such exemptions.

A-6 Property within the City had a gross assessed valuation for Fiscal year 1995/96 of $2,361,854,322. Shown in the following tables are the assessed valuations, tax charges and delinquencies for the City since 1990/91.

CITY OF TRACY Assessed and Estimated Actual Value of Taxable Property % of Fiscal Gross Net Estimated Assessed Value Year Assessed Value Exemptions Assessed Value Actual Value Growth 1991 1,500,003,346 71,947,899 1,428,055,447 1,500,003,346 29.98% 1992 1,785,732,303 81,408,637 1,704,323,666 1,785,732,303 19.05% 1993 1,992,752,568 88,145,030 1,904,607,538 1,992,752,568 11.59% 1994 2,161,575,714 65,409,776 2,096,165,938 2,161,575,714 8.47% 1995 2,227,129,889 97,941,927 2,129,187,962 2,227, 129 ,889 3.03% 1996 2,361,854,322 103,599,673 2,258,254,649 2,361,854,322 6.05% 1997* 2,515,220,215 105,363,223 2,409,856,992 2,515,220,215 6.49%

Source: San Joaquin County Auditor - Controller Office *Estimated

CITY OF TRACY Property Tax Levies and Collections Total Tax % of Collections Fiscal Gross Current Tax Current Levy (Including Year Tax Levy Collections Collected Delinquencies) 1991 3,543,284 3,404,780 96.1% 3,523,604 1992 3,978,351 3,748,130 94.2% 3,861,855 1993 3,912,543 3,850,769 98.4% 4,021,709

Source: San Joaquin County Auditor - Controller Office * Estimate.

A-7 [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIXB Griffin and Way Real Estate Appraisers and Consultants

209 I 578-9943 Fax: 209 I 578-9950 101 College Avenue, s·uite 3 I Modesto, CA 95350

October 23, 1996

Mr. Zane Johnston Finance Manager, City of Tracy 325 East Tenth Street Tracy, California 95376

Subject: Amended Appraisal of the 9 lots of the Tracy Marketplace, Tracy California

Dear Mr. Johnston:

On August 16, 1996 we provided you with an appraisal of 10 contiguous, irregularly shaped, parcels in the Tracy Marketplace totaling approximately 16.19 acres. The purpose of the appraisal was to provide you with an estimate of the bulk sale value of the 10 lots. The appraisal is to be used in the underwriting and sale of bonds used to finance infrastructure supporting the subject properties.

Several changes have occurred regarding the subject properties subsequent to the delivery of our appraisal. At your request we have prepared an amended appraisal to reflecting the changes. This letter report is a complete appraisal, in a restricted report format. It is not a stand-alone . document, and is to be used only in conjunction with the previous August 16, 1996 report.

This amended appraisal report has been made in conformity with and is subject to the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation (USP AP) and the Standards of Professional Practice of the Appraisal Institute. The appraisers meet the competency provisions outlined in USP AP and the Standards of Professional Practice of the Appraisal Institute. The following restricted appraisal report is based on the amended assumptions and limiting conditions, data reported in the original report and analysis in both the original and this amended report to support our value conclusion.

Site Description The subject property now consists of nine parcels on the south side of Grant Line Road, just west of Naglee Road. A portion of Assessor's Parcel Number 238-020-40 is being purchased by Dolan Foster Enterprises as a site for a Taco Bell fast food restaurant. A lot line adjustment is to be recor~ed to create a 25, 179-square-foot site. As of the date of this letter report neither the sale nor has the lot line adjustment have not been recorded. The purchaser has elected to prepay their portion of the infrastructure costs to be financed by the 1996 Special Bonds - Community Facilities District No. 93-1. At your request we have excluded the Taco Bell site from our amended analysis. The gross area of the Taco Bell site, as indicated on the unrecorded lot line adjustment map, has been excluded from our calculations. Mr. Zane Johnston Finance Manager, City of Tracy October 23, 1996 Page 2

The nine parcels which are the subject of this amended appraisal have a combined area of approximately 15.62 acres. There is no recorded map depicting the subject parcels. We have superimposed the unrecorded lot line adjustment map over the recorded parcel map and have out lined the nine sites comprising the subject property. A larger copy of the Tentative Lot Line Adjustment Map for the Taco Bell site can be found in the Addenda of the original August 16, 1996 report.

PARCEL 1 9 P. ·M. 2 CNOT A PART)

Recorded Parcel Map Book 20, Page 95, San Joaquin County

In our August 16, 1996 appraisal we were instructed to assume that all proposed street improvements along Grant Line Road were in place. At the time of our inspection, these improvements were not in fact constructed. Based on our instructions, we assumed that the curbs, gutters, sidewalk, and curb lane paving in front of the subject properties .would be developed in a manner similar to those fronting the Wal-Mart site. The City of Tracy has informed us that approximately 1,100 linear feet of Grant Line . Road frontage improvements are lacking in front of the subject and that these improvements are the obligation of the property owner. The City of Tracy has estimated the cost of these improvements at $110,000 or $ I 00 per linear foot. Our original appraisal did not recognize the cost to construct these improvements. This amended appraisal will recognize these costs.

Legal Description The appraisers have not been supplied with a Preliminary Title Report covering the nine parcels which are the subject of this appraisal. The subject sites are identified as parcels 15 through 24 as shown on Mr. Zane Johnston - - Finance Manager, City of Tracy October 23, 1996 Page 3

that c~rtain parcel map-recorded February 2_9, 1996 in book of parcel maps, Book 20, Page 95, San Joaquin County, excluding Parcel 23 as shown on the Tentative Lot Line Adjustment Map found in the Addenda-of our original report.

Sales Comparison Approach In our original valuation of the subject sites we analyzed the sales data using the price per square foot as a unit of comparison. In the sales comparison approach the front pads were estimated to have a market value of $1 S .SO per square foot. The sizes of the front and back pads was based on the sizes indicated on the Tentative Lot Line Adjustment Map. The original five front pads had a total area of 265,490 square feet. Deducting the 25, 179-square-foot Taco Bell site reduces the total front pad area to 240,311 square feet. Based on $15.50 per square foot, a value of Sl, 724,821 (240,311. SF x $15.50/SF) in indicated for the front pads. Front Pads

APN Size Retail Price Indicated Value 238-020-32 46,373 sf $15.SO /sf $718,782 238-020-36 76,107 sf . $15.50 /sf $1,179,659 238-020-37 51,547 sf $15.50 /sf $798,979 238-020-40 Taco Bell Taco Bell Taco Bell 238-02041 66.28~ sf $15.50 /sf SI.022.~02 240,311 sf $3,724,821 Less cost to construct road improvements £S2~ 600) $3,630,221 Round to $3,630,000 Back Pads

APN Size Retail Price Indicated Value 238-020-33 76,089 sf $6.50 /sf $494,579 238-020-34 94,827 sf $6.50 /sf $616,376 238-020-35 29,052 sf $6.50 /sf $188,838 238-020-38 94,961 sf $6.50 /sf $617,247

238-020-39 l~S.281 sf $6.50 /sf S2~~.366 440,216 sf $2,861,404 Total 680,527 sf Round to .$2,860,000 15.62 AC Total $6,490,000

The sales comparison approach analysis assumes finished pads. The subject lacks 1, 100 linear feet of curbs, gutters, sidewalk, and curb lane paving. Of this amount 154 feet front the Taco Bell site. The net frontage improvements required is therefore estimated to be 946 linear feet. In our amended analysis we Mr. Zane Johnston Finance Manager, City of Tracy October 23, 1996 Page 4

have deducted the cost to construct the Grant Line Road frontage improvements from the value indicated by the sales comparison approach. Using $100 per linear foot supplied by the City of Tracy and a net requirement of 946 feet the cost to construct is calculated at $94,600. Subtracting this amount from $3, 724,821 produces $3,630,221 rounded to $3,630,000. This is the amended value of the front pad sites.

The sales data indicated that the back pads have a market value of $6.50 per square foot. There is no change in the number or size of the back pads. Based on $6.50 per square foot, a value of $2,861,404 ( 440,216 SF x $6.50/SF), rounded to $2,860,000 is indicated for the back pad sites.

Based on the sales and analysis reported in the original appraisal and the changes noted in this report, the amended estimated aggregate retail value of the nine parcels in the Tracy Marketplace based on the sales comparison approach is $3,630,0.00 for the front pads plus $2,860,000 for the back pads totaling:

SIX MILLION FOUR HUNDRED NINETY THOUSAND DOLLARS

($6,490,000)

lnc-ome Approach - Discounted Cash Flow Analysis The above is not the market value of the nine sites, it is the aggregate retail value of the nine sites. Market value assumes a single sale of the entire project. A single buyer of multiple properties usually pays a lower price per unit than the buyer of only one unit. The buyer in bulk usually receives a bulk sale discount. We have been asked to value to subject property on a bulk sale basis. The defmition of bulk sale value is contained in the Assignment and Summary section of the original report. Typically, in estimating a bulk sale value a discounted cash flow (DCF) analysis provides a useful valuation tool in the absence of comparable bulk sale data. A discounted cash flow analysis is based on a set of assumptions regarding the subject property.

Some of the assumptions have changed in our amended DCF. The total size of the subject property has been reduced from 705, 706 square feet to 680,527 square feet and the total area of the front pads has been reduced from 265,490 square feet to 240,311 square feet. This is a-result of the deduction of the 25, 179-square-foot Taco Bell site. In our original DCF we deducted the size of the Taco Bell site as a presale. The beginning inventory of front pads remains the same. In our original DCF we added the presale income in the first quarter. In our amended analysis the Taco Bell site contributes no presale income. The Pre Sales Income in the first quarter has been reduced from $1,004,284 to $614,000. This represents only the presale of the Staples site.

Under expenses, our amended DCF includes the cost to construct the Grant Line Road frontage improvements. As noted above, the cost of these improvements has been estimated at $100 per linear foot by the City of Tracy. An amount of $94,600 has been included as an expense item during the first quarter .. We have also changed the estimated annual property tax component. When a property is purchased it will be reappraised and the property taxes will be based on the current market value. Estimating the property taxes requires a circular calculation, in that one has to know the market value of the property to estimate the property taxes. The· market value is unknown. Through iteration we have estimated the property taxes using the 1995-96 tax rates as applied to the estimated market value. This annual property tax component has been reduced from about $0.0675 per square foot to $0.0640 per square foot. The reduction in taxes is a result of the reduction in value due to the elimination of the Taco Bell site and the addition of the road frontage improvements costs. Mr. Zane Johnston - Fi~ance Manager, City of Tr~cy October 23, 1996 DiscmJnted Cash Flow Analysis Page·5 (9 lots in Tracy Marketplace)

DISCOUNT PROJECT 680,527 RATE MAR.KET VALUI 240.311 9.0(W. $4,.560,000 ·2 9.50% $4,527.~ 240,311 10.00% $4,49S,OOO 440,216 10.SO--' $4,463,000 11.00% $4,431,000 34S,7S3 I I.SO'% $4,.400,000 12 20,026 0 28.113 ~llii11lll!l~l!!ll!lli1lt1!l!!illili SIS.SO 13.SO'% $4.278,000 $6.SO 14.00% $4.249.000 3 14:50% $4,.220,000 IS.DO% $4,191,000 IS.50% $4,162.000 16.00% . $4,134,000 .. · IS. IDeWIICIIPCl':s Profit of Rmil Prices (Rounded to narest Sl.(KIO $6,SC0,000

DISCOUNT VALVE ANALYSIS

Qmrter 2 3 4 5 6

Saks IDco•e: From Pad Ablorption (Sq.Ft. per Qumtcr) 20.026 . 20,026 20,026 20,026 20,c,26 20.o26 FraatPad IDWlltOly (Sq.Ft.) 240.311 220.lBS 200.259 180.233 160,207- 140,181 Front Pad Sale Price/Sq.Ft. SIS.SO · SIS.62 SIS.73 SIS.IS SIS.97 $16.09 Bick Pad Absorption (Sq.Ft. per Qaaner) 28.813 28.813 28.813 28,813 28,113· 28,813 Bick Pad IDvmtolY (Sq.Ft.) 34S,7S3 316,.940 288.128 2S9.31S 230,502 201,689 Bick Pad Price (Per Sq.Ft.) $6..50 $6.SS $6.60 $6.6S $6.70 $6.75 Pn, Sale Income ~- HJl.!2 HJl.!2 . amt wm &Im Qau1atJ Sales IDcome Sl,111,694 S!Ol,417 $505,l71 S!Gl.96'7 $512,714 $511,0SI

Esdaated Qarterly Espeam Sdlmg CoSIS $77,819 $3S,099 $3S,362 $3S,628 $3S,89S $36,266 OallttiDe Road Jmprowm1ent Cosls 94,600 0 0 0 0 0 Property Taxes 3,844 3,524· 3.204 2.183 2"63 2.243 Developer's Profit .l§§..ll4 ~ nm ~ 1§.211 1l.7ll Tobl!spema $343,017 $113,836 $114,343 $114,156 $115,375 $116,222 .NET INCOME $761.,ffl $317,511 $390,835 $394,111 $397,409 $401,866 Quarter 7 I ' 10 11 12 13 Sala IDcome: Froat Pad Absorption (Sq.Ft. per Quarter) 20,026 20,026 20.026 20,026 20,026 20,026 0 FraatPad lnvmlOIY (Sq.Ft.) 120,156 100,130 I0,104 60,078 40,0S2 20,026 0 Front Pad Sile Price/Sq.Ft. $16.21 S16.33 $16.45 S16.S8 $16.70 $16.13 $0.00 Bick Pad Absorptkin (Sq.Ft. per Qulrtcr) 21,113 28,813 28,813 21,113 28,813 28,813 0 B8Ck Pad Inventory (Sq.Ft.) 172.,8Tl 144,064 11S.2Sl 16,438 51,626 28.813 0 · Bade Pad Price (Per Sq.Ft.) $6.80 S6.8S $6.90 $6.9S $7.00 $1.06 S0.00 Pn, Sale Income 1Q.2Q S2Jl!l . S2.Q2 W).Q S2JtQ .52.22 S2.Q2 Quaramy Sales Income mo.sos $!24,408 $528.,341 SS32,304 $536,296 $540,318 so

Estimated Quarterly Espema Selling Costs $36,435 $36,709 $36,984 $37,261 $37,541 $37,822 Gnntline Road Improvement Cosas 0 0 0 0 0 0 Property Taxes 1,922 1,602 1,281 961 641 320 0 "Developer's Profit 18..m 11.Ml 12.m ~ l2A4! .8.lMI TotalEspema $116,433 $116,972 $117,517 $118,068 $118,626 $119,190 .NET INCOME 5404.071 $407,43'7 SCI0,125 SCU,236 S417,670 5421.128 so Mr. Zane Johnston Finance Manager, City of Tracy October 23, 1996 Page 6

All other assumptions used in the amended DCF remain the same as in the original analysis. We are still of the opinion. that an appropriate discount or yield rate is the range of 12 to 13 percent. We have highlighted the band of values indicated from 12 to 13 percent discount rate. With no conclusive argument for a value at any point in the range we have given them equal weight and selected the midpoint in the range at $4,339,000 rounded to

FOUR MILLION THREE HUNDRED FORTY THOUSAND DOLLARS ($4,340,000)

Reconci Iiation The amended value estimates of the fee simple interest as indicated by the three approaches are:

Cost Approach: Not Used Sales Comparison Approach: $6,490,000 Income Approach: 4,340,000

It is neces-sary to compare the strengths and weaknesses of the individual value indicators to arrive at a f"mal ·value conclusion for the subject property.

The cost approach is most applicable on relatively new improvements. Because the only improvements on the subject parcels are the proposed street improvements along Grant Line Road, which amount to only $94,600, the cost approach is considered inappropriate and was not used in the amended appraisal.

The sales comparison approach provides the best estimate of value for the individual subject sites. We are confident with the value indicated by this approach. The comparable sales used indicated a fairly tight range of adjusted value on a per square foot basis. This produced an aggregate retail value, which is not the market value of the nine subject sites to a single buyer.

In the income approach, a discounted cash flow analysis was used to estimate the value of the shopping center land assuming a single purchaser who would then re-sell the nine individual parcels to end-users.

In arriving at an estimate of the market value of the subject sites we relied on the·sales comparison approach to estimate the individual parcel values. Our amended value conclusion was based solely on the discounted cash flow analysis to estimate the bulk sale value of the nine parcels in the Tracy Marketplace.

By reason of our inspection, investigation, and analysis, we are of the opinion that the bulk sale value of the fee simple interest of the 9 lots of the Tracy Marketplace totaling 15 .62 acres as of August 11, 1996 is:

FOUR MILLION THREE HUNDRED FORTY THOUSAND DOLLARS ($4,340,000)

Sincerely, ~7.Wy Bruce E. Way CA # AG020937 c # Expires February 3, 1998 Expires February 5, 2000 Griffin and Way

Real Estate Appraisers and Consultants

Certificate of Appraisal

We do hereby certify that upon request for valuation by: Mr. Zane Johnston, Finance Manager, City of Tracy

We have made an investigation and analysis of the following described property:

Nine parcels located in the Tracy Market Place Shopping Center

and that we are of the opinion that the bulk sale value of the fee simple interest in the property as of the valuation date of August 11, 1996 is:

Four Million Three Hundred Forty Thousand Dollars ($4,340,000)

We certify that to the best of our knowledge and belief: 1. The statement of facts contained in this report upon which the analysis, opinions, and conclusions expressed herein arc based, arc true and correct; however, no guarantee can be made as to their accuracy. 2. The reported analysis, opinions, and conclusions arc limited only by the reported assumptions and limiting conditions, and· ~c our personal, unbiased professional analysis, opinions,_·and conclusions. 3. We have no present or contemplated-future interest in the property that is the subject of this appraisal.report. We have no personal interest or bias with respect- to the subject matter of th~ appraisal or parties involved. 4. Our compensation is not contingent upon the reporting of~ predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event. · 5. Our analysis, opinions, and conclusions were developed, and this report was prepared in conformity with the Uniform Standards of Professional Appraisal Practice, and the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. 6. No one provided significant professional assistance to the persons signing this report except as noted~ 7. We have made p.crsonal inspections of the property that is the subject of this report. 8. The use of this report is subject to the requirements of the Appraisal Institute, relating to review by its duly authorized representatives 9. As of the date of this report, Eric P. Griffin has completed the requirements of the continuing,cducation program · of the Appraisal Institute. -· . . 10. The value conclusion, as well as other opinions expressed herein, arc not- based on a requested minimum value, a specific value, or approval of a loan. 11. Additional assumptions and limiting conditions may be found on the pages immediately· following this Certificate of Appraisal.

Dated: October 23, 1996 -~'F. ld Bruce E. Way r CA # AG020937 CA# 08 Expires Feb. 3, 1998 Expir s Feb. S, 2000

Page 7 Mr. Zane Johnston Finance Manager, City of Tracy October 23, 1996 Page 8

Assumptions and Limiting Conditions In completing this amended appraisal assignment, the following conditions and assumptions were presumed by the appraisers and are limitations to the appraisers' opinions:

Special Assumptions and Limiting Conditions 1. Mr. Daniel Bort, Bond Counselor for the City of Tracy, has requested that the properties be valued· on a bulk sale basis and has further requested that we not consider the impact of the· proposed or existing bonds on the market value of the subject properties. The value estimate is based on the assumption that all community facility district bonds have been paid off. 2. Mr. Bort also requested that we assume all proposed street improvements along Grant Line Road are in place. These improvements are the Grant Line Road widening and median divider which. is the responsibility of the City of Tracy. Approximately 1, 100 linear feet of curbs, gutters, sidewalk, and curb lane paving in front of the subject has not been constructed. These improvements are the responsibility of the landowner. We assume that these improvements will be developed in a manner similar to those fronting the Wal-Mart site to the west of the subject. We have relied on an estimated cost of $100 per linear foot to construct these improvements. This cost estimate was provided by the City of Tracy~ 3. Other than identified items, we assume development of the center is complete. 4. We reviewed a preliminary title report from First American Title Company dated May 23, 1996 which covers only the land being acquired for the Staples Office Supply Outlet. We also reviewed a preliminary title report from Fidelity National Title Insurance Company dated. September 10, 1996 which covers only the land being acquire~ for the Taco Bell fast food restaurant. Neither title report covers all nine parcels which are the subject of this amended report. No opinion as to title is rendered. Data on ownership and legal descriptions were obtained from sources generally thought to be reliable. Title is assumed to be marketable and free and clear ofall liens; encumbrances, easements, and restrictions except those specifically discussed in the report. The property is appraised assuming it is under reasonable ownership, competent management, and available for its highest and best · use. S. No opinion is intended to be expressed for legal or other matters that would require specialized investigation or knowledge beyond that ordinarily employed by real estate appraisers, although such matters may be discussed in the report. 6; The preliminary title report from First American Title Company indicates a Consent Order and Judgment issued by the United States District Court, Northern District of California entitled: Lynn Martin Secretary of the United States Department of Labor v. Dividend Development Corporation, Dividend Development Corporation Profit Sharing Plan, Dividend Development Corporation Money Purchase Plan, Richard B. Oliver, individually, and Douglas Watson, individually, defendants. We have requested a copy of Mr. Zane Johnston Finance Manager, City of T-racy October 23, 1996 Page 9

this document from the title compapy, but as of the date of this report we have not teceived a copy to- review. This. item does not appear in the preliminary title report from Fidelity National Title Insurance Company~ Based on the sales of the Staples and the Taco Bell sites, this Judgment does not appear to adversely affect the marketable. title to the property nor its market value. 7. The preliminary title· report from First American Title Company also indicates that a voluntary petition was filed February 20, 1992 in the U. S. Bankruptcy Court by Dividend Development Corporation. This item does not appear in the preliminary title report from Fidelity National Title Insurance Company. Based on the sales of the Staples and the Taco Bell sites,. this item does not appear to adversely affect the marketable·title to the property nor its market value. 8. Regarding specific contamination issues: Both preliminary title reports disclose a Judgment which is the result of a legal action by the landowners against Southern Pacific Transportation, Chevron Pipe Line Company, and Texaco Trading. and Transportation Company. From our reading of the documents, Texaco and Chevron are responsible for the cleanup of the contamination and agree to indemnify, defend and hold the landowners harmless for any and all liabilities, damages, costs, expenses, orders, judgments, and. claims of ariy kind. The history of this· contamination is addressed in greater detail in the original report. · There· is a requirement that " ... each deed ... shall contain a note stating that the subject _ property is subject to this judgment and order .... " Our estimate of value recognizes these requirements. Based on the sales of the Staples and the Taco Bell sites, this requirement does not appear to adversely affect the marketable title to the property nor· its market value. 9. The subject properties are located within Comm_unity Facilities Districts (CFO) 91-1 and 93-3. These districts were established by the City of Tracy to provide area-wide infrastructure within the 1-205 Specific Plan. The properties within the Tracy Marketplace are subject to an annual assessment which cannot exceed $994 per acre for CFD 91-1 and $11,000 per acre for CFD 93-1. Based on information provided by the City of Tracy, the bonded indebtedness. for CFD 93-1 is approximately $103,849 per ac_re. The payoff on the CFD 91-1 · bonds is approximately $5, 164 per acre. Our value estimate is based on the assumption that the- bonds have been paid off. 10. Information provided by the City of Tracy Finance Department.indicates that,fees due _when building permits are issued on the p_arcels total approximately $620,000. These fees are ·associated with the two community facilities districts. It is our understanding that these fees will be prorated to reflect the relationship of the area of the individual sites to the area of the parent parcel. 11. We have been provided with a copy of an unsigned purchase agreement for a portion of the subject land between the present owner and AMB/BTS 3, a California limited liability company. The contract indicates an agreed on price of $283,389 for the property, with the buyer responsible for the payment of fees associated with CFO 93-1. Mr. Zane Johnston Finance Manager, City of Tracy October 23, 1996 Page 10

General Assumptions and Limiting Conditions I 2. It is our understanding that the appraisal shall be used by the City of Tracy in the documentation for the sale of bonds. I 3. This report is not to be used for any syndication or limited partnership offering, either public or private, by agreement between the client and Griffin and Way. 14. Testimony or attendance in court or at any other hearing is not required by reason of rendering this appraisal unless such arrangements are made a reasonable time in advance. 15. The date of value set· forth in the letter of transmittal and the certification applies to the opinions expressed in this report. The appraisers assume no responsibility for economic or physical factors occurring at some later date which may affect the opinions herein stated. 16. Projections included in this report are utilized to assist in the valuation process. They are based on current market conditions, anticipated short term supply and demand factors, and . a continued stable economy. These projections are subject to change. Further conditions that cannot be accurately predicted by the appraiser could affect the future income or value projections. 17. No engineering survey has been made by the appraisers. Except as specifically stated, data relative to size and area were taken from sources considered reliable, and no encroachment of real property improvements is assumed to exist. 18. Maps, plats, and exhibits included are for illustration only, and are to be used as an aid in visualizing matters discussed within the report. They should not be considered as surveys, or relied upon for any other purpose. 19. No opinion is expressed as to the value of subsurface oil, gas or mineral rights except as specifically noted. It is assumed that the property is not subject to surface entry by others for the exploration or removal of any minerals except as expressly stated. 20. Unless otherwise stated in this report, the existence of hazardous materials, which may or may not be present on the property, was not observed by the appraisers. The appraisers have no knowledge of the existence of such materials on or in the property. The .. _ appraisers, however, are not qualified to detect such substances. The presence of substances such as asbestos, urea-formaldehyde foam insulation, or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption there are no such materials on or in the property that would cause a loss in value. No responsibility is assumed for any such condition, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field if desired. · · - Griffin and Way Real Estate Appraisers and Consultants

209 / 578-9943 Fax: 209 I 5i8-9950 l 01 College Avenue. Suite 3 ! ,\\odesto. CA 95350

August 16, 1996

Mr. Zane Johnston Finance Manager, City of Tracy 325 East Tenth Street Tracy, California 95376

Subject: Appraisal of 16.19 acres of the Tracy Marketplace, Tracy, California

Dear Mr. Johnston:

At your request, we have inspected the real property referenced above. The purpose of our inspection and subsequent investigation was to enable us to provide you with an estimate of the current bulk sale value of identified portions of the Tracy Marketplace. This is a complete appraisal in a self-contained report format. By reason of our inspection, investigation, and analysis, we are of the opinion that the bulk sale value of the fee simple interest in 16.19 acres of the Tracy Marketplace as of August 11, 1996 is: -

FOUR MILLION SEVEN HUNDRED TWENTY-FIVE THOUSAND DOLLARS ($4, 725,000)

This appraisal report has been made in conformity with and is subject to the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation (USP AP), the Standards of Professional Practice of the Appraisal Institute, and the Appraisal Standards for Land-Secured Financings by the California Debt Advisory Commission. The appraisers meet the competency provisions outlined in USP AP and the Standards of Professional Practice of the Appraisal Institute. It is our understanding this appraisal is to be used by the City of Tracy in the underwriting and sale of bonds used to finance infrastructure supporting the subject properties. The following self-contained appraisal report is based on the stated assumptions and limiting conditions, and contains the data and analysis to support the above value conclusion.

Sincerely, ~r~ CA # AG020937 Expires February 3, 1998 Griffin and Way Real Estate Appraisers and Consultants

209 I 578-9943 Fax: 209 I 578-9950 101 College Avenue. Suite 3 I Modesto. CA 95350

As of:

August 11, 1996

Appraisal for:

Mr. Zane Johnston Finance Manager, City of Tracy 325 East Tenth Street Tracy, California 95376

Appraisal of:

Tracy Marketplace 16.19 acres south of Grant Line Road Tracy, California Table of Contents

Assignment and Summary The Assignment and Function of the Appraisal...... I Scope of Appraisal ...... · ...... :..... I Definitions ...... 1 Certificate of Appraisal...... 3 Assumptions and Limiting Conditions ...... 4 Summary of Salient Facts and Conclusions ...... 7 General Data Identification of the Subject Property...... 9 History of the Property ...... 9 Regional and City Data ...... I I Residential Real Estate Market Trends ...... 16 Retail Real Estate Market Trends ...... 17 Neighborhood Map ...... _ ...... 20 Neighborhood Data ...... 21 Property Description

Assessor's Parcel Map ················:······· ...... 23 Site Description ...... 23 Environmental Hazards ...... 24 Improvement Description ...... 26 Recorded Parcel Map ...... 27 . Legal Description ...... 28 ·ownership ...... 28 Purchase Agreements ...... 28 Taxes and Assessments ...... 29 Special Assessments ...... 30 Covenants, Conditions, and Restrictions ...... ~ .... ; ...... 31 Zoning ...... •...... 31 Subject Photographs ...... 32 Valuation Analysis Highest and Best Use ...... 35 Valuation Methodology ...... 36 Sales Comparison Approach ...... ~ ...... 38 Income Approach - Discounted Cash Flow Analysis ...... 45 Reconciliation ...... 49 Market Time ...... SO Addenda

Griffin and Way, Real Estate Appraisers and Consultants Page i [THIS PAGE INTENTIONALLY LEFT BLANK] Assignment and Summary

The Assignment and Function of the Appraisal Mr. Zane Johnston, Finance Manager, City of Tracy, has requested an estimate of the market value of the 10 parcels identified as the· Tracy Marketplace Shopping Center. Mr. Daniel Bort, Bond Counselor for the City of Tracy, has requested that the properties be valued on a bulk sale basis and the appraisal is to assume all proposed street improvements along Grant Line Road are in place. Mr. Bort further requested that we not consider the impact of the proposed or existing bonds on the market value of the subject properties. The value estimate is based on the assumption that all community facility district bonds have been paid off. The property is located on the south side of Grant Line Road, north of Interstate 205, at the west edge of Tracy, California. The date of valuation is August 12, 1996, the date of the last inspection of the site.

According to the Assessor's Parcel map the entire site has a gross area of approximately 16.19 acres. It has been divided into 10 parcels, 5 of which have Grant Line Road frontage. The 10 parcels range in size from 25, 179 square feet to 145,287 square feet. These 10 parcels are part of The Tracy Marketplace Shopping Center. Wal-Mart, the one occupant of the shopping center at this time, is not included in this appraisal.

It is our understanding that this appraisal·report is to be used by the City of Tracy in the underwriting and sale of bonds used to finance infrastructure supporting the subject properties.

This complete appraisal report has been made in conformity with the document Appraisal Standards for Land-Secured Financing prepared by the California Debt Advisory Commission, and the Standards of Professional Practice of the Appraisal Institute. The appraisers meet the competency provisions outlined in USP AP and the Standards of Professional Appraisal Practice of the Appraisal .. Institute. The conclusions reported in this complete appraisal are based on the assumptions, limiting conditions, data, and reasoning in the following self­ contained appraisal report.

Scope of the Appraisal In accepting the assignment, we have determined we have the experience and knowledge to complete it. In preparing this appraisal report, we have researched the public records of San Joaquin, Stanislaus, and other northern California counties, as well as the databases of Griffin and Way. We have interviewed brokers and other real estate professionals. We have collected general and specific market data dealing with market trends, land sales, and rates of return. All the properties utilized in arriving at the value estimate have been viewed by the appraisers. Offerings and sales have been confirmed with either a buyer, seller, or their agents unless specifically noted.

Definitions Market Value: The most probable price in cash, or in terms equivalent to cash for which the specified property rights should sell for after reasonable exposure

Griffin and Way, Real Estate Appraisers and Consultants Page 1 Assignment and Summary

in a competitive market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self-interest, and assuming that neither is under duress. (Appraisal Standards for Land-Secured Financing)

Bulk Sale Value: The most probable price in a sale of all parcels within a tract or development project, to a single purchaser or sale to multiple buyers, over a reasonable absorption period discounted to present value, as of a specific date, in cash, or in terms equivalent to cash for which the property rights should sell after-reasonable exposure in a competitive market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self-interest, and assuming that neither is under stress. The bulk sale is executed in lieu of the seller proceeding with development and/or marketing of the individual parcels of tracts to end users or merchant builders over a market­ orientated absorption period for the type of project.

Highest and Best Use: 1. The reasonable and probable use that supports the highest present value of vacant land or improved property, as defined, as of the date of the appraisal. 2. The reasonably probable and legal use of land or sites as though vacant, found to be physically possible, appropriately supported, financially feasible, and which results in the highest present use land value. 3. The most profitable use.

Implied in these definitions is that the determination of Highest and Best Use takes into account the contribution of a specific use to the community and community development goals as well as the benefits of that use to individual property owners. Hence, in certain situations the Highest and Best Use of land may be for parks, green belts, preservation conservation, wildlife habitats, and the like. (American Institute of Real Estate Appraisers, The Dictionary of Real Estate Appraisal, Chicago: American Institute of Real Estate Appraisers, 1984, p. 152)

Fee Simple Estate: Absolute ownership unencumbered by any other interest or estate; subject only to the limitations of eminent domain, escheat, police power, and taxation. (Ibid., p. 123)

Leased Fee Estate: An ownership interest held by a landlord with the right of use and occupancy conveyed by lease to others; usually consists of the right to receive rent and the right to repossession at the termination of the lease. (Ibid., p. 179)

·------Griffin and Way, Real Estate Appraisers and Consultants Page 2 Griffin and Way

Real Estate Appraisers and Consultants

Certificate of Appraisal

We do hereby certify that upon request for valuation by: Mr. Zane Johnston, Finance Manager, City of Tracy

We have· made an investigation and analysis of the following described property: 10 parcels identified as the Tracy Market Place Shopping Center

and that we are of the opinion that the bulk sale value of the fee simple interest in the property as of the valuation date of August 11, 1996 is:

Four Million Seven Hundred Twenty-Five Thousand Dollars ($4,725,000)

We certify that to the best of our knowledge and belief: 1. The statement of facts contained in this report upon which the analysis, opinions, and conclusions expressed herein arc based, arc true and correct; however, no guarantee cari be made as to their accuracy. 2. The reported analysis, opinions, and conclusions arc limited only by the reported assumptions and limiting conditions, and arc our personal, unbiased professional analysis, opinions, and conclusions. 3. We have no present or contemplated future interest in the property that is the subject of this appraisal report. We have no personal interest or bias with respect to the subject matter of the appraisal or parties involved. 4. Our compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event. S. Our analysis, opinions, and conclusions were developed, and this report was prepared in conformity with the Uniform Standards of Professional Appraisal Practice, and the Code of Professional Ethics and Standards of· Professional Appraisal Practice of the Appraisal Institute. 6. No one provided significant professional assistance to the persons signing this report except as noted. 7. We have made personal inspections of the property that is the subject of this report. 8. The use of this report is subject to the requirements of the Appraisal Institute, relating to review by its duly authorized representatives 9. As of the date of this report, Eric P. Griffin has completed the requirements of the continuing education program of the Appraisal Institute. 10. The value conclusion, as well as other opinions expressed herein, arc not based on a requested minimum value, a specific value, or approval of a loan. 11. Additional assumptions and limiting conditions may be found on the pages immediately following this Certifi. te ofAppraisal.

Dated: August 16, 1996 2"f::c-rw~ CA # AG020937 Expires Feb. 3, 1998

Page3 Assignment and Summary

Assumptions and Limiting Conditions In completing this appraisal assignment, the following conditions and assumptions were presumed by the appraisers and are limitations to the appraisers' opinions:

Special Assumptions and Limiting Conditions 1. Mr. Daniel Bort, Bond Counselor for the City of Tracy, has requested that the properties be valued on a bulk sale basis and the appraisal is to assume all proposed street improvements along Grant Line Road are in place. Mr. Bort further requested that we not consider the impact of the proposed or existing bonds on the market value of the subject properties. The value estimate is based on the assumption that all community facility district bonds have been paid off. 2. Other than identified items, we assume development of the center is complete. 3. We have received a preliminary title report from First American Title Company dated May 23, 1996. According to the title officer, Mr. Jerry Hausauer, this report covers only the land be acquired for the Staples Office Supply Outlet and does not cover the entire 16.19-acre parcel identified as 238-020-16. Several items in this preliminary title are of concern and have been noted and discussed in both the special assumptions and limiting conditions and in the appraisal. No opinion as to title is rendered. Data on ownership and legal descriptions were obtained from sources generally thought to be reliable. Title is assumed to be marketable and free and clear of all liens, encumbrances, easements, and restrictions except those specifically discussed in the report. The property is appraised assuming it is under reasonable ownership, competent management, and available for its highest and best use. 4. No opinion is intended to be expressed for legal or other matters that would require specialized investigation or knowledge beyond that ordinarily employed by real estate appraisers, although such matters may be discussed in the report. 5. The preliminary title report indicates a Consent Order and Judgment issued by the United States District Court, Northern District of California entitled: Lynn Martin Secretary of the United States Department of Labor v. Dividend Development Corporation, Dividend Development Corporation Profit Sharing Plan, Dividend Development Corporation Money Purchase Plan, Richard B. Oliver, individually, and Douglas Watson, individually, defendants. We have requested a copy of this document from the title company, but as of the date of this report we have not received a copy to review. We assume that there is nothing in this document which will adversely affect the marketable title to the property nor its market value. 6. The preliminary title report also indicates that a voluntary petition was filed February 20, 1992 in the U. S. Bankruptcy Court by Dividend Development Corporation. We assume that the bankruptcy of Dividend Development Corporation will not adversely affect the marketable title to the property nor its market value.

Griffin and Way, Real Estate Appraisers and Consultants Page4 Assignment and Summary

7. Regarding specific contamination issues: The preliminary title report discloses an instrument entitled Consent Judgment and Decree which is the result of a legal action by the landowners against Southern Pacific Transportation, Chevron Pipe Line Company, and Texaco Trading and Transportation Company. From our reading of the documents, Texaco and Chevron are responsible for the cleanup of the contamination and agree to indemnify, defend and hold the landowners harmless for any and all liabilities, damages, costs, expenses, orders, judgments, and claims of any kind. We assume that our interpretation of the document is correct and that the oil companies will in fact complete the clean up of the contamination. 8. There is a requirement that " ... each deed, title or other instrument conveying an interest in the subject property shall contain a note stating that the subject property is subject to judgment and order, judgment and decree hereon and shall reference the recorded location of the judgment and order, judgment and decree hereon in any restrictions applicable to the subject property." We assume that this requirement does not have a negative impact on the proposed sales contracts on portions of the subject property nor upon the proposed community facility district bonds. 9. The subject properties are located within Community Facilities Districts (CFD) 91-1 and 93-3. These districts were established by the City of Tracy to provide area-wide infrastructure within the 1-205 Specific Plan. The properties within the Tracy Marketplace are subject to an annual assessment which cannot exceed $994 per acre for CFD 91-1 and $11,000 per acre for CFD 93-1. Based on information provided by the City of Tracy, the bonded indebtedness for CFD 93-1 is approximately $103,849 per acre. The payoff on the CFD 91-1 bonds is approximately $5, 164 per acre. Our value estimate is based on the assumption that the bonds have been paid off. 10. Information provided by the City of Tracy Finance Department indicates that fees due when building permits are issued on the parcels total approximately $620,000. These fees are associated with the two community facilities districts. It is our understanding that these fees will be prorated to reflect the relationship of the area of the individual sites to the area of the parent parcel. 11. We have been provided with a copy of an unsigned purchase agreement for a portion of the subject land between the present owner and AMB/BTS 3, a California limited liability company. The contract indicates an agreed on price of $283,389 for the property, with the buyer responsible for the payment of fees associated with CFD 93-1.

General Assumptions and Limiting Conditions 12. It is our understanding that the appraisal shall be used by the City of Tracy in the documentation for the sale of bonds. 13. This report is not to be used for any syndication or limited partnership offering, either public or private, by agreement between the client and Griffin and Way.

Griffin and Way, Real Estate Appraisers and Consultants Pages Assignment and Summary

14. Testimony or attendance in court or at any other hearing is not required by reason of rendering this :- - nraisal unless such arrangements are made a reasonable time in ad vat._ -. 15. The date of value set forth in the letter of transmittal and the certification applies to the opinions expressed in this report. The appraisers assume no responsibility for economic or physical factors occurring at some later date which may affect the opinions herein stated. 16. Projections included in this report are utilized to assist in the valuation process. They are based on current market conditions, anticipated short term supply and demand factors, and a continued stable economy. These projections are subject to change. Further conditions that cannot be accurately predicted by the appraiser could affect the future income or value projections. 17. No engineering survey has been made by the appraisers. Except as specifically stated, data relative to size and area were taken from sources considered reliable, and no encroachment of real property improvements is assumed to exist. 18. Maps, plats, and exhibits included are for illustration only, and are to be used as an aid in visualizing matters discussed within the report. They should not be considered as surveys, or relied upon for any other purpose. 19. No opinion is expressed as to the value of subsurface oil, gas or mineral rights except as specifically noted. It is assumed that the property is not subject to surface entry by others for the exploration or removal of any minerals except as expressly stated. 20. Unless otherwise stated in this report, the existence of hazardous materials, which may or may not be present on the property, was not observed by the appraisers. The appraisers have no knowledge of the existence of such materials on or in the property. The appraisers, however, are not qualified to detect such substances. The presence of substances such as asbestos, urea-formaldehyde foam insulation, or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption there are no such materials on or in the property that would cause a loss in value. No responsibility is assumed for any such condition, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an .expert in this field if desired.

Griffin and Way, Real Estate Appraisers and Consultants Page6 Assignment and Summary

Summary of Salient Facts and Conclusions

Location Of Subject Property: South side of the Grant Line Road, west of westbound on-ramp to Interstate Highway 205, Tracy, California.

Assessor's Parcel Numbers: San Joaquin County APN 238-020-32 through -41

Thomas Bro. 's Map Reference: 3-H2 Effective Date Of Value: August 11, 1996 Effective Date Of Report: August 16, 1996 Property Improvements: It is assumed all proposed street improvements along Grant Line Road are in place. Parcels Sizes: 238-020-32: 50,894 square feet 238-020-33: 132,422 square feet 238-020-34: 31, 741 square feet 238-020-35: 29,052 square feet 238-020-36: 78,103 square feet 238-020-37: 48,873 square feet 238-020-38: 94,961 square feet 238-020-39: 130,244 square feet 2"38-020-40: 43, 104 square feet 238-020-41: 66,284 square feet Ownership: Dividend Development Corporation Money Purchase Pension Plan Liquidation Trust, Richard B. Oliver and Douglas Watson, Trustees; and Dividend Development Corporation Profit Sharing Plan Liquidation Trust, Richard B. Oliver and Douglas Watson, Trustees Interest Appraised: Fee Simple Interest Zoning: PUD, Planned Unit Development Census Tract: San Joaquin County Census Tract # 8170.0052.03 Flood Zone: According to the FEMA FIRM Map Community Panel No. 060303 0005 A, dated June 18, 1987, this site is in a X flood hazard zone-an area determined to be outside the 500-year flood plain. Earthquake Zone: ISO Earthquake Zone 3, moderate hazard. This property is not in an Alquist-Priolo Earthquake Fault Zone. Natural, Cultural, Scientific, Recreational Value, Wetlands: NA

Griffin and Way, Real Estate Appraisers and Consultants Page 7 Assignment and Summary

Purpose Of The Appraisal: To provide an estimate of market value of the fee simple interest in the subject properties on a bulk sale basis as of August 11, 1996. Function Of The Appraisal: The report is to be used exclusively by City of Tracy in the underwriting and sale of bonds used to finance infrastructure supporting the subject properties. Value Indicators

Cost Approach: Not Used Sales Comparison Approach: $6,980,000 - Aggregate Retail Value Income Approach: $4, 725,000 - Bulk Sale Value

Marketing Time 36 Months

Special Limiting Conditions: See Certificate and pages 4 - 6.

Critical Assumptions: See Certificate and pages 4 - 6.

Report Requested By: Mr. Zane Johnston City of Tracy 325 East Tenth Street Tracy, CA 95376

=Special Limiting Conditions The user of this report is cautioned to review Special Assumptions and Limiting Conditions 1 through 11. The property is subject to special assessments and fees which would affect its value. Information regarding these fees and assessments is set forth in the Property Description section of the report.

The reported value estimate assumes all bonds have been paid off, but not the special fees associated with development of the property.

The reported value also assumes that all proposed street improvements along Grant Line Road are in place.

Griffin and Way, Real Estate Appraisers and Consultants Page 8 General Data

Identification of the Subject Properties. The subject properties are located on West Grant Line Road, at the west edge of and within the incorporated city of Tracy. These IO sites are a portion of the Tracy Marketplace, a shopping center on the south side of Grant Line Road, northwest of Interstate 205 (1-205). The shopping center backs up to 1-205 but is accessible only from Grant Line Road. The site has a gross area of approximately 16.19 acres and has been divided into 10 parcels, 5 of which have Grant Line Road frontage. These 10 parcels are further identified as Assessor Parcels 238-020-32 through 238-020-41. The parcel sizes range from 25,179 square feet to 145,216 square feet.

History of the Property In March 1986, Dividend Industries, Inc., purchased 124. 77 acres from Helen Marsh. The parcel was divided by J.;.205 right-of-way. A small portion was lost with the construction of the freeway, resulting in a parcel of about 123.38 acres. Several name changes have taken place over the years, all apparently due to some form of partnership transfer, with no true sale effected.

For the 1991-1992 tax year, the property was divided into two Assessor's parcels, 238-020-09 and 238-020-10. Parcel 10, south ofl-205, contained 61.96 acres and retained ownership as Dividend Tracy Partners. Parcel 09, north of I- 205, contained 61.42 acres, the ownership name was changed to Richard B. Oliver and Douglas Watson as Trustees for Dividend Development Corporation Money Purchase-Pension Plan Liquidation Trust as to an undivided 1/2 interest, and Richard B. Oliver and Douglas Watson, as Trustees for Dividend Development Corporation Profit Sharing Plan Liquidation Trusts to an undivided l /2 interest.

·on paper Parcel 09 has been divided into a shopping center of 25 pads. Only one pad has been developed, that consisting of a 13.50-acre parcel sold to Wal­ Mart, February 25, 1993, at a reported price of $2,354,000. There have been no other sales recorded since that purchase, but there are two additional sites in escrow. The sale of the Wal-Mart site, located to~ard the center of Parcel 09, required the Assessor to divide Parcel 09 into Parcels 238-020-14, -15, and -16.

For the 1996-1997 tax year, all of the shopping center pads have been assigned Assessor's parcel numbers. Assessor's Parcel Number 238-020-14, west of Wal­ Mart, was divided into APN 238-020-18 through 238-020-31. Assessor's Parcel Number 238-020-16, located east of the Wal-Mart site, containing approximately 16.19 acres, was divided into 10 parcels identified as APN 238- 020-32 through 238-020-41. These 10 parcels are the subject of this appraisal.

According to the listing agent, Christine Firstenberg of Terranomics, the front pads in the center have asking prices of $13.00 per square foot plus bonds, totaling approximately $2.50 per square foot. There is no list price on the back pads.

Griffin and Way, Real Estate Appraisers and Consultants Page9 Regional Map

·""',... _,., ·i .,.J:'

Page 10 Griffin and Way, Real Estate Appraisers and Consultants General Data

Regional and City Data The subject properties are located in the San Joaquin Valley, within the city of Tracy. Incorporated in 1910, Tracy is located 61 miles east of San Francisco, 68 miles south of Sacramento, and 343 miles north of Los Angeles. Stockton, the county seat, is 15 miles to the northeast. Livermore, the closest Bay Area city, is located 18 miles to the west.

The Stockton area, east of Tracy, came of age during the Gold Rush as a staging center for miners heading for the Mother Lode. As the mines played out, miners returned to the San Joaquin Valley to farm. Agriculture in Tracy was limited to dry farming of grain crops until 1914 due to the limited rainfall of the area. After construction of an irrigation system, Tracy became a top producer of field crops including lima beans, alfalfa, asparagus, and fruit orchards.

San Joaquin County has ranked among the top 10 counties in the United States in the value of agricultural production for many years. Dairy products, grapes, tomatoes, eggs, cattle, asparagus, almonds, walnuts, sugar beets, com, and cherries are produced in the area with total agricultural production valued at nearly $1 billion.

Transportation: In the 1870s, flour mills and grain elevators lined the Stockton waterfront where goods were shipped to San Francisco and foreign markets by boat, or shipped nationwide via the three transcontinental railroads which served the area by 1910. The area continued to grow steadily through the 1920s and 1930s when the deep water channel was dredged to accommodate ocean going vessels at the Port of Stockton. During the 1940s, the Stockton area became important as a production center for World War II, with two major supply depots still in operation. One of these is located at the east edge of Tracy.

Tracy was originally laid out by the Central Pacific Railroad in 1878 at the convergence of two rail lines leading to the San Francisco Bay Area. The city grew rapidly as a railway distribution link with facilities for water, fuel, and freight. Located along 1-205 which provides linkage with 1-580, 1-5, and Hwy. 99, Tracy continues to function as a transportation and distribution center. Interstate 5 (1-5) and State Highway 99 (Hwy. 99) are the two main north-south arterials connecting California to Mexico and Canada. Interstate 580 (1-580) links the valley to the Bay Area.

Population: As of January l, 1996, San Joaquin County had an estimated population of 529,300 and is designated as a Standard Metropolitan Statistical Area (SMSA) by the Census Bureau. Tracy is the fourth largest of the seven incorporated cities in San Joaquin County, with a population of 44,900.

Tracy's population has grown at a greater rate than both Stockton and the county as a whole. Through the year 2000 Tracy's population is expected to increase by an average annual rate of 5.17% for a total of 56,000.

Griffin and Way, Real Estate Appraisers and Consultants PaRe 11 General Data

NEW CONSTRUCTION ACTIVITY - TRACY Single Family Units Non-Residential Permits Permits Year Population Issued Valuation Issued Valuation 1989 29,403 1,390 S135,899, 165 29 $11,551,083 1990 32,701 714 $ 73,527,878 8 $12,483, 132 1991 35,760 502 $ 50, 164,699 27 $22,508,787 1992 37,875 650 $ 64, 187,777 16 $28,359,873 1993 40,507 595 $ 58, 119,428 11 $10,643,869 1994 42,082 386 $ 40,769,335 10 $26,249,951 1995 44,507 389 $45,243, 102 10 $33, 139,854 1996 * 44,900 149 $10, 176,993 3 $ 3,981,418

• Year to date

TRACY GROWTH

NUMBER OF SIZEIN YEAR POPULATION DWELLING UNITS SQUARE MILES 1980 18,428 7,171 7.0 1981 19, 176 7,512 7.2 1980 19,961 7,696 7.4 1983 20,684 7,793 7.8 1984 21,674 8,101 8.4 1985 23,281 6,642 9.4 1986 25,436 9,098 9.6 1987 27,279 9,641 9.6 1988 28,762 10,217 9.6 1989 29,403 10,428 9.6 1990 32,701 11,500 9.6 1991 35,760 12,985 11.7 1992 37,875 13,491 11.7 1993 40,507 14,143 11.7 1994 42,082 15, 188 13.0 1995 44,507 15,537 15.0 1996 44,900 NA 15.0

Page 12 Griffin and Way, Real Estate Appraisers and Consultants General Data

POPULATION DATA PERCENT CHANGE

1980 1990 1996 1980 to 1990 1990 to 1996

STOCKTON 148,283 210,943 233,600 42.3% 10.7%

TRACY 18,428 33,558 44,900 82.1% 33.8%

SAN JOAQUIN 347,342 490,000 529,300 41.1% 8.0% COUNTY

Source: California Department of Finance

Growth in Tracy was originally toward I-205 at the north edge of the city. With exceptional growth spurred by commuter demand in the 1980s, residential development continued at the south and west limits of the city. The city grew from 7 square miles in 1980 to 13 square miles in 1995; the general plan now addresses about 1S square miles. The population increased from 18,428 in 1980 to 44,900 in 1996. Growth continues in a westerly fashion, toward the Bay Area.

Another common measure of population growth is building permit activity and housing unit inventory. The top chart on the facing page shows the building permit activity, which peaked in 1989. The lower chart tracks the yearly population growth for Tracy, showing both increases in the number of housing units and the geographical size of the city. Most central valley cities peaked the year after the recession began in 1990 because developers did not believe the recession would be so tenacious. The fact is, Tracy continues to grow, with several subdivisions offering new housing. While sales have slowed, Tracy commands generally higher prices and more activity owing to its proximity to the Bay Area.

Employment: The city of Tracy has a strong economic base provided by a variety of industries. While diversifying, agribusiness and distribution remain the economic basis of the community. The city's largest employer is the Tracy Defense Distribution Depot with 5,000 employees, followed by the Safeway distribution center with 1,360 employees, and Tracy public schools with 940 employees. Area manufacturers include H. J. Heinz with 425 to 750 employees, Owens-Brockway Glass Containers with 550 employees, LePrino Foods with 21S employees, and Holly Sugar with lSO to 400 employees.

The two graphs on the following page, based on information provided by the Employment Development Department, depict the wide seasonal swings in the area's unemployment rate. The top graph illustrates the monthly unemployment rate for the county, showing the seasonal nature of the unemployment rate. Because the primary economic base is agriculturally oriented, employment tends to follow the agricultural harvest season, reaching its peak in the late winter months.

Griffin and Way, Real Estate Appraisers and Consultants Page 13 Employment Graphs

San Joaquin County Unemployment Rates (1992 through April 1996)

15% c: -- ..Q 0. 10% ·E

~0 5%

-+-1992 --11-1993 ---1994 -----1995 -,t-1996

San Joaquin County Unemployment Trends 18.0% (1986 through 1995)

16.00/o

14.0%

C:12.0% 8.00/o c: :::, ~ 6.00/o 0

4.00/o

2.00/o

0.0% +-----+----t-----t----+----+---+----+----+---+-----1 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995

-+-High --11-Low

Page 14 Griffin and Way, Real Estate Appraisers and Consultants General Data

The second graph shows the high-low unemployment rate trends for the years 1986 through 1995. It generally indicates the unemployment picture has been improving over the years, brought about by a diversification in the employment base, with less emphasis on agricultural and food processing, and the growing number of commuters employed in the East Bay Area.

The chart below displays taxable sales (in thousands of dollars) and business permits issued in Tracy, Stockton, and San Joaquin County. Approximately 5% of the county's population resides in Tracy, while the city accounts for 7% of total county sales activity. Furthermore, the data indicates continued growth in issued permits and sales as a result of population growth in the city and throughout the county. Even with a reported decline in the number of businesses in 1993 and 1994, Tracy reported increasing sales volume while some reversal is indicated in the figures for Stockton and the county as a whole. Overall Tracy's taxable sales doubled during the ten year period of 1985 to 1995.

Taxable Sales And Business Permit History (Sales In Thousands Of Dollars)

TRACY STOCKTON SAN JOAQUIN COUNTY YEAR PERMITS SALES PERMITS SALES PERMITS SALES 1985 509 146,497 3,861 1,248,097 9,329 2,615,210 1986 542 175,257 3,989 1,348,638 9,798 2,789, 177

1987 584 160,561 4,265 1 1,452,877 10,366 3,003,239 1988 619 162,685 4,376 1,569,481 10,756 3,252,697 1989 660 180,689 4,571 1,690, 162 11,218 3,555,641 1990 720 197,749 4,815 1,779,380 11,827 3,808,656 1991 732 197,360 4,498 1,723,746 11,432 3,645,281 1992 793 203,91 S 4,339 1,727,262 11,489 3,640,994 1993 783 215,343 4, 173 1,696,736 11,491 3,708, 151 1994 777 250,697 4,079 1,784,750 11,-713 3,957, 158 1995 821 291,545 4,215 1,905,688 11,921 4, 160,685

Agriculture is and will continue to be the driving force of the economy into the foreseeable future; however, non-agriculture sectors of manufacturing, services, retail trade, and government continue to grow. In light of the cost difference of the Bay Area compared to the central valley, -San Joaquin County can only be expected to continue to grow as individuals and companies seek to relocate and expand their facilities. This requires affordable housing and land. In the event the Bay Area does solve its housing/jobs imbalance, the rate of growth may be somewhat slower than in years prior to the recession. Yet, in spite of declines due to the recession, in the long term the valley will continue to grow.

Griffin and Way, Real Estate Appraisers and Consultants Page 15 General Data

Residential Real Estate Market Trends

Regional Existing Home Sales Activity Stockton/Lodi/Tracy City of Tracy

Number Avg Number Homes Mkt. Avg. Sale % Price Homes AvgMkt. Avg.Sale °lo Price Year Sold Time Price Change Sold Time Price Change 1985 1,882 99 $79,988 - 7 72 $88,857 - 1986 2,634 82 $90,055 12.6% •215 57 $111,757 25.8%

1987 2,n8 79 $98,883 9.8% 310 58 $118,713 6.2%

1988 .. 2,260 74 $105,916 7.1% 339 62 $126,628 6.7%

1989 3,136 66 $123,739 16.8% 382 37 $155, 151 22.5%

1990 2,688 n $136,552 10.4% 305 71 $169,568 9.3%

1991 2,560 99 $143,507 5.1 % 330 80 $160,758 -5.2%

1992 2,570 109 $139,365 -2.9% 369 78 $161,731 0.6%

1993 2,702 110 $137,414 -1.4% 435 78 $160,786 -0.6%

1994 2,739 99 $135,605 -1.3% 481 64 $160,023 -0.4%

1995• .. 2,084 89 $125,385 -7.5% •••232 66 $156,057 -2.5%

1996···· 338 109 $110,476 -11.9% 4 91 $159,325 0.2% •Tracy Joins MLS ••Data. through 10/88 •••Tracy & Lodi leave this MLS ••••Data Through March

The central valley experienced significant growth in the 1980s until the onset of the recession, which marks its beginnings with the Loma Prieta earthquake of October 1989. At that time sales slowed, first in the Bay Area and then locally, with the slowdown becoming fully apparent by mid-summer 1990. Many factors were blamed for the slowdown, including: the October 1989 earthquake and fear of future quakes; the budget deficit; increased taxes, housing prices, and gas prices; the Middle East situation; and fear of job loss.

Prior to the slowdown, developers .were offering upscale tract homes of semi­ custom quality aimed at the Bay Area commuter. With the slowdown, developers were forced to lower prices and/or offer concessions to spur sales. Many developers ultimately scaled down their offerings to the affordability level of the valley purchaser. Developers unwilling to adapt have been forced out of the housing market. Typically, the most active market segment in the valley is priced at the $100,000 level. Entry level homes are available from $87,000 in San Joaquin and Stanislaus counties, and from $75,000 in Merced County.

New entry level homes in Tracy start about $127,500. Home prices in Tracy generally range from approximately $80,000 for older, low-cost housing to

Griffin and Way, Real Estate Appraisers and Consultants Page 16 General Data

$300,000. The predominant range is $100,000 to $250,000. Rental rates range from approximately $400 for apartments to $1,000 for_~omes.

Several sales surges.have taken place since the onset of the recession. While price stabilization has been evident and sales are occurring, _the regional market continues to be soft with saies sl~w and prices in modest decline. The following table tracks· historical sales activity in Tracy and San Joaquin County. The Tracy Board of Realtors and the Lodi Board of Realtors left the Lodi/Stockton/Tracy Association in 1994 to join the Central Valley Association of Realtors. The Manteca Board of Realtors never was a part of the Stockton Association. In 1995, the Central Valley Association of Realtors reports an average price of $159,'772 for 358 sales and an average market time of 68 days for Tracy homes. Through June 1996, the average price for 231 sales is $156,025. While a regional decline in sales prices is evident, average sale prices are higher in Tracy, as the city experienced a milder decline than the rest of the region. Sales activity in Tracy is increasing while sales activity in the region continues to decline. Currently, 1,500 acres are available for development and there are 15,761 acres of residential land designated in the general plan.

Retail Real Estate Market Trends Retail activity in Tracy is concentrated along the main arterials of Tracy Boulevard, Eleventh Street, and Grant Line Road. The center of the city and its central business district is at Eleventh Street and Holly Drive/Central A venue. Eleventh Street ( old Route 205) is Tracy's "Main Street." This is an area of older retail and office buildings, dating back to Tracy's origins. The city has attempted to redevelop the downtown core with significant success. The area continues to serve as a business center with buildings being renovated, and an estimated vacancy rate of 5% to 10%.

With the city's growth in a northern direction, the central business district has given way to the construction of newer developments. The second area of commercial growth is north of the city, along Grant Line Road. The eastern portion of Grant Line has several free standing commercial buildings and an older (40 years}, fully occupied, neighborhood shopping center at the intersection of East Street. In recent years, many of the stores along Grant Line Road east of Tracy Boulevard have been remodeled. West of Tracy Boulevard along Grant Line the area is predominantly residential until the intersection of Corral Hollow Road. Land here is vacant and slated for commercial development. Farther west, at the intersection of 1-205, an automobile dealership, a boat dealership, fast food restaurants, and convenience stores are found. Northwest of 1-205 is the subject center (The Tracy Marketplace) and the West Valley Mall. Vacancies along this portion of Grant Line Road are not readily apparent.

The West Valley Mall is located just north of subject. The project has a building footprint of about 983,000 square feet located on a 70-acre site. The center opened October 25, 1995 and currently contains about 685,000 square feet of retail. The leasing agent indicated that shop space rents are $22.00 per square foot NNN. A bout 85% of the interior mall space is occupied. Construction is underway on three fast food restaurants on front pads along Naglee. These

Griffin and Way, Real Estate Appraisers and Consultants Page 17 Shopping Center Locator Map

Number Opened Name Type GLA (st) Site (st) Anchor Stores 1 1966 McKinley Village Neighborhood 70,000 435,600 Save Man, Thrifty (closed) 2 1968 Grant Line Plaza Neighborhood 30,487 87,120 None 3 1982 Valley Shopping Center Neighborhood 99,831 392,040 Lucky, Longs 4 1984 Westgate Plaza Neighborhood 92,500 348,480 Save Mart, Payless Shoes 5 1986 Grantrace Shopping Center Neighborhood 68,337 435,600 K Mart, Jack-in-The-Box 6 1987 Lincoln West Plaza Neighborhood 17,500 87,120 Quick Stop 7 1990 Gateway Plaza Community 138,000 595,444 Safeway, Walgreens 8 1991 Amado Plaza Neighborhood 86,000 361,548 Food 4 Less & Walgreens 9 1994 Tracy Outlet Mall Factory Outlet 153,000 361,548 None 10 1995 West Valley Mall Super-Regional 685,000 3,049,200 Target, JC Penny, Gottschalks

Page 18 Griffin and Way, Real Estate Appraisers and Consultants General Data

restaurants include International House of Pancakes (IHOP), Burger King, and Applebees. Four of the five anchor stores planned for the center have been constructed. These anchor tenants are Gottschalks, J. C. Penney, Ross Dress for Less, and Target. Target is the only store in the West Valley Mall that owns its site. The other anchors and the fast food restaurants are build to suit involving land leases. The West Valley Mall is the major competition to the subject properties. Depending on the tenant, a land lease may or may not be more desirable than a land purchase.

The third area of commercial growth has been easterly along Eleventh Street. In the early 1980s a neighborhood shopping center, Westgate Plaza, was constructed at Eleventh Street and Lincoln Boulevard. The anchor tenants in Westgate Plaza are Save Mart and Payless. The center has about 348,500 square feet of retail space including the anchors. Only 3,000 square feet, or less than 1% of the total area, is currently available for lease.

Farther west, at the intersection of Eleventh Street and Corral Hollow Road is another neighborhood shopping center, the Gateway Plaza. Construction began in 1989, with the first lease signed in 1991. Safeway and Walgreens are the anchors. This center is fully occupied. The leasing agent indicates an additional 13,000-square-foot building will be constructed when a third anchor tenant is found. This would increase the center by about 10.6%. Older residential uses along Eleventh Street are being converted to office use. Both shopping centers continue to advertise for tenants.

The fourth area of commercial growth has been in a northerly direction, along Tracy Boulevard. Two shopping centers are located on Tracy Boulevard at Grant Line Road: McKinley Village is located at the southwest comer, and Grantrace Shopping Center is located on the northwest comer. McKinley Village is anchored by Thrifty's and Save Mart. This center was originally built in the mid-1960s and was remodeled and expanded in the early 1990s. Save Mart constructed a new superstore and Thrifty's relocated into the old Save Mart space. Thrifty's has subsequently closed and they are attempting to sublease their store. Several vacancies were noted in McKinley Village, although the leasing agent indicates all of the space is spoken for with leases out for signature.

Grantrace Shopping Center was developed in the mid- l 980s and is anchored by K-Mart. Additional tenants include Jack-In-The-Box and Round Table Pizza. It is said that K-Mart intends to close the Tracy store.

Two more neighborhood centers are located at Tracy Boulevard and Clover just south of 1-205: Amado Plaza, located at the southwest corner of the intersection is the newest having been developed about 1991. This center has about 86,000 square feet including Walgreens and Food 4 Less as the anchor tenants. Valley Shopping Center is located on the southeast corner and has just under I 00,000 square feet of retail space including Lucky Supermarket and Longs Drugs. While Walgreens remains open in the Arnado Plaza, it is seeking to sublet its space. This represents 18% of the center space available, including an additional 1,500-square-foot space. Approximately I 0% of available space was noted to be vacant in the Valley Shopping Center.

Griffin and Way, Real Estate Appraisers and Consultants Page 19 Neighborhood Map

___ .... ______..... __ ,,._ ..... , .. --

', ...... ______------µ--=--=--=--=--=-_...... , ____

Page 20 Griffin and Way, Real Estate Appraisers and Consultants General ·Data

In addition to the West Valley Mall, one other shopping center has been recently constructed in Tracy. "rhe Tracy Outlet Mall is a factory outlet mall located on Pescadero at MacArthur Drive, adjacent to I-205. This·is predominately an industrial area, the area of preference for outlet malls. The Tracy Outlet Mall was completed in August 1994. At the time of their grand opening in November 1994 center was 96% occupied. This center has 40 spaces totaling 153,000 square feet of retail space. Some of the tenants occupy an area greater than one space, so the number of tenants is less than 40. At our inspection two of the spaces were vacant, but the demising wall was being removed for a new tenant desfring both spaces. There are currently no vacancies in this center.

There are no recent retail vacancy studies for Tracy. The last survey conducted by CB Commercial in the last quarter of 1993 reported 883,943 square feet of space in Tracy for a 7 .1 % retail vacancy. Based on our observation, there is significant vacant space available in Tracy at this time. Including the older central business district, the overall vacancy rate is probably in excess of 10%. Tracy, however, has historically performed better than other valley communities, primarily because of its growth, and the new retail space has been absorbed in a timely manner.

Neighborhood Data The subject sites are located at the junction of Grant Line Road and 1-205. Grant Line Road (County Route J4) has served as a major regional thoroughfare over the years and is the main east-west arterial in the northern portion of Tracy. For most of it's length through Tracy, Grant Line Road is four to six lanes wfde. 1- 205 is a four-lane freeway linking Tracy to the Bay area via 1-580, and to the balance of the Central Valley and the state via 1-5 and Hwy. 99.

The immediate neighborhood is bounded by Tracy Boulevard to the east; . Eleventh Street/old Route 205 to the south; Middle Road (the north limit of the · city's sphere of influence) on the north; and Patterson Pass Road on the west. Patterson Pass Road is the west limit of residential development within the influence of the city.

Within this area about 10% is residential ranchette property, 30% is low density residential, 3% is medium to high density residential,-12% is commercial/retail, 20% is now within the city limits and or in transition to residential or commercial/retail uses, and 25% will continue as agricultural into the reasonable future.

The subject site is located at the west edge of Tracy. The location is one the city classifies as a special services area, slated for development to retail and business uses. Two retail shopping centers are now under construction. West Valley Mall, a regional shopping center anchored by J.C. Penny's, Gottschalks, Ross Dress for Less, and Target is located on the east side of Naglee north of 1- 205. The subject properties are a portion of the second center, the Tracy Marketplace Shopping Center. A third center, Tracy Auto Center, is also under development across from the West Valley Mall north of subject.

Griffin and Way, Real Estate Appraisers and Consultants Page 21 General Data

Although additional residential development is slated for the east and north areas of the city, primary activity continues to be concentrated at the west limit. The location of the subject in the northwestern quadrant of the city is convenient to the populace. The location provides adequate linkage by Grant Line Road, the city's surface streets, and 1-205 with newly constructed on- and off-ramps for the freeway.

Griffin and Way, Real Estate Appraisers and Consultants Page 22 Property Description

POR. S£C. 19 T.2S.R.5£ 238-02

THIS MAP F'OR ASSESSM£Nr US£ ONLY

Assessor's Parcel Map 238-02-32 through 238-020-41

Site Description The subject property consists of 10 parcels on the south side of Grant Line Road, just west of Naglee Road. These parcels are contiguous, irregularly shaped, and have a combined gross area of approximately 16.19 acres. The subject sites are the eastern IO of 25 parcels which make up the neighborhood shopping center known as the Tracy Marketplace~ With the exception of the 13.5-acre parcel occupied by Wal-Mart, the center is unimproved. The subject sites are located east of Wal-Mart, the central store in the center. The entire center will occupy approximately 61.42 acres. According to the most recent and newly issued Assessor's map, five of the subject sites have a total of 1,454 feet of frontage along Grant Line Road. Five of the sites back onto Interstate 205 (1- 205) and will have good exposure and visibility from but no direct access to 1- 205.

The Preliminary Title Report issued by First American Title Company of Stockton on May 23, 1996 was supplied to the appraisers and is included in the Addenda. Mr. Jerry Hausauer, the title officer, has informed us that this report covers only the parcel in escrow for the Staples Office Supply Outlet site, and not the entire 16.19-acre parcel. We have assumed that any easements in place are beneficial to the property, allowing for its development and operation. In

Griffin and Way, Real Estate Appraisers and Consultants Page 23 Property Description

addition to the 1996-97 Assessor's parcel maps covering the subject property, we have been provided with two preliminary lot line adjustment maps affecting the two parcels in escrow. These maps will create a larger back parcel for the development of a Staples Office Supply Outlet and a smaller front parcel as a site for a Taco Bell fast food restaurant. Copies of these parcel maps can be found in the Addenda. Based on this information and our inspection of the property there are no readily apparent easements or barriers to development of the property.

The only portion of the center that has been developed thus far is the Wal-Mart site. The developed portion is level and at street grade. Offsite improvements are in place to that portion of the center, including sidewalks, curbs, gutters and street lighting. An additional access road has been paved with a driveway from Grant Line Road to the Wal-Mart parcel. It is assumed the remaining land and subject sites will be developed in a manner similar to the Wal-Mart site. The undeveloped pads are basically level, and slightly above street grade. It appears they were rough graded for the future development of the center. The undeveloped pads west of Wal-Mart currently serve as storm retention ponds. Storm sewers will be installed as the area develops.

Grant Line Road is a four lane paved public street with center divider and appropriate tum lanes for access to subject development. A west-bound on-ramp to 1-205 is located at the east end of the shopping center site. An additional off­ ramp from west-bound I-205 was constructed on Naglee Road, just north of Grant Line. This is a signalized intersection, allowing easy access to the Tracy Marketplace, the West Valley Mall, or other properties in this vicinity. On- and off-ramps to the east-bound lanes are located east of the I-205 Grant Line overpass. The subject has good freeway access from both the west- and east­ bound lanes of I-205.

All public utilities are in place to the site; all are underground with the exception of power lines along Grant Line Road. Utility services are adequate to support development of the proposed shopping center. Services to this site will be provided as follows:

Electricity Pacific Gas & Electric Natural Gas Pacific Gas & Electric Telephone Pacific Bell Sewer and Water City of Tracy Positive Storm Drainage City of Tracy

Environmental Hazards Flood Zone: The subject properties are located in a Zone X flood hazard area, as identified by FEMA Flood Insurance Panel Map No. 060303 OOOSA, dated June 18, 1987. Zone X is designated as an area outside of the 500-year flood plain, minimal flooding hazard. Tracy joined the regular flood program December 22, 1980.

Earthquake Hazard: These properties are in an ISO Earthquake Hazard Zone 3, an area of moderate damage. This is the least hazardous zone in the state of

------Griffin and Way, Real Estate Appraisers and Consultants Page 24 Property Description

California. This area is not listed as being in an Alquist-Priolo Earthquake Fault Zone as of January I, 1994.

Wetlands: The sites are not located in an area that has been targeted as a possible habitat for endangered species. Our inspection of the properties did not indicate the presence of en.dangered species or endangered habitat. The properties are not located in a known wetlands area, are not subject to a California Conservation Act Contract, and are not in an agriculture preserve.

Potential contamination: The preliminary title report from First American Title Company discloses an instrument entitled Consent Judgment and Decree entered in Case number 245459 of the Superior Court of San Joaquin, a certified copy of which was recorded with the Notice of Entry ofJudgment on July 28, 1994 Recorder's Instrument number 94088003, San Joaquin County Records. This Consent Judgment and Decree is the result of a legal action by the landowners against Southern Pacific Transportation, Chevron Pipe Line Company, and Texaco Trading and-Transportation Company.

The legal action surrounds " ... all contamination of soil and ground water ... resulting from crude oil, bunker Coil, or other product which was transported ... by Associated Pipeline, Tidewater Oil Company, Getty Oil Company and/or Standard Oil Company of California and its affiliate companies, and form.ally located on or about or adjacent to the Southern Pacific right of way located next to ... " a portion of the subject property.

The July 1991 report prepared by Toxic Technology, Inc., indicates the following:

• A Phase I Site Assessment was performed by Harlan, Miller and Tait Associates San Francisco, on the neighboring Toste/Schwilke property in November 1989. Of particular interest was information about the previous existence of two pipelines located south of the Southern Pacific Railroad tracks. These parallel pipelines were originally owned by Associates Products, then Tidelands Oil Company, and later Getty Oil Company. One of these pipelines sustained a rupture in the late 1950s and covered approximately one acre of adjacent farm land with crude oil. The affected farm topsoil was reportedly removed and replaced- with additional topsoil. The two pipelines were reportedly abandoned and removed in the early 1970s." The approximate location of this rupture is just south of the 61.96 acres owned by Dividend Development Company on the south side of 1-205.

• SCS Engineering, Dublin, California, performed trenching operations at the North (62 acres) Dividend property in October, 1990. This field study included the laboratory analysis of six soil samples collected from two backhoe trenches excavated northwest of 1-205 and Byron Road. Diesel concentrations of 167 ppm and 1,060 ppm, and xylene concentrations of 14 ppm and 73 ppm were detected in two of the soil samples analyzed."

• Toxic Technology, Inc., conducted a visual inspection of the site on May 22, 1991. Seven groundwater monitoring wells were drilled. Soils samples were collected at five foot intervals in each well. Laboratory analyses of both soil

Griffin and Way, Real Estate Appraisers and Consultants Page 25 Property Description

and groundwater samples at the Dividend site (parcel north of I-205) reveal the presence of hydrocarbon chains corresponding to motor oil, gasoline, and diesel fuel. Small amount of benzene, toluene, and xylene were also detected. The ( 1991) maximum lateral extent of petroleum migration in the groundwater northward appears to be about 200 feet north of West Byron Road. The petroleum contamination encountered on the Dividend property is believed to have originated off site from a petroleum pipeline on the Southern Pacific Railroad Easement.

• Toxic Technology, Inc., recommended the immediate removal of free floating product to preclude further migration of petroleum hydrocarbon contamination into the site from the pipeline easement. Soil and water contamination must be mitigated in accordance with applicable regulatory requirements. All mitigation can be performed simultaneously with construction activities.

From our reading of the Consent Judgment and Decree and the Notice ofEntry ofJudgment, the oil companies are doing the cleanup of the contamination and agree to indemnify, defend and hold the landowners harmless for any and all liabilities, damages, costs, expenses, orders, judgments, and claims of any kind, whether meritorious or not, arising from any and all claims or demands, including, without limitation, any government or regulatory agencies, resulting from or related to the contamination, the remediation or the implementation or completion of, or failure to complete the plan. A copy of the Phase II Environmental Site Assessment by Toxic Technologies, Inc., can found in the Addenda.

The Consent Judgment and Decree and the Notice of Entry ofJudgment requires that " ... each deed, title or other instrument conveying an interest in the subject property shall contain a note stating that the subject property is subject to judgment and order, judgment and decree hereon and shall reference the recorded location of the judgment and order, judgment and decree hereon in any restrictions applicable to the subject property."

We strongly recommend that the City of Tracy's legal council review this document to determine what, if any, effect it may have on the proposed community facility district bonds.

No soil survey has been provided for the subject property. Typically, soils in the area are sandy loams which provide adequate drainage and a stable base, requiring no special engineering.

Improvement Description The subject sites are unimproved. This appraisal does, however, assume all proposed street improvements along Grant Line Road are in place.

Griffin and Way, Real Estate Appraisers and Consultants Page 26 i ~ t-.J ,,:t 11· ,,1) G.l'S ·Zo~~11Gf.'S.• ., DE JQ~'{ (t) 'I 1 GLOML rosmotb S'l'STtM (G.J: ~, olo-i~A r,tf~~o:' ~:1~4;.,. ,:-_?!--l,~ cf~r01 ,~~~ "·'-~- (') ,~~~h:r~:f~ .,.">.,.~t' ~~1,.~- 1~!ij SEE !!l!Etr T AA G.P.5. OESCNPTION 0 = fr~ ~~ ~~~ PARCEL MAP

BASIS OF B£ARIHGS, ~ en, 0, IIIACY ClOl•L rosn IOO

.o_.oirA r-·~, DlLTA MDIV, UNGTlf 111!,E.ll\JNG CD w ,o· o,• I 11410.ocr 1 "' ,z· !·· ~n,· JO"N _

REFERE~E5• ,,,_ (A\ 17 P.M.~, ,Jt."­ (&l ~R.,.f>, 'lJCA. t) 19P.M.t, SJ.C.ll. C).., ·~ I. IIQNUCLUllvt lAl(~TI QV(II ALL COtTIOH § AAUI Al H'l"1:D IN C.C. I 11.•t POii INC'IUI. :::s lGllt.. , OIIIYlVAY US(. UMINC,Ulll1Tll~.l6I01HU•D ~ I.M.OAOIIIG fll ~CIAL ANO Ollff:11 Y(lflCUI. ~ .iND QTlfE.IIVII( FOii Ttc: lN.IOlfltNT. COl1fOIIT, :::s LEGEi«> NOTES, AICI COHYIN INCi OI' C:UST"IIS. IN'llf(ll, • 0.. llCENltllo Tlll.'NTI ,.NO lnPLOY([S o, A\.L FOUND IIAllllOAD SPIKE fU,t,P.M.lc,t I. PUISU.INf fO l[CflOH 1141 I. I fll THE IUIIICISU PH Dtct..AIIATION OI COvtNAIITI. • FOUIIO 314" l~OAJ 1., - COYl~T CODI Of' CAllrOIIIIU, OIINtJI CONOUONI. llllTIIICTIOHI ,\IC) ll(CIPIIOCA\. ~ "' PIPE UGCED l!', "'210 .n II TO INSTALL JU. 1,-i11ovt1CNTI Al . (Alt!Clttl lltCDIIOED FllllUAIIT IS. IHJ IN f'l~ 1, 1'"1 2 ,OU<; fj()ft0 (1\_ lltOUllltO IT Ttlt Cl TY 0#' TIIACT • AtCOllotQ IIIITIIINNJ MNlll tlOllUS Of Gr,SCIAL lltCOIIOI OI' IAN JOAQUIN COIMTY. ~ 0 SET l/t• X lO" IIION (f\ I .... Tovtlll.UC IAKht!lf ra , ••• ' ,. PIPE TAGGED lS 4210 IIO IIIOTII Of lltCOIIO IIOOII "A" I. UPIIOvtO ACC[H TO OCH LOT Ptll C.C.& •· "S ,0 0, OUDI. VOL...-C ;ve. PAOI 1191 IIICOllotO FIIIIUAIIT IS. IHJ IN IIECOIIDEII' I N".. AC'-E INIJiu.;NT IUIIEA tlOUUS Of OHICIM. ll(COIIOI SU8DIYISION B~AIIY llHl 1 1 0, IAN JOAOUIN CCIIMTt. ANO Ptll "Ort IUll[II I ~ E.ASEMENT l lH£ :1. ,~·,~: : r t~ m1~,Ur":;1. 0, TIC PAIICtl IW' FILtO IN IOOII If o, ,AIIC£L . m Cl TT L 1nirs l 111£ IIAPI, AT PACC I IN rift o,,iu 0, THt CIUlfT II\ ~,,~ 0. IIESTII ICIEO ACCESS 4. U. IIO" TCllllllt. llC tA9tl'ltllf TD lllCCIIDIII .OI' IAN JOAQUIN COUNTY. !JIU IIAOIAL l!EAIIING ,.,. & t. rvot. ... 334. ,,.~ 1111 1111 11£.ASUIIED DISTANCE m TOTAL rJ P.11, PARCEL 11AP II. ~1°'&r.'l!~c.,'l.t~1?.f'.J'1eeo1 IO. CITY o, tUCY 11&1 Tiil IIIClllf TO COJltfllUCT. PRIKl(OIY 0.11. OH ICIAL ll~COAD lltCONITIII.CT, lllPAIII ANO IIAIHUIH P'*.IC AllOUOJASSOC .• IHC. > 11.0.11. IIICHT•Of·IIAT ll'l'IIOVl!CIITI AND TIC Ill APPUU(NANCU lll'DH. AND "O I, Tlfll PAIIC£L IW". CONFOllnl TQ NIHOII "O El. EXISTING IUIDIVIIIOH Al'PllCAJIOH NO, 1 M.S. H =0~.=~=!!'3".\;:,,~.. ~~:!,.~r ,00 141196 S.O.[. STOAn OIIAIN (ASE11£Hf "I.I,(.• Oil "IAIIITAllf ltlltll (Al(l1[NI" AICI Dl S.S.[. $AHif AIIT SEIIEII (AS[lt[NT 1. llfll IW' IIIOllt All lAlt~NTI ON "V.t, • Oil 0 1/Af(A IAK11CHT" Al l11!11AC(O 111 THIN u;· 11.S. IIECOIID Of SIJIIVET · rte PIWIIIU Oii Ol'. lltCDIID. TIC llTtlllOII l(UCIAIIJ LIIC UPON Tltll NAI'. !.J.C. ~ \J.C.11. W: ~tll/lU E/N:l111rc0Aos iil Hut!«,-_ SHEET 2 OF 7 :::s~ Q. n ~O-C/5A 0:::s II\c :::s6f r;r Property Descri"ption

Legal Description The appraisers have been supplied with a Preliminary Title Report issued by First American Title Company of Stockton on May 23, 1996. This title report, however, covers only the parcel in escrow for the Staples Office Supply Outlet site, and not the entire 16.19-acre parcel. The subject property is basically a triangle. It is bounded by the Wal-Mart Property on the west, Grant Line Road on the north, and 1-205 on the southeast. The subject sites are identified as parcels 15 through 24 as shown on that certain parcel map recorded February 29, 1996 in book of parcel maps, Book 20, Page 95, San Joaquin County. The appraisers recommend that the City of Tracy obtain a Preliminary Title Report covering the entire 16.19-acre area to determine its legal description.

Ownership According to the preliminary title report, the title to subject is vested in the name of Richard B. Oliver and Douglas Watson as Trustees for Dividend Development Corporation Money Purchase Pension Plan Liquidation Trust as to an undivided 1/2 interest; and, Richard B. Oliver and Douglas Watson as Trustees for Dividend Development Corporation Profit Sharing Plan Liquidation Trust, as to an undivided I /2 interest. As noted above this title report does not cover the entire 16.19-acre site.

The preliminary title report contains information regarding a "Consent_ Order and Judgment" issued by the United States District Court, Northern District of California entitled: Lynn Martin Secretary of the United States Department of Labor v. Dividend Development Corporation, Dividend Development Corporation Profit Sharing Plan, Dividend Development Corporation Money Purchase Plan, Richard B. Oliver, individually, and Douglas Watson, individually, defendants. We have requested a copy of this document from the title company, but as of the date of this report we have not received a copy to review. We assume that there is nothing in this document which will adversely affect the marketable title to the property nor its market value.

Purchase Agreements We have been informed by Comerica Bank that there was an agreement between the land owners and Opus Southwest Corporation to purchase one of the sites for about $4.00 per square foot. Tom Rocca and Luis Belmonte subsequently entered into an agreement to take Opus' place in the purchase of the land and development of the property. It is our understanding Rocca and Belmonte will acquire title as AMB/BTS 3, a California limited liability company. We have reviewed an unsigned purchase agreement reflecting an agreement by AMB/BTS 3 to purchase the property. The agreement set forth a purchase price of $283,389 or $3.00 per square foot.

This agreement requires the buyer to pay off the bonds for CFD 93-1, which are a lien at close of escrow, unless other arrangements are made. The buyer is also to perform certain development and improvement work. The buyer is responsible for relocating and extending the water, sanitary sewer and storm

------~------Griffin and Way, Real Estate Appraisers and Consultants Page 28 Property Description

sewer lines as necessary to service the subject site. This includes any required meter, manholes, fire hydrants, engineering work, staking and related fees. The buyer is also responsible for: the PG&E joint trench and conduit costs; fees and taxes; asphaltic pavement work, including grading, base pavement and striping, as necessary to reconfigure the parking and drive aisle on or adjacent to the Wal-Mart property and including the necessary completion of the drive aisle that parallels Grant Line Road from the Staples site to the Wal-Mart entrance that provides secondary access to Wal-Mart. The buyer has estimated that relocating and extending the water, sanitary sewer lines, etc., is going to cost about $31,000, and the joint trench is going to cost about $7 ,000. He said there were additional items that he would have expected the seller to provide if the sale price was $4.00 per square foot. These additional items amount to $25,000 to $30,000. The buyer felt that he paid about $25,000 to $30,000 below market because he was the first buyer and he was bringing in a national anchor tenant.

We have been told that a front parcel is in escrow as a site for a Taco Bell. The parcel map has been re-engineered to produce a 25, 179-square-foot-site. The price is $13.00 per square foot with the buyer responsible for the CFD 93-1 bonds. We have not seen a copy of the purchase contract nor the escrow instructions on this sale.

Taxes and Assessments According to San Joaquin County Tax Assessor's office, the subject properties were identified as parcel number 238-020-16 for the fiscal year 1995-1996. The San Joaquin County Tax Collector indicates assessed values and taxes for the fiscal year 1995-1996, the most recent information available, are as follows:

Assessment No: 238-020-16 Code Area: 004-087 Land: $191,861 Improvements: None Personal Property: None Taxes: $12,009.42 Base Tax Rate: $ 1.0034/$ 100

Included in the taxes are special assessments for Community Facilities District 91-1 at S10,057 .27 per year, Mosquito abatement at $4.44 per year, and South Delta Water at $22.60 per year.

Griffin and.Way, Real Estate Appraisers and Consultants Page 29 Property Description

For the 1996-1997 fiscal year, the Assessor has divided the property into 10 individual parcels. The assessed values for the new parcels are available but the tax rate has not been set as of the effective date of this appraisal. Assessment No. Assessed Value 238-020-32 $23, 181 238-020-33 $20,077 238-020-34 $4,824 238-020-35 $4,357 238-020-36 $35,467 238-020-37 $22, 192 238-020-38 $14,401 238-020-39 $19,747 238-020-40 $19,615 238-020-41 $30, 121

According to Article 13A of the California Constitution, property assessments are based on 1975 values. The basis for assessments on properties which have transferred ownership or were constructed after 1975 is the fair market value as of the date ownership was transferred or construction was completed. Once the base year is established, it is subject to a maximum annual upward adjustment of 2% per year, based on the California Consumer Price Index. The base year value, plus the annual adjustments produces the taxable value. Taxable values are multiplied by the tax rate plus any direct or special assessments to arrive at total property taxes. Under Article 13A, the basic tax rate is $1.00 per $100 of taxable value plus amortization of existing bonded indebtedness. Changes in the tax rate requires a two-thirds majority of the votes cast in an election held within the affected area. Any significant change in the current tax rate of 1.0034 is highly unlikely barring a restructuring of the current California Property Tax system.

Special Assessments Community Facilities District 91-1: This is part of the 1-205 project. This CFO was established to fund the preliminary engineering and environmental work on the 1-205 Specific Plan. Properties which participate~ in this CFO receive a credit on their fees in the 93-1 CFO. The properties in this assessment district, are obligated to pay a special tax which cannot exceed $994.00 per acre per year. The actual taxes have run closer to 66% of the maximum ($656 per acre). The 1995-96 assessment for the subject property was $614.37 per acre. According to the City of Tracy's Finance Department these bonds will be paid off in 2003. The bonds can be paid off early, with a 3% penalty. The payoff for the subject including the penalty would be approximately $5, 164 per acre or $0.12 per square foot.

Community Facilities District 93-1: On January 19, 1993, the Tracy City Council adopted a Boundary Map for Community Facilities District 1993-1 (CFO 93-1) to fund various infrastructure elements for Parcel GL 17 of the 1-205 Specific Plan (The Tracy Marketplace). The facilities constructed include roads, sewer systems, water systems, traffic signals, a portion of the future sewage treatment plant expansion, water resource and storm drainage. The liability for

Griffin and Way, Real Estate Appraisers and Consultants Page 30 Property Description

the remaining 16.37-acre Tracy Marketplace is approximately $I, 700,000, which can be prepaid or paid at $ I 1,000 per acre per year. The $1 I ,000 per acre figure includes two increases which can be made over the life of the bonds. According to the Finance Department, initially the maximum annual special assessment is approximately $10,550 per acre. The bonds have not yet been sold, so the city is unable to provide an estimate of what the special assessment will actually be. The assessment for the Tracy Marketplace can be divided among the future property owners who may cash out their portion or continue to pay the assessment until their portion is paid. Based on the information provided by the city we have estimated the payoff of this assessment at approximately $103,849 per acre or $2.38 per square foot.

In reviewing the effect of the special assessments on the subject property, it appears they total approximately $109,0.13 per acre. These special assessments can either be paid off in a single lump sum payment or paid in annual special taxes not to exceed $11,994. It is probable the special assessments initially will be closer to $11, 1SO per acre.

Fees Due at issuance of Building Permit: The Tracy Marketplace Finance Plan includes fees collected at issuance of the building permit. The total fees collected will be approximately $620,000 for the entire 16.19-acre parcel. According to Bob Conant at the Tracy Community Development Department, this fee will be prorated over the 10 individual parcels.

Covenants, Conditions, and Restrictions A declaration of covenants, conditions, restrictions, and reciprocal easements have been filed with the Department of Real Estate which pertain to the subject property. While the document is between Wal-Mart and Dividend Development, it will affect all tenants and future owners of all portions of the center. The CC&R' s contain provisions limiting uses in the center generally, and providing specific limitations as to proximity of uses to Wal-Mart. The document is over 25 pages in length. It appears to be typical of such instruments and pertains to the use and enjoyment of the center by the tenants and their customers. A summary of the document has been included in the Addenda of the report.

Zoning The City of Tracy Planning Department has zoned the subject site as PUD, Planned Unit Development. The parcel and the shopping center are a portion of the 1-205 Specific Plan corridor. The Specific Plan calls for residential and commercial development within the city's plan of development. Each project requires approval by the city on an individual basis. The Tracy Marketplace, the subject shopping center, has been approved. The city planner indicated that a Staples Office Supply Outlet has also been approved for construction.

Griffin and Way, Real Estate Appraisers and Consultants Page 31 [THIS PAGE INTENTIONALLY LEFT BLANK] Valuation Analysis

Highest And Best Use The definition of highest and best use is contained in the Assignment and Summary section of the report. In a highest and best use analysis there are four key elements to consider. The highest and best use of a property should be: physically possible, legally permissible, financially feasible, and maximally productive.

Physically Possible: The 10 subject sites are part of the proposed Tracy Marketplace Shopping Center. The most current parcel map indicates that the parcels range in size from 25, 179 square feet to 145,287 square feet. Five of the sites have Grant Line Road frontage and are considered ''front" pads. These front pads range from about 25,119 square feet to about 76,000 square feet. This is a good size range for fast food restaurants and other free standing retail uses desiring high visibility, and which typically locate on front pads in shopping centers. The five back pads are primarily larger anchor store pads. Two of the 10 parcels have sold and are in escrow. These sales required lot line adjustments to create a smaller front pad and a larger back pad than currently mapped by the Assessor. It is physically possible to develop the sites to a wide variety of retail uses requiring various sized parcels.

Legally Permissible: Factors to be considered when analyzing the legally permissible use of a property are: current zoning, any potential change in zoning, and legal restrictions other than zoning (i.e., government agencies and laws that could restrict or delay development). The current PUD zoning designation allows a variety of uses with each project requiring approval by the city on an individual basis. Under the development plan of the city, the subject sites are designated for retail development as a shopping center. There is no possibility for an alternate plan at this point in time. Located west of the intersection of Grant Line Road and 1-205; a portion of the shopping center has . already been developed with a Wal-Mart. Development to a use other than retail is not feasible; it does not fit with the city's plan, the development plan of the shopping center, or with neighboring use (Wal-Mart).

Financially Feasibility: The subject sites have good freeway visibility and are located at a freeway interchange. There has been and continues to be a demand for retail sites along 1-205 in the Tracy area. Two of the subject sites are in escrow as sites for a Staples Office Supply Outlet and a Taco Bell fast food restaurant.

Maximally Productive: An analysis of maximally productive uses considers the uses analyzed in the three other factors. Conclusions are then drawn on what would produce the greatest return to the property. Staples is considered to be a second anchor tenant and Taco Bell is a nationally known fast food franchise restaurant. The location of additional retail users within·the center will increase the feasibility of developing the remainder of the center as planned. Considering the permitted uses, the pending sales, and the plan of the city to develop this area as a retail center, development of the subject sites as pads within a shopping center is considered the highest and best use of the subject sites.

Griffin and Way, Real Estate Appraisers and Consultants Page 35 Valuation Analysis

Valuation Methodology In order to estimate the market value of most types of real property the appraiser must systematically and logically analyze the market forces that reflect supply and demand for real estate. This analysis requires acquiring, classifying, and interpreting market data such as current building costs, rental rates, investment returns, and recent sales of comparable properties. Three generally accepted indicators of value developed through the process are:

• The Cost Approach • The Sales Comparison Approach • The Income Approach

These approaches have varying degrees of applicability, depending on the type of property being appraised.

Cost Approach: To estimate value by this approach, one must first determine the value of the land as if it were vacant and add to this the replacement cost new of the improvements, less any accrued loss in value. This loss in value, or depreciation, is generally in the form of physical deterioration and functional and/or economic obsolescence, if any. The value of the site is estimated using the sales comparison approach. While it has been assumed that all proposed street improvements along Grant Line Road are in place, the subject sites are being appraised as retail building sites. Because there are no other improvements, the cost approach is considered inappropriate and was not used in this appraisal.

Sales Comparison Approach: This technique relies on sales of comparable properties. The sales are compared to the subject, making adjustments for dissimilar characteristics. Typically, some common denominator is arrived at to .establish units of comparison. In the valuation of the subject sites we have analyzed the sales using the price per square foot as a unit of comparison. While there is insufficient data to develop quantitative adjustments for all the various factors, the adjustment direction and relative magnitude of the adjustment can be estimated. One element which could be quantified is the additional costs of bonds and fees which were included in some of the sales. In this appraisal, the sales comparison approach was used to estimate the retail value of the individual subject sites.

Income Approach: The basic assumption of this technique is the existence of a relationship between the amount of income a property is capable of earning in the future and its value. This approach is based on the assumption that value is created by the expectation of future benefits. The expenses necessary for the generation of the income are deducted from the projected gross revenues to derive the net income. The net income is converted to an indication of value by dividing it by a capitalization rate.

In the case of the subject, the income is derived from the sale of the individual parcels. This income is generated over the projected absorption period of the project. This future income is discounted to arrive at an estimated present value

Griffin and Way, Real Estate Appraisers and Consultants Page 36 land Sales Chart

Gnntor/Gnmtee Location Date Sale Sale APN Deed# .. Price Parcel Size $/SF Comments Richard B. Oliver I AMBIBTS 3, L.L.C. Pending $284,481 94,827 sf . $3.00 Stapels Office Supply site .. Buyer Tracy Market Place to pay CFD 93-1 bonds and fees 238-020-34 plus some on-site development. 2 Richard B. Oliver I Taco.Bell Pending $327,327 25,179 sf · $13.00 Sale price includes utilities. Buyer Tracy Market Place to pay $2.50/sf in bonds and 238-02040 $0.86/sf in fees for CFD 93-1 3 Clover Place Assoc. I Undisclosed Lease-Option Pending $717,869 44,867 sf $16.00 Ground lease w/ option to W. Clover Rd., Tracy Addition costs SJS.JD2 . purchase at $16.00/sf plus 214-210-07 $755,869 $16.85 $38,000 offsite costs by buyer. 4 Tract Auto Plaza I NBK Partners Feb-96 $819,SOO 226,512 sf $3.62 Plus $2.43/sf in.bonds and Tracy Auto Plaza 96-020931 $0. 75/sf in fees for CFD 94-1. 212-270-11 s Tract Auto Plaza I Tracy Ford Pending $766,656 191,664 sf $4.00 Reponcd sale price is $4.00/sf Tracy Auto Plaza plus $2.43/sf in bonds and 212-270-02 $0.75/sf in fees for CFD 94-1. 6 Tract Auto Plaza I Kenneth Harvey (Honda) Pending $408,370 108,900 sf $3.75 Reponcd sale price is $3.75/sf Tracy Auto Plaza plus $2.43/sf in bonds and 212-270-10 $0. 75/sf in fees for CFD 94-1. 7 Tracy Mall Partners I Dayton Hudson Jul-95 $1,334,000 354,970 sf $3.76 Land only, cost to West Valley Mall 95-065573 develope and area-wide 212-050-23 costs not included. 8 Leon Schultz I Phillip Cordoza Dec-94 $269,000 68,824 sf . $3.91 Land only, cost to develop not Grant Line Road at Corral Hollow 94-131780 included. Property lacked· curbs, 214-020-10 gutters & side walks on two sides. 9 · Clover Place Assoc. I In-N-Out Burgers Feb-94 $657,330 43,822 sf $15.00 In-N-Out Burger fast food 575 W. Clover Rd., Tracy 94-025397 restaurant site 214-210-06 10 Richard B. Oliver I Wal-Man Stores Feb-93 $2,354,000 588,060 sf $4.00 Land only. Buyer to pay $2.50/sf Tracy Market Place 93-023934 in bonds and $0.86/sf in fees 238-020-15 for CFO 93-1

Page 37 Griffin and Way, Real Estate Appraisers and Consultants Valuation Analysis

for the entire property. This value represents the present market value of the entire property assuming a sale to a single buyer.

In the case of the subject sites, shopping center pads are primarily purchased to develop either by an owner-user or an investor. The income ~o the shopping center developer comes from the sale of the sites to end users. Expenses involve holding costs, selling costs, and developer's profit. The net cash flows are discounted to arrive at the present value of the entire property.

The final step in the appraisal is the reconciliation of the various value indicators. In this step, the appraisers consider the relative strengths and weakness of each of the approaches used. The ranges between value indicators are examined and emphasis is placed on those approaches which appear to produce the most reliable indication of value.

Sales Comparison Approach A search for land sales in the Tracy area produced nine closed or pending sales and a ground lease with option to purchase. A summary of the data on comparable land sales is illustrated on the facing page. Unless specifically noted, all sales are on a cash equivaient basis. More detailed information on these sales is presented on the individual land sales sheets included in the Addenda. The sales are compared to the subject sites based on location, market conditions, potential uses, and zoning. An adjustment chart showing the comparison adjustments for each sale is located at the end of the land comparables discussion. Land Sale 1 is a pending sale of a 94,463-square-foot back pad in the subject Tracy Marketplace shopping center. This is to be the site for a Staples Office Supply Outlet. The owners originally agreed to sell the site to Opus Southwest Corporation for about $4.00 per square foot. AMB/BTS 3, a California limited liability company, subsequently entered into an agreement to take Opus' place in the purchase of the land and the development of the site for a Staples. This agreement indicates the purchase price is $283,389 with the buyer to be responsible for payment of all bonded indebtedness. The outstanding obligation arising from the subject's inclusion in the two community facilities districts is estimated to be about $236,500. The buyer is also to perform certain development and improvement work. The buyer is responsible for relocating and extending the water, sanitary sewer and storm sewer lines, the PG&E joint trench and conduit costs, and asphalt pavement work. The buyer has estimated that relocating and extending the water, sanitary sewer lines, etc., is going to cost about $31,000, and the joint trench is going to cost about $7 ,000. He said there were additional items that he would have expected the seller to provide if the sale price was $4.00 per square foot. These additional items amount to $25,000 to $30,000. The buyer felt that he paid about $25,000 to $30,000 below market because he was the first buyer and he was bringing in a national anchor tenant. The buyer is assuming the community facility district bonds. Because we are assuming the community facility district bonds have been paid off, the indicated sale price needs to be adjusted upward. The original contract to Opus Southwest Corporation was for a developed site. AMB/BTS 3 negotiated a lower price, but

Griffin and Way, Real Estate Appraisers and Consultants Page 38 Valuation Analysis

in exchange agreed to pay for some of the development costs. This sale is a good indication of the value of the back pads in the Tracy Marketplace. Land Sale 2 is the pending purchase of a 25, 179-square-foot front pad in the Tracy Marketplace shopping center. This is to be a site for a Taco Bell fast food restaurant. This is a smaller site and will have all utilities extended to the site. The agreed upon sale price is $13.00 per square foot. The buyer will assume the bonds-on the property. We have confirmed this sale with both the owner and the real estate agent but have not seen a copy of the purchase agreement. Unlike Land Sale 1, this is sale is for a developed site and is considered a good indication of the value of the front pads in the Tracy Marketplace. Land Comparable 3 is located approximately two and one half miles northeast of the subject on the north side of Clover Road east of Tracy Boulevard. This 44,867-square-foot site backs up to 1-205. The real estate agent indicates that the property is in escrow under a ground lease. The ground lease includes an option to purchase the property for $16.00 per square foot. The buyer is also paying $38,000 for additional off-site development costs. The buyer intends to develop the property as a BP gas station and a car wash facility. The properties west of this site are developed as fast food restaurant with cross access agreements. This property is not subject to Mello Roos bonds. This facility could just as easily be built on a front pad in the Tracy Marketplace. The location near the intersection of Clover and Tracy Boulevard is considered superior to the.subject due to the adjoining fast food restaurants, highway commercial development, and population base. Land Sales 4, Sand 6 are parcels in the Tracy Auto Mall. The Tracy Auto Mall is located on Naglee Road opposite the West Valley Mall, just north of subject. Land Sale 4 is the February 1996 sale of a 226,512-square-foot parcel on the comer ofNaglee Road and Auto Plaza Way. The $819,500 indicated sale price equates to $3.62 per square foot. The buyer is assuming the Community Facility District bonds of $2.42 per square foot. The buyer has also purchased an adjoining 59,677 square feet to the south for $337,450 or $5.65 per square foot plus area-wide costs. The parcel has a comer location and will be the site of a Chevrolet dealership. Land Sale 5 is a pending sale of the parcel just north of Land Sale 4 on the comer ofNaglee Road and Auto Plaza Drive. This 191,664-square-foot site is reported to be in escrow at $4.00 per square foot plus the Community Facility District bonds of $2.42 per square foot. This parcel also has a comer location and will be the site of a Ford dealership.

Land Sale 6 is a pending sale of the parcel west of Land Sale 4 and 5 along the west side of Auto Plaza Way. This 108,900-square-foot parcel is reported to be in escrow for $3.75 per square foot in addition to the Community Facility District bonds of $2.42 per square foot. This will be the site of a Honda dealership.

Griffin and Way, Real Estate Appraisers and Consultants Page 39 u! r- i P..> ~ ::J 0 Cl.. V'> Sale ·<':s@it#.tt .. Sale 2 Sale3 Sale9 Sale I Sale4 Sale 5 Sale6 Sale7 Sale 8 Sale 10

Price/SF 1 $13.00 /SF $16.00 /SF $15.00 /SF $3.00 /SF $3.62 /SF $4.00 /SF $3.75 /SF $3.76 /SF $3.91 /SF $4.00 /SF Date of Sale ::1:r:i:i:i1:1:i::ii1iii1i11i:i:1 Pendinl Pcndinl Feb-94 Pendin1 Fcb-96 Pendinl Pendin1 Jul-95 Dec-94 Feb-93 I;

1 )> CFO Bonds •

Frontage & Visibility Front-Good Front- Good Front-Good Back- Fair Front- Good Front-Good Back- Fair Back - Fair Fa.ir Back - Fair Cl C).., fJi,111:J = = = = = ··--:-::;:::::- -:-:-:} :;::=::::: ::::::: "' "' ~ ::::, Parcel Size ::::: ifi~:$.fil:::!\ 28,314 SF 44,867 SF 43,822 SF 94,827 SF 226,512 SF 191,664 SF 108,900 SF 354,970 SF 68,824 SF 588,060 SF 11,1 = = = = = ::::, ::::::::t4MJ1$i%I: + + + = ~ Q. Market Conditions Same Same Inferior Same Same Same Same Same Inferior Inferior I = = + + -fl ;;o Other None Dev. Costs None None None Sir motivation None Dev. Costs Dev. Costs Dev. Costs et Plus SO.SS/SF m = = = = + + + + rJ"' Overall Adjustment + "' "' + + + + + + + 'C> 'C rJ j' iii 11,1 ::::, Q. n g "'c ET°::::, ~ •~l\lillll1111111111•1u, ______... ______Valuation Analysis/(;(.// OS=xR3 r· Land Sale 7 is the July 1995 purchase of the 354,970-square-foot Target site in the West Valley Mall. The West Valley Mall is located just north of the subject on the east side of Naglee Road. The reported sale price of S 1,334,000 equates to $3. 76 per square foot. This amount reflects the land costs, but does not include onsite and offsite development costs and area-wide (CFO) costs. There is a certain amount of synergism being located in a regional shopping mall. We have been unable to determine the Target development costs. Target is the only land sale within the West Valley Mall. All the other anchor stores and front restaurant pads have been or are being developed under ground leases. Land Sale 8 is a December 1994 sale of 1.588 acres located at the northwest comer of Grant Line and Corral Hollow roads. The $269,000 indicated sales price equates to $3.89 per square foot. The price reflects land costs only. All utilities were available to the site but it lacked curbs, gutters and sidewalks along the road frontages. This parcel is located on the south side of I-205. This parcel is considered to have an inferior location. With the exception of the vicinity of the I-205 interchange, Grant Line is primarily -developed to residential in this area. There was to be a shopping center developed at the opposite comer, but this has not occurred. Road widening has reduced the parcel size to 68,824 square feet. It is our understanding that there are no bonds on this property. This site was purchased by a real estate broker who has the property listed for sale at $20.00 per square foot.

Land Sale 9 is located just west to Land Sale 3. This 43,822-square-foot parcel sold in February 1994 for $657,330. The sales price equates to $15.00 per square foot. It was purchased as a site for an Jn-N-Out Burger fast food restaurant. This was a finished site with no bonds or special assessments.

Land Sale 10 is the February 1993 purchase of the 588,060-square-foot Wal­ Mart site in the subject development. The $2,354,000 sales price equates to $4.00 per square foot. Area-wide costs were $1,200,00 plus $84,875 for sewer and water to be paid by the buyer. This sale is considered a good indication of the value of a back parcel.

The front pad comparables range from $13.00 to $16.85 per square foot and the back pad comparables range from $3.00 to $4.00 per square foot. On the facing page is an adjustment grid that displays how the land sales compare to the subject. The key factors to be considered are CFO Bonds, CFD Fees, location, access, shape, frontage and visibility, parcel size, and market conditions at time of sale. Because the costs of the CFO Bonds and Fees can be quantified, we have made these adjustments first. We have analyzed the front and back pad separately.

Front Pad Comparable Adjustments Community Facility District Bonds: In the appraisal of the subject sites, we have been requested to assume that the community facility district bonds have been paid off. Land Sale 2 is part of the Tracy Marketplace. The CFO 91-1 and CFD 93-1 Bonds for the Tracy Marketplace have been estimated to total approximately S2.50 per square foot. An upward adjustment to Land Sale 2 is necessary to reflect the fact that the buyers assumed these bonds in addition to the indicated sales price. There were no CFO Bonds associated with Land Sales 3 and 9. therefore no adjustments are required for comparability.

Griffin and Way, Real Estate Appraisers and Consultants Page 41 MUNICIPLE~ 606 878 5267:# 2! 4 SENT BY: 8-18-97 ;11:36AM; va,uatton Analysis :,s::lb&&&& :il!llill-1 lilllfff Ja& -Mlf•'#

~ Community Facility District Fees: A ponion of the infra.structure costs within the J.. 20:5 Corridor Specific Plan is being funded by fees which are coJlected with the building permits. These fees are in addition to the normal building fees. While it has been requested that we assume the CFO.Bonds have been paid off, we are assuming that the potential buyers of the subject sites wiIJ be required to pay the CfD fees at the time the property is developed. The estimated CFO fees for the Tracy Marketplace equate to about S0.86 per square foo1. Land SaJe 2 is located in the Tracy Marketplace so no adjustment is necessary. Land Sales 3 and 9 involve no CFD fees. Downward adjustments to their indicated sale price is necessary to reflect the absence of CFO fees.

Locat'ioa: The subject property consists of 10 parcels in the Tracy MarketpJace which is anchored by Wal .. Man. The Tracy Marketplace is located on the south side of Grant Line Road just west of the westbound 1-205 on-ramp. Land Sale 2 is lo,ated in the Tracy Marketplace and is considered to have a similar location. Land Sales l and 9 near the intersection of Tracy Boulevard and Clover are considered to have a superior location requiring a downward location adjustment.

Access: There is a median divider on Grant Line which limits access to the center from the east direction only~ We consider the subject sites to ha"\'e fair access. Land Sale 1 located in the Tracy Marketplace is considered to also have fair access. No adjustment is required for access. Land Sales 3 and 9 have superior access which require downward adjustments for comparability to the subject.

Shape: The subject sites are irregular, but do allow efficient development. All of the land sales have com-parable shapes requiring no adjustments.

Frontage and Visibility: The subjectjs five front pads combined have approximately l ,4S4 feet of frontage on Grant Line Road allowing good visibility. Land Sales 2, 3, and 9 are considered to have similar frontage and visibility.

Parcel Size: The subject front pads range from 25,179 square feet to 76tJ07 square feet. Three of the subject front pads arc over an acre in size. Typically, front pad users require an acre or Jess. Bob Conant, at the Tracy Community Development Departmellt, indicates that there would be no problem splitting the larger front pads into small pads. Land Sales 2, 3, and 9 range from 25, 179 to 44.861 square feet. No size adjustment is deemed necessary for these sales because the subject front pad sizes can be adjusted to meet the users needs.

Market Conditions at Time or Sale: Land Sales 2 and 3 are pending sales requiring no time adjustments. Land Sale 3 and Land Sale 9 are nearly identical in size and are adjacent to each other. The adjusted sales prices indicate about 12% appreciation over a two and one half year period. Pan of that appreciation might be attributable to the value of the lease option compared to a purchase. It does appear to indicate a strengthening market. An upward adjustment is necessary to reflect the current market conditions compared to the market conditions when Land Sale 9 occurred. Valuation A~alysis

Other Conditions: The buyer of Land Sale 3 is also paying $38,000 for additional off-site development costs. An upward adjustment of at least $0.85 per square foot is necessary to reflect the time and expense to develop the site.

Land Sales 2, 3, and 9 are considered front pad compara~les. The unadjusted range is $13.00 to 16.00 per square foot. Adjustments that were made for CFD Bonds and Fees produced a price range of approximately $15.00 to $16.50 per square foot. This allows us to have a reasonable degree of confidence in the indicator. Placing greatest reliance on Land Sale 2 would suggest a market price of $15.50 per square foot. Based on $15.50 per square foot, a value of $4,115,095 (265,490 SF x $15.50/SF), rounded to $4,120,000 is indicated for the front pad sites. ··

Back Pad Comparable Adjustments Community Facility District Bonds: In the appraisal of the subject sites, we have been requested to assume that the community facility district bonds have been paid off. Land Sales 1, and lO are part of the Tracy Marketplace. The CFO 91-1 and CFD 93-1 Bonds for the Tracy Marketplace have been estimated to total approximately $2.50 per square foot. Upward adjustments to Land Sales I, and 10 are necessary to reflect th~ fact that the buyers assumed these bonds in addition to the indicated sales price. Land Sales 4, 5, and 6 are located in the Tracy Auto Mall. The CFD Bonds associated with this project haye been estimated at approximately $2.43 per square foot. Upward adjustments to Land Sales 4, S, and 6 are necessary to reflect the fact that the buyers also assumed these bonds in addition to the indicated sales price. Land Sale 7 fs located in the West Valley Mall. There are CFD Bonds associated with this project. It 1s our understanding that the sales price did not include the bonds. We have not been able to determine the exact cost of these bonds. An upward adjustment is, however, necessary to reflect the -fact that the true acquisition price includes the cost of the bonds. There were no CFO Bonds associated with Land Sale 8. No adjustment is therefore required for comparability.

Community Facility District Fees: A portion of the infrastructure costs within the 1-205 Corridor Specific Plan is being funded by fees which are collected with the building permits. These fees are in addition to the normal building fees. While it has been requested that we assume the CFO Bonds have been paid off, we are assuming that the potential buyers of the ·subject sites will be required to pay the CFO fees at the time the property is developed. The estimated CFO fees for the Tracy Marketplace equate to about $0.86 per square foot. Land Sales 1, and 10 are located in the Tracy Marketplace so no adjustment is necessary. The estimated CFO fees for the Tracy Auto Mall equate to about $0. 7 S per square foot. Therefore, a slight downward adjustment is necessary for Land Sales 4, S, and 6 to reflect the lower fees. We have not been able to estimate the fees associated with Land Sale 7 in the West Valley Mall, so we have made no adjustment. Land Sale 8 involved no CFD fees. A downward adjustment to the indicated sale price is necessary to reflect the absence of CFD fees.

Location: The subject property consists of 10 parcels in the Tracy Marketplace which is anchored by Wal-Mart. The Tracy Marketplace is located on the south side of Grant Line Road just west of the westbound 1-205 on-ramp.

Griffin and Way, Real Estate Appraisers and Consultants Page43 Valuation Analysis

Land Sales l, and IO are located in the Tracy Marketplace and are considered to have similar locations~ Land Sales 4, 5 and 6, located in the Tracy Auto Mall, are also considered to have similar locations. No location adjustments are necessary for these sales. Land Sale 7 within the West Valley Mall is considered to have a superior location requiring a downward location adjustment. Land Sale 4 is located on Grant Line Road south side of 1-205, and east of the Grant Line/1-205 interchange. This sale is considered to have an inferior location, requiring an upward location adjustment.

Access: There is a median divider on Grant Line which limits access to the center from the east direction only. We consider the subject sites to have fair access. Land Sale I, located in the subject are considered to also have fair access requiring no adjustment for access. There is also a median divider on Naglee Road. Therefore Land Sales 4, 5, and 6 in the Tracy Auto Mall; and Land Sale 7 in the West Valley Mall have comparable access. Land Sale 8 and Land Sale IO (Wal-Mart) are both located at a signalized intersections. These two sales are considered to have superior access, which require downward adjustments for comparability to the subject.

Shape: The subject sites are irregular, but do allow efficient development. All of the land sales have comparable shapes requiring no adjustments.

Frontage and Visibility: The back pads in the Tracy Marketplace lack frontage on Grant Line Road. While they will have fair to average visibility from Grant Line Road, they will have good rear visibility for signage from 1-205. All of the land sales are considered to have similar frontage and visibility.

Parcel Size: The back pads range from 29,052 square feet to 145,287 square feet. Land Sale 4 in the Tracy Auto Mall; Land Sale 7, the Target site; and Land Sale 10, the Wal-Mart site, are all considerably larger. As a rule of thumb, when there is sufficient supply of small and large parcels, a smaller parcel will command a higher price per square foot than a larger parcel. Therefore, an upward size adjustment is necessary for Land Sales 4, 7, and 10. All of the other comparable land sales fall within this range. No size adjustment is necessary for these sales.

Market Conditions at Time of Sale: Land Sales I, and 4 through 7 are either pending or have closed within the last year and require no time adjustments. Land Sales 8 and IO occurred between February 1993 and December 1994. Land Sale 3 and Land Sale 9 are nearly identical size and are adjacent to each other. The adjusted sales prices indicate about 12% appreciation over a two and one half year period. Part of that appreciation might be attributable to the value of the lease option compared to a purchase. It does appear to indicate a strengthening market. The Wal Mart site was purchased before the Tracy Outlet or the West Valley Mall were developed. There was a greater degree of risk involved at the time of this sale than there is now that both shopping centers have been developed and have a high occupancy level. An upward adjustment is necessary to reflect the current market conditions compared to the market conditions when Land Sales 8, and 10 occurred.

Griffin and Way, Real Estate Appraisers and Consultants Page 44 Valuation Analysis

Other Conditions:. Land Sale 7, 8, and 10 involved development costs paid by the buyer. We were not able to determine the amount of the development costs in addition to the CFO fees for Land Sales 7 and 10. No CFO Bonds or fees are associated with Land Sale 8. It was, however, raw land at the time of sale. Since the December 1994 sale date, the owner has installed curb~, gutters, and sidewalks along both Grant Line Road and Corral Hollow Road frontages. Upward adjustments are necessary to reflect the time and expense to develop the sites for Land Sales 7, 8, and 10.

Land Sales l, 4 through 8, and IO are considered back pad comparables. The unadjusted range is $3.00 to $4.00 per square foot. After adjusting for known CFO Bonds and Fees, the most similar comparables displayed an adjusted sale price range of $5.50 to $6.50 per square foot. Land Sale 1 was the lowest and the buyer acknowledged that he negotiated a good deal because the seller needed a second anchor store for the shopping center. The remaining comparables were in the $6.00 to $6.50 per square foot range. Placing greatest reliance on Land Sale 10 (Wal-Mart) would suggest a market price of $6.50 per square foot, which is at the top of the range. Based on $6.50 per square foot, a value of $2,861,404 (440,216 SF x $6.50/SF) rounded to $2,860,000 is indicated for the front pad sites.

Based on the above sales and analysis, the estimated aggregate retail value of the 10 parcels in the Tracy Marketplace based on the sales comparison approach is $4, 120,000 for the front pads plus $2,860,000 for the back pads totaling:

SIX MILLION NINE HUNDRED EIGHTY THOUSAND DOLLARS

($6,980,000)

Income Approach - Discounted Cash Flow Analysis The above is not the market value of the 10 sites, it is the aggregate retail value of the 10 sites. Market value assumes a single sale of the entire project. A single buyer of multiple properties usually pays a lower price per unit than the buyer of only one unit. The buyer in bulk usually receives a bulk sale discount. This is most often observed in the sale of residential subdivision lots. We have been asked to value to subject property on a bulk sale ·basis. The definition of bulk sale value is contained in the Assignment and Summary section of the report. Typically, in estimating a bulk sale value a discounted cash flow (DCF) analysis provides a useful valuation tool in the absence of comparable bulk sale data. A discounted cash flow analysis is based on a set of assumptions regarding the subject property.

The subject property consists of 10 parcels of various sizes. Under the current Assessor's Parcel Map the five front pads have a total area of 287 ,258 square feet and the back pads total 418,420 square feet. The first two sales in the Tracy Marketplace involved a lot line adjustment to create a smaller front pad and a larger back pad. After the lot line adjustment the property has 265,490 square feet of front pads and 440,216 square feet of back pads. These two lot line adjustments did not change the total number of pads. Bob Conant, at the Tracy Community Development Department, however, indicates that there would be

Griffin and Way, Real Estate Appraisers and Consultants Page 45 Valuation Analysis

no problem splitting the larger front pads into small pads. Because it seems probable that additional sales might also require lot line adjustments or parcel splits, we have converted the sales volume or absorption to a per-square-foot basis rather than a per-lot basis.

The appraisers have not been supplied with a feasibility study for the Tracy Marketplace. The City of Tracy has information on the number of non­ residential building permits, taxable sales, and business permits. To the appraisers' knowledge there have been no studies as to the amount of retail space developed and absorbed in Tracy over the last decade. The city's figures do show that the taxable sales in Tracy have doubled over the 10-year period of 1985 through 1995. The 1994 Shopping Center Directory published by National Research Bureau indicates that only two shopping centers were built in Tracy during the 1960s, and no shopping centers were developed in the 1970s. Since 1984, however, five neighborhood shopping centers, one community shopping center, one factory outlet, and a super-regional mall have opened in Tracy. The shopping centers are charted below.

Shopping Centers Tracy, California

Year Name GI.A Site Land to Bid. Anchor Srores Opened Location Type (sq. ft.) (sq. ft.) Ratio Save Mart. Thrifty (closed) 1966 McKinley ViJlace Neighborhood 70,000 435,600 6.22: 1 1968 Grant Line Plaza Neighborhood nm !Z.Jln U6..:..l None Total 100,487 m.120 5.20: 1

1982 Valley SbopJJDII Center Neighborhood 99,831 392,040 3.93: 1 Lucky,Longs 1984 Westgate Plaza Neighborhood 92,.500 348,480 3.77: 1 Save Mart, Payless Shoes 1986 Gnmrace Shopping Center Neighborhood 68,337 435,600 6.37: 1 K Mart, Jack-in-The-Box 1987 LiDcolD Wm Plaza Neighborhood 17.SOO 87,120 4.98: 1 Quick Stop 1990 Gateway Plaza Community 138,000 S9S,+14 4.31: 1 Safeway' Walgn:cm 1991 AmadoPlaza Neipborhood 86,000 361,548 4.20: 1 Food 4 Less & Walgreem 1994 Tracy OatJet Mall Facu,ry Outlet lSJ,000 361,548 2.36: 1 199.S Wm Valley MaD Super-Regional WJD2 3 049,200 ~ Target. JC Pamy, Gouscbaiks Total 1,340,168 S.630.980 4.20: 1

Most of the shopping centers on the chart were discussed in the Retail Real Estate Market Trends section of this report. Most of these shopping centers have relatively low vacancy rates. The one exception is the West Valley Mall which has about 20% vacancy. These eight shopping centers have added about 1.3 million square feet of gross leaseable area of retail space on about 5.6 million square feet of land. This equates to over 510,000 square feet of land per year.

The West Valley Mall, located northeast of the subject, has been open for less than one year and is still leasing up. About 15% of the interior mall store space is available. In talking to the management at West Valley Mall we have learned

Griffin and Way, Real Estate Appraisers and Consultants Page 46 Valuation Analysis

that three front pads are being developed as fast food restaurants under ground leases. West Valley Mall has four additional front pads available for development. This center is in direct competition with the Tracy Marketplace. Based on the available space in these two projects we have estimated that it will take approximately three years to sell all 10 subject parcels.

We have ass.urned that the front pads and the back pads will be absorbed at the same rate. Mathematically, the absorption has been spread over 12 quarters. It has been estimated that the absorption will be equal in each quarter. Based on the most recent parcel map reflecting the two lot line adjustments, we estimate that the front pads total 265,490 square feet and the back pads total 440,216 square feet. Subtracting the two parcels in escrow leaves a beginning inventory of240,311 square feet of front pad space and 345,753 square feet of back pad space. We have therefore calculated that 20,026 square feet of front pad space and 28,813 square feet of back pad space will absorbed in each quarter.

It has been assumed that the probable sales price of the individual parcels will be at the retail value as estimated in the sales comparison approach. We have projected annual appreciation at 3%. Adjacent Land Sales 3 and 9 are nearly identical and indicate approximately 6% per year appreciation since early 1994. Part of this appreciation is estimated- to be a product of the value of the lease­ option compared to a sale.

The two pending land sales in the Tracy Marketplace have been negotiated where by the buyers are responsible for the CFO bonds. Because we have been requested to appraise the property as if the existing bonds have been paid off, we have adjusted the actual sales prices to our estimated retail values in calculating the pre-sale income.

To develop the selling expenses for the subject property it is necessary to examine the property tax situation. The DCF assumes a bulk sale to a developer ·how will then sell of the individual parcels. When the developer purchases the property it will be reappraised and the property taxes will be based on the market value. Estimating the property taxes requires a circular calculation, in that one has to know the market value of the property to estimate the property taxes. The market value is unknown. Through iteration we have estimated the property taxes using the 1995-96 tax rates as applied t~ the estimated market value which equates to about $0.0675 per square foot.

Our discounted cash flow projections for the subject property assume that the total selling expenses, excluding taxes, will be 7% of the sales price. The selling expenses include sales commissions, escrow and title fees, etc.

The major expense item to be deducted is the developer's profit. The developer's profit was partly based on the 1992 Single-Family Builder Cost of Doing Business Study, conducted by the National Association of Home Builders and Builder magazine. This survey of 382 builders indicated the typical profit for these companies is 9%. We interviewed several real estate brokers, developers and an individual who makes locating decisions for a major supermarket chain. The consensus was that many felt the Tracy retail market is close to being over built. While a great deal of retail space has been developed

Griffin and Way, Real Estate Appraisers and Consultants Page 47 Discounted Cash Flow Chart

... ·.. ·.··.·, ,::: :::",(X)~CLUSIONS::>::' I CFO 93· I Bonds have been paid off. DISCOUNT PROJECT 01tal Size of Subject Propcny (Sq. Ft.) 70S,706 RATE MARKET VALUE 01:al Area of Front Pads (Sq. Ft.) 26S,490 9.00-.4 $4,949,000 rent Pad Presales (Sq. Ft.) ~ 9.500.4 $4,916,000 eginning Inventory ofFront Lots (Sq.Ft) 240,31 I I 0.00-.4 $4,883,000 otall Area of Baclc Pads 440.216 10.S00.4 $4,851,000 ac:k: Pad Presalcs (Sq. Ft.) 11.00% $4,818,000 q~lling Inventory of Back Pads (Sq.Ft) 34S,1S3 11.50% $4,787,000 jected Absorption Period (Quanm) (3yrs) 12 .... >>•••:, .. ·:::::_:•::s.t~~: molJltion Rate For Back Pads (Sq.Ft per quarter) 28,813 .·.· .·. :ttn#.r+Lt •< \: •:<><>< :, =- · •'•

DISCOUNT VALUE ANALYSIS

Quarter 2 3 4 s 6

"s:i:ilncome: Front Pad Absorprion (Sq.Ft per Quarter) 20,026 20,026 20,026 20,026 20,026 20,026 F:root Pad Inventory (Sq.Ft) 240,311 220.28S 200.2S9 180.233 160,207 140,181 F1ront Pad Sale Price/Ser.Ft SIS.SO SlS.62 SIS.73 SIS.SS SIS.97 SI6.09 Back Pad Absorptioo (Sq.Ft. per Quarter) 28,813 28,813 28,813 28,813 28,813 28,813 :Back Pad Invcntory(Sq.Ft.) 34S,1S3 316,940 288,128 2S9,31S 230,502 201,689 JB:ack Pad Price (Per Sq.Ft.) $6.50 $6.SS $6.60 $6.6S $6.70 $6.1S li>J-e Sale Income Sl~.2M SQ.22 SQ.22 12.QQ R.02 SQ.22 Quarterly Sala IDc:ome Sl,SOl,969 $501,417 $505,178 SSOl,967 5!12,784 $!18,088

Estilll1•1tal Quarterly E:spema

Sc:lling Costs SIOS,138 $3S,099 S3S,362 S3S,628 S3S,89S S36.266 Property Taxes 4,0S7 3,719 3,381 3,043 2,705 2,367 I>c:vclopcr's Profit m.w nm 1J..1IJ. ~ .2Ull 1Ull Total E:xpenses $334,491 $114,031 Sll4,520 Sll!,016 SllS,Sl7 $116.346 NETU~COME $1,167,478 $387,386 $390,6!7 $393,951 $397,266 $401,742

Quarter 7 8 9 10 11 12 13 --Sala hicome: Fnmt Pad Absorpcioo (Sq.Ft. per Quarter) 20,026 20,026 20,026 20,026 20,026 20,026 0 Fnmt Pad Invcnto«y (Sq.Ft.) 120,IS6 100,130 80,104 60,078 40,0S2 20,026 0 Fmnt Pad Sale Price/Sq.Ft. Sl6.21 $16.33 Sl6.4S SI6.58 Sl6.70 Sl6.83 S0.00 Back Pad Absorption (Sq.Ft. per Quarter) 28,813 28,813 28,813 28,813 28,813 28,813 0 Back Pad Inventory (SqR) 172,877 144,064 11S,2Sl 86,438 S1,626 28,813 0 Bade Pad Price (Per Sq.Ft.) $6.80 S6.8S $6.90 $6.9S S7.00 S7.06 S0.00 Pire: Sale Income $.Q.2Q tMQ $.Q.2Q SW S2..2Q SQ.22 SQ.@ Quarterly Sales lacome mo.sos $524,408 $528,341 $532,304 $536,296 $540,318 so

Estimatl!Ci Quarterly Expenses Sdling Costs S36,43S $36,709 $36,984 S37.,261 $37,S41 $37,822 Pmpcrty Taxes 2,029 1,691 l,3S2 1,014 676 338 0 Developer's Profit 1B.J212 1BMl 12.m 12.8:% ~ W!a Toal Eltpenses $116..540 $117,060 $117,588 SIJS,121 $118,661 $119,208 NET INCOME $403,965 $407,348 $410,754 $414,183 $417,635 $421,110 so

Page 48 Griffin and Way, Real Estate Appraisers and Consultants Valuation Analysis

and absorbed, there is some question as to where the saturation point is. Does current supply equal .demand or is there continued demand to support additional retail development? It is the appraisers' opinion that the development of a shopping center entails greater risk than the development of a residential subdivision. We have, therefore, estimated that a developer would anticipate a 15% profit, considering the risk associated with the project.

The final element of the DCF is the selection of the discount or yield rate. We have no direct evidence for yield rates for shopping center land. Rates published in the December 1995 issue of Appraiser News shows pre-tax yield rates on regional malls at 10.0% to 14.0%. with an average of 11.55%. Because the property is not a finished and occupied shopping center, we concluded that a rate above the midpoint of rates found in the survey is appropriate. Higher risk properties command higher returns from informed buyers. Considering the additional degree of uncertainty involving development and lease-up of the shopping center we have concluded a rate in the 12 to 13 percent range would be required to attract an investor.

On the facing page are the results of our DCF. We have included a range of value indicators using rates from 9 to 16 percent. We have highlighted the band of values indicated from 12 to 13 percent. With no conclusive argument for a value at any point in the range, we have given them equal weight and selected the midpoint in the range at $4,724,000 rounded to:

FOUR MILLION SEVEN HUNDRED TWENTY-FIVE THOUSAND DOLLARS ($4, 725,000)

Reconciliation The value estimates of the fee simple interest as indicated by the three approaches are:

Cost Approach: Not Used Sales Comparison Approach: $6,980,000 Income Approach: $4,725,000

It is necessary to compare the strengths and weaknesses of the individual value indicators to arrive at a final value conclusion for the subject property.

The cost approach is most applicable on relatively new improvements. Because the only improvements on the subject parcels are the proposed street improvements along Grant Line Road, which we have assumed are in place, the cost approach is considered inappropriate and was not used in this appraisal.

The sales comparison approach provides the best estimate of value for the subject sites. We are confident with the value indicated by this approach. The comparable sales used indicated a fairly tight range of adjusted value on a per square foot basis. This produced an aggregate retail value, which is not the market value of the IO subject sites to a single buyer.

Griffin and Way, Real Estate Appraisers and Consultants Page 49 Valuation Analysis

In the income approach a discounted cash flow analysis was used to estimate the value of the shopping center land assuming a single purchaser who would then re-sell the individual parcels to end-users.

We have been requested to provide estimates of the value of the subject properties assuming a bulk sale. At the client's request we have valued the property assuming all bonds associated with Community Facilities Districts 91- 1 and 93-1 have been paid. In arriving at an estimate of the market value of the subject sites we relied on the sales comparison approach to estimate the individual parcel values. Our value conclusion was based solely on the discounted cash flow analysis to estimate the bulk sale value of the IO parcels in the Tracy Marketplace. Based on this analysis, the bulk sale value of the fee simple interest in the subject property as of August 11, 1996 is:

FOUR MILLION SEVEN HUNDRED TWENTY FIVE-THOUSAND DOLLARS ($4, 725,000)

Market Time The value conclusion expressed in this report reflects current market conditions by virtue of the fact that the sales are current. The market is believed to be in recovery from the recession. Still, mixed signals continue to be reported by government and privately, as to recovery and the health of the economy. While the situation could change, the market outlook for properties such as the subject is considered to be average. The available sales data indicates an active market.

Considering the foregoing, based on the available data the estimated marketing time (i.e., the amount of time it would probably take to sell the subject property if exposed on the market beginning on the date of this valuation) is estimated to be three years.

·------~------~------~Griffin and Way, Real Estate Appraisers and Consultants Page 50 APPENDIX C

COMMUNITY FACILITIES DISTRICT NO. 93-1 (1-205 PARCEL GL-17) CITY OF TRACY SAN JOAQUIN COUNTY, CALIFORNIA

Rate and Method of Apportionment of Special Tax

I. DEFINITIONS: "CFD No. 93-1" means Community Facilities District No. 93-1 (I-205 Parcel GL-17), City of Tracy, San Joaquin County, State of California. "City" means the City of Tracy, San Joaquin County, California. "Council" means the City Council of the City. "Final Use Property" means all of an Original Parcel ( and all of its successor Properties) once a building permit has been obtained from the City for a structure anywhere on such Original Parcel, as well as all Property within CFD No. 93-1 once building permits have been obtained from the City for structures anywhere on two Original Parcels. "Fiscal Year" means the period from July 1st of any calendar year through June 30th of the following calendar year. "Original Parcel" means any one of the three parcels labelled 1-A, 1-B and 1-C on the Amended Boundary Map of CFD No. 93-1 approved by the Council on March 2, 1993 by its Resolution No. 93-064 and recorded in the Office of the County Recorder of San Joaquin County on March 4, 1993 in Volume 3 of Maps of Assessment and Community Facilities Districts at page 36. "Property" means legal parcels (as of March 1 of the previous Fiscal Year, or later if adjustments are made after that date by the San Joaquin County Assessor and Treasurer(fax Collector) of real property in private ownership within CFD 93-1. "Undeveloped Property" means Property that is not Final Use Property. "Special Tax" means the special tax that may be levied on any Property for any Fiscal Year, and shall be levied as long as necessary to pay for the facilities to be financed by CFD No. 93-1 and to discharge authorized bond obligations of CFD No. 93-1. "Special Tax Obligation" means the total obligation of a parcel or parcels of Property to pay Special Tax for the remaining life of CFD 93-1. "Special Tax Requirement" is an amount to be determined annually by the Council. It shall be comprised of the amount necessary to pay the authorized costs and expenses of CFD 93-1 including those necessary to administer the bonds, collect and administer the Special Taxes, and administer CFD 93-1 (which total administrative amount shall be separately stated by the Council in each levy), to pay current debt service on the bonds, to accumulate funds for future debt service (if this is deemed necessary by the Council), to pay amounts delinquent on the bonds ( or to become delinquent based upon past Special Tax delinquen­ cies), to replenish the reserve fund to its proper level (including payments to be made from the reserve fund based upon past special tax delinquencies), to pay directly for any authorized facilities or to accumulate funds for that purpose, less all other amounts, from any lawful source, available for payment of these costs.

C-1 II. MAXIMUM TAX RATES: The maximum annual special tax for fiscal year 1993-1994 is $10,786 per acre. For example, if a parcel is .873 acres, its maximum annual tax shall be .873 times $10,786.00, or $9,416.18. Similarly, if a parcel is 4.27 acres, its maximum annual tax shall be 4.27 times the acreage rate, or $46,056.22. This maximum rate is subject to increase under the fallowing conditions: 1. The maximum rate will not be subject to increase until fiscal year 1995-1996; 2. There will be no further increase for an Original Parcel and all of its successor Properties once the Original Parcel has become a Final Use Parcel, once all authorized bonds have been issued, or upon adoption and recording of an appropriate resolution wherein the Council effectively surren­ ders, releases and renounces any unused bond authorization; 3. The maximum annual special tax is for these purposes divided into two parts. Part A is $1,402.00. Part A is not subject to increase. Part Bis $9,384.00. The annual increase for any year of the Part B special tax shall be a percentage of the previous year's maximum Part B special tax equal to the most current annual percentage increase in the Northern California Engineering News Record Construction Cost Index or suitable replacement index should that one be discontinued. III. METHOD OF APPORTIONMENT: For the limited purpose set forth in the next sentence, authority is conferred to make differentiation between Original Parcel 1-C and all of its successor Properties on the one hand, and Original Parcels 1-B and 1-A and all of their successor Properties on the other hand, in the percentage of maximum Special Tax levied. This is to enable the City, in levying the Special Tax, to provide each group of Properties with the benefit of its own period of capitalized interest for the bond issue associated with the beginning of development ( and hence beginning of taxability) of that group of Properties. The Special Taxes shall be levied for each Fiscal Year by the Council, or by City staff under guidelines and authority established by the City Council. The Special Taxes shall be set, initially, at the maximum rate for all Final Use Property. If the resulting Special Taxes, together with funds on hand in the redemption fund, foreclosure proceeds, property redemptions, reimbursements and any other lawfully available and committed funds, exceed, in the aggregate, the Special Tax Requirement, then the amount of that excess shall be stated as a percentage of the total amount of Special Tax that could be raised for that Fiscal Year if all Final Use Property were taxed at its maximum rate, and the Special Tax on each parcel of Final Use Property shall be reduced by that same percentage of its maximum rate. There will be no special tax on Undeveloped Property. Iv. PREPAYMENT OF SPECIAL TAX OBLIGATION: The entire Special Tax Obligation for a parcel of Property may be prepaid as follows: First. The parcel to be prepaid must not be delinquent in any payment of Special Tax. Prepayment hereunder shall not relieve any property owner from paying those Special Taxes which have already become due and payable, and the Notice of Cancellation of Special Tax Lien shall not be recorded until those Special Taxes have been paid. Second. If no bonds have been issued in respect of CFD 93-1, the prepayment amount shall be $72,437.00 per acre. $9,417.00 of this amount is not subject to increase. $63,020.00 of this amount is subject to the same percentage increases as shall apply to the Part B maximum special tax as set forth in Para­ graph IL above.

C-2 Third. If bonds have been issued in respect of CFD 93-1, the Special Tax Obligation may be prepaid as of an interest payment date on the bonds as follows: a. The maximum authorized annual Special Tax for the parcel to be prepaid, as of the prepayment date, shall be calculated as a percentage of the maximum authorized annual Special Tax on all Final Use Property as of the prepayment date. b. This percentage shall be applied to the total amount of outstanding bonded indebtedness of CFD 93-1 as of the prepayment date or, if all of the Property is Final Use Property, it shall be assumed that all authorized but unissued debt (less any debt authorization formally disclaimed by the Council) is issued as of the prepayment date. The total amount of outstanding bonded indebtedness of CFD 93-1 shall be reduced by the amount of principal which has been paid ( or will be paid by Special Taxes which have already become due and payable). c. Interest on the amount calculated under "b", above shall be calculated at the bond rate from the last preceding interest payment date on the bonds to the prepayment date, unless interest to the prepayment date is to be paid from Special Taxes which have already been paid or which have become due and payable. This amount, when paid, will be deposited in the debt service fund or account for the bonds, and not used to redeem bonds. d. If interest beyond the prepayment date is to be paid from Special Taxes which have already been paid or which have become due and payable, a credit on the amount calculated under "b", above shall be calculated at the bond rate from the prepayment date to the date to which interest will be paid by the Special Taxes in question. This credit shall be balanced by a transfer of a like amount from the debt service fund or account to the prepayment itself and used to redeem bonds. e. Credit shall be given for the percentage of the reserve fund or account calculated under "a", above, which credit shall be balanced by a transfer of a like amount from the reserve fund or account to the prepayment itself and used to redeem bonds. f. An additional premium for any negative arbitrage during any period of defeasance (investment of prepayment monies in direct U.S. Government securities pending the end of the call-protection period and the retirement of bonds) shall be calculated by a certified public accountant acceptable to the City, in a writing addressed to the City, effective as of the prepayment date. The fee of the CPA shall be paid by the owner of the parcel to be prepaid. g. The prepayment premium on the bonds, if any, shall be applied to the amount determined under "b", above. h. The amount to be prepaid for any parcel of Property shall be the sum of the amounts calculated for that parcel under paragraphs "b", "c", "f" and "g", above, less any credits under paragraphs "d" and "e", above, plus the reasonable costs and expenses of performing the calculations, preparing and recording the Notice of Cancellation of Special Tax Lien and any other acts or procedures required to be performed in connection with the prepayment. i. If a portion of the cost of the authorized facilities is being paid directly from Special Tax Proceeds, and not from Bond Proceeds, the proportionate share of this obligation, as calculated by the City, shall also be added to the prepayment amount. In addition, the City may add any other charges to the prepayment as are consistent with the integrity of the financing plan and with equity. The proceeds of all pre-payments ( except where otherwise specified above) shall be used, to the fullest extent possible, to retire (by redemption or defeasance) bonds. Any remainder after the maximum amount of bonds have been redeemed or defeased shall be deposited in the debt service fund or account. V. APPEALS AND INTERPRETATION PROCEDURE Any taxpayer who feels that the amount or formula of the Special Tax is in error may file an application with the City's Director of Public Works (the "Director") contesting the levy of the special tax. The Director, or his or her appointee, shall promptly review the application, and if necessary, meet with the applicant. If the findings of the Director or appointee verify that the Special Tax should be modified or changed, a

C-3 recommendation to that effect shall be made to the Council and, as appropriate, the Special Tax levy shall be corrected and, if applicable in any case, a refund shall be granted. If the Director or appointee denies the application, the taxpayer may appeal that determination, within 14 days of the mailing of notification of denial, to the City Council under such procedures as the Council shall establish. The determination of the Council on the appeal shall be final for all purposes. The filing of an application or an appeal shall not relieve the taxpayer of the obligation to pay the Special Tax when due. Interpretations may be mde by Resolution of the Council for purposes of clarifying any vagueness or ambiguity as it relates to any of the terms or provisions of this Exhibit.

C-4 APPENDIXD

SUMMARY OF FISCAL AGENT AGREEMENT

Introduction The Fiscal Agent Agreement was approved by Resolution No. 96-259, adopted on August 20, 1996. This summary of the Fiscal Agent Agreement does not purport to be complete. Reference is hereby made to the Fiscal Agent Agreement for further information. Unless otherwise defined, terms used in this summary shall have the same meaning as those terms have in the Fiscal Agent Agreement. Copies of the Fiscal Agent Agreement are available from the City. Funds and Accounts As described below, the Fiscal Agent Agreement establishes certain special funds and accounts for administering the proceeds of the Special Tax collections and of the sale of the Bonds and for administering payment of interest and principal on the Bonds. These special funds are designated the Special Tax Fund, the CFO Fund (containing the Expense Account and the Improvements Account), the Optional Redemption Fund and four other accounts to be known as the Acquisition Account, the Redemption Account, the Reserve Account, and the Arbitrage Rebate Account, respectively, for CFD 93-1. The distribution of proceeds to and among these accounts is governed by the Fiscal Agent Agreement as described below. The CFD Fund with its accounts shall be held and maintained by the City. The other funds and accounts shall be held and maintained by the Fiscal Agent. 1. Acquisition Account. The Community Facilities District Acquisition Account (the "Acquisition Account") shall be held and maintained by the Fiscal Agent. Earnings on the investments in the Acquisition Account shall remain in or be deposited in the Acquisition Account. Disbursements from the Acquisition Account, including the costs of issuance of the Bonds, shall be made by the Fiscal Agent, upon receipt of a requisition from the City substantially in the form attached to the Fiscal Agent Agreement as Exhibit c, and signed by the City Finance Manager. Should the City Manager or City Finance Manager ever declare a surplus in the Acquisition Account, he or she shall do so in writing, directing the Fiscal Agent to transfer the surplus to the Special Tax Fund. This writing may direct that the Acquisition Account be closed. The Fiscal Agent shall take the directed action. If not previously closed, the Acquisition Account shall be closed by the Fiscal Agent on September 1, 2001, and any monies therein transferred to the Special Tax Fund.

SF2-63079 .1 D-1 2. Special Tax Fund. The Community Facilities District Special Tax Fund ("Special Tax Fund") shall be held and maintained by the Fiscal Agent and shall retain its own earnings. All Special Tax revenues of CFD 93-1, beginning with the 1997- 1998 fiscal year, shall be segregated by the City, as soon as received from the County of San Joaquin. The Special Taxes collected shall be immediately transferred to the Fiscal Agent for deposit into the Special T~x Fund. The Fiscal Agent shall disburse moneys in the Special Tax Fund, as received and as needed, as follows:

First: To the Redemption Account to the extent necessary to fully fund all scheduled payments of interest and principal (including mandatory term bond redemptions) coming due on the Bonds through the next succeeding September 1;

Second: To the Reserve Account to the extent necessary to replenish the Reserve Account to the Reserve Requirement -- in this connection, investments in the Reserve Account shall be valued annually at market as of April 1;

Third: Funds not needed for these purposes shall be disbursed, on September 15 each year, to the City for deposit in the CFD Fund.

3. Redemption Account. The Community Facilities District Redemption Account ("Redemption Account") shall be maintained by the Fiscal Agent, shall receive funds as set forth in Sections 3.3 and 4.2 of the Fiscal Agent Agreement, and shall be held in trust for the benefit of the Bondholders. Earnings on investments in the Redemption Account shall be deposited into the Special Tax Fund. Payment of the Bonds at maturity, or at redemption prior to maturity (including bond premium, if any, and other than redemptions made from the Optional Redemption Fund), and all interest on the Bonds shall be made from the Redemption Account.

4. Reserve Account. The Community Facilities District Reserve Account ("Reserve Account") shall be held and maintained by the Fiscal Agent. The amount on deposit in the Reserve Account shall be maintained at an amount equal to the lesser of ten percent (10%) of the original principal amount of the Bonds, one-hundred percent (100%) of maximum annual debt service on the Bonds, or one-hundred and twenty-five percent (125%) of average annual debt service on the Bonds as determined and specified by the City (the "Reserve Requirement"). The Reserve Requirement shall be funded from the proceeds of the sale of Bonds. The Reserve Account shall be administered as follows:

A. During the term of the Bonds, the amount in the Reserve Account shall be available for transfer into the Redemption Account if necessary in order to make payments of

SF2-63079 .1 D-2 principal and interest due on the Bonds. The amount so advanced shall be reimbursed to the Reserve Account either from the proceeds of redemption or sale of the parcel for which payment of delinquent Special Taxes was made from the Reserve Account, or from Special Tax proceeds. If reimbursement of the proceeds of redemption or sale, or the deposit of Special Taxes, will at any time cause the Reserve Account (based upon its most recent market valuation under Section 3.3 of the Fiscal Agent Agreement) to exceed the Reserve Requirement, those monies will, to the extent of the excess, be deposited instead in the Special Tax Fund. Upon the valuation of the Reserve Account each April 1, amounts in the Reserve Account, if any, that exceed the Reserve Requirement, shall be deposited into the Acquisition Account or, if that has been closed, into the Special Tax Fund. Cash amounts in the Reserve Account, if any, will be invested without yield restriction, in investments whlch may not have maturities extending beyond five (5) years. B. When the amount of money in the Reserve Account equals or exceeds the amount required to retire the remaining unmatured Bonds (whether by advance retirement or otherwise), the Council may direct in writing that the amount in the Reserve Account be transferred to the Redemption Account for redemption of the Bonds, in which case the Special Tax shall no longer be levied for payment of principal and interest on the Bonds. 5. Arbitrage Rebate Account. The Community Facilities District Arbitrage Rebate Account ("Arbitrage Rebate Account") shall be held and maintained by the Fiscal Agent. On October 1 of each year (or at such other times as may be required or permitted by regulations of the United States Internal Revenue Service), the City Finance Manager shall determine whether any portion of investment earnings from any account established by the Fiscal Agent Agreement must be rebated to the United States pursuant to Section 148 of the United States Internal Revenue Code and regulations adopted thereunder. Any amounts required to be rebated will be transferred from any available source, at the written direction of the City Finance Manager, to the Arbitrage Rebate Account. The City Finance Manager is authorized to retain independent attorneys, accountants and other consultants to assist in complying with Federal requirements, and the fees of such consultants may be paid from the Expense Account. Amounts in the Arbitrage Rebate Account shall be invested without yield restriction and shall be held in trust for rebate to the United states at the written direction of the City Finance Manager. Earnings on the Arbitrage Rebate Account are to remain in that account and shall similarly be held in trust for rebate to the United States.

SF2-63079 .1 D-3 6. CFD Fund. The CFD Fund ("CFD Fund") shall be held and maintained by the City. All transfers from the Special Tax Fund to the CFD Fund, pursuant to Section 3.3 of the Fiscal Agent Agreement, shall be transmitted by the Fiscal Agent to the City. The city shall disburse moneys in the CFD Fund, as received and as needed, as follows:

First: To the Expense Account to the extent necessary to replenish the Expense Account to the amount budgeted, under Section 3.7.1 of the Fiscal Agent Agreement, for annual expenses for the new fiscal year;

Second: To the Improvements Account, any remaining funds.

6.1 Exoense Account. The Community Facilities District Expense Account ("Expense Account") shall be an account in the CFD Fund, and shall be held and maintained by the City and shall receive funds as set forth in Section 3.7 of the Fiscal Agent Agreement. This account may be used to pay the annual expenses of CFD 93-1 including, but not limited to, the charges of the Fiscal Agent, the cost of preparation of the annual Special Tax roll, the cost of the arbitrage calculations as shall be required by federal law, arbitrage rebate itself, and the payment of City expenses, including personnel costs, in administering CFD 93-1. Disbursements from the Expense Account shall be made by the city. In June of each year, the City Finance Manager shall prepare a budget setting forth the estimated expenses for the next fiscal year (the next July 1 through the following June 30). The budget may be amended at any time. If in any year expenses exceed the amount deposited in the Expense Account pursuant to Section 3.7 of the Fiscal Agent Agreement, the Council may transfer funds to the Expense Account from the Improvements Account pursuant to Section 3.7.2. of the Fiscal Agent Agreement.

6.2 Improvements Account. The Community Facilities District Improvements Account ("Improvements Account") shall be an account in the CFD Fund, and shall be held and maintained by the City and shall receive funds as set forth in Section 3.7 of the Fiscal Agent Agreement. The funds in the Improvements Account may be used by the City to pay for, or help pay for, any Improvements. All of the foregoing notwithstanding, the Council may authorize transfers from the Improvements Account to the Expense Account if necessary, or to pay interest on or the principal of or redemption premiums, if any, on the Bonds in the event that no other money is available therefor.

7. Optional Redemption Fund. The Community Facilities District Optional Redemption Fund ("Optional Redemption Fund") shall be held and maintained by the Fiscal Agent. The City may transfer to the Fiscal Agent for deposit in the Optional Redemption Fund any revenues that become available to it for early redemption of the Bonds from any lawful source, other than

SF2-63079 .1 D-4 (unless an approving legal opinion is received from nationally­ recognized bond counsel) any proceeds of other federally tax­ exempt obligations. The Fiscal Agent shall establish a Special Tax Prepayment Subaccount within the Optional Redemption Fund (the "Prepayment Subaccount"). Amounts received by the City Finance Manager as prepayments of the Special Tax obligation (including any monies received pursuant to Section 53317.5 of the Act [eminent domain], or any similar provision that may be enacted) shall be transmitted immediately by the City Finance Manager to the Fiscal Agent for deposit into the Prepayment Subaccount, and shall be used by the Fiscal Agent without further action by the City, to redeem the Bonds under Section 4.3 of the Fiscal Agent Agreement at the earliest opportunity. Other amounts in the Optional Redemption Account shall be used on or after September 1, 2006, at the direction of the City Finance Manager, for optional redemption of the Bonds under Section 4.3 of the Fiscal Agent Agreement. covenants of the city So long as any of the Bonds are outstanding and unpaid, the city covenants to faithfully perform and abide by all of the following covenants for the benefit of the owners of the Bonds: 1. Arbitrage. During the term of the Bonds, the City will make no use of Bond proceeds which, if such use had been reasonably expected at the date the Bonds were issued, could have caused the Bonds to be "arbitrage bonds" within the meaning of Section 148 of the United states Internal Revenue Code of 1986, and regulations of the Internal Revenue Service adopted thereunder. · 2. Maintenance of Tax Exemption. The City will take all reasonable actions required to maintain the status of the Bonds as bonds on which the interest is not includable in the gross income of the bondholder for federal income tax purposes and as bonds on which the interest is exempt from State of California personal income taxes. In acting under this covenant, the City may rely conclusively on the opinion of nationally recognized bond counsel. 3. Levy and Disposition of the Special Tax. Beginning in calendar year 1997, and so long as any Bonds remain outstanding, the City will annually, after the review of Special Tax collections required by the Fiscal Agent Agreement to be completed by August 31, levy the Special Tax, subject to the limits of the Resolution of Formation, in an amount which will be at least sufficient, after making reasonable allowances for contingencies, errors in the levy and anticipated delinquencies (if CFO 93-1 is removed from the County's Teeter Plan, the allowance for anticipated delinquencies shall be the greater of 5% of the total levy or the actual delinquency rate experienced in CFO 93-1 in the previous fiscal year), to pay principal and interest on the Bonds as they become due, to pay all actual and

SF2-63079 .1 D-5 budgeted expenses of administering CFD 93-1, to cure any delinquencies in the payment of principal or interest on the Bonds which have occurred or (based on delinquencies in the payment of Special Taxes) will occur in the fiscal year just beginning, and to replenish the Reserve Accounts to the Reserve Requirements as necessary (including in the replenishment charges against the Reserve Accounts which will be necessary in the future because of delinquencies in the payment of Special Taxes which have already taken place). The Special Taxes shall be levied and presented to the County of San Joaquin at such time and in such format as to enable the County Tax Collector to cause the Special Tax to appear annually on the secured property tax bills of the properties within CFD 93-1 which are subject to the Special Tax. The Special Tax shall be collected in the same manner as ordinary ad valorem property taxes and, except when enforced by judicial foreclosure, shall be subject to the same penalties and the same procedure, sale, and lien priority in case of delinquency as is provided for ad valorem property taxes.

4. Judicial Foreclosure. The City will review the public records of San Joaquin County in connection with the collection of the Special Tax not later than August 31 of each year to determine the amount of Special Tax collected in the prior fiscal year.

In the event that the Teeter Plan is not applicable, or is abandoned or no longer in effect, for CFD 93-1, and if the amount of Special Tax collected for the prior fiscal year is less than ninety-five percent (95%) of the amount levied, then the City will, not later than the succeeding November 1, institute civil actions to foreclose the lien of special tax, and thereafter will vigorously prosecute the same to completion, against all parcels delinquent in the amount of $2,000 or more (excluding penalties and interest).

The City will in any case institute civil actions to foreclose the lien of special tax, and thereafter will vigorously prosecute the same to completion, against all parcels delinquent in the amount of $10,000 or more (excluding penalties and interest).

The foregoing notwithstanding, the City may, in any particular case, elect to advance (from any available funds other than any Funds or Accounts established hereunder) the amount of any delinquency (excluding penalties and statutory interest on the delinquency but including interest on the delinquent amount at the blended yield of the outstanding bonds from the date of delinquency) to the Special Tax Fund. In that event the City need not initiate the foreclosure action. In such a case, the City may reimburse itself, when the Special Tax is paid on the property, for the principal amount of its advance plus the statutory interest and penalties paid in respect of the delinquency.

SF2-63079 .1 D-6 5. No Additional Bonds. The City will issue no additional bonds on parity with the Bonds by and through its CFD 93-1 unless and until all of the following conditions are satisfied: (a) the issuance of additional bonds will have been provided for by a supplemental fiscal agent agreement providing for the form, execution and issuance of bonds ("supplemental agreement") consistent with the Act and which, in addition, is either consistent with the Fiscal Agent Agreement, or does not adversely affect the rights and interests of Bondholders under the Fiscal Agent Agreement; (b) the City shall be in compliance with the Fiscal Agent Agreement and any supplemental agreements; (c) the City shall cause the increase in the amount of the Reserve Requirement occasioned by the issuance of the additional bonds to be made available to the Reserve Account from the proceeds of such additional bonds; (d) the City shall have made findings in the supplemental agreement, based upon a certificate of the city's special tax consultant filed with the City, that (1) the special tax proceeds that would be available to the City, if the special tax were to be levied and collected at its maximum rate and amount on all Final Use Property within CFD 93-1 in each fiscal year during which any Bonds are to be outstanding, based upon land use categories in effect on the date of the closing of the additional bonds (and taking into account the authorized escalation of the maximum special tax), shall be equal to at least one hundred and ten percent (110%) of the debt service requirements for such fiscal year on the outstanding Bonds plus all additional bonds of CFD 93-1 including those proposed to be issued under the supplemental agreement (this calculation must assume the maximum interest rate permitted under the applicable bond documentation on all variable rate bonds outstanding and to be issued); and (2) with respect to the period of time preceding the receipt of special tax proceeds as calculated above, the funds that would be available to the City if the special tax as most recently levied is fully collected, and funds from any other source identified in the certificate or supplemental agreement (including capitalized interest), shall be equal to at least one hundred percent (100%) of the interest and principal requirements due on all outstanding bonds of CFD 93-1, including the Bonds, during such period (if variable rate debt is outstanding or proposed, this calculation shall be based on the actual interest rate applicable during the relevant period); (e) the City shall have made a finding in the new agreement or supplemental agreement that the fair market value of the land and then existing improvements subject to the special tax, as shown on the most recent secured roll of the County or by a current MAI appraisal, is at least three (3) times the sum of (1) the aggregate principal amount of all CFD 93-1 bonds

SF2-63079.1 D-7 (including the Bonds) then outstanding, plus (2) the aggregate principal amount of the additional bonds proposed to be issued, plus (3) the aggregate principal amount of all assessment district bonds then outstanding and payable from assessments to be levied on parcels of land subject to the special tax under CFO 93-1, plus (4) the proportion of the aggregate principal amount of other community facilities district bonds then outstanding which are payable from special taxes to be levied within the area of CFO 93-1.

Provided, that nothing contained herein shall limit the issuance of any special tax bonds of CFO 93-1 if (1) the rights and claims of such bonds to the special tax revenues of CFO 93-1 and the funds and accounts established or described in the Fiscal Agent Agreement are in all respects subordinate to the rights and claims of the Bonds, or (2) after the issuance and delivery of such special tax bonds, none of the Bonds shall be outstanding. Defeased_Bonds, or Bonds in exchange for or in lieu of which other bonds have been delivered, shall not be considered outstanding.

The Fiscal Agent Agreement imposes no obstacle to the refunding of the Bonds pursuant to the Act.

6. Books and Records. The City, to the extent it is not the responsibility of the Fiscal Agent under the Fiscal Agent Agreement, will at all times keep, or cause to be kept, proper and current books and accounts (separate from all other records and accounts) in which complete and accurate entries shall be made of all transactions, made by the City, relating to the Special Tax revenues and the funds and accounts provided for in the Fiscal Agent Agreement.

The City will prepare annually not later than October 30 of each year and file with the California Debt Advisory Commission all necessary information required to be filed under the Act, and the City will notify the California Debt Advisory Commission by mail, postage prepaid, within ten (10) days after the event, if the City or the Fiscal Agent fails to pay any interest on or principal of the Bonds on any scheduled payment date, or if funds are withdrawn from the Reserve Account to pay any interest on or principal of the Bonds.

7. Preservation of Security. The City will preserve and protect the security of the Bonds and the rights of the Bondholders and defend their rights against all claims and demands of all persons.

8. Punctual Pavment and Performance. The City will punctually pay, from the proceeds of the Special Tax, the interest on and principal of and redemption premium, if any, to become due on every Bond issued under the Fiscal Agent Agreement or any supplemental fiscal agent agreement in strict conformity with the terms of the Act, the Fiscal Agent Agreement, and any

SF2-63079 .1 D-8 supplemental fiscal agent agreement, and will faithfully observe and perform all agreements, conditions, covenants and terms contained in the Fiscal Agent Agreement and in the Bonds required to be observed and performed by it. 9. Continuing Disclosure. The City will comply with and carry out all of the provisions of the Continuing Disclosure Certificate. For purposes of this covenant, the rights and powers conferred upon Bondholders under the Fiscal Agent Agreement, shall also be conferred upon Beneficial Owners. "Beneficial owner" is defined in the Fiscal Agent Agreement as: "any person which has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds, including persons holding Bonds through nominees or depositories." A copy of the Continuing Disclosure Certificate in included in this Official Statement as Appendix F.

Remedies of Bondholders Any bondholder shall have the right for the equal benefit and protection of all Bondholders similarly situated (a) by mandamus or other suit or proceeding at law or in equity to enforce their rights against the City or the Council or any of the officers or employees of the City, and to compel the City or the Council or any such officers or employees to perform and carry out their duties under the Act and the agreements and covenants with the Bondholders contained in the Fiscal Agent Agreement, any supplemental fiscal agent agreement and in the Bonds; (b) by suit in equity to enjoin any acts or things which are unlawful or violate the rights of the Bondholders; and (c) by suit in equity upon the nonpayment of the Bonds to require the City or the Council or the officers and employees of the City to account as the trustee of an express trust. No remedy conferred upon or reserved to the Bondholders is intended to be exclusive of any other remedy, and every such remedy shall be cumulative and shall be in addition to every other remedy given under the Fiscal Agent Agreement or now or hereafter existing at law or in equity or by statute or otherwise, and may be exercised without exhausting and without regard to any other remedy conferred by the Act or any other law or otherwise.

Defeasance If an escrow agent designated by the City (the "Escrow Agent") shall hold sufficient monies, or Escrow Investments, the principal of and the interest on which when due and payable will provide sufficient monies to pay the principal, interest and the

SF2-63079 .1 D-9 redemption premium, if any, upon any Bonds then outstanding to the maturity date or dates specified for the redemption thereof, and if, in the event any Bonds are to be called for redemption, irrevocable instructions to call the Bonds for redemption shall have been given by the City to the Escrow Agent, and sufficient funds shall also have been provided or provision made for paying all other obligations as to the Bonds to be redeemed by the City, then the Bonds so provided for shall be deemed to be defeased and no longer outstanding; and the rights of the owners of such Bonds to the covenants contained in the Fiscal Agent Agreement (except those pertaining to arbitrage and maintenance of the tax exemption) and to all monies, accounts, Special Tax proceeds or security for payment of the Bonds, other than the monies and Escrow Investments held by the Escrow Agent on their behalf, shall terminate.

In the event of defeasance, the City shall require the Escrow Agent, within thirty (30) days thereof, to mail notice by first class mail to all owners of record of the Bonds so defeased, and to each Repository (as that term is defined in the then current Continuing Disclosure Certificate for the Bonds), setting forth (a) the date or dates, if any, designated for the redemption of the Bonds, (b) a description of the monies and Escrow Investments so held by it, and (c) that the rights of the owners of the Bonds and the Fiscal Agent in the accounts pledged to the payment of the Bonds so defeased has terminated.

The City shall confer upon the Escrow Agent such rights, powers and privileges as may be necessary and convenient in respect of the defeased Bonds for the payment of the principal, interest and any premium for which the monies and Escrow Investments have been deposited.

The City shall require that the Escrow Agreement provide that all monies and Escrow Investments held by the Escrow Agent pursuant to the Escrow Agreement shall be held in trust and applied to the payment, when due, of the defeased Bonds payable therewith.

"Defeasance Investments" shall mean only cash, direct non-callable obligations of the United States of America and securities fully and unconditionally guaranteed as to the timely payment of principal and interest by the United States of America, to which direct obligation or guarantee the full faith and credit of the United states of America has been pledged.

Amendment of or supplement to the Fiscal Agent Agreement

The Fiscal Agent Agreement and the rights and obligations of the City and of the owners of the Bonds may be amended or supplemented at any time by a supplemental fiscal agent agreement which shall become binding when the written consents of the owners of at least 60% in aggregate principal

SF2-63079 .1 D-10 amount of the Bonds then outstanding (other than Bonds held by or for the account of the City) are filed with the city. No such amendment or supplement shall (i) extend the maturity of or reduce the interest rate on or otherwise alter or impair the obligation of the City to pay the interest on or the principal of or redemption premium, if any, on any Bond at the time and place and at the rate and in the currency and from the funds provided in the Fiscal Agent Agreement without the express written consent of the owner of such Bond, or (ii) permit the issuance by the City of any obligations payable from the Special Tax other than as provided in the Fiscal Agent Agreement, or (iii) jeopardize the ability of the City to levy or collect the Special Tax, or (iv) reduce the percentage of Bonds required for the written consent to any such amendment or supplement, or (v) modify any rights or obligations of the Fiscal Agent without its prior written assent. The Fiscal Agent Agreement and the rights and obligations of the City and of the owners of the Bonds may also be amended or supplemented at any time by a supplemental resolution or fiscal agent agreement which shall become binding without the prior written consent of any owners, but only to the extent permitted by law and only for any one or more of the following purposes: (a) to add to the covenants required to be performed by the City which shall not adversely affect the interests of the owners of the Bonds; or (b) to cure any ambiguity or correct or supplement any defective provision contained in the Fiscal Agent Agreement or to add any provision which the City may deem desirable or necessary and which shall not adversely affect the interests of the owners of the Bonds; or (c) to authorize the issuance of additional bonds and to provide the terms and conditions under which such bonds may be issued, subject to compliance with the Fiscal Agent Agreement. No such amendment or supplement shall modify any rights or obligations of the Fiscal Agent without its prior written assent.

Contract with the Bondholders The Fiscal Agent Agreement constitutes a contract between the City, the Fiscal Agent, and the registered owners of the Bonds, and shall be for the equal and proportionate benefit of all Bondholders.

SF2-63079.l D-11 Business Day

If the date for making any payment or the last date for performance of any act or the exercise of any right, as provided in the Fiscal Agent Agreement, is not a Business Day (which means any day other than a Saturday or Sunday or legal holiday or a day on which banking institutions in the city in which the principal office of the Fiscal Agent is located are authorized to close), such payment, with no interest accruing for the period after such nominal date, may be made or act performed or right exercised on the next succeeding Business Day with the same force and effect as if done on the nominal date provided therefor in the Fiscal Agent Agreement.

SF2-63079.l D-12 APPENDIXE

Form of Opinion of Bond Counsel

, 1996

City Council City of Tracy 325 East Tenth Street Tracy, CA 95376 City of Tracy community Facilities District No. 93-1 (I-205 Parcel GL-17) Special Tax Bonds. Series A (1996) (Final Opinion) Ladies and Gentlemen: We have acted as bond counsel in connection with the issuance by the City of Tracy (the "Issuer") of its$---,,----- a g gre gate principal amount of Community Facilities District No. 93-1 (I-205 Parcel GL-17) Special Tax Bonds, Series A (1996) (the "Bonds"), pursuant to the provisions of the Mello-Roos Community Facilities Act of 1982 of the State of California (being Sections 53311 et seq. of the Government Code of the State of California, as amended) and the fiscal agent agreement providing for the form, execution and issuance of special tax bonds approved by Resolution No. 96-259 adopted by the City Council on August 20, 1996 (the "Fiscal Agent Agreement"). Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Fiscal Agent Agreement. In such connection, we have reviewed the Fiscal Agent Agreement, the Tax Certificate of the Issuer dated the date hereof (the "Tax Certificate"), an opinion of counsel to the Issuer, certifications of the Issuer and others and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein. Certain agreements, requirements and procedures contained or referred to in the 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

SF2-63072.l E-1 City of Tracy Community Facilities District No. 93-1 (I-205 Parcel GL-17) Special Tax Bonds, Series A (1996) Final Opinion

, ______, 1996 Page 2 subject to the terms and conditions set forth in such documents. No opinion is expressed herein as to any Bond or the interest thereon if any such change occurs or action is taken or omitted upon the advice or approval of counsel other than ourselves.

The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur, and we disclaim any obligation to update this letter. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or copies) and the due and legal execution and delivery thereof by, and validity against, any parties other than the Issuer. We have not undertaken to verify independently, and have assumed, the accuracy of the factual matters represented, warranted or certified in the documents, and of the legal conclusions contained in the opinion, referred to in the second paragraph hereof. Furthermore, we have assumed compliance with all covenants and agreements contained in the Fiscal Agent Agreement and the Tax Certificate, including (without limitation) covenants and agreements compliance with which is necessary to assure that future actions, omissions or events will not cause interest on the Bonds to be included in gross income for federal income tax purposes. In addition, we call attention to the fact that the rights and obligations under the Bonds, the Fiscal Agent Agreement and the Tax Certificate and their enforceability may be subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors' rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against cities in the State of California. We express no opinion with respect to the plans, specifications, maps, financial report or other engineering or financial details of the proceedings, or upon the Rate and Method of Apportionment of the Special Tax or the validity of the Special Tax levied upon any individual parcel. Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official Statement or other

SF2-63072.l E-2 City of Tracy community Facilities District No. 93-1 (I-205 Parcel GL-17) Special Tax Bonds, Series A (1996) Final Opinion Page 3 offering material relating to the Bonds and express no opinion with respect thereto. Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions: 1. The Bonds constitute valid and binding special tax obligations of the Issuer, payable solely from the proceeds of the Special Tax (as that term is defined in the Fiscal Agent Agreement) and certain funds held under the Fiscal Agent Agreement. 2. The Fiscal Agent Agreement has been duly adopted and constitutes a valid and binding obligation of the Issuer; provided, that reference should be made to the qualifications expressed in our supplemental opinion dated the date hereof pertaining to the Fiscal Agent Agreement and the effect thereon of certain provisions of a proposed initiative measure, appearing on the November 5, 1996, California statewide ballot as Proposition 218, if adopted on that date. 3. Amounts treated as interest on the Bonds for federal income tax purposes are excluded from gross income under section 103 of the Internal Revenue Code of 1986 and are exempt from State of California personal income taxes. Interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although we observe that it is included in adjusted current earnings in calculating corporate alternative minimum taxable income. We express no opinion regarding other tax consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the Bonds. Faithfully yours, ORRICK, HERRINGTON & SUTCLIFFE LLP

per

SF2-63072.l E-3 Form of Supplemental Opinion of Bond Counsel

I 1996 city Council City of Tracy 325 East Tenth Street Tracy, CA 95376

City of Tracy Community Facilities District No. 93-1 (I-205 Parcel GL-17} Special Tax Bonds. Series A (1996} (Supplemental Opinion}

Ladies and Gentlemen:

This Supplemental Opinion is delivered for the purpose of qualifying our Final Opinion relating to the above bonds dated the date hereof to the effect that the Fiscal Agent Agreement constitutes the valid and binding obligation of the City (with all capitalized terms referred to herein having the meanings ascribed to them in the Fiscal Agent Agreement referred to in such Final Opinion unless otherwise defined herein):

The California Secretary of state has certified an initiative measure entitled "Voter Approval for Local Government Taxes -- Limitation on Fees, Assessments, and Charges -­ Initiative Constitutional Amendment," also known as Proposition 218 (herein the "Initiative"}, for the November 5, 1996, California statewide election. If enacted at such election, the Initiative would add Articles XIIIC and XIIID to the California Constitution, and all references herein to Article XIIIC are references to the proposed text of such Article XIIIC, as set forth in the Initiative.

Section 3 of Article XIIIC (herein the "Section 3 provisions"} would remove any constitutional or other limitation on the exercise of the initiative power to reduce or repeal any local tax, assessment, fee or charge, and would provide that "the power of initiative to affect local taxes, assessments, fees and charges shall be applicable to all local governments."

Section 10 of Article I of the United states constitution provides that "No state shall ... pass any ... law impairing the obligation of contracts ... " (herein the "Contract Impairment Clause").

SF2-63072.l E-4 City Council City of Tracy Community Facilities District No. 93-1 (I-205 Parcel GL-17) Special Tax Bonds, Series A (1996) Supplemental Opinion I 1996 ~~~~~~~~~~~Page 2 In Section 5.3 of the Fiscal Agent Agreement, the City has covenanted that, so long as any Bonds remain outstanding, the City will annually levy the Special Tax, subject to the limits of the Resolution of Formation, in an amount which will be at least sufficient, after making reasonable allowances for contingencies, errors in the levy and anticipated delinquencies, to pay principal and interest on the Bonds as they become due, to pay all actual and budgeted expenses of administering Community Facilities District No. 93-1, to cure any delinquencies in the payment of principal or interest on the Bonds which have occurred or (based on delinquencies in the payment of Special Taxes) will occur in the fiscal year just beginning, and to replenish the Reserve Account to the Reserve Requirement as necessary (including in the replenishment charges against the Reserve Account which will be necessary in the future because of delinquencies in the payment of Special Taxes which have already taken place) (herein the "Section 5.3 covenant"). Section 53358 of the Act provides in part: "When the legislative body provides for the fixing and levying of special taxes and charges for the community facilities district it shall also provide for the fixing and levying of that amount of special taxes and charges within the community facilities district which is required for the payment of the principal of and interest on any outstanding bonded debt of the community facilities district, including any necessary replenishment or expenditure of bond reserve funds •.•• " Assuming the Initiative is adopted on November 5, 1996, and with respect to the annual levy of the Special Tax occurring after November 6, 1996, it could be argued that the City's ability to make the annual Special Tax levy could be subject to reduction or repeal pursuant to the Section 3 provisions, and thus the City could be precluded from levying the Special Tax in the amount required by the Section 5.3 covenant and the Act. In the case of the Special Taxes to be levied annually by the City in accordance with the Section 5.3 covenant, we have assumed that the proceeds of the sale of the Bonds will be applied in conformity with the requirements and limitations prescri'bed by the Fiscal Agent Agreement, and that the proceeds

SF2-63072.l E-5 City Council city of Tracy Community Facilities District No. 93-1 (I-205 Parcel GL-17) Special Tax Bonds, Series A (1996) Supplemental Opinion , 1996 ------~Page 3 of the special tax will be deposited and administered and used in accordance with the provisions of the Fiscal Agent Agreement.

Based upon and subject to the foregoing, as well as the limitations set forth below, assuming that the Initiative is adopted on November 5, 1996, and further assuming that the matter were properly briefed and presented to a court of competent jurisdiction, while the matter is not entirely free from doubt, it is our opinion that the court would hold that the Section 5.3 covenant is protected from abrogation under the Section 3 provisions by the Contract Impairment Clause to the extent necessary to enable the City to make timely payment of principal and interest on the Bonds.

This opinion addresses the legal consequences of only the facts existing or assumed as of the date hereof. The opinions expressed herein are based on an analysis of existing laws and court decisions and cover certain matters not directly addressed by such authorities, and such opinions may be affected by actions taken or omitted, or events occurring, or changes in the relevant facts, after the date hereof, and we have not undertaken to determine, or to inform any person of, the occurrence or non-occurrence of any such actions, events, or changes. Finally, we disclaim any obligation to update this opinion for events occurring or coming to our attention after the date hereof.

Faithfully yours,

ORRICK, HERRINGTON & SUTCLIFFE LLP

per

SF2-63072.l E-6 APPENDIXF

CONTINUING DISCLOSURE CERTIFICATE

CITY OF TRACY COMMUNITY FACILITIES DISTRICT NO. 93-1 (I-205 PARCEL GL-17) SPECIAL TAX BONDS, SERIES A (1996)

This Continuing Disclosure Certificate (the "Disclosure Certificate") is executed and delivered by the City of Tracy (the "Issuer") in connection with the issuance of$ of its Community Facilities District No. 93-1 (I-205 Parcel GL-17), Special Tax Bonds, Series A (1996) (the "Bonds"). The Bonds are being issued pursuant to a Fiscal Agent Agreement (referred to herein as the "Fiscal Agent Agreement") approved by the Issuer's Resolution No. 96-259, dated August 20, 1996. The Issuer covenants and agrees as follows:

SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Issuer for the benefit of the Bondholders and Beneficial Owners of the Bonds and in order to assist the Underwriter in complying with S.E.C. Rule 15c2-12(b) (5).

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

"Annual Report" shall mean any Annual Report provided by the Issuer pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.

"Beneficial Owner" shall mean any person which has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds, including persons holding Bonds through nominees or depositories.

"Dissemination Agent" shall mean First Trust of California, National Association, acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the Issuer and which has filed with the Issuer a written acceptance of such designation.

"Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure Certificate.

"National Repository" shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. The National Repositories currently approved by the Securities and Exchange Commission are set forth in Exhibit B.

SF2-62750. l F-1 "Underwriter" shall mean as underwriter for the Issuer, required to comply with the Rule in connection with the offering of the Bonds.

"Repository" shall mean each National Repository and each State Repository, if any.

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

"State" shall mean the State of California.

"State Repository" shall mean any public or private repository or entity designated by the State as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of this Certificate, there is no State Repository.

SECTION 3. Provision of Annual Reports.

(a) The Issuer shall, not later than 154 days after the end of the Issuer's fiscal year (which currently would be December 1), commencing with the report for the 1996-1997 Fiscal Year, provide to each Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the Issuer may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date. If the Issuer's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c).

(b) If the Issuer is unable to provide to the Repositories an Annual Report by the date required in subsection (a), the Issuer shall send a notice to each Repository in substantially the form attached as Exhibit A.

(c) The Dissemination Agent shall:

(i) determine each year prior to the date for providing the Annual Report the name and address of each National Repository and each State Repository, if any; and

(ii) file a report with the Issuer certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided and listing all the Repositories to which it was provided.

SFZ-62750.1 F-2 SECTION 4. Content of Annual Reports. The Issuer's Annual Report shall contain or incorporate by reference the following: (a) A maturity schedule for the outstanding Bonds, and a listing of Bonds redeemed prior to maturity during the fiscal year. (b) Balances in each of the following funds established pursuant to the Fiscal Agent Agreement as of the close of the fiscal year: (i) the Redemption Account (with a statement of the debt service requirement to be discharged by said Fund prior to the receipt of expected additional special tax revenue); and (ii) the Reserve Account. (c) A statement whether the CFD remains subject to the County's "Teeter Plan," and whethe~ the County has indicated any intention to remove the CFD from its Teeter Plan. (d) A statement of the total Special Tax levy for the fiscal year. (e) A statement of the debt service requirements for the Bonds for the fiscal year. (f) A statement of the actual special tax collections for the community facilities district for the fiscal year. (g) A listing of each parcel subject to the Special Tax, with the name of its owner, the current use to which the parcel is being put and, if not actively in use, the status of its development including, but not limited to, the status of any City approvals (including design review, building permit, construction inspections, certificate of occupancy and the like) obtained or applied for, with the dates of such approval or application, and the status of any improvement project on the parcel. (h) A listing of each parcel delinquent in the payment of Special Taxes, with the date of the first delinquency and the amount of the delinquency, irrespective of whether the CFD remains in the County's Teeter Plan. (i) A current statement of the chart contained under the heading "VALUATION INFORMATION" in the Official Statement. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the Issuer or related public entities, which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document included by reference is a

SF2-62750.1 F-3 final official statement, it must be available from the Municipal Securities Rulemaking Board. The Issuer shall clearly identify each such other document so included by reference.

SECTION 5. Reporting of Significant Events.

(a) Pursuant to the provisions of this Section 5, the Issuer shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material:

(i) principal and interest payment delinquencies;

( ii) non-payment related defaults;

(iii) Unscheduled draws on debt service reserves reflecting financial difficulties;

(iv) Unscheduled draws on credit enhancements reflecting financial difficulties;

(v) Substitution of credit or liquidity providers, or their failure to perform;

(vi) Adverse tax opinions or events affecting the tax-exempt status of the Bonds;

(vii) Modifications to the rights of Bondholders;

(viii) Bond calls;

(ix) Defeasances;

(x) Release, substitution, or sale of property securing repayment of the Bonds; and

(xi) Rating changes.

(b) Whenever the Issuer obtains knowledge of the occurrence of a Listed Event, the Issuer shall as soon as possible determine if such event would be material under applicable federal securities laws.

(c) If the Issuer determines that knowledge of the occurrence of a Listed Event would be material under applicable federal securities laws, the Issuer shall promptly deliver a notice of such occurrence to the Dissemination Agent which shall promptly file copies of the notice with the Repositories, and then file a report with the Issuer certifying that the Listed

SF2-62750.l F-4 Event notice has been provided pursuant to this Disclosure Certificate, stating the date it was provided and listing all the Repositories to which it was provided. Notwithstanding the foregoing, notice of Listed Events described in subsections (a) (4) and (5) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to Bondholders of affected Bonds pursuant to the Fiscal Agent Agreement.

SECTION 6. Termination of Reporting Obligation. The Issuer's obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the Issuer shall give notice of such termination in the same manner as for a Listed Event under Section 5(c).

SECTION 7. Dissemination Agent. The Issuer may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the Issuer pursuant to this Disclosure Certificate. The initial Dissemination Agent shall be First Trust of California, National Association.

SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Issuer may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied: (a) If the amendment or waiver relates to the provisions of Sections 3(a), 4, or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements or change in law; (b) The undertaking, as amended or taking into account such waiver, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) The amendment or waiver either (i) is approved by the Bondholders of the Bonds in the same manner as provided in the Fiscal Agent Agreement for amendments to the Fiscal Agent Agreement with the consent of Bondholders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Bondholders or Beneficial owners of the Bonds.

SF2-62750.1 F-5 In the event of any amendment or waiver of a provision of this Disclosure Certificate, the Issuer shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of information being presented by the Issuer.

SECTION 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Issuer chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Issuer shall have no obligation under this Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

SECTION 10. Default. In the event of a failure of the Issuer to comply with any provision of this Disclosure Certificate any Bondholder or Beneficial owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Issuer to comply with its obligations under this Disclosure Certificate. The sole remedy under this Disclosure Certificate in the event of any failure of the Issuer to comply with this Disclosure Certificate shall be an action to compel performance.

SECTION 11. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Issuer, the Underwriter, the Bondholders and the Beneficial Owners of the Bonds from time to time~ and shall create no rights in any other person or entity.

Date: 1996

City of Tracy

By____ _ Finance Manager

SF2-62750.l F-6 EXHIBIT A NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT

Name of Issuer: City of Tracy Name of Bond Issue: Community Facilities District No. 93-1 (I-205 Parcel GL-17), Special Tax Bonds Series A (1996) Date of Issuance: NOTICE IS HEREBY GIVEN that the Issuer has not provided an Annual Report with respect to the above-named Bonds as required by Section 5.9 of the Fiscal Agent Agreement dated September 1, 1996. [The Issuer anticipates that the Annual Report will be filed by .]

City of Tracy

SF2-62750.l F-7 EXHIBIT B

Nationally Recognized Municipal Securities Information Repositories approved by the Securities and Exchange Commission as of September 1996: Bloomberg Municipal Repository P.O. Box 840 Princeton, NJ 08542-0840 Internet address: [email protected] (609) 279-3200 FAX (609) 279-3235 or {609) 279-5963 Contact: Dave Campbell Thomson Financial Services Secondary Market Disclosure 395 Hudson Street, 3rd Floor New York, NY 10014 Internet address: [email protected] (212) 807-3826 FAX {212) 989-2078 Contact: Thomas Garske Disclosure, Inc. Document Augmentation/Municipal Securities 5161 River Road Bethesda, MD 20816 (301) 951-1450 FAX (301) 718-2329 Contact: Barry Sugarman {301) 215-6015

JJ Kenny Information services The Repository 65 Broadway, 16th Floor New York, NY 10006 (212) 770-4568 FAX {212) 797-7994 Contact: Joan Horai, Repository Moody's NRMSIR Public Finance Information Center 99 Church Street New York, NY 10007-2796 (800) 339-6306 FAX {212) 553-1460 Contact: Claudette Stephenson {212) 553-0345 R.R. Donnelly Financial Municipal Security Disclosure Archive 559 Main Street Hudson, MA 01749 Internet address: http://www.municipal.com phone: (800) 580-3670 fax: ( 508) 562-1969 Contact: Susan Harvey

SF2-62750.l F-8