$16,665, Tax Allocation Revenue Bonds, Subordinate Series B. (Contra Costa Centre, North Richmond, Bay Point,

Transcription

1 NEW ISSUE-FULL BOOK ENTRY Ratings: S&P insured (Series A and A-T): AAA Underlying (Series A and A-T): A- Insured (Series B): AA Underlying (Series B): BBB (See RATINGS ) In the opinion of Quint & Thimmig LLP, San Francisco, California, Bond Counsel, subject, however, to certain qualifications described herein, under existing law, the interest on the Series A Bonds and on the Series B Bonds is excludable from gross income of the owners thereof for federal income tax purposes and is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations under the Internal Revenue Code of 1986, as amended, but is taken into account in computing an adjustment used in determining the federal alternative minimum tax for certain corporations. In the further opinion of Bond Counsel, interest on the Bonds is exempt from California personal income taxes. Interest on the Series A-T Bonds is subject to all applicable federal income taxation. See TAX MATTERS. COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY $62,205,000 $25,500, Tax Allocation Revenue Bonds, 2007 Taxable Tax Allocation Revenue Bonds, Series A Series A-T (Contra Costa Centre, North Richmond, Bay Point, (North Richmond, Bay Point, Rodeo and Montalvin Rodeo and Manor Project Areas) Montalvin Manor Project Areas) $16,665, Tax Allocation Revenue Bonds, Subordinate Series B (Contra Costa Centre, North Richmond, Bay Point, Rodeo and Montalvin Manor Project Areas) Dated: Date of Issuance Due: August 1, as shown on inside cover The County of Contra Costa Public Financing Authority (the Authority ) has determined to issue its Series A Bonds, Series A-T Bonds and Series B Bonds captioned above (collectively, the Bonds ). Proceeds of the Bonds will be used (i) to finance acquisition and construction by the Authority of certain public capital improvements in the County of Contra Costa (the County ) and (ii) to provide funds for nine separate loans (the 2007 Loans or the Loans ) to be made by the Authority to the Contra Costa County Redevelopment Agency (the Agency ) pursuant to five loan agreements (the Loan Agreements ). The Agency will use the proceeds of the Loans to (a) finance certain redevelopment and housing activities of the Agency within five of the Agency s redevelopment project areas (each, a Project Area ), (b) provide for the prepayment of certain outstanding obligations of the Agency, (c) fund separate reserve funds and pay the premium for debt service reserve surety bonds for each of the Loans, as applicable, and (d) pay the costs of issuing the Bonds. The Bonds will be 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 ultimate purchasers ( Beneficial Owners ) in the denomination of $5,000 or any integral multiple thereof, under the book-entry system maintained by DTC. Beneficial Owners will not be entitled to receive delivery of certificates representing their ownership interest in the Bonds. The principal of, premium if any, and interest on the Bonds, due February 1 and August 1 of each year, commencing February 1, 2008, will be payable by U.S. Bank National Association, San Francisco, California, as trustee (the Trustee ), to DTC for subsequent disbursement to DTC participants, so long as DTC or its nominee remains the registered owner of the Bonds. The Bonds are subject to optional and mandatory redemption prior to maturity as described in this Official Statement. See THE BONDS. The Bonds are being issued pursuant to the terms of an Indenture of Trust, dated as of May 1, 2007, between the Authority and the Trustee. The Bonds are limited obligations of the Authority and are payable exclusively from Revenues (as defined in this Official Statement) to be derived primarily from amounts payable to the Authority by the Agency under the Loan Agreements. The Agency s obligations under each Loan Agreement are secured by and payable from Tax Revenues (as more completely defined in this Official Statement), which consist of a portion of the tax increment revenue received by the Agency from the applicable Project Area, and amounts on deposit in certain funds and accounts, including the Reserve Funds and the Special Funds established under the Loan Agreements. Generally, Tax Revenues from one Project Area may not be used to make Loan payments with respect to another Project Area, but in certain circumstances payments on the Loans used for Low and Moderate Income Housing purposes may be made from Tax Revenues generated from other Project Areas, as described under the heading SECURITY FOR THE BONDS Limited Cross-Collateralization. The Agency s pledge of Tax Revenues to secure its obligation to repay the Loans is on a parity with its pledge of Tax Revenues to repayment of certain outstanding indebtedness. In addition, the Agency is authorized to incur additional debt secured by Tax Revenues on parity with the Loans, as described in this Official Statement. See SECURITY FOR THE BONDS Loan Agreements and Parity Obligations. The receipt of Revenues by the Authority and Tax Revenues by the Agency is subject to certain risks and limitations. See RISK FACTORS and LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING LIMITATIONS. The Series B Bonds are secured under the Indenture on a subordinate basis to the Series A Bonds and Series A-T Bonds, and the purchase of the Series B Bonds involves significant risks. See RISK FACTORS for a discussion of the risk factors that should be considered in evaluating the investment quality of the Bonds. Payment of principal of and interest on the Series A and Series A-T Bonds when due will be insured by an insurance policy to be issued by MBIA Insurance Corporation simultaneously with delivery of the Bonds. d Payment of principal of and interest on the Series B Bonds will be insured in accordance with the terms of a financial guaranty insurance policy to be issued simultaneously with the delivery of the Bonds by RADIAN ASSET ASSURANCE INC. THE BONDS ARE NOT A DEBT OF THE COUNTY, THE AGENCY OR THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS (EXCEPT THE AUTHORITY), AND NONE OF THE COUNTY, THE AGENCY, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS (EXCEPT THE AUTHORITY) IS LIABLE THEREFOR, NOR IN ANY EVENT WILL THE BONDS BE PAYABLE OUT OF ANY FUNDS OTHER THAN THOSE OF THE AUTHORITY SPECIFICALLY PLEDGED THEREFOR UNDER THE INDENTURE. THE BONDS DO NOT CONSTITUTE AN INDEBTEDNESS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMIT OR RESTRICTION. THE AUTHORITY HAS NO TAXING POWER. THE AGENCY S OBLIGATION TO REPAY THE LOANS PURSUANT TO THE LOAN AGREEMENTS IS NOT A DEBT OF THE COUNTY, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS (EXCEPT THE AGENCY), AND NEITHER THE COUNTY, THE STATE OF CALIFORNIA NOR ANY OF ITS POLITICAL SUBDIVISIONS (EXCEPT THE AGENCY) IS LIABLE THEREFOR. THE AGENCY S OBLIGATION TO REPAY THE LOANS PURSUANT TO THE LOAN AGREEMENTS CONSTITUTES AN INDEBTEDNESS OF THE AGENCY PAYABLE SOLELY FROM THE FUNDS OF THE AGENCY SPECIFICALLY PLEDGED THEREFOR UNDER THE LOAN AGREEMENTS. This cover page contains certain information for quick reference only. It is not intended to be a summary of all factors relating to an investment in the Bonds. Investors should review the entire Official Statement before making any investment decision. The Bonds are offered when, as and if issued and accepted by the Underwriter, subject to approval as to their legality by Quint & Thimmig LLP, San Francisco, California, Bond Counsel, and subject to certain other conditions. Jones Hall, A Professional Law Corporation, San Francisco, California is acting as disclosure counsel to the Authority. Certain legal matters will be passed on for the Agency by Goldfarb & Lipman, Oakland, California and for the Authority by County Counsel. It is anticipated that the Bonds, in book-entry form, will be available for delivery on or about June 13, Dated: May 30, 2007

2 COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY 2007 Tax Allocation Revenue Bonds, Series A (Contra Costa Centre, North Richmond, Bay Point, Rodeo and Montalvin Manor Project Areas) MATURITY SCHEDULE (BASE CUSIP :212262) $18,235,000 Serial Bonds Maturity (August 1) Principal Amount Interest Yield CUSIP Maturity (August 1) Principal Amount Interest Yield CUSIP 2008 $240, % 3.570% GU $885, % 4.070% HD , GV , HE , GW ,000, HF , GX ,035, HG , GY ,095, HH , GZ ,680, HJ , HA ,865, HK , HB ,965, HL , HC ,040, HM4 $12,660, % Term Bond due August 1, 2030, Yield: 4.460% 1 CUSIP HP7 $20,600, % Term Bond due August 1, 2037, Yield: 4.490% 1,CUSIP HQ5 $1,160, % Term Bond due August 1, 2014*, Yield: 4.000%, CUSIP HX0 $1,210, % Term Bond due August 1, 2019*, Yield: 4.350%, CUSIP JC4 $2,245, % Term Bond due August 1, 2026*, Yield: 4.700% 1, CUSIP JK6 $6,095, % Term Bond due August 1, 2037*, Yield: 4.800%, CUSIP JM2 1 Yield to August 1, 2017 optional call date. *Indicates Bonds that are Escrow Bonds. COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY 2007 Taxable Tax Allocation Revenue Bonds, Series A-T (North Richmond, Bay Point, Rodeo and Montalvin Manor Project Areas) MATURITY SCHEDULE (BASE CUSIP : ) $2,365, % Term Bond due August 1, 2017, Yield: 5.521%, CUSIP JN0 $13,860, % Term Bond due August 1, 2037, Yield: 6.111%, CUSIP JP5 $9,275, % Term Bond due August 1, 2037*, Yield: 6.291%, CUSIP JR1 *Indicates Bonds that are Escrow Bonds. Copyright 2007, American Bankers Association. CUSIP data in this Official Statement is provided by Standard & Poor's CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc.

3 COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY 2007 Tax Allocation Revenue Bonds, Subordinate Series B (Contra Costa Centre, North Richmond, Bay Point, Rodeo and Montalvin Manor Project Areas) MATURITY SCHEDULE (BASE CUSIP :212262) $6,370,000 Serial Bonds Maturity (August 1) Principal Amount Interest Yield CUSIP Maturity (August 1) Principal Amount Interest Yield CUSIP 2008 $260, % 3.750% JS $450, % 4.100% JZ , JT , KA , JU , KB , JV , KC , JW , KD , JX , KE , JY , KF5 $2,545, % Term Bond due August 1, 2026, Yield: 4.600% 1, CUSIP KK4 $2,780, % Term Bond due August 1, 2030, Yield: 4.640% 1, CUSIP KL2 $4,970, % Term Bond due August 1, 2035, Yield: 4.670% 1, CUSIP KM0 1 Yield to August 1, 2017 optional call date. Copyright 2007, American Bankers Association. CUSIP data in this Official Statement is provided by Standard & Poor's CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc.

4 No dealer, broker, salesperson or other person has been authorized to give any information or to make any representations with respect to the Bonds, other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by the Authority, the Agency, the County or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described in this Official Statement, are intended solely as such and are not to be construed as a representation of facts. The information set forth in this Official Statement has been obtained from the Authority, the Agency, the County and other sources believed to be reliable, but the accuracy or completeness of such information is not guaranteed by, and should not be construed as a representation by, the Underwriter. The information and expressions of opinions in this Official Statement are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Authority or the Agency since the date hereof. All summaries contained in this Official Statement of the Indenture, the Loan Agreements or other documents are made subject to the provisions of such documents and do not purport to be complete statements of any or all of such provisions. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL ON THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. OTHER THAN WITH RESPECT TO INFORMATION CONCERNING RADIAN ASSET ASSURANCE INC. ( RADIAN ASSET ASSURANCE ) CONTAINED UNDER THE CAPTIONS FINANCIAL GUARANTY INSURANCE FOR THE SUBORDINATE BONDS AND RADIAN SURETY BONDS HEREIN AND IN APPENDICES I and J HERETO, NONE OF THE INFORMATION IN THIS OFFICIAL STATEMENT HAS BEEN SUPPLIED OR VERIFIED BY RADIAN ASSET ASSURANCE, AND RADIAN ASSET ASSURANCE MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO: (i) THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION; (ii) THE VALIDITY OF THE BONDS; OR (iii) THE TAX STATUS OF THE INTEREST ON THE BONDS.

5 COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY AUTHORITY MEMBERS Mary N. Piepho, Chair John Gioia, Member Gayle B. Uilkema, Member Susan A. Bonilla, Member Federal D. Glover, Member AUTHORITY AND REDEVELOPMENT AGENCY STAFF John Cullen, County Administrator and Authority Executive Director James Kennedy, Redevelopment Director and Authority Deputy Executive Director Gabriel Lemus, Redevelopment Project Manager Vincent Manuel, Redevelopment Project Manager Maureen Toms, Redevelopment Project Manager D Andre Wells, Redevelopment Project Manager David Bullock, Redevelopment Accountant AGENCY S SPECIAL COUNSEL Goldfarb & Lipman Oakland, California SPECIAL SERVICES BOND COUNSEL Quint & Thimmig LLP San Francisco, California DISCLOSURE COUNSEL Jones Hall, A Professional Law Corporation San Francisco, California TRUSTEE AND ESCROW AGENT U.S. Bank National Association San Francisco, California FISCAL CONSULTANT Fraser & Associates Roseville, California VERIFICATION AGENT Causey Demgen & Moore Denver, Colorado

6 (This page intentionally left blank)

7 TABLE OF CONTENTS INTRODUCTION...1 PURPOSE OF THE BONDS AND THE LOANS...2 THE COUNTY, THE AUTHORITY AND THE AGENCY...2 SECURITY FOR THE BONDS...4 DESCRIPTION OF THE BONDS...5 BOND OWNERS' RISKS...6 CONTINUING DISCLOSURE...6 OTHER INFORMATION...6 THE BONDS...7 DESCRIPTION...7 OPTIONAL REDEMPTION FROM LOAN PREPAYMENTS...7 MANDATORY REDEMPTION FROM SINKING FUND PAYMENTS...8 MANDATORY REDEMPTION UPON TRANSFERS FROM ESCROW FUNDS...15 GENERAL REDEMPTION PROVISIONS...16 DEBT SERVICE SCHEDULE...18 THE FINANCING PLAN...21 GENERAL...21 ESTIMATED SOURCES AND USES OF FUNDS...22 FINANCING OF CAPITAL PROJECTS...25 PREPAYMENT OF CERTAIN AGENCY OBLIGATIONS...26 SECURITY FOR THE BONDS...29 GENERAL...29 TAX REVENUES...30 TAX ALLOCATION FINANCING...31 ALLOCATION OF TAXES...31 UNITARY TAXES...32 LOAN AGREEMENTS AND PARITY OBLIGATIONS 33 SUBORDINATE OBLIGATIONS...37 ESCROW FUNDS...37 REVENUE FUND...38 RESERVE FUNDS...39 LIMITED CROSS-COLLATERALIZATION...41 BOND INSURANCE FOR THE SENIOR BONDS...42 THE MBIA INSURANCE CORPORATION INSURANCE POLICY...42 MBIA INSURANCE CORPORATION...43 REGULATION...43 FINANCIAL STRENGTH RATINGS OF MBIA...43 MBIA FINANCIAL INFORMATION...44 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...44 MBIA SURETY BONDS...45 i FINANCIAL GUARANTY INSURANCE FOR THE SUBORDINATE BONDS DESCRIPTION OF RADIAN POLICY DESCRIPTION OF RADIAN ASSET ASSURANCE INC RADIAN SURETY BONDS LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING LIMITATIONS PROPERTY TAX LIMITATIONS - ARTICLE XIIIA ALLOCATION OF TAXES PROPERTY TAX COLLECTION PROCEDURE TAX COLLECTION FEES EXCLUSION OF TAX REVENUES FOR GENERAL OBLIGATION BONDS DEBT SERVICE APPROPRIATIONS LIMITATIONS - ARTICLE XIIIB 54 PROPOSITION FUTURE INITIATIVES OTHER LEGISLATION AFFECTING REDEVELOPMENT AGENCIES PASS-THROUGH OBLIGATIONS SECTION ALLOCATIONS LOW AND MODERATE INCOME HOUSING APPEALS OF ASSESSED VALUES THE AUTHORITY THE AGENCY AUTHORITY AND PERSONNEL AGENCY POWERS AND DUTIES AGENCY FINANCIAL STATEMENTS AGENCY INDEBTEDNESS THE PROJECT AREAS THE CONTRA COSTA CENTRE PROJECT AREA GENERAL THE CONTRA COSTA CENTRE REDEVELOPMENT PLAN REDEVELOPMENT PLAN LIMITATIONS TAX SHARING AGREEMENTS SECTION ALLOCATIONS STATUTORY PASS-THROUGH OBLIGATIONS LOW AND MODERATE INCOME HOUSING HISTORIC ASSESSED VALUE AND TAX REVENUES MAJOR TAXABLE PROPERTY OWNERS PROJECTED TAX REVENUES ESTIMATED LOAN PAYMENT COVERAGE THE NORTH RICHMOND PROJECT AREA GENERAL THE NORTH RICHMOND REDEVELOPMENT PLAN... 79

8 NORTH RICHMOND REDEVELOPMENT PLAN LIMITATIONS...79 TAX SHARING AGREEMENTS...80 SECTION ALLOCATIONS...80 STATUTORY PASS-THROUGH OBLIGATIONS...80 LOW AND MODERATE INCOME HOUSING...81 HISTORIC ASSESSED VALUES AND TAX REVENUES...81 MAJOR TAXABLE PROPERTY OWNERS...83 APPEALS OF ASSESSED VALUES...84 PROJECTED TAX REVENUES...85 ESTIMATED LOAN PAYMENT COVERAGE...89 THE BAY POINT PROJECT AREA...91 GENERAL...91 THE BAY POINT REDEVELOPMENT PLAN...92 BAY POINT REDEVELOPMENT PLAN LIMITATIONS...92 TAX SHARING AGREEMENT...93 SECTION ALLOCATIONS...93 STATUTORY PASS-THROUGH OBLIGATIONS...94 LOW AND MODERATE INCOME HOUSING...94 HISTORIC ASSESSED VALUE AND TAX REVENUES...94 MAJOR TAXABLE PROPERTY OWNERS...96 APPEALS OF ASSESSED VALUES...96 PROJECTED TAX REVENUES...97 ESTIMATED LOAN PAYMENT COVERAGE THE RODEO PROJECT AREA GENERAL THE RODEO REDEVELOPMENT PLAN RODEO REDEVELOPMENT PLAN LIMITATIONS.104 TAX SHARING AGREEMENTS SECTION ALLOCATIONS STATUTORY PASS-THROUGH OBLIGATIONS LOW AND MODERATE INCOME HOUSING HISTORIC ASSESSED VALUE AND TAX REVENUES MAJOR TAXABLE PROPERTY OWNERS APPEALS OF ASSESSED VALUES PROJECTED TAX REVENUES ESTIMATED LOAN PAYMENT COVERAGE THE MONTALVIN MANOR PROJECT AREA GENERAL APPENDIX A - Summary of Certain Provisions of the Principal Legal Documents APPENDIX B - Audited Financial Statements of the Agency for Fiscal Year Ended June 30, 2006 APPENDIX C - Fiscal Consultant Report APPENDIX D - General Information About the County of Contra Costa APPENDIX E - Form of Bond Counsel Opinion APPENDIX F - Form of Continuing Disclosure Certificate APPENDIX G - DTC and the Book-Entry Only System APPENDIX H - Specimen MBIA Policy APPENDIX I - Specimen Radian Policy APPENDIX J - Specimen Radian Surety Bond THE MONTALVIN MANOR REDEVELOPMENT PLAN MONTALVIN MANOR REDEVELOPMENT PLAN LIMITATIONS STATUTORY PASS-THROUGH OBLIGATIONS TAX SHARING AGREEMENTS SECTION ALLOCATIONS LOW AND MODERATE INCOME HOUSING HISTORIC ASSESSED VALUE AND TAX REVENUES MAJOR TAXABLE PROPERTY OWNERS APPEALS OF ASSESSED VALUES PROJECTED TAX REVENUES ESTIMATED LOAN PAYMENT COVERAGE RISK FACTORS REDUCTION IN TAXABLE VALUE REDUCTION IN INFLATIONARY RATE LEVY AND COLLECTION PARITY DEBT BANKRUPTCY STATE BUDGET DEFICIT AND ERAF SHIFT SECONDARY MARKET LOSS OF TAX EXEMPTION HAZARDOUS SUBSTANCES SEISMIC FACTORS AND FLOODING RISK FACTORS UNIQUELY RELATING TO THE SUBORDINATE BONDS VERIFICATION OF MATHEMATICAL ACCURACY LITIGATION RATINGS TAX MATTERS BACKUP WITHHOLDING FOREIGN INVESTORS ERISA CONSIDERATIONS OTHER MATTERS AFFECTING THE BONDS CERTAIN LEGAL MATTERS UNDERWRITING MISCELLANEOUS ii

9 Contra Costa County Redevelopment Project Areas Rodeo Bay Point North Richmond 580 Montalvin Manor San Pablo Richmond 80 Hercules El Cerrito Pinole ÄÅ 4 ÄÅ 24 Orinda Martinez Lafayette Pleasant Hill Concord Contra Costa Centre Walnut Creek Clayton Pittsburg ÄÅ 4 Antioch Oakley Brentwood Highway 4 Moraga 680 Danville San Ramon Alameda County l N Miles

10 (This page intentionally left blank)

11 OFFICIAL STATEMENT COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY $62,205, Tax Allocation Revenue Bonds, Series A (Contra Costa Centre, North Richmond, Bay Point, Rodeo and Montalvin Manor Project Areas) $25,500, Taxable Tax Allocation Revenue Bonds, Series A-T (North Richmond, Bay Point, Rodeo and Montalvin Manor Project Areas) $16,665, Tax Allocation Revenue Bonds, Subordinate Series B (Contra Costa Centre, North Richmond, Bay Point, Rodeo and Montalvin Manor Project Areas) INTRODUCTION This Official Statement, including the cover page and appendices, is provided to furnish information in connection with the sale by the County of Contra Costa Public Financing Authority (the Authority ) of the following series of bonds (collectively, the Bonds ): Senior Bonds: 2007 Tax Allocation Revenue Bonds, Series A (Contra Costa Centre, North Richmond, Bay Point, Rodeo and Montalvin Manor Project Areas) (the Series A Bonds ) and 2007 Taxable Tax Allocation Revenue Bonds, Series A-T (North Richmond, Bay Point, Rodeo and Montalvin Manor Project Areas) (the Series A-T Bonds and together with the Series A Bonds, the Senior Bonds ); and Subordinate Bonds: 2007 Tax Allocation Revenue Bonds, Subordinate Series B (Contra Costa Centre, North Richmond, Bay Point, Rodeo and Montalvin Manor Project Areas) (the Series B Bonds or the Subordinate Bonds ). Definitions of certain terms used in this Official Statement are set forth in APPENDIX A Summary of Certain Provisions of the Principal Legal Documents. The Bonds are being issued pursuant to the laws of the State, including the Marks-Roos Local Bond Pooling Act of 1985, constituting Article 4 of Chapter 5 of Division 7 of Title 1 (commencing with Section 6584) of the California Government Code (the Bond Law ), a resolution of the Authority adopted on May 1, 2007, and an Indenture of Trust (the Indenture ), dated as of May 1, 2007 between the Authority and U.S. Bank National Association, as trustee (the Trustee ). This introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement, including the cover page and appendices, and the documents summarized or described in this Official Statement. A full review should be made of the entire Official Statement. The offering of the Bonds to potential investors is made only by means of the entire Official Statement. 1

12 Purpose of the Bonds and the Loans A portion of the proceeds of the Bonds will be used to fund five non-housing loans (the 2007A Loans ) and four housing loans (the 2007B Loans ) from the Authority to the Contra Costa County Redevelopment Agency (the Agency ), pursuant to five loan agreements, each as supplemented as described in this Official Statement (each, a Loan Agreement and collectively, the Loan Agreements ) with respect to the five separate project areas described below (each a Project Area and collectively, the Project Areas ) each between the Authority and the Agency. See SECURITY FOR THE BONDS Loan Agreements and Parity Obligations. The 2007A Loans and the 2007B Loans are referred to collectively as the 2007 Loans or the Loans. The proceeds of the 2007 Loans will be used by the Agency to (i) prepay certain outstanding obligations of the Agency, (ii) provide funds for redevelopment and housing activities of the Agency in the Project Areas, (iii) fund separate reserve funds and pay the premium for debt service reserve surety bonds for each of the Loans, as applicable, (iv) pay a portion of the interest on the Escrow Bonds (defined below) to August 1, 2009, and (v) pay the costs of issuing the Bonds. Proceeds of the Bonds identified as Escrow Bonds in the Maturity Schedule on the inside front cover of this Official Statement will be deposited into two escrow funds (the North Richmond Escrow Fund and the Bay Point Escrow Fund and, together, the Escrow Funds ) for the purpose of increasing amounts in the Program Fund and three of the 2007 Loans to the Agency pending satisfaction of certain escrow release conditions. In the event the Agency does not satisfy the escrow release conditions prior to June 15, 2009, or extend the time period for release under the Indenture, amounts in the Escrow Funds will be used to redeem all or a portion of the Escrow Bonds on August 1, See THE BONDS Mandatory Redemption Upon Transfers From Escrow Funds and SECURITY FOR THE BONDS Escrow Funds. The portion of the Bond proceeds that is not escrowed or loaned to the Agency under the Loan Agreements will be used by the Authority to finance acquisition and construction by the Authority of certain public capital improvements in the County of Contra Costa ( County ). See THE FINANCING PLAN Estimated Sources and Uses of Funds. The Agency will enter into the Loan Agreements pursuant to the State of California s (the State ) Community Redevelopment Law, constituting Part 1, Division 24 (commencing with Section 33000) of the Health and Safety Code of the State (the Redevelopment Law ). The County, the Authority and the Agency The County. The County is located in northern California, approximately 20 miles northeast of San Francisco, and is bounded by the San Francisco and San Pablo Bays, the Sacramento River Delta, and by Alameda County on the south. Ranges of hills effectively divide the County into three distinct regions. The western portion, with its access to water, contains much of the County s heavy industry. The central section is rapidly developing from a suburban area into a major commercial and financial headquarters center. The eastern portion is also undergoing substantial change, from a rural, agricultural area, to a suburban region. The population of the County, as of January 1, 2006, was 1,029,377. For certain information with respect to the County, see APPENDIX D General Information About the County of Contra Costa. The Authority. The Authority was formed pursuant to an agreement dated as of April 7, 1992, between the County and the Agency. The Authority was created for the purpose of 2

13 assisting the County and the Agency in financing projects, through, among other means, the acquisition by the Authority of capital improvements and/or the purchase by the Authority of local obligations within the meaning of Articles 1 through 4 (commencing with Section 6500) of Chapter 5, Division 7, Title 1 of the Government Code of the State of California (the Act ). The Authority is a distinct legal entity separate and apart from the County and the Agency, and its debts and obligations are not debts or obligations of the County or the Agency. The Authority has no taxing power. The Agency. The Agency was activated in 1983, pursuant to the Redevelopment Law. As described in this Official Statement, certain proceeds of the Bonds will be used to fund the 2007 Loans from the Authority to the Agency with respect to the following Project Areas: No. of Acres Assessed Value Incremental Value Project Area Contra Costa Centre Redevelopment Project Area (formerly known as the Pleasant Hill BART Project Area) (the Contra Costa Centre Project Area ) 125 $610,652,120 $582,004,123 North Richmond Redevelopment Project Area (the North Richmond Project Area ) ,649, ,080,531 Bay Point Redevelopment Project Area (formerly known as the West Pittsburg Redevelopment Project Area) (the Bay Point Project Area ) 1, ,142, ,320,189 Rodeo Redevelopment Project Area (the Rodeo Project Area ) ,006, ,206,232 Montalvin Manor Redevelopment Project Area (the Montalvin Manor Project Area ) ,978,359 52,504,158 For more information on the Agency and the Project Areas, see the following sections in this Official Statement: THE PROJECT AREAS ; THE CONTRA COSTA CENTRE PROJECT AREA ; THE NORTH RICHMOND PROJECT AREA ; THE BAY POINT PROJECT AREA ; THE RODEO PROJECT AREA ; and THE MONTALVIN MANOR PROJECT AREA. 3

14 Security for the Bonds The Bonds are limited obligations of the Authority, secured by a pledge, charge and lien of all the Revenues (as defined below), consisting primarily of amounts payable by the Agency to the Authority under the Loan Agreements. The Senior Bonds are equally secured by a first pledge, charge and lien of all the Revenues. The Subordinate Bonds are secured by the Revenues on a subordinate basis to the Senior Bonds, and debt service on the Subordinate Bonds on any Interest Payment Date is payable from the Revenues only after payment of debt service on and deposits related to the Senior Bonds have been made on such Interest Payment Date. The Agency s obligation under each Loan Agreement is secured by a pledge of Tax Revenues derived from the Project Area to which each Loan Agreement pertains. Tax Revenues are generally defined in each Loan Agreement to be, with respect to the Project Area to which such Loan Agreement pertains and subject to certain deductions, all taxes, with certain exceptions, annually allocated and paid to the Agency with respect to such Project Area following the date of delivery of the Bonds pursuant to the Redevelopment Law and Section 16 of Article XVI of the Constitution of the State and as provided in the Redevelopment Plan. For a complete definition of Tax Revenues, see SECURITY FOR THE BONDS Tax Revenues. The Redevelopment Law provides a means for financing redevelopment projects based upon an allocation of taxes collected within a redevelopment project area. The taxable valuation of a redevelopment project area last equalized prior to adoption of the redevelopment plan, or base roll, is established and, except for any period during which the taxable valuation drops below the base year level, the taxing agencies thereafter receive the taxes produced by the levy of the then-current tax rate upon the base roll. Taxes collected upon any increase in taxable valuation over the base roll (other than the annual increase of the base year assessed value for inflation of up to 2% which in some cases may be allocated to the taxing agencies, and except for taxes allocated to other taxing agencies by agreement with the Agency and pursuant to the Redevelopment Law) are allocated to a redevelopment agency and may be pledged by a redevelopment agency to the repayment of any indebtedness incurred in financing or refinancing a redevelopment project. Redevelopment agencies themselves have no authority to levy property taxes and must look specifically to the allocation of taxes produced as indicated above. The Agency s pledge of Tax Revenues to secure its obligation to repay the 2007 Loans relating to the Project Areas is on parity with its pledge of Tax Revenues to repayment of certain outstanding indebtedness. In addition, the Agency is authorized to incur additional debt secured by Tax Revenues on parity with the 2007 Loans. See SECURITY FOR THE BONDS Loan Agreements and Parity Obligations. Except to the limited extent described in SECURITY FOR THE BONDS Limited Cross-Collateralization relating to Loans used for low and moderate income housing purposes, Tax Revenues generated in one Project Area may not be used to make payments due under a Loan Agreement relating to another Project Area. Any future decrease in the taxable valuation in a Project Area or in the applicable tax rates could reduce the Tax Revenues allocated to the Agency, thereby potentially impacting the ability of the Agency to make 2007 Loan payments under the Loan Agreements and, consequently, could have an adverse impact on the ability of the Authority to pay debt service on the Bonds. See RISK FACTORS. 4

15 Bond Insurance and Surety Bonds for the Senior Bonds. Concurrently with issuance of the Bonds, MBIA Insurance Corporation (the Senior Bonds Insurer or MBIA ) will issue its insurance policy (the MBIA Policy ) for the Senior Bonds. See BOND INSURANCE FOR THE SENIOR BONDS and APPENDIX H Specimen MBIA Policy. The Subordinate Bonds are not insured by the MBIA Policy. The Senior Bonds Insurer will also be issuing reserve fund surety bonds (each, a MBIA Surety Bond ) for the portions of the 2007 Loan Reserve Funds attributable to the Senior Bonds. See MBIA SURETY BONDS. Bond Insurance and Surety Bonds for the Subordinate Bonds. Concurrently with issuance of the Bonds, Radian Asset Assurance Inc. (the Subordinate Bonds Insurer or Radian Asset Assurance ) will issue its insurance policy (the Radian Policy ) for the Subordinate Bonds. See FINANCIAL GUARANTY INSURANCE FOR THE SUBORDINATE BONDS and APPENDIX I Specimen Radian Policy. The Senior Bonds are not insured by the Radian Policy. The Subordinate Bonds Insurer will also be issuing reserve fund surety bonds (each, a Radian Surety Bond ) for the portions of the 2007 Loan Reserve Funds, except for the Contra Costa Centre 2007 Loan Reserve Fund, attributable to the Subordinate Bonds. See RADIAN SURETY BONDS and APPENDIX J Specimen Radian Surety Bond. Description of the Bonds Payments. Interest on the Bonds is payable on February 1, 2008, and semiannually thereafter on each February 1 and August 1 by check or draft of the Trustee mailed by first class mail or, in certain circumstances, by wire transfer, to the registered owners thereof. Principal is payable when due upon surrender of the Bonds at the corporate trust office of the Trustee in San Francisco, California. So long as DTC is the sole depository for the Bonds, all payments of principal and interest on the Bonds will be made to DTC. See APPENDIX G DTC and the Book-Entry Only System. Denominations. The Bonds will be issued in denominations of $5,000 each or integral multiples thereof. Redemptions. The Bonds are subject to redemption prior to their respective maturity dates, from any optional prepayment of the 2007 Loans or any other source of available funds. The Term Bonds are also subject to mandatory redemption. The Escrow Bonds are subject to mandatory redemption in the event the conditions for release of moneys from the Escrow Funds are not met. See THE BONDS - Optional Redemption From Loan Prepayments, Mandatory Redemption From Sinking Fund Payments, - Mandatory Redemption Upon Transfers From Escrow Funds and SECURITY FOR THE BONDS - Escrow Funds. Registration. The Bonds will be issued in fully registered form without coupons in the name of Cede & Co., as nominee of The Depository Trust Company of New York which will act as securities depository for the Bonds. No physical distribution of the Bonds will be made to the public under this arrangement. So long as the Bonds are maintained in book-entry form, all references in this Official Statement to the owners or holders of the Bonds shall mean The Depository Trust Company and not the beneficial owners of the Bonds. See APPENDIX G - DTC and the Book-Entry Only System. 5

16 Bond Owners' Risks Prospective investors should review this Official Statement and the Appendices in their entirety and should consider certain risk factors associated with the purchase of the Bonds, some of which have been summarized in the section entitled RISK FACTORS. Continuing Disclosure The Agency, on behalf of itself and the Authority, will execute an undertaking to provide certain annual financial information and operating data relating to the Bonds, the Agency and the Project Areas (the Annual Report ). The undertaking will be in the form attached as Exhibit F. The Annual Report shall be delivered annually, not later than nine months after the end of the Agency s fiscal year (which would be March 31 based upon the Agency s current June 30 fiscal year end), commencing March 31, 2008 with respect to the fiscal year. The Agency has also covenanted to provide notices of the occurrence of certain enumerated events, if material. The specific nature of the information to be contained in the Annual Report or the notices of material events is set forth below in Appendix F. These covenants have been made in order to assist the Underwriter in complying with S.E.C. Rule 15c2-12(b)(5). The Agency has never failed to comply, in all material respects, with an undertaking pursuant to Rule 15c2-12. Other Information This Official Statement speaks only as of its date, and the information contained in this Official Statement is subject to change. No dealer, broker, salesperson or other person has been authorized by the Authority, the Agency or the County to give any information or to make any representations in connection with the offer or sale of the Bonds other than as contained in this Official Statement and, if given or made, such other information or representations must not be relied upon as having been authorized by the Authority, the Agency or the County. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described, are intended solely as such and are not to be construed as representations of fact. The summaries and references to documents, statutes and constitutional provisions referred to in this Official Statement do not purport to be comprehensive or definitive, and are qualified in their entireties by reference to such documents, statutes and constitutional provisions. All capitalized terms used in this Official Statement (unless otherwise defined in this Official Statement) which are defined in the Indenture or the Loan Agreements shall have the meanings set forth therein, some of which are set forth in APPENDIX A Summary of Certain Provisions of the Principal Legal Documents. 6

17 THE BONDS Description The Bonds will be issued as fully registered bonds, and will bear interest at the rates, and mature on August 1 in the years and in the amounts all as set forth on the inside cover pages of this Official Statement. The Bonds will be dated the date of issuance. Interest on the Bonds will be payable semiannually on February 1 and August 1 of each year (each an Interest Payment Date ), commencing February 1, 2008, and will be calculated on the basis of a 360-day year composed of twelve 30-day months. Each Bond will bear interest from the Interest Payment Date next preceding the date of authentication thereof, unless (a) it is authenticated after a Record Date (as defined below) and on or before the following Interest Payment Date, in which event it shall bear interest from such Interest Payment Date; or (b) it is authenticated on or before January 15, 2008, in which event it shall bear interest from the date of issuance; provided, however, that if, as of the date of authentication of any Bond, interest thereon is in default, such Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon. Interest on the Bonds will be paid to the person whose name appears on the Registration Books as the Owner thereof as of the fifteenth calendar day of the month immediately preceding such Interest Payment Date (a Record Date ) immediately preceding each such Interest Payment Date. Such interest will be paid by check mailed on each Interest Payment Date by first-class mail, postage prepaid, to the Owner at the address of such owner as it appears on the Registration Books as of the preceding Record Date, or, upon written request received by the Trustee prior any Record Date of an owner of at least $1,000,000 in aggregate principal amount of Bonds, by wire transfer in immediately available funds to an account within the continental United States designated by such owner. While the Bonds are held in the book-entry only system of DTC, all such payments will be made to Cede & Co., as the registered owner of the Bonds. Principal of and the redemption premium (if any) on the Bonds are payable in lawful money of the United States of America upon surrender of the Bonds at maturity or earlier redemption at the corporate trust office of the Trustee indicated in the Indenture. Optional Redemption From Loan Prepayments Series A Bonds. The Series A Bonds maturing on or before August 1, 2017 are not subject to optional redemption prior to their respective maturity dates. The Series A Bonds maturing on or after August 1, 2018 are subject to optional redemption prior to their respective maturity dates, as a whole or in part (among maturities as described below in Selection of Bonds for Redemption and by lot within a maturity), on any date on or after August 1, 2017, from any optional prepayment of the Loans or any other source of available funds, at a redemption price equal to the principal amount of the Series A Bonds to be redeemed, plus accrued interest thereon to the date of redemption, without premium. Series A-T Bonds. The Series A-T Bonds maturing on August 1, 2017 are not subject to optional redemption prior to their respective maturity dates. The Series A-T Bonds maturing on August 1, 2037 are subject to optional redemption prior to their respective maturity dates, as a whole or in part (between the Series A-T Bonds with such maturity as described below in Selection of Bonds for Redemption and by lot within a maturity), on any date on or after August 1, 2017, from any optional prepayment of the Loans or any other source of available 7

18 funds, at a redemption price equal to the principal amount of the Series A-T Bonds to be redeemed, plus accrued interest thereon to the date of redemption, without premium. Series B Bonds. The Series B Bonds maturing on or before August 1, 2017 are not subject to optional redemption prior to their respective maturity dates. The Series B Bonds maturing on or after August 1, 2018 are subject to redemption prior to their respective maturity dates, as a whole or in part (among maturities as described below in Selection of Bonds for Redemption and by lot within a maturity), on any date on or after August 1, 2017, from any optional prepayment of the Loans or any other source of available funds, at a redemption price equal to the principal amount of the Series B Bonds to be redeemed, plus accrued interest thereon to the date of redemption, without premium. Mandatory Redemption From Sinking Fund Payments Series A Bonds. The Series A Bonds that are not Escrow Bonds maturing on August 1, 2030 are also subject to mandatory redemption prior to their stated maturity, in part by lot, from payments made by the Authority into the Principal Account, on each August 1 on or after August 1, 2026 at a redemption price equal to the principal amount thereof to be redeemed plus accrued interest thereon to the date fixed for redemption, without premium, in the principal amounts and on August 1 in the years as set forth in the following table: Series A Non-Escrow Bonds Maturing August 1, 2030 Mandatory Redemption Date (August 1) Principal Amount Redeemed 2026 $2,080, ,125, ,240, ,035, (maturity) 3,180,000 The Series A Bonds maturing on August 1, 2037 that are not Escrow Bonds are also subject to mandatory redemption prior to their stated maturity, in part by lot, from payments made by the Authority into the Principal Account, on each August 1 on or after August 1, 2031 at a redemption price equal to the principal amount thereof to be redeemed plus accrued interest thereon to the date fixed for redemption, without premium, in the principal amounts and on August 1 in the years as set forth in the following table: Series A Non-Escrow Bonds Maturing August 1, 2037 Mandatory Redemption Date (August 1) Principal Amount Redeemed 2031 $3,345, ,515, ,680, ,575, ,755, ,330, (maturity) 1,400,000 8

19 The Series A Bonds maturing on August 1, 2014 that are Escrow Bonds are also subject to mandatory redemption prior to their stated maturity, in part by lot, from payments made by the Authority into the Principal Account, on each August 1 on or after August 1, 2009 at a redemption price equal to the principal amount thereof to be redeemed plus accrued interest thereon to the date fixed for redemption, without premium, in the principal amounts and on August 1 in the years as set forth in the following table: Series A Escrow Bonds Maturing August 1, 2014 Mandatory Redemption Date (August 1) Principal Amount Redeemed 2009 $170, , , , , (maturity) 215,000 The Series A Bonds maturing on August 1, 2019 that are Escrow Bonds are also subject to mandatory redemption prior to their stated maturity, in part by lot, from payments made by the Authority into the Principal Account, on each August 1 on or after August 1, 2015 at a redemption price equal to the principal amount thereof to be redeemed plus accrued interest thereon to the date fixed for redemption, without premium, in the principal amounts and on August 1 in the years as set forth in the following table: Series A Escrow Bonds Maturing August 1, 2019 Mandatory Redemption Date (August 1) Principal Amount Redeemed 2015 $220, , , , (maturity) 260,000 9

20 The Series A Bonds maturing on August 1, 2026 that are Escrow Bonds are also subject to mandatory redemption prior to their stated maturity, in part by lot, from payments made by the Authority into the Principal Account, on each August 1 on or after August 1, 2020 at a redemption price equal to the principal amount thereof to be redeemed plus accrued interest thereon to the date fixed for redemption, without premium, in the principal amounts and on August 1 in the years as set forth in the following table: Series A Escrow Bonds Maturing August 1, 2026 Mandatory Redemption Date (August 1) Principal Amount Redeemed 2020 $285, , , , , , (maturity) 340,000 The Series A Bonds maturing on August 1, 2037 that are Escrow Bonds are also subject to mandatory redemption prior to their stated maturity, in part by lot, from payments made by the Authority into the Principal Account, on each August 1 on or after August 1, 2027 at a redemption price equal to the principal amount thereof to be redeemed plus accrued interest thereon to the date fixed for redemption, without premium, in the principal amounts and on August 1 in the years as set forth in the following table: Series A Escrow Bonds Maturing August 1, 2037 Mandatory Redemption Date (August 1) Principal Amount Redeemed 2027 $375, , , , , , , , , , (maturity) 780,000 10

21 Series A-T Bonds. The Series A-T Bonds maturing on August 1, 2017 that are not Escrow Bonds are also subject to mandatory redemption prior to their stated maturity, in part by lot, from payments made by the Authority into the Principal Account, on each August 1 on or after August 1, 2008 at a redemption price equal to the principal amount thereof to be redeemed plus accrued interest thereon to the date fixed for redemption, without premium, in the principal amounts and on August 1 in the years as set forth in the following table: Series A-T Non-Escrow Bonds Maturing August 1, 2017 Mandatory Redemption Date (August 1) Principal Amount Redeemed 2008 $ 65, , , , , , , , , (maturity) 305,000 11

22 The Series A-T Bonds maturing on August 1, 2037 that are not Escrow Bonds are also subject to mandatory redemption prior to their stated maturity, in part by lot, from payments made by the Authority into the Principal Account, on each August 1 on or after August 1, 2018 at a redemption price equal to the principal amount thereof to be redeemed plus accrued interest thereon to the date fixed for redemption, without premium, in the principal amounts and on August 1 in the years as set forth in the following table: Series A-T Non-Escrow Bonds Maturing August 1, 2037 Mandatory Redemption Date (August 1) Principal Amount Redeemed 2018 $ 320, , , , , , , , , , , , , , , , ,155, ,220, ,300, (maturity) 1,370,000 12

23 The Series A-T Bonds maturing on August 1, 2037 that are Escrow Bonds are also subject to mandatory redemption prior to their stated maturity, in part by lot, from payments made by the Authority into the Principal Account, on each August 1 on or after August 1, 2009 at a redemption price equal to the principal amount thereof to be redeemed plus accrued interest thereon to the date fixed for redemption, without premium, in the principal amounts and on August 1 in the years as set forth in the following table: Series A-T Escrow Bonds Maturing August 1, 2037 Mandatory Redemption Date (August 1) Principal Amount Redeemed 2009 $ 70, , , , , , , , , , , , , , , , , , , , , , , , , ,170, ,255, ,325, (maturity) 1,415,000 13

24 Series B Bonds. The Series B Bonds maturing on August 1, 2026 are also subject to mandatory redemption prior to their stated maturity, in part by lot, from payments made by the Authority into the Principal Account, on each August 1 on or after August 1, 2022 at a redemption price equal to the principal amount thereof to be redeemed plus accrued interest thereon to the date fixed for redemption, without premium, in the principal amounts and on August 1 in the years as set forth in the following table: Series B Bonds Maturing August 1, 2026 Mandatory Redemption Date (August 1) Principal Amount Redeemed 2022 $ 635, , , , (maturity) 515,000 The Series B Bonds maturing on August 1, 2030 are also subject to mandatory redemption prior to their stated maturity, in part by lot, from payments made by the Authority into the Principal Account, on each August 1 on or after August 1, 2027 at a redemption price equal to the principal amount thereof to be redeemed plus accrued interest thereon to the date fixed for redemption, without premium, in the principal amounts and on August 1 in the years as set forth in the following table: Series B Bonds Maturing August 1, 2030 Mandatory Redemption Date (August 1) Principal Amount Redeemed 2027 $ 535, , , (maturity) 860,000 14

25 The Series B Bonds maturing on August 1, 2035 are also subject to mandatory redemption prior to their stated maturity, in part by lot, from payments made by the Authority into the Principal Account, on each August 1 on or after August 1, 2031 at a redemption price equal to the principal amount thereof to be redeemed plus accrued interest thereon to the date fixed for redemption, without premium, in the principal amounts and on August 1 in the years as set forth in the following table: Series B Bonds Maturing August 1, 2035 Mandatory Redemption Date (August 1) Principal Amount Redeemed 2031 $ 900, , , ,040, (maturity) 1,090,000 If some but not all of any of such Term Bonds have been redeemed pursuant to the optional or escrow fund redemption provisions of the Indenture, the total amount of all future sinking fund payments for such Term Bonds will be reduced by the aggregate principal amount of such Term Bonds so redeemed, to be allocated among such sinking fund payments on a pro rata basis at the written direction of the Authority. Mandatory Redemption Upon Transfers From Escrow Funds The Escrow Bonds are also subject to mandatory redemption in part (among series as described below and by lot within a maturity) on August 1, 2009, or on any Interest Payment Date thereafter for which notice of redemption can timely be given following a transfer of amounts in the North Richmond Escrow Fund (see SECURITY FOR THE BONDS - Escrow Funds ) created under the Indenture to the Principal Account. The Trustee will transfer such amounts from the North Richmond Escrow Fund to the Principal Account on June 15, 2009 to be used to redeem the Escrow Bonds on August 1, 2009, unless such date is extended by the Agency as provided in the Indenture. Any such redemption shall be at a redemption price equal to the principal amount of the Bonds to be redeemed, without premium, together with accrued interest thereon to the redemption date. Provided however, that in any event the principal and interest on the Bonds which remain Outstanding following such redemption must be equal in total amount on each succeeding Interest Payment Date to the remaining principal and interest due on each such date on the Loans funded from the Bonds which remain unpaid following such redemption. The Escrow Bonds are also subject to mandatory redemption in part (among series as described below and by lot within a maturity) on August 1, 2009, or on any Interest Payment Date thereafter for which notice of redemption can timely be given following a transfer of amounts in the Bay Point Escrow Fund (see SECURITY FOR THE BONDS - Escrow Funds ) created under the Indenture to the Principal Account. The Trustee will transfer such amounts from the Bay Point Escrow Fund to the Principal Account on June 15, 2009 to be used to redeem the Escrow Bonds on August 1, 2009, unless such date is extended by the Agency as provided in the Indenture. Any such redemption shall be at a redemption price equal to the principal amount of the Bonds to be redeemed, without premium, together with accrued interest thereon to the redemption date. 15

26 In connection with any redemption of Escrow Bonds, the Authority shall select the Escrow Bonds as set forth in the Indenture. General Redemption Provisions Notice of Redemption. The Trustee is required to 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 Depositories and to one or more Information Services, at least 30 but not more than 60 days prior to the date fixed for redemption. The redemption notice will state the date of the notice, the redemption date, the redemption place and the redemption price and will designate the CUSIP numbers, the Bond numbers (but only if less than all of the Outstanding Bonds are to be redeemed) and the maturity or maturities (in the event of redemption of all of the Bonds of such maturity or maturities in whole) of the Bonds to be redeemed. Effect of Redemption. From and after the date fixed for redemption, if funds available for the payment of the principal of and interest (and premium, if any) on the Bonds called for redemption have been provided, such Bonds will cease to be entitled to any benefit under the Indenture other than the right to receive payment of the redemption price, and no interest will accrue from and after the redemption date. Selection of Bonds for Redemption. Whenever provision is made in the Indenture for the optional redemption of less than all of the Bonds, the Authority will select the Bonds to be redeemed from all Bonds then Outstanding as follows: (i) if the Bonds are being redeemed from prepayments of the Loan made under the Contra Costa Centre Loan Agreement will be applied approximately 15% to the redemption of Series B Bonds and approximately 85% to the redemption of Series A Bonds; (ii) if the Bonds are being redeemed from prepayments of Loans made under the North Richmond Loan Agreement, the Rodeo Loan Agreement, the Bay Point Loan Agreement or the Montalvin Manor Loan Agreement, the Bonds will be selected for redemption by the Authority pursuant to the Indenture; and (iii) in any event, Bonds shall be selected for redemption under the preceding clauses (i) and (ii) such that (A) the principal and interest due on the Series A Bonds and on the Series A-T Bonds which remain Outstanding following such redemption are equal in total amount on each succeeding Interest Payment Date to the remaining principal and interest due on each such date on the 2007A Loans which remain unpaid following such redemption. Selection of Bonds for Redemption within a Maturity. Whenever provision is made in the Indenture for the redemption of less than all of the Bonds of any maturity of any series, the Trustee will select the Bonds to be redeemed from all Bonds of such maturity and series not previously called for redemption, by lot in any manner which the Trustee in its sole discretion deems appropriate and fair. For purposes of such selection, all Bonds of a series will be deemed to be comprised of separate $5,000 portions and such portions will be treated as separate Bonds which may be separately redeemed. 16

27 Purchase in lieu of Redemption. In lieu of mandatory sinking fund redemption of Bonds on August 1 in any year, all or a portion of such Bonds may be purchased by the Agency and tendered to the Trustee for cancellation not later than the preceding June

28 Debt Service Schedule Scheduled debt service on the Bonds (including a separate schedule of debt service on the Escrow Bonds), without regard to any optional redemption or any redemption from amounts in the Escrow Funds, is shown in the following tables. Bond Year Ending August 1 Non-Escrow Series A Bonds Principal Non-Escrow Series A Bonds Interest TABLE 1A COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY Senior Bonds Debt Service Schedule Escrow Series A Bonds Principal Escrow Series A Bonds Interest Total Series A Annual Debt Service Non-Escrow Series A-T Bonds Principal Non- Escrow Series A-T Bonds Interest Escrow Series A-T Bonds Principal Escrow Series A-T Bonds Interest Total Series A-T Annual Debt Service Total Sr. Bonds Annual Debt Service 2008 $240,000 $2,889,377 $0 $561,210 $3,690,586 $65,000 $1,092,189 $0 $661,289 $1,818,478 $5,509, ,000 2,539, , ,185 3,755, , ,108 70, ,490 1,833,598 5,588, ,000 2,517, , ,385 3,746, , ,961 60, ,087 1,812,048 5,558, ,000 2,495, , ,185 3,746, , ,539 50, ,312 1,795,851 5,542, ,000 2,472, , ,585 3,735, , ,565 70, ,166 1,804,731 5,540, ,000 2,448, , ,985 3,864, , ,314 80, ,763 1,802,077 5,666, ,000 2,411, , ,385 3,873, , ,788 75, ,730 1,788,518 5,662, ,000 2,372, , ,785 3,860, , ,709 75, ,012 1,794,721 5,655, ,000 2,331, , ,215 3,850, , ,251 95, ,293 1,809,544 5,659, ,000 2,288, , ,210 3,847, , , , ,317 1,802,281 5,649, ,000 2,244, , ,553 3,862, , , , ,026 1,794,151 5,656, ,000,000 2,197, , ,460 3,864, , , , ,735 1,808,624 5,673, ,035,000 2,147, , ,150 3,863, , , , ,129 1,800,680 5,663, ,095,000 2,095, , ,613 3,857, , , , ,895 1,801,505 5,659, ,680,000 2,040, , ,075 4,394, , , , ,031 1,835,499 6,230, ,865,000 1,956, , ,588 4,506, , , , ,280 1,830,502 6,336, ,965,000 1,863, , ,913 4,507, , , , ,585 1,833,659 6,340, ,040,000 1,765, , ,763 4,487, , , , ,576 1,834,398 6,322, ,080,000 1,663, , ,663 4,388, , , , ,623 1,792,691 6,181, ,125,000 1,559, , ,513 4,348, , , , ,614 1,806,026 6,154, ,240,000 1,452, , ,700 4,374, , , , ,290 1,796,040 6,170, ,035,000 1,340, , ,225 5,067, , , , ,337 1,973,923 7,041, ,180,000 1,189, , ,325 5,060, , , , ,464 1,977,973 7,038, ,345,000 1,030, , ,475 5,059, , , , ,389 1,978,018 7,037, ,515, , , ,913 5,059, , , , ,371 1,979,113 7,038, ,680, , , ,400 5,050, , , , ,780 1,980,931 7,031, ,575, , , ,700 4,896,700 1,155, ,255 1,170, ,930 2,953,185 7,849, ,755, , , ,400 4,900,650 1,220, ,828 1,255, ,325 2,960,153 7,860, ,330, , ,000 72,438 2,283,938 1,300, ,494 1,325, ,373 2,957,867 5,241, ,400,000 70, ,000 37,050 2,287,050 1,370,000 82,351 1,415,000 89,018 2,956,368 5,243,418 Totals: $51,495,000 $51,892,777 $10,710,000 $9,995,042 $124,092,819 $16,225,000 $20,153,922 $9,275,000 $14,059,232 $59,713,154 $183,805,973 18

29 TABLE 1B COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY Subordinate Bonds Debt Service Schedule Bond Year Ending August 1 Series B Bonds Principal Series B Bonds Interest Total Series B Annual Debt Service 2008 $260,000 $880,138 $1,140, , ,193 1,146, , ,993 1,130, , ,793 1,120, , ,393 1,120, , ,393 1,114, , ,993 1,117, , ,793 1,120, , ,793 1,117, , ,193 1,154, , ,743 1,152, , ,468 1,150, , ,668 1,146, , ,438 1,151, , ,750 1,149, , , , , , , , , , , , , , , , , , , , ,500 1,152, , ,500 1,151, , ,500 1,148, , ,500 1,148, , ,250 1,151, ,040, ,500 1,146, ,090,000 54,500 1,144,500 Totals: $16,665,000 $13,966,236 $30,631,236 19

30 Bond Year Ending August 1 TABLE 1C COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY Series A, Series A-T and Series B Bonds Debt Service Schedule Total Series A Annual Debt Service Total Series A-T Annual Debt Service Total Sr. Bonds Annual Debt Service Total Series B Annual Debt Service Total Bonds Annual Debt Service 2008 $3,690,586 $1,818,478 $5,509,064 $1,140,138 $6,649, ,755,035 1,833,598 5,588,633 1,146,193 6,734, ,746,235 1,812,048 5,558,283 1,130,993 6,689, ,746,635 1,795,851 5,542,486 1,120,793 6,663, ,735,835 1,804,731 5,540,566 1,120,393 6,660, ,864,235 1,802,077 5,666,312 1,114,393 6,780, ,873,885 1,788,518 5,662,403 1,117,993 6,780, ,860,785 1,794,721 5,655,506 1,120,793 6,776, ,850,215 1,809,544 5,659,759 1,117,793 6,777, ,847,710 1,802,281 5,649,991 1,154,193 6,804, ,862,803 1,794,151 5,656,953 1,152,743 6,809, ,864,460 1,808,624 5,673,084 1,150,468 6,823, ,863,150 1,800,680 5,663,830 1,146,668 6,810, ,857,863 1,801,505 5,659,368 1,151,438 6,810, ,394,575 1,835,499 6,230,074 1,149,750 7,379, ,506,088 1,830,502 6,336, ,000 7,259, ,507,163 1,833,659 6,340, ,000 7,266, ,487,763 1,834,398 6,322, ,750 7,249, ,388,663 1,792,691 6,181, ,250 7,109, ,348,513 1,806,026 6,154, ,500 7,077, ,374,450 1,796,040 6,170, ,750 7,096, ,067,975 1,973,923 7,041,898 1,152,500 8,194, ,060,325 1,977,973 7,038,298 1,151,500 8,189, ,059,475 1,978,018 7,037,493 1,148,500 8,185, ,059,663 1,979,113 7,038,776 1,148,500 8,187, ,050,400 1,980,931 7,031,331 1,151,250 8,182, ,896,700 2,953,185 7,849,885 1,146,500 8,996, ,900,650 2,960,153 7,860,803 1,144,500 9,005, ,283,938 2,957,867 5,241, ,241, ,287,050 2,956,368 5,243, ,243,418 Totals: $124,092,819 $59,713,154 $183,805,973 $61,262,472 $245,068,444 20

31 THE FINANCING PLAN General Use of Bond Proceeds. The Authority will use the proceeds of the Bonds to (i) finance acquisition and construction by the Authority of certain public capital improvements in the County, (ii) make nine Loans to the Agency, (iii) establish an escrow fund to be used to increase the amounts in the Program Fund and of the 2007A Loan relating to the North Richmond Project Area if the related Redevelopment Plan is amended to increase the cumulative tax increment limit and if the Agency is able to demonstrate that tax increment revenues in the North Richmond Project Area will meet certain debt service coverage requirements, and (iv) establish an escrow fund to be used to increase the amounts in the Program Fund and of the 2007A Loan and the 2007B Loan relating to the Bay Point Project Area if the related Redevelopment Plan is amended to increase the cumulative tax increment limit and if the Agency is able to demonstrate that tax increment revenues in the Bay Point Project Area will meet certain debt service coverage requirements. Use of Loan Proceeds. The Agency will apply the proceeds of the 2007 Loans to (A) pay the costs of issuing the Bonds, (B) fund a reserve fund with respect to each Loan, (C) finance certain redevelopment and housing activities of the Agency in or for the benefit of the Project Areas, (D) capitalize a portion of the interest on the Escrow Bonds to August 1, 2009, and (E) provide for the prepayment of certain outstanding obligations of the Agency. 21

32 Estimated Sources and Uses of Funds The anticipated sources and ultimate uses of funds relating to the Bonds are as follows: Sources of Funds: Series A Bonds Series A-T Bonds Series B Bonds Totals Principal Amount $62,205, $25,500, $16,665, $104,370, Plus/Less: OIP/OID 2,325, (191,129.40) 239, ,373, Less: Underwriter s Discount (436,442.51) (137,513.97) (141,243.12) (715,199.60) Plus: Prior Funds 6,970, ,970, Total Sources $71,065, $25,171, $16,762, $112,999, Uses of Funds: Costs of Issuance (1) $ 883, $ 350, $ 282, $ 1,516, Capitalized Interest (2) 714, , ,181, Loan Fund (3) 12,134, ,079, ,308, ,522, North Richmond and Bay Point Escrow Funds (4) 10,669, ,275, ,944, Refunding Funds (5) 45,947, ,111, ,059, Reserve Funds (6) , , Program Fund 715, ,495, ,210, Total Uses $71,065, $25,171, $16,762, $112,999, (1) Includes fees and expenses of the Trustee/Escrow Bank, Bond Counsel and Disclosure Counsel, bond insurance premium, surety bond premiums, printing costs, rating agency fees and other related costs. (2) Represents capitalized interest on the Escrow Bonds through August 1, See SECURITY FOR THE BONDS Escrow Funds. (3) See Financing of Capital Projects below. (4) Represents amounts expected to be transferred to the Program Fund or loaned to the Agency after certain conditions are met. See SECURITY FOR THE BONDS Escrow Funds. (5) Including the 1995 North Richmond Refunding Fund, the 1995 Bay Point Refunding Fund, the 1999 Refunding Fund and the 2003 Refunding Fund. See Prepayment of Certain Agency Obligations below. (6) In an amount equal to the initial Reserve Requirement - Subordinate for the Contra Costa Centre 2007A Loan. The initial Reserve Requirement for the other Loans will be met through the deposit of the Surety Bonds. See SECURITY FOR THE BONDS Reserve Funds below. 22

33 The anticipated sources and ultimate uses of funds relating to the 2007A Loans are as follows: Sources of Funds: Contra Costa Centre North Richmond (Non-Escrow) North Richmond (Escrow) (1) Bay Point (Non-Escrow) Bay Point (Escrow) (2) Rodeo Montalvin Manor Totals Principal Amount $37,775, $8,870, $7,850, $16,455, $7,740, $9,775, $2,195, $90,660, Plus/Less: OIP/OID 1,214, , (30,065.10) 206, (9,727.70) 442, , ,329, Less: Underwriter s Discount (320,159.55) (75,177.10) - (139,463.29) - (82,847.38) (18,603.58) (636,250.90) Less: Program Fund Deposit (1,495,000.00) - (250,000.00) - (540,000.00) (565,000.00) (150,000.00) (3,000,000.00) Plus: Prior Funds 4,002, , ,271, , ,464, $41,176, $10,007, $7,569, $17,793, $7,190, $9,952, $2,127, $95,817, Uses of Funds: Refunding Funds $34,650, $5,436, $- $8,262, $- $3,460, $- $51,810, Costs of Issuance (3) 652, , , , , ,317, Capitalized Interest (4) 714, , ,181, Redevelopment Funds (5) 5,308, ,704, ,740, ,335, ,094, ,184, Escrowed Funds - - 7,569, ,190, ,760, Reserve Funds (6) 564, , Total Uses $41,176, $10,007, $7,569, $17,793, $7,190, $9,952, $2,127, $95,817, (1) Represents amounts deposited in the North Richmond Escrow Fund and expected to be loaned to the Agency as part of the North Richmond 2007A Loan after certain conditions are met. See SECURITY FOR THE BONDS Escrow Funds. (2) Represents amounts deposited in the Bay Point Escrow Fund and expected to be loaned to the Agency as part of the Bay Point 2007A Loan after certain conditions are met. See SECURITY FOR THE BONDS Escrow Funds. (3) Includes fees and expenses of the Trustee/Escrow Bank, Bond Counsel and Disclosure Counsel, bond insurance premium, surety bond premiums, printing costs, rating agency fees and other related costs. (4) Represents capitalized interest on the Escrow Bonds through August 1, See SECURITY FOR THE BONDS Escrow Funds. (5) See Financing of Capital Projects below. (6) In an amount equal to the initial Reserve Requirement - Subordinate for the Contra Costa Centre 2007A Loan. The initial Reserve Requirement for the other Loans will be met through the deposit of the Surety Bonds. See SECURITY FOR THE BONDS Reserve Funds below. 23

34 The anticipated sources and ultimate uses of funds relating to the 2007B Loans are as follows: Sources of Funds: North Richmond Bay Point (Non-Escrow) Bay Point (Escrow) (1) Rodeo Montalvin Manor Totals Principal Amount $3,975, $620, $4,395, $3,930, $790, $13,710, Plus: OIP 20, , , (9,170.35) 44, Less: Underwriter s Discount (33,689.86) (5,254.75) - (33,308.46) (6,695.63) (78,948.70) Plus: Prior Funds 212, , , , Total Sources $4,173, $796, $4,395, $4,042, $774, $14,182, Uses of Funds: Refunding Funds $1,379, $772, $1,097, $3,249, Costs of Issuance Funds (2) 82, , , , , Taxable Accounts of LMI Funds (3) 2,711, ,869, , ,338, Escrowed Funds - - 4,395, ,395, Total Uses $4,173, $796, $4,395, $4,042, $774, $14,182, (1) Represents amounts deposited in the Bay Point Escrow Fund and expected to be loaned to the Agency as part of the Bay Point 2007A Loan after certain conditions are met. See SECURITY FOR THE BONDS Escrow Funds. (2) Includes fees and expenses of the Trustee/Escrow Bank, Bond Counsel and Disclosure Counsel, bond insurance premium, surety bond premiums, printing costs, rating agency fees and other related costs. (3) LMI Funds refers to the Low and Moderate Income Housing Accounts. See Financing of Capital Projects below. 24

35 Financing of Capital Projects Certain proceeds of the Bonds will be used (i) to finance acquisition and construction by the Authority of certain public capital improvements in the County and (ii) to provide the Agency with Loan proceeds to finance certain redevelopment and housing projects in the Project Areas. None of the improvements financed with proceeds of the Bonds or the 2007 Loans will provide security for the Bonds or the 2007 Loans. Agency Redevelopment Projects. The Agency will use certain proceeds of the 2007 Loans (including moneys initially loaned to the Agency and moneys that may thereafter be released from the Escrow Funds and loaned to the Agency) to finance certain redevelopment projects. None of the proposed projects will provide security for the Bonds or the 2007 Loans. The Agency anticipates that these redevelopment projects may include the following, among others: Contra Costa Centre Project Area. Public area improvements, including pedestrian/bicycle projects, development of greenspace, tree planting, infrastructure and improvement of public facilities BART property improvements, including construction of a parking garage and a conference center Drainage projects North Richmond Project Area. Road and infrastructure improvements, including storm drains, lighting, median installation Economic development projects Affordable housing projects Bay Point Project Area. Road and infrastructure improvements Marina/waterfront infrastructure Mixed use development project Land acquisition in marina/waterfront and light industrial areas Affordable housing projects Rodeo Project Area. Road and infrastructure improvements Waterfront infrastructure Park facility projects Affordable housing projects Montalvin Manor Project Area. Mixed use development projects Waterfront infrastructure and improvements Affordable housing projects Escrow Funds. A portion of the proceeds of the Bonds will be deposited by the Authority into the North Richmond Escrow Fund and is expected to be used to increase the 25

36 deposit to the Program Fund and to increase the North Richmond 2007A Loan to the Agency after amendment of the North Richmond Redevelopment Plan to increase the tax increment receipt limit for such Project Area and satisfaction of certain other requirements. A portion of the proceeds of the Bonds will be deposited by the Authority into the Bay Point Escrow Fund and is expected to be used to increase the deposit to the Program Fund and to increase the Bay Point 2007A Loan and the Bay Point 2007B Loan to the Agency after amendment of the Bay Point Redevelopment Plan to increase the tax increment receipt limit for such Project Area and satisfaction of certain other requirements. Prepayment of Certain Agency Obligations A portion of the proceeds of the Series A Bonds and the Series B Bonds will be used to prepay certain Agency obligations as described below. Refunded Obligations Principal Amount Outstanding Authority Bonds Related Agency Loans Prior to Refunding After Refunding 1995A 1995 North Richmond $ 1,330,000 $ B 1995 Bay Point 2,255, Contra Costa Centre 19,450,000 11,185, North Richmond 3,465,000 2,280, Bay Point 6,970,000 5,390, Rodeo 2,855,000 2,855, A 2003A Contra Costa Centre 31,285,000 7,025, A 2003A North Richmond 3,155, A 2003A Bay Point 4,140, A 2003A Rodeo 3,250, B 2003B North Richmond 775, B 2003B Bay Point 580, B 2003B Rodeo 1,030,000 0 Refunding Plan for 1995 North Richmond Loan. The Authority previously issued its 1995 Tax Allocation Revenue Bonds, Series A (North Richmond Project Area) (the 1995 North Richmond Bonds ) and loaned a portion of the proceeds of the 1995 North Richmond Bonds to the Agency under the North Richmond Loan Agreement. The Agency will use certain proceeds of the 2007 Loans for the North Richmond Project Area to prepay all of the outstanding 1995 North Richmond Loan (the Refunded 1995 North Richmond Loan ) and, as a result, to provide for the refunding of the remaining outstanding 1995 North Richmond Bonds (the Refunded 1995 North Richmond Bonds ). The 1995 North Richmond Bonds were purchased by the Association of Bay Area Governments ( ABAG ) with the proceeds of its 1995 Tax Allocation Revenue Bonds, Series A4 (California Redevelopment Agency Pool) and its 1995 Subordinated Tax Allocation Revenue Bonds, Series B4 (California Redevelopment Agency Pool) (together, the 1995 ABAG Bonds ). A portion of the 1995 ABAG Bonds will be redeemed as a result of the redemption of the 1995 North Richmond Bonds. The portion of proceeds of the 2007 North Richmond Loans, together with certain funds made available through the prepayment of the Refunded 1995 North Richmond Loan, will be deposited in trust with U.S. Bank National Association, as escrow bank (the 1995 North Richmond Escrow Bank ), pursuant to an Escrow Deposit and Trust Agreement 1995 North Richmond, dated as of May 1, 2007, by and among the Authority, the Agency and the 1995 North Richmond Escrow Bank (the 1995 North Richmond Escrow Agreement ). The funds deposited with the 1995 North Richmond Escrow Bank will be deposited into a separate escrow for the 1995 North Richmond Refunded Loan (the 1995 North Richmond Refunding Fund ). The total amount of moneys deposited in the 1995 North Richmond Refunding Fund will be 26

37 applied by the 1995 North Richmond Escrow Bank for the sole purpose of (i) paying the principal of and interest on the 1995 North Richmond Refunded Loans and the Refunded 1995 North Richmond Bonds as the same shall become due and payable to and including June 15, 2007, and (ii) prepaying the remaining amounts due on such portion of the Refunded Loans, redeeming all outstanding Refunded 1995 North Richmond Bonds in full on June 15, 2007, and redeeming a portion of the 1995 ABAG Bonds on June 15, 2007, each at the price of 100% of the principal amount thereof, plus accrued interest. See VERIFICATION OF MATHEMATICAL ACCURACY. Amounts deposited in the 1995 North Richmond Refunding Fund and interest earnings thereon will not be available to pay principal of and interest on the Loans or the Bonds. Refunding Plan for 1995 Bay Point Loan. The Authority previously issued its 1995 Tax Allocation Revenue Bonds, Series B (Bay Point Redevelopment Project Area) (the 1995 Bay Point Bonds ) and loaned a portion of the proceeds of the 1995 Bay Point Bonds to the Agency under the Bay Point Loan Agreement. The Agency will use certain proceeds of the 2007 Loans for the Bay Point Project Area to prepay all of the outstanding 1995 Bay Point Loan (the Refunded 1995 Bay Point Loan ) and, as a result, to provide for the refunding of the remaining outstanding 1995 Bay Point Bonds (the Refunded 1995 Bay Point Bonds ). The portion of proceeds of the 2007 Bay Point Loans, together with certain funds made available through the prepayment of the Refunded 1995 Bay Point Loan, will be deposited in trust with U.S. Bank National Association, as escrow bank (the 1995 Bay Point Escrow Bank ), pursuant to an Escrow Deposit and Trust Agreement 1995 Bay Point, dated as of May 1, 2007, by and among the Authority, the Agency and the 1995 Bay Point Escrow Bank (the 1995 Bay Point Escrow Agreement ). The funds deposited with the 1995 Bay Point Escrow Bank will be applied to the purchase of Federal Securities and deposited into a separate escrow for the Refunded 1995 Bay Point Loan (the 1995 Bay Point Refunding Fund ). The total amount of Federal Securities and uninvested moneys deposited in the 1995 Bay Point Refunding Fund will be applied by the 1995 Bay Point Escrow Bank for the sole purpose of (i) paying the principal of and interest on the Refunded 1995 Bay Point Loan and the Refunded 1995 Bay Point Bonds as the same shall become due and payable to and including August 1, 2007, and (ii) prepaying the remaining amounts due on such portion of the Refunded Loans and redeem all outstanding Refunded 1995 Bay Point Bonds in full on August 1, 2007, at the price of 100% of the principal amount thereof, plus accrued interest. See VERIFICATION OF MATHEMATICAL ACCURACY. Amounts deposited in the 1995 Bay Point Refunding Fund and interest earnings thereon will not be available to pay principal of and interest on the Loans or the Bonds. Refunding Plan for 1999 Bonds. The Authority previously issued its 1999 Tax Allocation Revenue Bonds (Pleasant Hill BART, North Richmond, Bay Point, Oakley and Rodeo Redevelopment Project Areas) (the 1999 Bonds ) and loaned a portion of the proceeds of the 1999 Bonds to the Agency under the Contra Costa Centre, North Richmond, Bay Point and Rodeo Loan Agreements. The Agency will use certain proceeds of the 2007 Loans for the Contra Costa Centre, North Richmond, Bay Point and Rodeo Project Areas to prepay portions of certain 1999 Loans (the Refunded 1999 Loans ) and, as a result, to provide for the refunding of a portion of the 1999 Bonds (the Refunded 1999 Bonds ). The portion of the 1999 Bonds loaned to the Oakley Redevelopment Project Area have previously been refunded and the corresponding loan has been prepaid in full. 27

38 The portion of proceeds of the 2007 Loans described above, together with certain funds made available through the prepayment of the Refunded 1999 Loans, will be deposited in trust with U.S. Bank National Association, as escrow bank (the 1999 Escrow Bank ), pursuant to an Escrow Deposit and Trust Agreement 1999 Bonds, dated as of May 1, 2007, by and among the Authority, the Agency and the 1999 Escrow Bank (the 1999 Escrow Agreement ). The funds deposited with the 1999 Escrow Bank will be applied to the purchase of Federal Securities and deposited into a separate escrow for the Refunded 1999 Loans (the 1999 Refunding Fund ). The total amount of Federal Securities and uninvested moneys deposited in the 1999 Refunding Fund will be applied by the 1999 Escrow Bank for the sole purpose of (i) paying the principal of and interest on the Refunded 1999 Loans and the Refunded 1999 Bonds as the same shall become due and payable to and including August 1, 2009, and (ii) prepaying the remaining amounts due on such portion of the Refunded Loans and redeem all outstanding Refunded 1999 Bonds in full on August 1, 2009, at the price of 102% of the principal amount thereof, plus accrued interest. See VERIFICATION OF MATHEMATICAL ACCURACY. Amounts deposited in the 1999 Refunding Fund and interest earnings thereon will not be available to pay principal of and interest on the Loans or the Bonds. Refunding Plan for 2003 Bonds. The Authority previously issued its 2003 Tax Allocation Revenue Bonds, Series A (Multiple Project Areas) and 2003 Tax Allocation Revenue Bonds, Series B (Multiple Project Areas Housing Set Aside Revenues) (collectively, the 2003 Bonds ) and loaned a portion of the proceeds of the 2003 Bonds to the Agency under the Contra Costa Centre, North Richmond, Bay Point and Rodeo Loan Agreements. The Agency will use certain proceeds of the 2007 Loans for the Contra Costa Centre, North Richmond, Bay Point and Rodeo Project Areas to prepay all or portions of certain 2003 Loans (the Refunded 2003 Loans ) and, as a result, to provide for the refunding of a portion of the 2003 Bonds (the Refunded 2003 Bonds ). The portion of proceeds of the 2007 Loans described above, together with certain funds made available through the prepayment of the Refunded 2003 Loans, will be deposited in trust with U.S. Bank National Association, as escrow bank (the 2003 Escrow Bank ), pursuant to an Escrow Deposit and Trust Agreement 2003 Bonds, dated as of May 1, 2007, by and among the Authority, the Agency and the 2003 Escrow Bank (the 2003 Escrow Agreement ). The funds deposited with the 2003 Escrow Bank will be applied to the purchase of Federal Securities and deposited into a separate escrow for the Refunded 2003 Loans (the 2003 Refunding Fund ). The total amount of Federal Securities and uninvested moneys deposited in the 2003 Refunding Fund will be applied by the 2003 Escrow Bank for the sole purpose of (i) paying the principal of and interest on the Refunded 2003 Loans and the Refunded 2003 Bonds as the same shall become due and payable to and including August 1, 2013, and (ii) prepaying the remaining amounts due on such portion of the Refunded Loans and redeem all outstanding Refunded 2003 Bonds in full on August 1, 2013, at the price of 100% of the principal amount thereof, plus accrued interest. See VERIFICATION OF MATHEMATICAL ACCURACY. Amounts deposited in the 2003 Refunding Fund and interest earnings thereon will not be available to pay principal of and interest on Loans or the Bonds. 28

39 SECURITY FOR THE BONDS General The Bonds are limited obligations of the Authority, secured by a pledge, charge and lien of all the Revenues (as defined below), consisting primarily of amounts payable by the Agency to the Authority under the Loan Agreements. The Senior Bonds are equally secured by a first pledge, charge and lien of all the Revenues. The Subordinate Bonds are secured by the Revenues on a subordinate basis to the Senior Bonds, and debt service on the Subordinate Bonds is payable on each Interest Payment Date from the Revenues only after payment of debt service on and deposits related to the Senior Bonds have been made on such Interest Payment Date. Revenues is defined in the Indenture to include (i) all amounts payable by the Agency to the Authority pursuant to the Loan Agreements, (ii) all moneys deposited and held from time to time by the Trustee in the funds and accounts established under the Indenture, other than amounts in the Costs of Issuance Fund, the Program Fund and the Rebate Account; and (c) income and gains with respect to the investment of amounts on deposit in the funds and accounts established under the Indenture, other than the Rebate Account, the Program Fund and the Costs of Issuance Fund. As security for its obligation to make 2007 Loan payments to the Authority, the Agency has made a pledge in each Loan Agreement of Tax Revenues from the related Project Area (see Tax Revenues below). The Tax Revenues from each Project Area represent amounts allocated from the increased tax revenues to the Agency based on an increase in taxable valuation over the base year valuation property tax roll on the property within such Project Area. The Agency s pledge of Tax Revenues is on a parity with its pledge to certain outstanding obligations. See Loan Agreements and Parity Obligations below. Failure by the Agency to meet its obligations under a Loan Agreement may result in insufficient Revenues being available for the Authority to pay the principal of, premium (if any) and interest on the Bonds. The Indenture provides that any amounts recovered by the Trustee as the result of its exercise of remedies following an event of default will be used for the following purposes and in the following order: (i) to the payment of fees, costs and expenses of the Trustee in declaring an event of default and carrying out the provisions of the Indenture relating to the default, (ii) to the payment of the whole amount of interest on and principal of the Senior Bonds then due and unpaid, and (iii) to payment of the whole amount of interest on and principal on the Subordinate Bonds then due and unpaid. See APPENDIX A Summary of Certain Provisions of the Principal Legal Documents for the payments to be made in the event amounts available are insufficient to pay in full the amounts owing on the Senior or Subordinate Bonds. Except to the limited extent described in Limited Cross-Collateralization below relating to Loans used for low and moderate income housing purposes, Tax Revenues generated in one Project Area may not be used to make Loan payments relating to another Project Area. See also APPENDIX A Summary of Certain Provisions of the Principal Legal Documents. THE BONDS ARE NOT A DEBT OF THE COUNTY, THE AGENCY OR THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS (EXCEPT THE AUTHORITY), AND NONE OF THE COUNTY, THE AGENCY, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS (EXCEPT THE AUTHORITY) IS LIABLE THEREFOR, NOR IN ANY EVENT WILL THE BONDS BE PAYABLE OUT OF ANY FUNDS OTHER THAN THOSE OF THE AUTHORITY SPECIFICALLY PLEDGED THEREFOR UNDER THE INDENTURE. THE BONDS DO NOT CONSTITUTE AN INDEBTEDNESS WITHIN THE 29

40 MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMIT OR RESTRICTION. THE AUTHORITY HAS NO TAXING POWER. Tax Revenues Definition. Each Loan Agreement defines Tax Revenues to be all taxes annually allocated to the Agency with respect to the applicable Project Area following the date of issuance of the Bonds pursuant to Article 6 of Chapter 6 (commencing with Section 33670) of the Redevelopment Law and Section 16 of Article XVI of the Constitution of the State and as provided in the Redevelopment Plans, including (a) all payments, subventions and reimbursements (if any) to the Agency specifically attributable to ad valorem taxes lost by reason of tax exemptions and tax rate limitations, and (b) all amounts of such taxes required to be deposited into the Low and Moderate Income Housing Fund of the Agency in any Fiscal Year pursuant to Section of the Redevelopment Law, to the extent permitted to be applied to the payment of principal, interest and premium (if any) with respect to the Loan and any Parity Debt; but excluding (w) amounts of such taxes required to be deposited into the Low and Moderate Income Housing Fund of the Agency in any Fiscal Year pursuant to Section of the Redevelopment Law, to the extent not permitted to be applied to the payment of principal, interest and premium (if any) with respect to the Loan and/or any Parity Debt, (x) all other amounts of such taxes required to the deposited into the Low and Moderate Income Housing Fund and Investment Earnings, and also excluding all amounts required to be paid to taxing entities pursuant to Sections and of the Redevelopment Law unless such payments are subordinated to payments due under the applicable Loan Agreement pursuant to Section (e) of the Redevelopment Law, (y) all amounts of such taxes required to be paid by the Agency pursuant to the Agency s agreements to share tax increment revenues with other taxing agencies (except and to the extent that any amounts so payable are payable on a basis subordinate to the payment of the Loans and/or any Parity Debt, as applicable), and (z) the Business Inventory Tax Subvention. Housing Set-Aside. As of the date hereof, the Agency deposits 20% of tax increment revenues annually allocated to the Agency (the Housing Set-Aside ) into a Low and Moderate Income Housing Account established for each Project Area. The Housing Set-Aside, to the extent permitted by applicable law to be applied to the payment of principal, interest and premium (if any) with respect to a Loan and/or any Parity Debt, constitutes Tax Revenues. The following outstanding Loans were or are to be used for low and moderate income housing purposes and are payable from the Housing Set-Aside for such Project Areas (each a Housing Loan and collectively the Housing Loans ): Portions of the 1999 North Richmond Loan, the 1999 Bay Point Loan, and the 1999 Rodeo Loan. The 2007B North Richmond Loan, the 2007B Bay Point Loan, the 2007B Rodeo Loan and the 2007B Montalvin Manor Loan. In certain circumstances, the Housing Set-Aside for each of the Project Areas except for the Contra Costa Centre Project Area may be used to repay the Housing Loan for another Project Area (other than Contra Costa Centre Project Area). No portion of the Contra Costa Centre Loan may be repaid from moneys on deposit in the Low and Moderate Income Housing Accounts for the Contra Costa Centre Project Area or any other Project Areas, nor may moneys on deposit in the Low and Moderate Income Housing Account for the Contra Costa Centre Project Area be used to repay any Loan. See Limited Cross-Collateralization below and the paragraphs entitled Low and Moderate Income Housing in the sections relating to each of the Project Areas. 30

41 Limitations. The Agency has no power to levy and collect property taxes, and any property tax limitation, legislative measure, voter initiative or provisions of additional sources of income to taxing agencies having the effect of reducing the property tax rate, could reduce the amount of Tax Revenues available to repay the 2007 Loans and, thus, could reduce the Revenues that would otherwise be available to pay debt service on the Bonds. Likewise, broadened property tax exemptions could have a similar effect. See RISK FACTORS and LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING LIMITATIONS. Tax Allocation Financing The Redevelopment Law provides a means for financing redevelopment projects based upon an allocation of taxes collected within a project area. The taxable valuation of a project area last equalized prior to adoption of the redevelopment plan, or base roll, is established and, except for any period during which the taxable valuation drops below the base year level, the taxing agencies thereafter receive the taxes produced by the levy of the then current tax rate upon the base roll. Taxes collected upon any increase in taxable valuation over the base roll (commonly known as tax increment revenues ) are allocated to a redevelopment agency and may be pledged by a redevelopment agency to the repayment of any indebtedness incurred in financing or refinancing a redevelopment project. Redevelopment agencies themselves have no authority to levy property taxes and must look specifically to the allocation of tax increment revenues. Allocation of Taxes As provided in the Redevelopment Plans, and pursuant to Article 6 of Chapter 6 of the Redevelopment Law (commencing with Section of the California Health and Safety Code) and Section 16 of Article XVI of the Constitution of the State of California, taxes levied upon taxable property in the Project Areas each year by or for the benefit of the State and any city and county, district or other public corporation (herein collectively referred to as taxing agencies ) for each fiscal year beginning after the effective date of the ordinances approving the Redevelopment Plans, are divided as follows: 1. To other taxing agencies: That portion of the taxes which would be produced by the rate upon which the tax is levied each year by or for each of the taxing agencies upon the total sum of the assessed value of the taxable property in the Project Area as shown upon the assessment roll used in connection with the taxation of such property by such taxing agency last equalized prior to the effective date of the ordinances which approved the Redevelopment Plans (the Base Year Amount ) shall be allocated to and when collected shall be paid into the funds of the respective taxing agencies in the same manner as taxes by or for the taxing agencies on all other property are paid; and 2. To the Agency: Except for taxes which are attributable to a tax rate levied by a taxing agency for the purpose of producing revenues to repay bonded indebtedness approved by the voters of the taxing agency on or after January 1, 1989, which shall be allocated to and when collected shall be paid to the respective taxing agency, and except for statutory pass-through payments, that portion of the levied taxes each year in excess of the Base Year Amount shall be paid into a special fund of the Agency to pay the principal of and interest on bonds, loans, moneys advanced to, or indebtedness (whether funded, refunded, assumed, or otherwise) incurred by the Agency to finance or refinance, in whole or in part, the Project Area. 31

42 When all bonds, loans, advances, and indebtedness, if any, and interest thereon, have been paid, all moneys thereafter received from taxes upon the taxable property in the Project Area shall be paid into the funds of the respective taxing agencies as taxes on all other property are paid. See Tax Revenues and the sub-sections entitled Tax Sharing Agreements and Statutory Pass-Through Obligations in the sections in this Official Statement pertaining to each of the Project Areas. Unitary Taxes The Agency receives an annual allocation of unitary property taxes attributable to each of the Project Areas. Legislation enacted in 1986 (Chapter 1457) and 1987 (Chapter (921) provided for a modification of the distribution of tax revenues derived from utility property assessed by the State Board of Equalization ( SBE ), other than railroads. Prior to the fiscal year, property assessed by the SBE was assessed statewide and was allocated according to the location of individual components of a utility in a tax rate area. Commencing in , tax revenues derived from utility property assessed by the SBE is accumulated in a single Tax Rate Area for the County and distributed to each taxing entity in the County in the following manner: (1) each taxing entity will receive the same amount as in the previous year plus an increase for inflation of up to 2%; (2) if utility tax revenues are insufficient to provide the same amount as in the previous year, each taxing entity's share would be reduced pro-rata county wide; and (3) an increase in revenue above 2% would be allocated in the same proportion as the taxing entity's local secured and taxable values are to the local secured taxable values of the County. The valuation of railroad property continues to be allocated to individual tax rate areas. Estimated unitary property tax revenue in fiscal year in each of the Project Areas is set forth below: Project Area Unitary Tax Revenue Contra Costa Centre $29,164 North Richmond 3,868 Bay Point 7,807 Rodeo 3,492 Montalvin Manor N/A In projecting Tax Revenues for each Project Area, Fraser & Associates (the Fiscal Consultant ) held unitary revenues constant at the fiscal year estimated amounts shown above. The Montalvin Manor Project Area receives only a nominal amount of unitary property tax revenue, and the Fiscal Consultant projected no unitary property tax revenues for that Project Area. See Projected Tax Revenues in the sections in this Official Statement pertaining to each of the Project Areas. 32

43 Loan Agreements and Parity Obligations Existing Debt and Loan Agreements. The Authority previously issued the following outstanding series of bonds: In 1999, the Authority issued its $44,615, Tax Allocation Revenue Bonds (Pleasant Hill BART, North Richmond, Bay Point, Oakley and Rodeo Redevelopment Project Areas), dated March 1, 1999 (the 1999 Bonds ), the proceeds of which were used to prepay certain obligations of the Authority and to fund five separate loans (the 1999 Loans ) to the Agency. In 2003, the Authority issued its $43,345, Tax Allocation Revenue Bonds, Series A (Multiple Project Areas) (the 2003A Bonds ) and its $2,445, Tax Allocation Revenue Bonds, Series B (Multiple Project Areas Housing Set-Aside Revenues) (the 2003B Bonds and, together with the 2003A Bonds, the 2003 Bonds ), dated September 11, 2003, the proceeds of which were used to prepay certain obligations of the Authority and to fund seven separate loans to the Agency. The Authority and the Agency have entered into the loan agreements described below, each between the Agency and the Authority, each supplemented by the applicable Supplements to Loan Agreements (collectively, the Loan Agreements ). As described in greater detail below, the Loan Agreements establish a parity relationship between the Agency s pledge of Tax Revenues to repayment of the 2007 Loans and its pledge of Tax Revenues to outstanding loans described below. Loans, bonds, notes, advances or indebtedness payable from Tax Revenues on a parity with the applicable 2007 Loan constitute Parity Debt under the Loan Agreements. The Agency plans to refinance a portion of the Parity Debt outstanding, including the 2003A Loans, except for the Contra Costa Centre 2003A Loan, the 2003B Loans and portions of the 1999 Loans. See THE FINANCING PLAN Prepayment of Certain Agency Obligations for a description of certain Parity Debt outstanding under the Loan Agreements and the plan to refinance portions of such Parity Debt. Contra Costa Centre Project Area. Loan Agreement: The Pleasant Hill Loan Agreement, dated as of May 1, 1992, as supplemented by the First Supplement to Pleasant Hill Loan Agreement, dated as of March 1, 1999, the Second Supplement to Pleasant Hill Loan Agreement, dated as of August 1, 2003, and the Third Supplement to Pleasant Hill Loan Agreement, dated as of May 1, 2007 (the Contra Costa Centre Loan Agreement ). Outstanding Loans: A portion of the proceeds of the 1999 Bonds were used to fund a loan (the 1999 Contra Costa Centre Loan ) pursuant to the Contra Costa Centre Loan Agreement. A portion of the proceeds of the 2003A Bonds were used to fund a loan (the 2003A Contra Costa Centre Loan ) pursuant to the Contra Costa Centre Loan Agreement. After the refunding described in THE FINANCING PLAN - Prepayment of Certain Agency Obligations, the 1999 Contra Costa Centre Loan will be outstanding in the amount of $11,185,000 and the 2003A Contra Costa Centre Loan will be outstanding in the amount of $7,025,000. Parity Pledge: The Agency s pledge of Tax Revenues to its obligation to repay the 2007A Contra Costa Centre Loan will be on a parity with the Agency s pledge of 33

44 Tax Revenues to its obligation to repay the outstanding 1999 Contra Costa Centre Loan and the outstanding 2003A Contra Costa Centre Loan. North Richmond Project Area. Loan Agreement: The North Richmond Loan Agreement, dated as of May 1, 1992, as supplemented by the First Supplement to Loan Agreement, dated as of June 1, 1995, the Second Supplement to Loan Agreement, dated as of March 1, 1999, the Third Supplement to North Richmond Loan Agreement, dated as of August 1, 2003, the Fourth Supplement to North Richmond Loan Agreement, dated as of August 1, 2003, the Fifth Supplemental to North Richmond Loan Agreement, dated as of May 1, 2007, and the Sixth Supplement to North Richmond Loan Agreement, dated as of May 1, 2007 (the North Richmond Loan Agreement ). Outstanding Loans: A portion of the proceeds of the 1999 Bonds were used to fund a loan (the 1999 North Richmond Loan ) pursuant to North Richmond Loan Agreement. After the refunding described in THE FINANCING PLAN - Prepayment of Certain Agency Obligations, the 1999 North Richmond Loan will be outstanding in the amount of $2,280,000. Parity Pledge: The Agency s pledge of Tax Revenues to its obligations to repay the 2007A North Richmond Loan and 2007B North Richmond Loan will be on a parity with the Agency s pledge of Tax Revenues to its obligations to repay the outstanding 1999 North Richmond Loan. Bay Point Project Area. Loan Agreement: The West Pittsburg Loan Agreement, dated as of May 1, 1992, as supplemented by the First Supplement to the West Pittsburg Loan Agreement, dated as of December 1, 1995, the Second Supplement to the West Pittsburg Loan Agreement, dated as of March 1, 1999, the Third Supplement to West Pittsburg Loan Agreement, dated as of August 1, 2003, the Fourth Supplement to West Pittsburg Loan Agreement, dated as of August 1, 2003, the Fifth Supplement to the West Pittsburg Loan Agreement, dated as of May 1, 2007, and the Sixth Supplement to the West Pittsburg Loan Agreement, dated as of May 1, 2007 (the Bay Point Loan Agreement ). Outstanding Loans: A portion of the proceeds of the 1999 Bonds were used to fund a loan (the 1999 Bay Point Loan ) pursuant to the Bay Point Loan Agreement. After the refunding described in THE FINANCING PLAN - Prepayment of Certain Agency Obligations, the 1999 Bay Point Loan will be outstanding in the amount of $5,390,000. Parity Pledge: The Agency s pledge of Tax Revenues to its obligations to repay the 2007A Bay Point Loan and 2007B Bay Point Loan will be on a parity with the Agency s pledge of Tax Revenues to its obligations to repay the outstanding 1999 Bay Point Loan. Rodeo Project Area. Loan Agreement: The Rodeo Loan Agreement, dated as of March 1, 1999, as supplemented by the First Supplement to Rodeo Loan Agreement, dated as of 34

45 August 1, 2003, the Second Supplement to Rodeo Loan Agreement, dated as of August 1, 2003, the Third Supplement to Rodeo Loan Agreement, dated as of May 1, 2007, and the Fourth Supplement to Rodeo Loan Agreement, dated as of May 1, 2007 (the Rodeo Loan Agreement ). Outstanding Loans: A portion of the proceeds of the 1999 Bonds were used to fund a loan (the 1999 Rodeo Loan ) pursuant to the Rodeo Loan Agreement. After the refunding described in THE FINANCING PLAN - Prepayment of Certain Agency Obligations, the 1999 Rodeo Loan will be outstanding in the amount of $2,855,000. Parity Pledge: The Agency s pledge of Tax Revenues to its obligations to repay the 2007A Rodeo Loan and 2007B Rodeo Loan will be on a parity with its pledge of Tax Revenues to its obligation to repay the outstanding 1999 Rodeo Loan. Montalvin Manor. Loan Agreement: The Montalvin Manor Loan Agreement, dated as of May 1, 2007 and the First Supplement to Montalvin Manor Loan Agreement, dated as of May 1, 2007 (the Montalvin Manor Loan Agreement ). Outstanding Loans: The Agency currently has no outstanding debt payable from Tax Revenues generated in the Montalvin Manor Project Area on a parity with the 2007A Montalvin Manor Loan or the 2007B Montalvin Manor Loan. Limited Obligations. The Indenture and the Loan Agreements are separate and distinct instruments, and amounts payable under any one of such agreements may not be used to satisfy an obligation under any other such agreements, except for the use of payments on the 2007 Loans to pay the Series of the Bonds that funded the respective 2007 Loans and except to the limited extent described in SECURITY FOR THE BONDS Limited Cross- Collateralization. THE AGENCY'S OBLIGATION TO REPAY THE 2007 LOANS PURSUANT TO THE LOAN AGREEMENTS IS NOT A DEBT OF THE COUNTY, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS (EXCEPT THE AGENCY), AND NEITHER THE COUNTY, THE STATE OF CALIFORNIA NOR ANY OF ITS POLITICAL SUBDIVISIONS (EXCEPT THE AGENCY) IS LIABLE THEREFOR. THE AGENCY S OBLIGATION TO REPAY THE LOANS PURSUANT TO THE LOAN AGREEMENTS CONSTITUTES AN INDEBTEDNESS OF THE AGENCY PAYABLE SOLELY FROM THE FUNDS OF THE AGENCY SPECIFICALLY PLEDGED THEREFOR UNDER THE LOAN AGREEMENTS. Additional Parity Debt. In addition to the 2007 Loans and any outstanding Parity Debt, each Loan Agreement permits the Agency at any time to issue any loans, bonds, notes, advances or indebtedness payable from Tax Revenues on a parity with the applicable 2007 Loan ( Additional Parity Debt ) to finance the applicable Redevelopment Project, upon satisfaction of certain conditions contained in the Loan Agreements, including the following: (A) No Event of Default (as defined in the Loan Agreement) shall have occurred and be continuing, and the Agency shall otherwise be in compliance with all covenants set forth in the Loan Agreement. (B) Unless the Parity Debt is Refunding Debt (in which case the restrictions in this paragraph (B) shall not apply), the Tax Revenues for the then current Fiscal Year, 35

46 as set forth in a Written Certificate of the Agency, based on assessed valuation of property in the Project Area as evidenced in the written records of the County, plus at the option of the Agency the Additional Revenues, shall be at least equal to: 120% of Maximum Annual Debt Service with respect to the Contra Costa Centre Loan, 120% of Maximum Annual Debt Service with respect to the Rodeo Loan, 125% of Maximum Annual Debt Service with respect to the Montalvin Manor Loan and 100% of Maximum Annual Debt Service with respect to the Montalvin Manor Loan if the Tax Revenues attributable to the top two taxpayers in the Montalvin Manor Project Area are excluded from the calculation, 130% of Maximum Annual Debt Service with respect to the North Richmond Loan so long as the 1999 North Richmond Loan is not fully paid, and 125% of Maximum Annual Debt Service thereafter, and 150% of Maximum Annual Debt Service with respect to the Bay Point Loan so long as the 1999 Bay Point Loan is not fully paid, and 125% of Maximum Annual Debt Service thereafter. Additional Revenues is defined in the Loan Agreements as the amount of Tax Revenues which are estimated to be received by the Agency within the Fiscal Year following the Fiscal Year in which such calculation is made as a result of increases in the assessed valuation of taxable property in the Project Area due to transfer of ownership or any other interest in real property which has been recorded but which is not then reflected on the tax rolls. (C) The issuance of such Additional Parity Debt shall not cause the Agency to exceed any applicable Plan Limitations (defined in the Loan Agreements as the limitations contained or incorporated in the applicable redevelopment plan on (a) aggregate principal amount of indebtedness payable from Tax Revenues which may be outstanding at any time, (b) the aggregate amount of taxes which may be divided and allocated to the Agency pursuant to the Redevelopment Plan and (c) the period of time for establishing or repaying indebtedness payable from Tax Revenues). See THE PROJECT AREAS for a summary of the current Plan Limitations for each Project Area. Without limiting the generality of the foregoing, the Agency shall not issue any Additional Parity Debt in the event and to the extent that either (a) the amount of Maximum Annual Debt Service in any Bond Year following such issuance exceeds the aggregate amount of Tax Revenues which are eligible under the Redevelopment Plan to be allocated to the Agency in any Fiscal Year, or (b) the aggregate amount of debt service on all outstanding obligations of the Agency, including such Additional Parity Debt, exceeds the aggregate amount of Tax Revenues which are eligible under the Redevelopment Plan to be allocated and paid to the Agency during the period while such outstanding obligations remain outstanding, or (c) the aggregate principal amount of all outstanding obligations of the Agency, including such Additional Parity Debt, exceeds any applicable limit in the Redevelopment Plan on the aggregate principal amount of indebtedness which the Agency is permitted to have outstanding at any one time. See APPENDIX A Summary of Certain Provisions of the Principal Legal Documents for a more complete description of the conditions which must be satisfied for the issuance of Parity Debt. See THE AGENCY Agency Indebtedness for a discussion of currently outstanding Parity Debt of the Project Areas. 36

47 Subordinate Obligations Each Loan Agreement provides that, in addition to the 2007 Loans and any Parity Debt, from time to time the Agency may issue or incur Subordinate Debt in a principal amount determined by the Agency, provided that the issuance of Subordinate Debt may not cause the Agency to exceed any applicable Plan Limitations (as defined above). SEE APPENDIX A Summary Of Certain Provisions of the Principal Legal Documents. Escrow Funds North Richmond Escrow Fund. A portion of the proceeds from the sale of the Bonds will initially be deposited into the North Richmond Escrow Fund. The North Richmond Escrow Fund will include a capitalized interest account to be funded with proceeds of the North Richmond 2007A Loan. Moneys in the capitalized interest account, together with interest earnings on the North Richmond Escrow Fund, will be applied to pay the interest on the Escrow Bonds to August 1, 2009, or, when all amounts have been released from the North Richmond Escrow Fund, will be transferred to the 2007 Redevelopment Fund under the North Richmond Loan Agreement. The North Richmond Escrow Fund, excluding the capitalized interest account, will be invested in a guaranteed investment agreement or in Federal Securities. Amounts in the North Richmond Escrow Fund may be released from the North Richmond Escrow Fund and loaned to the Agency or deposited in the Program Fund in whole or in several disbursements after amendment of the North Richmond Redevelopment Plan to increase the cumulative tax increment limit and if the Agency is able to demonstrate that tax increment revenues in the North Richmond Project Area will meet certain debt service coverage requirements. See APPENDIX A Summary of Certain Provisions of the Principal Legal Documents. The County has initiated the process to increase the cumulative tax increment limit for the North Richmond Project Area. If the amounts in the North Richmond Escrow Fund are not released as described in the preceding paragraph, amounts in the North Richmond Escrow Fund will be used to redeem Escrow Bonds as described under THE BONDS Mandatory Redemption Upon Transfers from Escrow Funds. Bay Point Escrow Fund. A portion of the proceeds from the sale of the Bonds will initially be deposited into the Bay Point Escrow Fund. The Bay Point Escrow Fund will include a capitalized interest account to be funded with proceeds of the Bay Point 2007 Loans. Moneys in the capitalized interest account, together with interest earnings on the Bay Point Escrow Fund, will be applied to pay the interest on the Escrow Bonds to August 1, 2009, or, when all amounts have been released from the Bay Point Escrow Fund, will be transferred to the 2007 Redevelopment Fund under the Bay Point Loan Agreement. The Bay Point Escrow Fund, excluding the capitalized interest account, will be invested in a guaranteed investment agreement or in Federal Securities. Amounts in the Bay Point Escrow Fund may be released from the Bay Point Escrow Fund and loaned to the Agency or deposited in the Program Fund in whole or in several disbursements after amendment of the Bay Point Redevelopment Plan and if the Agency is able to demonstrate that tax increment revenues in the Bay Point Project Area will meet certain debt service coverage requirements. See APPENDIX A Summary of Certain Provisions of the Principal Legal Documents. The County has initiated the process to increase the cumulative tax increment limit for the Bay Point Project Area. 37

48 If the amounts in the Bay Point Escrow Fund are not released as described in the preceding paragraph, amounts in the Bay Point Escrow Fund will be used to redeem Escrow Bonds as described under THE BONDS Mandatory Redemption Upon Transfers from Escrow Funds. Revenue Fund Principal and Interest Accounts. All of the Agency s Loan repayments will be deposited into the Revenue Fund, which will be held by the Trustee pursuant to the Indenture. The Trustee will transfer the following amounts into the following accounts in the specified order of priority: On or before each Interest Payment Date for the Senior Bonds, the Trustee will deposit into the Interest Account an amount required to cause the aggregate amount on deposit in the Interest Account to equal the amount of interest becoming due and payable on such date on all Outstanding Senior Bonds. On or before each date on which the principal of the Senior Bonds is payable, the Trustee will deposit into the Principal Account an amount required to cause the aggregate amount on deposit in the Principal Account to equal the aggregate amount of principal coming due and payable on such date on the Senior Bonds, or the redemption price of the Senior Bonds (consisting of the principal amount thereof and any applicable redemption premiums) required to be redeemed on such date. On or before each Interest Payment Date for the Subordinate Bonds, the Trustee will deposit into the Interest Account an amount required to cause the aggregate amount on deposit in the Interest Account to equal the amount of interest becoming due and payable on such date on all Outstanding Subordinate Bonds. On or before each date on which the principal of the Subordinate Bonds is payable, the Trustee will deposit into the Principal Account an amount required to cause the aggregate amount on deposit in the Principal Account to equal the aggregate amount of principal coming due and payable on such date on the Subordinate Bonds, or the redemption price of the Subordinate Bonds (consisting of the principal amount thereof and any applicable redemption premiums) required to be redeemed on such date. Surplus. In the event that any amounts remain on deposit in the Revenue Fund on any August 1st after making all of the required transfers for such date, the Trustee will apply such amounts for the following purposes in the following order of priority (as directed by the Authority): (i) such amounts may, at the election of the Authority, be applied to pay or reimburse the payment of the reasonable costs and expenses incurred by the Authority to administer the Bonds and the Loans, (ii) to the extent permitted under the Bond Law (as confirmed and directed in writing by the Authority), such amounts may be used for any lawful purpose of the 38

49 Authority and may be accumulated in the Revenue Fund for any such purpose as directed by the Authority to the Trustee in writing, and (iii) the remainder of such amounts shall be paid to the Agency to be applied by the Agency for any lawful purpose of the Agency. Reserve Funds General. Pursuant to the Loan Agreements, a separate Reserve Fund is held by the Trustee for each of the 2007 Loans. In connection with the issuance of 2007 Loans, the Trustee will establish a 2007A Reserve Fund and 2007B Reserve Fund (except for Contra Costa Centre 2007A Loan), and within each such fund, a Senior Account and a Subordinate Account. The Reserve Funds are held in trust for the benefit of the Authority and the owners of the Bonds. The Agency is obligated to maintain the amount on deposit in the Senior Account of each Reserve Fund, taking into account amounts available to be drawn on the related MBIA Surety Bond, at the Reserve Requirement Senior and the amount on deposit or available to be drawn on the related Radian Surety Bond in the Subordinate Account of each Reserve Fund at the Reserve Requirement Subordinate for each respective Loan at all times prior to the payment of each Loan in full, except as otherwise described in this Official Statement. Senior Accounts. In the event that the Agency fails to deposit with the Trustee on or before any Interest Payment Date or date of prepayment of each Loan the full amount of interest or principal required to be deposited as described in the following paragraph, the Trustee will withdraw from the Senior Account of the related Reserve Fund an amount equal to any such deficiency. In the event that the amount on deposit in the Senior Account in any Reserve Fund, taking into account amounts available to be drawn on the related MBIA Surety Bond, shall at any time be less than the Reserve Requirement - Senior, the Trustee is required to promptly notify the Agency of the amount required to be deposited therein to restore the balance to the Reserve Requirement - Senior. In the event that the amount on deposit in the Interest Account or the Principal Account on any date that amounts are due on the Senior Bonds are not sufficient to fully pay the interest and/or principal so due on the Senior Bonds, the Trustee will determine the Loan or Loans that have not fully paid amounts due on such Loan or Loans on such date and will draw on the Senior Account of the respective 2007A Reserve Fund or 2007B Reserve Fund with respect to the delinquent Loan, as applicable, an amount equal to the insufficiency to pay the Senior Bonds in full, not to exceed, with respect to any Senior Account, the lesser of the amount that is delinquent on the corresponding Loan or the amount then on deposit in the applicable Senior Account. In the event that the amounts so drawn on the Senior Accounts of the delinquent Loans are not sufficient to pay all amounts then due on the Senior Bonds, the available amounts will first be applied to the payment of interest then due on the Senior Bonds and then to the payment of principal due on the Senior Bonds. Subordinate Accounts. In the event that the Agency fails to deposit with the Trustee on or before any Interest Payment Date or date of prepayment of each Loan the full amount of interest or principal required to be deposited as described in the following paragraph, the Trustee will withdraw from the Subordinate Account of the related Reserve Fund an amount equal to any such deficiency. In the event that the amount on deposit in the Subordinate Account in any Reserve Fund taking into account amounts available to be drawn on the related Radian Surety Bond (if applicable) shall at any time be less than the Reserve Requirement - Subordinate, the Trustee is required to promptly notify the Agency of the amount required to be deposited therein to restore the balance to the Reserve Requirement - Subordinate. 39

50 In the event that the amount on deposit in the Interest Account or the Principal Account on any date that amounts are due on the Subordinate Bonds are not sufficient to fully pay the interest and/or principal so due on the Subordinate Bonds, the Trustee will determine the Loan or Loans that have not fully paid amounts due on such Loan or Loans on such date and will draw on the Subordinate Account of the respective 2007A Reserve Fund or 2007B Reserve Fund with respect to the delinquent Loan, as applicable, an amount equal to the insufficiency to pay the Subordinate Bonds in full, not to exceed, with respect to any Subordinate Account, the lesser of (i) the amount that is delinquent on the corresponding Loan, less any transfer from the Senior Accounts of the 2007A Reserve Fund and of the 2007B Reserve Fund on such date as described under Senior Accounts above, or (ii) the amount then on deposit in the applicable Subordinate Account. In the event that the amounts so drawn on the Subordinate Accounts of the delinquent Loans are not sufficient to pay all amounts then due on the Subordinate Bonds, the available amounts will first be applied to the payment of interest then due on the Subordinate Bonds and then to the payment of principal due on the Subordinate Bonds. Qualified Reserve Fund Credit Instruments. The Agency will fund each Reserve Requirement Senior with a separate MBIA Surety Bond. The Agency will fund each Reserve Requirement Subordinate (except for the Contra Costa Centre 2007A Loan) with a separate Radian Surety Bond. The Agency may fund the Reserve Requirement for the Contra Costa Centre 2007A Loan and any remaining portion of the Reserve Requirement Senior or Reserve Requirement - Subordinate with one or more Qualified Reserve Fund Credit Instruments. Upon deposit of any Qualified Reserve Fund Credit Instrument with the Trustee, the Trustee shall pay to the Agency from amounts in the applicable account of the Reserve Fund an amount equal to the principal of the Qualified Reserve Fund Credit Instrument. See APPENDIX A Summary of Certain Provisions of the Principal Legal Documents. In any case where an account of the Reserve Fund is funded with a combination of cash and a Qualified Reserve Fund Credit Instrument, the Trustee is required to deplete all cash balances before drawing on the Qualified Reserve Fund Credit Instrument. With regard to replenishment, any available moneys will be used first, to reinstate the Qualified Reserve Fund Credit Instrument and second, to replenish the cash in the Reserve Fund. In the event the Qualified Reserve Fund Credit Instrument is drawn upon, the Agency will be required to make payment of interest on, and of amounts advanced under the Qualified Reserve Fund Credit Instrument after making payments of principal of or interest on the Loan and any Parity Debt. Each of the Senior Accounts of the Reserve Funds will initially be funded with a Qualified Reserve Fund Credit Instrument. See MBIA SURETY BONDS. Moneys on deposit in the Reserve Fund with respect to one Loan are not available to make Loan payments with respect to another Loan. 40

51 Limited Cross-Collateralization In certain circumstances, Tax Revenues generated in one Project Area may be used to repay a Loan, to the extent the proceeds of the Loan were used for low and moderate income housing purposes (a Housing Loan ), from another Project Area. The proceeds of the 2007B Loans for the North Richmond, Bay Point, Rodeo and Montalvin Manor Project Areas (the Cross-Collateralized Project Areas ) are considered to be used for low and moderate income housing purposes that benefit all of the Cross-Collateralized Project Areas. Consequently, the Loan Agreements for the Cross-Collateralized Project Areas provide that, if at any time there is a deficiency in the amounts required to make the 2007B Loan payments after depletion of the applicable Reserve Fund under one of the Cross-Collateralized Project Area Loan Agreements, the Housing Set-Aside portion of Tax Revenues from the other Cross-Collateralized Project Areas with 2007B Loans outstanding shall be used by the Agency to make up such deficiency. In addition, portions of the proceeds of the 1999 Loans (in the percentages specified below) for each Cross-Collateralized Project Area (except Montalvin Manor Project Area) are considered to be used for low and moderate income housing purposes that benefit all of the Cross-Collateralized Project Areas (except Montalvin Manor Project Area): North Richmond Project Area: approximately 21% of the 1999 Loan Bay Point Project Area: approximately 30% of the 1999 Loan Rodeo Project Area: approximately 30% of the 1999 Loan Consequently, the Loan Agreements for the Cross-Collateralized Project Areas (except Montalvin Manor Project Area) provide that, if at any time there is a deficiency in the amounts required to make the portion of the 1999 Loan payments allocable to low and moderate income housing purposes after depletion of the applicable Reserve Fund under one of the Cross- Collateralized Project Area Loan Agreements (except Montalvin Manor Project Area), the Housing Set-Aside portion of Tax Revenues from the other Cross-Collateralized Project Areas (except Montalvin Manor Project Area) with 1999 Loans outstanding may be used by the Agency to make up such deficiency. The Loan Agreements require the deficiency to be apportioned pro rata among the Cross-Collateralized Project Areas that do not then have an insufficient balance in their respective Reserve Fund. The Agency s pledge of the Housing Set-Aside portion of Tax Revenues for the purpose of cross-collateralization is junior to its pledge of such funds to repayment of the applicable Loans and any related Parity Debt. As a result, in any given Bond Year, the Housing Set-Aside portion of Tax Revenues from a Cross-Collateralized Project Area will be available for use towards the Agency s obligations under an unrelated Cross- Collateralized Project Area Loan Agreement, as described above, only to the extent such Tax Revenues exceed the Agency s obligations on the applicable payment date under the Loan Agreement from which Tax Revenues are to be used to make up a deficiency under a Cross- Collateralized Project Area Loan Agreement. 41

52 BOND INSURANCE FOR THE SENIOR BONDS The following information has been supplied by the Senior Bonds Insurer for inclusion in this Official Statement. No representation is made by the Authority or the Agency as to the accuracy or completeness of the information. The Senior Bonds Insurer accepts no responsibility for the accuracy or completeness of this Official Statement or any other information or disclosure contained in this Official Statement, or omitted herefrom, other than with respect to the accuracy of the information regarding the Senior Bonds Insurer and its affiliates set forth under this heading. In addition, the Senior Bonds Insurer makes no representation regarding the Bonds or the advisability of investing in the Bonds. The MBIA Insurance Corporation Insurance Policy The following information has been furnished by MBIA Insurance Corporation ( MBIA or the Senior Bonds Insurer ) for use in this Official Statement. Reference is made to Appendix H for a specimen of MBIA's policy (the Policy ). The MBIA Policy unconditionally and irrevocably guarantees the full and complete payment required to be made by or on behalf of the Agency to the Trustee or its successor of an amount equal to (i) the principal of (either at the stated maturity or by an advancement of maturity pursuant to a mandatory sinking fund payment) and interest on, the Senior Bonds as such payments shall become due but shall not be so paid (except that in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or otherwise, other than any advancement of maturity pursuant to a mandatory sinking fund payment, the payments guaranteed by the MBIA Policy shall be made in such amounts and at such times as such payments of principal would have been due had there not been any such acceleration, unless MBIA elects in its sole discretion, to pay in whole or in part any principal due by reason of such acceleration); and (ii) the reimbursement of any such payment which is subsequently recovered from any Owner of the Senior Bonds pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference to such Owner within the meaning of any applicable bankruptcy law (a Preference ). The Subordinate Bonds are not insured by the MBIA Policy. The MBIA Policy does not insure against loss of any prepayment premium which may at any time be payable with respect to any Senior Bonds. The MBIA Policy does not, under any circumstance, insure against loss relating to: (i) optional or mandatory redemptions (other than mandatory sinking fund redemptions); (ii) any payments to be made on an accelerated basis; (iii) payments of the purchase price of Senior Bonds upon tender by an owner thereof; or (iv) any Preference relating to (i) through (iii) above. The MBIA Policy also does not insure against nonpayment of principal of or interest on the Bonds resulting from the insolvency, negligence or any other act or omission of the Trustee or any other trustee or paying agent for the Senior Bonds. Upon receipt of telephonic or telegraphic notice, such notice subsequently confirmed in writing by registered or certified mail, or upon receipt of written notice by registered or certified mail, by MBIA from the Trustee or any owner of a Senior Bond the payment of an insured amount for which is then due, that such required payment has not been made, MBIA on the due date of such payment or within one business day after receipt of notice of such nonpayment, whichever is later, will make a deposit of funds, in an account with U.S. Bank Trust National Association, in New York, New York, or its successor, sufficient for the payment of any such insured amounts which are then due. Upon presentment and surrender of such Senior Bonds 42

53 or presentment of such other proof of ownership of the Senior Bonds, together with any appropriate instruments of assignment to evidence the assignment of the insured amounts due on the Senior Bonds as are paid by MBIA, and appropriate instruments to effect the appointment of MBIA as agent for such owners of the Senior Bonds in any legal proceeding related to payment of insured amounts on the Bonds, such instruments being in a form satisfactory to U.S. Bank Trust National Association, U.S. Bank Trust National Association shall disburse to such owners or the Trustee payment of the insured amounts due on such Senior Bonds, less any amount held by the Trustee for the payment of such insured amounts and legally available therefor. MBIA Insurance Corporation The Senior Bonds Insurer is the principal operating subsidiary of MBIA Inc., a New York Stock Exchange listed company (the Company ). The Company is not obligated to pay the debts of or claims against MBIA. MBIA is domiciled in the State of New York and licensed to do business in and subject to regulation under the laws of all 50 states, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, the Virgin Islands of the United States and the Territory of Guam. MBIA, either directly or through subsidiaries, is licensed to do business in the Republic of France, the United Kingdom and the Kingdom of Spain and is subject to regulation under the laws of those jurisdictions. The principal executive offices of MBIA are located at 113 King Street, Armonk, New York and the main telephone number at that address is (914) Regulation As a financial guaranty insurance company licensed to do business in the State of New York, MBIA is subject to the New York Insurance Law which, among other things, prescribes minimum capital requirements and contingency reserves against liabilities for MBIA, limits the classes and concentrations of investments that are made by MBIA and requires the approval of policy rates and forms that are employed by MBIA. State law also regulates the amount of both the aggregate and individual risks that may be insured by MBIA, the payment of dividends by MBIA, changes in control with respect to MBIA and transactions among MBIA and its affiliates. The MBIA Policy is not covered by the Property/Casualty Insurance Security Fund specified in Article 76 of the New York Insurance Law. Financial Strength Ratings of MBIA Moody's Investors Service, Inc. rates the financial strength of MBIA Aaa. Standard & Poor's, a division of The McGraw-Hill Companies, Inc. rates the financial strength of MBIA AAA. Fitch Ratings rates the financial strength of MBIA AAA. Each rating of MBIA should be evaluated independently. The ratings reflect the respective rating agency's current assessment of the creditworthiness of MBIA and its ability to pay claims on its policies of insurance. Any further explanation as to the significance of the above ratings may be obtained only from the applicable rating agency. 43

54 The above ratings are not recommendations to buy, sell or hold the Senior Bonds, and such ratings may be subject to revision or withdrawal at any time by the rating agencies. Any downward revision or withdrawal of any of the above ratings may have an adverse effect on the market price of the Senior Bonds. MBIA does not guaranty the market price of the Senior Bonds nor does it guaranty that the ratings on the Senior Bonds will not be revised or withdrawn. MBIA Financial Information As of December 31, 2006, MBIA had admitted assets of $10.9 billion (audited), total liabilities of $6.9 billion (audited), and total capital and surplus of $4.0 billion (audited),, each as determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. As of March 31, 2007, MBIA had admitted assets of 11.2 billion (unaudited), total liabilities of $7.0 billion (unaudited), and total capital and surplus of $4.2 billion (unaudited), each as determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. For further information concerning MBIA, see the consolidated financial statements of MBIA and its subsidiaries as of December 31, 2006 and December 31, 2005 and for each of the three years in the period ended December 31, 2006, prepared in accordance with generally accepted accounting principles, included in the Annual Report on Form 10-K of the Company for the year ended December 31, 2006 and the consolidated financial statements of MBIA and its subsidiaries as of March 31, 2007 and for the three month period ended March 31, 2007 and March 31, 2006 included in the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2007, which are hereby incorporated by reference into this Official Statement and shall be deemed to be a part hereof. Copies of the statutory financial statements filed by MBIA with the State of New York Insurance Department are available over the Internet at the Company s web site at and at no cost, upon request to MBIA at its principal executive offices. Incorporation of Certain Documents by Reference The following documents filed by the Company with the Securities and Exchange Commission (the SEC ) are incorporated by reference into this Official Statement: (1) The Company s Annual Report on Form 10-K for the year ended December 31, 2006, and (2) The Company s Quarterly Report on Form 10-Q for the quarter ended March 31, Any documents, including any financial statements of MBIA and its subsidiaries that are included therein or attached as exhibits thereto, filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of the Company s most recent Quarterly Report on Form 10-Q or Annual Report on Form 10-K, and prior to the termination of the offering of the Senior Bonds offered hereby shall be deemed to be incorporated by reference in this Official Statement and to be a part hereof from the respective dates of filing such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein, or contained in this Official Statement, shall be deemed to be modified or superseded for purposes of this Official Statement to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be 44

55 incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Official Statement. The Company files annual, quarterly and special reports, information statements and other information with the SEC under File No Copies of the Company s SEC filings (including (1) the Company s Annual Report on Form 10-K for the year ended December 31, 2006, and (2) the Company s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 are available (i) over the Internet at the SEC s web site at (ii) at the SEC s public reference room in Washington, D.C.; (iii) over the Internet at the Company s web site at and (iv) at no cost, upon request to MBIA at its principal executive offices. In the event the Senior Bonds Insurer were to become insolvent, any claims arising under a policy of financial guaranty insurance are excluded from coverage by the California Insurance Guaranty Association, established pursuant to Article 14.2 (commencing with Section 1063) of Chapter 1 of Part 2 of Division 1 of the California Insurance Code. MBIA SURETY BONDS Application has been made to MBIA for a commitment to issue nine surety bonds (each, a MBIA Surety Bond ), one for each 2007 Loan. Each MBIA Surety Bond will be in an amount equal to the Reserve Requirement - Senior applicable to the respective Loan. Each MBIA Surety Bond will provide that upon notice from the Trustee to the Senior Bonds Insurer to the effect that insufficient amounts are on deposit in the applicable Senior Account of the Reserve Fund to pay the principal of (at maturity or pursuant to mandatory redemption requirements) and interest on the portion of the applicable Loan attributable to the Senior Bonds, the Senior Bonds Insurer will promptly deposit with the Trustee an amount sufficient to pay the principal of and interest on the portion of the applicable Loan attributable to the Senior Bonds, or the available amount of the MBIA Surety Bond, whichever is less. Upon the later of: (i) three days after receipt by the Senior Bonds Insurer of a Demand for Payment in the form attached to each MBIA Surety Bond, duly executed by the Trustee; or (ii) the payment date of the applicable Loan as specified in the Demand for Payment presented by the Trustee to the Senior Bonds Insurer, the Senior Bonds Insurer will make a deposit of funds in an account with U.S. Bank Trust National Association, in New York, New York, or its successor, sufficient for the payment to the Trustee, of amounts which are then due to the Trustee (as specified in the applicable Loan Demand for Payment) subject to the Surety Bond Coverage. The available amount of each MBIA Surety Bond is the initial face amount of such MBIA Surety Bond less the amount of any previous deposits by the Senior Bonds Insurer with the Trustee which have not been reimbursed by the Agency. The Agency and the Senior Bonds Insurer have entered into a Financial Guaranty Agreement (the Agreement ) with respect to each Surety Bond. Pursuant to the Agreement, the Agency is required to reimburse the Senior Bonds Insurer, within one year of any deposit, the amount of such deposit made by the Senior Bonds Insurer with the Trustee under the related MBIA Surety Bond. Such reimbursement shall be made only after all required deposits to the applicable Special Fund have been made. Under the terms of each Agreement, the Trustee is required to reimburse the Senior Bonds Insurer, with interest, from Tax Revenues until the face amount of the MBIA Surety Bond is reinstated. No optional prepayment of a related Loan may be made until the Senior Bonds Insurer's MBIA Surety Bond for such Loan is reinstated. Each MBIA Surety Bond will be held by 45

56 the Trustee in the applicable Senior Account of the Reserve Fund for the related Loan and is provided as an alternative to the Agency depositing funds equal to the Reserve Requirement - Senior for the applicable Loan. Each MBIA Surety Bond will be issued in the face amount equal to initial Reserve Requirement - Senior for the applicable Loan that is attributable to the Senior Bonds and the premium therefor will be fully paid by the Agency at the time of delivery of the Bonds. FINANCIAL GUARANTY INSURANCE FOR THE SUBORDINATE BONDS The following information has been supplied by the Subordinate Bonds Insurer for inclusion in this Official Statement. No representation is made by the Authority or the Agency as to the accuracy or completeness of the information. The Subordinate Bonds Insurer accepts no responsibility for the accuracy or completeness of this Official Statement or any other information or disclosure contained in this Official Statement, or omitted herefrom, other than with respect to the accuracy of the information regarding the Subordinate Bonds Insurer and its affiliates set forth under this heading. In addition, the Subordinate Bonds Insurer makes no representation regarding the Bonds or the advisability of investing in the Bonds. Description of Radian Policy A financial guaranty insurance policy (the Radian Policy ) will be issued by Radian Asset Assurance Inc. (the Subordinate Bonds Insurer ) simultaneously with the issuance and delivery of the Bonds. The Radian Policy is noncancelable during its term and provides for the prompt payment of principal of and interest on the Subordinate Bonds to the extent that the Trustee has not received sufficient funds from the Agency for payment of the Subordinate Bonds on the due date. The Subordinate Bonds Insurer is obligated to make the required payment on the later of the due date or the first business day after which the Subordinate Bonds Insurer has received notice from The Bank of New York, as Insurance Trustee (the Insurance Trustee ), that the Agency has failed to pay amounts due on the Subordinate Bonds. Under the Radian Policy, the due date of the Subordinate Bonds, when referring to the payment of principal, means the stated maturity date thereof or the date on which payment of principal is due by reason of mandatory sinking fund payments and does not mean any earlier date on which payment is due by reason of any call for redemption, acceleration, or other advancement of maturity, other than in the discretion of the Subordinate Bonds Insurer. With respect to interest on the Subordinate Bonds, the due date means the stated date for payment of interest. The Radian Policy guarantees reimbursement of any recovery of any such payment from a Holder or the Trustee pursuant to a final judgment by any court of competent jurisdiction holding that such payment constituted a voidable preference within the meaning of any applicable bankruptcy law. For specific information on the coverage provided, reference should be made to the Radian Policy that has been reproduced in specimen form in Appendix I hereto. The Radian Policy does not insure against nonpayment of principal or interest on the Subordinate Bonds due to the insolvency, misconduct or negligence of the Trustee. The Radian Policy does not insure the payment of any redemption premium. Description of Radian Asset Assurance Inc. Radian Asset Assurance is a monoline financial guaranty insurance company, regulated by the Insurance Department of the State of New York and licensed to do business in all 50 states, the District of Columbia, Guam and the United States Virgin Islands. As of March 31, 46

57 2007, the Subordinate Bonds Insurer had total consolidated shareholders' equity of approximately $1,662,290,000 and total consolidated assets of approximately $2,698,676,000. The financial information relating to the Subordinate Bonds Insurer presented in this Official Statement was prepared internally by the Subordinate Bonds Insurer, based on accounting principles generally accepted in the United States of America ( GAAP ), and has not been audited by independent auditors. The address of the Subordinate Bonds Insurer's administrative office is 335 Madison Avenue, New York, New York 10017, and its telephone number is The Subordinate Bonds Insurer has filed the information contained in (i) (ii) below with entities designated as Nationally Recognized Municipal Securities Information Repositories ( NRMSIRs ) pursuant to Rule 15c2-12 of the Securities Exchange Act of 1934, and such financial information is available through such NRMSIRs: (i) (ii) The Subordinate Bonds Insurer s audited consolidated financial statements as of December 31, 2006 and 2005, and for each of the three years in the period ended December 31, 2006, prepared in accordance with GAAP, together with the accompanying report of the Subordinate Bonds Insurer s independent registered public accounting firm, which expresses an unqualified opinion (the Radian Financial Statements ); and The Subordinate Bonds Insurer s quarterly unaudited consolidated balance sheet as of March 31, 2007 and unaudited consolidated statement of operations for the three-month period then ended, prepared in accordance with GAAP. Additional information regarding the Subordinate Bonds Insurer can be found in the following documents filed by the Insurer s ultimate parent, Radian Group Inc. ( Radian ) with the Securities and Exchange Commission: (a) Annual Report on Form 10-K for the year ended December 31, 2006, under the headings: (i) Forward Looking Statements - Safe Harbor Statement (but only insofar as it relates to the financial guaranty business or financial guaranty insurance); (ii) Item 1. Business I. General (but only insofar as it relates to the financial guaranty business or financial guaranty insurance), Financial Guaranty Business (General), including subsections 1-4 thereunder, II. Risk in Force/Net Par Outstanding B. Financial Guaranty (Risk in Force/Net Par Outstanding), III. Defaults and Claims B. Financial Guaranty (Defaults and Claims), IV. Loss Management B. Financial Guaranty (Loss Management), V. Risk Management B. Financial Guaranty (Risk Management), including subsections 1 and 2 thereunder, VI. Customers B. Financial Guaranty (Customers), VII. Sales and Marketing Financial Guaranty (Sales and Marketing), VIII - Competition Financial Guaranty(Competition), IX. Ratings (but only insofar as it relates to the Subordinate Bonds Insurer), and XI Regulation Parts A 2-6, C and D(but in each case only insofar as it relates to the Subordinate Bonds Insurer or the financial guaranty business); (iii) Item 1A Risk Factors Risks Affecting Our Company (but only insofar as it relates to the Subordinate Bonds Insurer, the financial guaranty business or the proposed merger between Radian and MGIC (as defined below)) and Risks Particular to our Financial Guaranty Business ; (iv) Item 6 - Selected Ratios - Financial Guaranty and Other Data - Financial Guaranty, and (v) Item 7 Managements Discussion and Analysis of Financial Condition and Results of Operations Business Summary Financial Guaranty, Overview of Business Results (but only insofar as it relates to the Subordinate Bonds Insurer), Results of Operations - Financial Guaranty and Liquidity and Capital Resources (but only to the extent it relates to the Subordinate Bonds Insurer), and Critical Accounting Policies (but only to the extent it relates to the Subordinate Bonds Insurer, the financial guaranty business or Financial Guaranty ); (b) Quarterly Report on 47

58 Form 10-Q for the period ended March 31, 2007, in Part I, Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations, under the following headings: Business Summary Financial Guaranty, Overview, of Business Results (but only to the extent it relates to the Insurer), Results of Operations Financial Guaranty, Liquidity and Capital Resources (but only to the extent it relates to the Insurer) and Critical Accounting Policies (but only to the extent it relates to Financial Guaranty ); (c) the Reports on Form 8-K dated January 24, 2007, February 6, 2007, February 9, 2007, February 12, 2007, April 9, 2007, April 25, 2007 and May 11, 2007; and (d) Report on Form 8-K/A filed March 16, 2007 (amending Report on Form 8-K filed February 6, 2007). A complete copy of the Radian Financial Statements is available from the Subordinate Bonds Insurer upon written request. The Subordinate Bonds Insurer is an indirect, wholly owned subsidiary of Radian, a publicly owned corporation with its shares listed on the New York Stock Exchange (symbol RDN ). Radian is a global credit risk management company headquartered in Philadelphia with significant operations in both New York and London. Radian develops innovative financial solutions by applying its core mortgage credit risk expertise and structured finance capabilities to the credit enhancement needs of the capital markets worldwide, primarily through credit insurance products. The company also provides credit enhancement for public finance and other corporate and consumer assets on both a direct and reinsurance basis and holds strategic interests in credit-based consumer asset businesses. NONE OF RADIAN, RADIAN S OTHER SUBSIDIARIES OR ANY OF RADIAN S INVESTORS IS OBLIGATED TO PAY THE DEBTS OF OR CLAIMS AGAINST THE SUBORDINATE BONDS INSURER. On June 29, 2006, Standard & Poor s Ratings Services, a division of The McGraw-Hill Companies, Inc. ( S&P ) affirmed the Subordinate Bonds Insurer s AA financial strength rating and revised upward its outlook on the Subordinate Bonds Insurer from negative to stable. The Subordinate Bonds Insurer also has an insurance financial strength rating of Aa3 (outlook: stable) from Moody s Investors Service, Inc. ( Moody s ) and a claims paying ability rating of AA (outlook: negative) from Fitch Ratings Services ( Fitch ). The ratings of S&P, Moody s and Fitch reflect only the views of the applicable rating agency, respectively, do not constitute a recommendation to buy, sell or hold securities and are subject to revision or withdrawal at any time by such rating agencies. Any further explanation of any rating may be obtained only from the applicable rating agency. Any downward revision or withdrawal of any of the above ratings may have an adverse effect on the market price of the Subordinate Bonds. The Subordinate Bonds Insurer does not guarantee the market price or investment value of the Subordinate Bonds nor does it guarantee that the ratings on the Subordinate Bonds will not be revised or withdrawn. The Subordinate Bonds Insurer is licensed and subject to regulation as a financial guaranty insurance corporation under the laws of the State of New York, its state of domicile. In addition, Radian and its insurance subsidiaries are subject to regulation by insurance laws of the various other jurisdictions in which they are licensed to do business. As a financial guaranty insurance corporation licensed to do business in the State of New York, the Subordinate Bonds Insurer is subject to Article 69 of the New York Insurance Law which, among other things, limits the business of each financial guaranty Subordinate Bonds Insurer to financial guaranty insurance and related business lines, requires that each financial guaranty Subordinate Bonds Insurer maintain a minimum surplus to policyholders, establishes contingency, loss and unearned premium reserve requirements for each financial guaranty Subordinate Bonds Insurer, and limits the size of individual transactions and the volume of transactions that may be underwritten by each financial guaranty Subordinate Bonds Insurer. Other provisions of the 48

59 New York Insurance Law, applicable to non-life insurance companies such as the Subordinate Bonds Insurer regulate, among other things, permitted investments, payment of dividends, transactions with affiliates, mergers, consolidations, acquisitions or sales of assets and incurrence of liability for borrowings. Neither the Subordinate Bonds Insurer nor any of its affiliates accepts any responsibility for the accuracy or completeness of, nor have they participated in the preparation of, this Official Statement or any information or disclosure that is provided to potential purchasers of the Subordinate Bonds, or omitted from such disclosure, other than with respect to the accuracy of information presented under the headings FINANCIAL GUARANTY INSURANCE FOR THE SUBORDINATE BONDS and RADIAN SURETY BONDS and as set forth in Appendix I of this Official Statement. The Subordinate Bonds Insurer's role is limited to providing the coverage set forth in the Radian Policy and the Subordinate Debt Service Reserve Surety Bonds. In addition, the Subordinate Bonds Insurer makes no representation regarding the Bonds or the advisability of purchasing the Bonds. On February 6, 2007, Radian and MGIC Investment Corporation (NYSE: MTG) ( MGIC ) entered into an Agreement and Plan of Merger, pursuant to which Radian has agreed, subject to the terms and conditions of the merger agreement, to merge with and into MGIC, with the combined company to be renamed MGIC Radian Financial Group Inc. Additional information regarding this merger may be found in a Current Report on Form 8-K of Radian filed on February 6, 2007 and the attachments thereto. The merger has been approved by each company s board of directors and shareholders and is currently expected to be completed late in the third quarter or early in the fourth quarter of 2007, subject to various regulatory approvals. Upon completion of the merger, certain of the Subordinate Bond Insurer s reinsurance customers will have the right to recapture reinsurance business previously assumed by the Subordinate Bonds Insurer. At March 31, 2007, the Subordinate Bonds Insurer has assumed an aggregate of up to $10.2 billion par in force and up to $88.0 million of unearned premium reserves (on a statutory basis).. If all this reinsurance business were recaptured, the Subordinate Bonds Insurer estimates it would have to disburse $63.4 million in cash to settle the recaptures. A small portion of this reinsurance business from these customers is not subject to recapture. The Subordinate Bonds Insurer cannot provide any assurances as to whether the merger shall be consummated, and if so whether any or which of these customers will recapture all or any portion of this business upon consummation of the merger described above or the exact impact of the actual recapture, if any. RADIAN SURETY BONDS Concurrently with the closing relating to the Bonds, the Subordinate Bonds Insurer will issue eight debt service reserve surety bonds (each, a Radian Surety Bond ) for the 2007 Loans, excluding the Contra Costa Centre Loan. Each Radian Surety Bond will guarantee the replacement of funds needed to maintain the Reserve Fund - Subordinate Account at the level required by the applicable Loan Agreement. Each Radian Surety Bond guarantees that upon the later of (i) three (3) days after receipt by the Subordinate Bonds Insurer of a Demand for Payment or (ii) the payment date of the Loans as specified in the Demand for Payment, the Subordinate Bonds Insurer will deposit funds with the Insurance Trustee sufficient for the payment of amounts needed to restore the Reserve Fund Subordinate Account for the applicable Loan Agreement to the Reserve Requirement - Subordinate (the Surety Bond Coverage ). 49

60 Where a Subordinate Account of a Reserve Fund contains both a Radian Surety Bond from the Subordinate Bonds Insurer and cash, the Subordinate Bonds Insurer requires that the cash be drawn down completely before any demand is made on the Radian Surety Bond. Where a Subordinate Account of a Reserve Fund contains a Radian Surety Bond from the Subordinate Bonds Insurer and a surety bond from another entity, the Indenture should provide for a pro-rata draw on each of the surety bonds. Notwithstanding the foregoing, the Radian Surety Bond for any 2007 Loan will be drawn prior to any draws on the MBIA Surety Bond for such 2007 Loan. The Subordinate Bonds Insurer shall be reimbursed for any payment on a Radian Surety Bond before the cash in a Subordinate Account of a Reserve Fund is replenished. No acceleration payment can be made under a Radian Surety Bond unless such acceleration is at the sole option of the Subordinate Bonds Insurer. LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING LIMITATIONS Property Tax Limitations - Article XIIIA California voters, on June 6, 1978, approved an amendment (commonly known as both Proposition 13 and the Jarvis-Gann Initiative) to the California Constitution. This amendment, which added Article XIIIA to the California Constitution, among other things, affects the valuation of real property for the purpose of taxation in that it defines the full cash value of property to mean the county assessor s valuation of real property as shown on the 1975/76 tax bill under full cash value, or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment. The full cash value may be adjusted annually to reflect inflation at a rate not to exceed 2% per year, or any reduction in the consumer price index or comparable local data, or any reduction in the event of declining property value caused by damage, destruction or other factors. The amendment further limits the amount of any ad valorem tax on real property to 1% of the full cash value except that additional taxes may be levied to pay debt service on indebtedness approved by the voters prior to July 1, In addition, an amendment to Article XIII was adopted in June 1986 by initiative which exempts any bonded indebtedness approved by two-thirds of the votes cast by voters for the acquisition or improvement of real property from the 1% limitation. In the general election held November 4, 1986, voters of the State of California approved two measures, Propositions 58 and 60, which further amend Article XIIIA. Proposition 58 amends Article XIIIA to provide that the terms purchased and change of ownership, for purposes of determining full cash value of property under Article XIIIA, do not include the purchase or transfer of (1) real property between spouses and (2) the principal residence and the first $1,000,000 of other property between parents and children. Proposition 60 amends Article XIIIA to permit the Legislature to allow persons over age 55 who sell their residence to buy or build another of equal or lesser value within two years in the same county, to transfer the old residence s assessed value to the new residence. Pursuant to Proposition 60, the Legislature has enacted legislation permitting counties to implement the provisions of Proposition 60. There have been many challenges to Article XIIIA of the California Constitution. In Nordlinger v. Hahn, the United States Supreme Court heard an appeal relating to residential property. Based upon the facts presented in Nordlinger, the United States Supreme Court held that the method of property tax assessment under Article XIIIA did not violate the federal Constitution. The Agency cannot predict whether there will be any future challenges to California s present system of property tax assessment and cannot evaluate the ultimate effect 50

61 on the Agency s receipt of tax increment revenues should a future decision hold unconstitutional the method of assessing property. Allocation of Taxes Secured taxes are due in two equal installments. Installments of taxes levied upon secured property become delinquent on December 10 and April 10. Taxes on unsecured property are due March 1 and become delinquent August 31. The County Auditor-Controller is responsible for the aggregation of the taxable values assigned by the Assessor as of the January 1 lien date for property within the boundaries of the Project Areas. This results in the reported total current year Project Area taxable value and becomes the basis of determining tax increment revenues due to the Agency. Although adjustments to taxable values for property within the Project Areas may occur throughout the fiscal year to reflect escaped assessments, roll corrections, etc., such adjustments are not assumed on the tax increment projection. The County disburses tax increment revenue to all redevelopment agencies from November through August with approximately 35% of secured revenues apportioned by the end of December and a total of 75% of the secured revenues by the end of the following April. Unsecured revenues are disbursed in November, March and August of each year. The November payment consists of an 80% advance on the total unsecured levy. The County has implemented the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the Teeter Plan ), which allows each entity levying property taxes in the County to draw on the amount of property taxes levied rather than the amount actually collected. Therefore, the Fiscal Consultant s projections of Tax Revenues reflect the total amount levied rather than actual collections. Property Tax Collection Procedure Classifications. In California, property which is subject to ad valorem taxes is classified as secured or unsecured. Secured and unsecured property are entered on separate parts of the assessment roll maintained by the county assessor. The secured classification includes property on which any property tax levied by the County becomes a lien on that property sufficient, in the opinion of the county assessor, to secure payment of the taxes. Every tax which becomes a lien on secured property has priority over all other liens on the secured property, regardless of the time of the creation of other liens. A tax levied on unsecured property does not become a lien against unsecured property, but may become a lien on certain other property owned by the taxpayer. Collections. The method of collecting delinquent taxes is substantially different for the two classifications of property. The taxing authority has four ways of collecting unsecured property taxes in the absence of timely payment by the taxpayer: (1) a civil action against the taxpayer; (2) filing a certificate in the office of the county clerk specifying certain facts in order to obtain a judgment lien on certain property of the taxpayer; (3) filing a certificate of delinquency for record in the county recorder's office, in order to obtain a lien on certain property of the taxpayer; and (4) seizure and sale of the personal property, improvements or possessory interests belonging or assessed to the assessee. The exclusive means of enforcing the payment of delinquent taxes with respect to property on the secured roll is the sale of property securing the taxes to the State for the amount of taxes which are delinquent. 51

62 Penalties. A 10% penalty is added to delinquent taxes which have been levied with respect to property on the secured roll. In addition, property on the secured roll on which taxes are delinquent is declared in default on or about June 30 of the fiscal year. Such property may thereafter be redeemed by payment of the delinquent taxes and a delinquency penalty, plus a redemption penalty of 1.5% per month to the time of redemption and a $15 Redemption Fee. If taxes are unpaid for a period of five years or more, the property is recorded in a Power to Sell status and is subject to sale by the county tax collector. A 10% penalty also applies to the delinquent taxes on property on the unsecured roll, and further, an additional penalty of 1-1/2% per month accrues with respect to such taxes beginning the first day of the third month following the delinquency date. Delinquencies. The valuation of property is determined as of January 1 each year and equal installments of taxes levied upon secured property become delinquent on the following December 10 and April 10. Taxes on unsecured property are due January 1. Unsecured taxes enrolled by July 31, if unpaid, are delinquent August 31 at 5:00 p.m. and are subject to penalty; unsecured taxes added to roll after July 31, if unpaid, are delinquent on the last day of the month succeeding the month of enrollment. Supplemental Assessments. A bill enacted in 1983, SB 813 (Statutes of 1983, Chapter 498), provides for the supplemental assessment and taxation of property as of the occurrence of a change in ownership or completion of new construction after the January 1 lien date. The statute provides increased revenue to redevelopment agencies to the extent that supplemental assessments as a result of new construction or changes of ownership occur within the boundaries of redevelopment projects subsequent to the lien date. Supplemental property tax receipts for the Project Areas over the past four years are set forth below: Project Area Contra Costa Centre $ 373,030 $ 443,608 $ 239,758 $ 372,904 North Richmond 101, , , ,398 Bay Point 235, , , ,685 Rodeo 92, , , ,154 Montalvin Manor N/A N/A 78,352 77,453 Source: Fiscal Consultant. Because of the difficulty of projecting future supplemental tax revenues, the Fiscal Consultant did not include supplemental assessments in the projection of Tax Revenues for each Project Area. See Projected Tax Revenues in the sections pertaining to each of the Project Areas. 52

63 Tax Collection Fees Senate Bill 2557 ( SB 2557 ) (Chapter 466, Statutes of 1990) authorizes county auditors to determine property tax administration costs proportionately attributable to local jurisdictions. Subsequent legislation specifically includes redevelopment agencies among the entities which are subject to a property tax administration charge. The estimated fiscal year SB 2557 charges, based upon the actual SB 2557 charges to the Agency for fiscal year , are as follows: Project Area Estimated SB 2557 Charge Estimated % of Total Tax Increment Contra Costa Centre $58, % North Richmond 20, Bay Point 37, Rodeo 21, Montalvin Manor 5, Source: Fiscal Consultant. The County deducts the SB 2557 charge from gross tax increment revenues before distributing any tax increment revenues to the Agency. As a result, the amount of the SB 2557 charge in each year is not included in Tax Revenues and will not be available to pay debt service on the Bonds. In projecting Tax Revenues for each Project Area, the Fiscal Consultant assumed that the SB 2557 charges would continue to be imposed at the percentages listed above on a basis senior to payment of debt service. See Projected Tax Revenues in the sections pertaining to each of the Project Areas. Exclusion of Tax Revenues for General Obligation Bonds Debt Service An initiative to amend the California Constitution entitled Property Tax Revenues Redevelopment Agencies ( Proposition 87 ) was approved by California voters at the November 8, 1988 general election. Under prior law, a redevelopment agency using tax increment revenue received additional property tax revenue whenever a local government increased its property tax rate to pay off its general obligation bonds. Proposition 87 amended the California Constitution to allow the California Legislature to prohibit redevelopment agencies from receiving any of the property tax revenues raised by increased property tax rates imposed by local governments to make payments on their bonded indebtedness. Proposition 87 only applies to tax rates levied to finance general obligation bonds approved by the voters on or after January 1, Any revenue reduction to redevelopment agencies would depend on the number and value of the general obligation bonds approved by voters in prior years, which tax rate will reduce due to increased valuation subject to the tax or the retirement of the indebtedness. 53

64 The tax rates in the Project Areas currently include the basic 1% levy plus debt service tax rates as shown below: Project Area Secured Tax Rate Land Rate (1) Contra Costa Centre (2) % % North Richmond Bay Point Rodeo Montalvin Manor (1) Levied on incremental land value. (2) Blended rate for the Initial Project Area and the Amendment Area. Source: Fiscal Consultant. In projecting Tax Revenues for each Project Area, the Fiscal Consultant did not include post-january 1, 1989 debt service tax rates and estimated the decline in pre-january 1, 1989 debt service tax rates as follows: Taxing Entity Debt Service Tax Rate Ending Date East Bay Regional Park District (1) % Acalanes School District (2) Contra Costa County Water Agency (3) None (1) Applicable to each of the Project Areas. (2) Applicable to a portion of the Contra Costa Centre Project Area only. (3) Applicable to incremental land value in the Contra Costa Centre and Bay Point Project Areas only. Source: Fiscal Consultant. See Projected Tax Revenues in the sections pertaining to each of the Project Areas. Appropriations Limitations - Article XIIIB On November 6, 1979, California voters approved Proposition 4, the so-called Gann Initiative, which added Article XIIIB to the California Constitution. The principal effect of Article XIIIB is to limit the annual appropriations of the State and any city, county, school district, authority or other political subdivision of the State to the level of appropriations for the prior fiscal year, as adjusted for changes in the cost of living, population and services rendered by the government entity. Effective November 30, 1980, the California Legislature added Section to the Redevelopment Law which provided that the allocation of taxes to a redevelopment agency for the purpose of paying principal of, or interest on, loans, advances, or indebtedness will not be deemed the receipt by such agency of proceeds of taxes levied by or on behalf of the agency within the meaning of Article XIIIB, nor will such portion of taxes be deemed receipt of taxes by, or an appropriation subject to the limitation of, any other public body within the meaning or for the purpose of the Constitution and laws of the State, including Section of the Redevelopment Law. Proposition 218 On November 5, 1996, California voters approved Proposition Voter Approval for Local Government Taxes - Limitation on Fees, Assessments, and Charges - Initiative Constitutional Amendment. Proposition 218 added Articles XIIIC and XIIID to the California Constitution, imposing certain vote requirements and other limitations on the imposition of new 54

65 or increased taxes, assessments and property-related fees and charges. Tax Revenues securing the Agency's obligations to make payments on the Loans are derived from property taxes, which are outside the scope of taxes, assessments and property-related fees and charges which were limited by Proposition 218. Future Initiatives Article XIIIA, Article XIIIB, Proposition 87 and Proposition 218 were each adopted as measures which qualified for the ballot pursuant to California's initiative process. From time to time other initiative measures could be adopted, further affecting Agency revenues or the Agency's ability to expend revenues. Other Legislation Affecting Redevelopment Agencies Assembly Bill In 1993, the California Legislature enacted Assembly Bill 1290 ( AB 1290 ) which contained several significant changes in the Redevelopment Law. Among the changes made by AB 1290 is a provision which limits the period of time for incurring and repaying loans, advances and indebtedness which are payable from tax increment revenues. In general, a redevelopment plan may terminate not more than 40 years following the date of original adoption, and loans, advances and indebtedness may be repaid during a period extending not more than 10 years following the date of termination of the redevelopment plan. Assembly Bill In 1998, the California Legislature enacted Assembly Bill 1342, effective January 1, 1999 ( AB 1342 ). AB 1342 permits redevelopment agencies having plan limits shorter than those permitted by AB 1290 to amend their plans to incorporate the maximum permitted limits without complying with the statutory amendment process. Senate Bill 211. The California Legislature enacted Senate Bill 211, Chapter 741, Statutes 2001, effective January 1, 2002 ( SB 211 ). SB 211 provides, among other things, that the limitation on incurring indebtedness contained in a redevelopment plan adopted prior to January 1, 1994, may be deleted by ordinance of the legislative body. SB 211 also authorizes the amendment of a redevelopment plan adopted prior to January 1, 1994, in order to extend for not more than 10 years the effectiveness of the redevelopment plan and the time to receive tax increment revenues and to pay indebtedness. Any such extension must meet certain specified requirements, including the requirement that the redevelopment agency establish the existence of both physical and economic blight within a specified geographical area of the redevelopment project and that any additional tax increment revenues received by the redevelopment agency because of the extension be used solely within the designated blighted area. SB 211 authorizes any affected taxing entity, the Department of Finance, or the Department of Housing and Community Development to request the Attorney General to participate in the proceedings to effect such extensions. It also would authorize the Attorney General to bring a civil action to challenge the validity of the proposed extensions. SB 211 also prescribes additional requirements that a redevelopment agency would have to meet upon extending the time limit on the effectiveness of a redevelopment plan, including requiring an increased percentage of new and substantially rehabilitated dwelling units to be available at affordable housing cost to persons and families of low or moderate income prior to the termination of the effectiveness of the plan. Senate Bill The California Legislature enacted Senate Bill 1045, Chapter 260, Statutes 2003, effective September 1, 2003 ( SB 1045 ). SB 1045 provides, among other 55

66 things, that the tax increment limit of a redevelopment plan for a project area may automatically be increased by the amount of the Educational Revenue Augmentation Fund ( ERAF ) payments made by the Agency. SB 1045 also permits the redevelopment plan to be amended to add one year on to the duration of the redevelopment plan effectiveness and on to the period for collection of tax increment revenues and the repayment of debt. Senate Bill The Legislature has also adopted Senate Bill 1096, Chapter 211, Statutes of 2004 ( SB 1096 ), authorizing extension of the effectiveness of redevelopment plans for an additional year for each year in which an ERAF payment was made for those redevelopment plans with 20 years or less remaining. Senate Bill The Legislature has adopted Senate Bill 1206, Chapter 595, Statutes of 2006 ( SB 1206 ) which became effective January 1, SB 1206 includes significant revisions to the Redevelopment Law, including revisions to the redevelopment plan adoption and amendment procedures. In particular, SB 1206 requires that agencies amending redevelopment plans file reports with the Department of Finance ( DOF ) and the Department of Housing and Community Development ( HCD ). Such reports must include information justifying the amendment similar to the information typically included in a preliminary report on a new redevelopment plan. DOF and HCD may comment on the reports, and such comments must be considered by the agency and legislative body at the public hearing for the plan amendment. Additionally, SB 1206 increases the time period for circulation of referendum petitions relating to redevelopment plans or amendments and extends the statute of limitations for challenging redevelopment plans or amendments. Redevelopment Plan Amendments. In 1994, the Agency amended the Contra Costa Centre, North Richmond, Bay Point and Rodeo Redevelopment Plans (the Pre-AB 1290 Plans ) to extend the time limitations for plan effectiveness and establishment of indebtedness and to increase the cumulative tax increment limitation under AB In 1999, the Agency amended the Pre-AB 1290 Plans to extend the time limitation for receipt of tax increment under AB In 2005, the Agency amended the Contra Costa Centre Redevelopment Plan to extend the effectiveness, receipt and collection time limits by one year under SB 1045 and to remove the debt establishment time limits under SB 211. In 2006, the Agency amended the remaining Pre-AB 1290 plans to extend the effectiveness, receipt and collection time limits by one year and to remove the debt establishment time limits under SB 211. In 2006, the Agency also amended the Contra Costa Centre Redevelopment Plan to extend the effectiveness, receipt and collection time limits for an additional year under SB 1096 and the Montalvin Manor Redevelopment Plan to extend the effectiveness, receipt and collection time limits by one year under SB See THE PROJECT AREAS for a summary of the current limitations relating to each of the Project Areas. The Agency plans to amend each of the North Richmond and Bay Point Redevelopment Plans in order to increase the cumulative tax increment limitation for such Project Areas. These amendments will be subject to the provisions of SB 1206, and the Agency intends to comply with the SB 1206 procedural requirements. Pass-Through Obligations Tax Sharing Agreements. Pursuant to former Section of the Redevelopment Law, certain taxing entities receive a portion of the tax increment generated in redevelopment project areas pursuant to the terms of pass-through agreements negotiated between a redevelopment agency and the taxing entity. The Agency has entered into such Tax Sharing 56

67 Agreements relating to the Contra Costa Centre Project Area, the Bay Point Project Area and the Rodeo Project Area. The Agency s Tax Sharing Agreements for the Project Areas are either subordinate by their terms or provide for their subordination to the Loans and any Parity Debt provided the Agency demonstrates to the affected taxing agencies that the Agency has sufficient Tax Revenues to pay debt service on the Loans and other obligations and make the payments provided by the respective tax sharing agreements. As of the pricing date for the Bonds, the Agency has subordinated the payments under the Tax Sharing Agreements to payments of debt service on the Loans. For the purpose of projecting Tax Revenues, the Fiscal Consultant has assumed that payments under the Tax Sharing Agreements are subordinate to the payments on the Loans. Statutory Pass-Through Obligations. Sections and of the Redevelopment Law require statutory pass-through payments to all jurisdictions receiving a portion of the basic 1% levy. The Contra Costa Centre Project Area, North Richmond Project Area, Bay Point Project Area and Rodeo Project Area are subject to the provisions of Section because the Redevelopment Plans for these Project Areas were amended to remove their debt establishment limitations. These Project Areas are required to pass-through payments to taxing agencies not receiving payments under former Section pass-through agreements. The statutory pass-through payments are made during three statutorily-defined periods as described under Statutory Pass-Through Obligations in the description of each of these Project Areas. The Montalvin Manor Project Area is subject to the provisions of Section because the Montalvin Manor Redevelopment Plan was adopted after The pass-through payments are made during three statutorily-defined periods as described under MONTALVIN MANOR PROJECT AREA Statutory Pass-Through Obligations. Under the Redevelopment Law, the Agency may subordinate the payment of statutory pass-through payments to the repayment of indebtedness. The Agency has subordinated the statutory pass-through payments to debt service on the Loans. Section Allocations For redevelopment project areas established after December 31, 1984 and prior to January 1, 1994, Section of the Redevelopment Law allows taxing entities to receive additional property taxes in a redevelopment project area above the base year revenue amount. Such payments are based on annual increases in the real property portion of the base year value up to the inflation limit of 2%. To be eligible to receive the additional property taxes, a taxing entity must have adopted a resolution prior to the adoption of a redevelopment plan and must not be receiving tax sharing payments pursuant to former Section of the Redevelopment Law. Although the Contra Costa Centre Redevelopment Plan was adopted prior to 1985, the Redevelopment Plan itself provides for these payments. The State Court of Appeals recently upheld a Superior Court decision in Santa Unified School District v Orange County Development Agency which held the Santa Ana Unified School District had the right to receive payments from the Orange County Redevelopment Agency pursuant to a resolution adopted by the School District in 1996 under former Section 33676(a) of the California Redevelopment Law (Santa Ana Unified School District v. Orange County Redevelopment Agency; App. 4 Dist Cal. Rptr.2d 770, 90 Cal. App 4th 404, review 57

68 denied). Former Section 33676(a)(2) provided that, unless a negotiated tax sharing agreement had been entered into, upon passage of a resolution prior to adoption of a redevelopment plan, affected taxing agencies and every school and community college district could elect to be allocated increases in the assessed value of taxable property in the project area based on inflation growth (the 2% Property Tax Increase ). The Court of Appeals affirmed the lower court ruling that school and community college districts were to automatically receive the 2% Property Tax Increase even without adopting the appropriate resolution prior to the adoption of a redevelopment plan. As noted in the Fiscal Consultant Report, the County currently allocates Section revenues to all eligible school districts. See APPENDIX C - FISCAL CONSULTANT REPORT. Low and Moderate Income Housing The Redevelopment Law requires redevelopment agencies to annually set aside 20% of all tax increment revenues (the Housing Set-Aside ) into a Low and Moderate Income Housing Fund. The Agency has established a Low and Moderate Income Housing Fund and, within the Fund, established a separate Low and Moderate Income Housing Account for each Project Area. Sections and of the Redevelopment Law require redevelopment agencies to set aside not less than 20% of all tax increment revenues allocated and paid to redevelopment agencies from redevelopment project areas adopted after November 30, 1976 in the Low and Moderate Income Housing Fund to be expended for authorized low and moderate income housing. Amounts on deposit in the Low and Moderate Income Housing Fund may also be applied to pay debt service on bonds, loans or advances of redevelopment agencies to provide financing for such low and moderate income housing purposes. The Tax Revenues projections estimate the annual Housing Set-Aside and are exclusive of assumed SB 2557 administrative charges. Portions of the Loans for the North Richmond, Bay Point, Rodeo and Montalvin Manor Project Areas were used or are being used for low and moderate housing purposes and are payable from the Housing Set-Aside. In addition, under certain circumstances, the Housing Set- Aside for each of these Project Areas may be used to repay the Loan for another Project Area. See Limited Cross-Collateralization above and the paragraphs entitled Low and Moderate Income Housing in the sections relating to each of the Project Areas. Appeals of Assessed Values General. Pursuant to California law, property owners may apply for a reduction of their property tax assessment by filing a written application, in the form prescribed by the State Board of Equalization, with the appropriate county board of equalization or assessment appeals board. After the applicant and the assessor have presented their arguments, the Appeals Board makes a final decision on the proper assessed value. The Appeals Board may rule in the assessor's favor, in the applicant's favor, or the Appeals Board may set its own opinion of the proper assessed value, which may be more or less than either the assessor's opinion or the applicant's opinion. Any reduction in the assessment ultimately granted applies to the year for which the application is made and may also affect the values in subsequent years. Refunds for taxpayer overpayment of property taxes may include refunds for overpayment of taxes in years after that 58

69 which was appealed. Current year values may also be adjusted as a result of a successful appeal of prior year values. Any taxpayer payment of property taxes that is based on a value that is subsequently adjusted downward will require a refund for overpayment. Appeals for reduction in the base year value of an assessment, if successful, reduce the assessment for the year in which the appeal is taken and prospectively thereafter. The base year is determined by the completion date of new construction or the date of change of ownership. Any base year appeal must be made within four years of the change of ownership or new construction date. A base year assessment appeal has significant future revenue impacts because a reduced base year assessment will then reduce the compounded value of the property prospectively. Except for the 2% inflation factor, the value of the property cannot be increased until a change of ownership occurs or additional improvements are added. Section 51 of the Revenue and Taxation Code permits a reduction in the assessed value if the full cash value of the property has been reduced by damage, destruction, depreciation, obsolescence, removal of property or other factors causing a decline in value. Significant reductions have taken place in some counties due to declining real estate values. Reductions made under this code section may be initiated by the County Assessor or requested by the property owner. After an assessment reduction is granted under Section 51, the property is reviewed on an annual basis to determine its full cash value and the valuation is adjusted accordingly. This may result in further reductions or in value increases. Such increases must be in accordance with the full cash value of the property and it may exceed the maximum annual inflationary growth rate allowed on other properties under Article XIIIA of the State Constitution. Once the property has regained its prior value, adjusted for inflation, it once again is subject to the annual inflationary factor growth rate allowed under Article XIIIA. The taxable value of unitary property may be contested by utility companies and railroads to the State Board of Equalization. Generally, the impact of utility appeals is on the statewide value of a utility determined by the State Board of Equalization. As a result, the successful appeal of a utility may not impact the taxable value of a project area but could impact a project area s allocation of unitary property tax revenues. 59

70 THE AUTHORITY The County of Contra Costa Public Financing Authority was established pursuant to a Joint Exercise of Powers Agreement dated April 7, 1992, by and between the County and the Agency, under the provisions of the Act. The Board of Directors of the Authority is composed of the members of the Board of Supervisors of the County. The Authority was created for the purpose of providing financing for public capital improvements for the County and the Agency through the acquisition by the Authority of such public capital improvements and/or the purchase by the Authority of local obligations within the meaning of the Act. Authority and Personnel THE AGENCY The Agency is a public body corporate and politic, organized and existing under and pursuant to the Constitution and laws of the State. The Agency was established on December 6, 1983 with adoption of Ordinance No pursuant to the Law. The five members of the County Board of Supervisors serve as the governing body of the Agency and exercise all rights, powers, duties and privileges of the Agency. The Agency is charged with the authority and responsibility of redeveloping and upgrading blighted areas of the County. The Agency is a separate public body and exercises governmental functions in planning and carrying out redevelopment projects. The Agency can build public improvements, facilitate the development of on- and off-site improvements for private development projects, acquire and re-sell property, and provide services of special benefit to the Project Areas. The County Administrator, under terms of a cooperative agreement between the County and the Agency, serves as Executive Director of the Agency. The present County Administrator, John Cullen, was named to that position in Agency Powers and Duties The Agency is charged with the responsibility for eliminating blight through the process of redevelopment. Generally, this process is culminated when the Agency disposes of land for development by the private sector, but before this can be accomplished, the Agency must complete the process of acquiring and assembling the necessary sites, relocating residents and businesses, demolishing the deteriorated improvements, grading and preparing the sites for purchase by developers and providing for ancillary off-site improvements. Redevelopment in the State is carried out pursuant to the Redevelopment Law. Section of the Redevelopment Law defines redevelopment as the planning, development, replanning, redesign, clearance, reconstruction or rehabilitation, or any combination of these, of all or part of a survey area and the provision of such residential, commercial, industrial, public or other structures or spaces as may be appropriate or necessary in the interest of the general welfare, including recreational and other facilities incidental or appurtenant to them. All powers of the Agency are vested in its five members. The Agency exercises all of the governmental functions authorized under the Law and has, among other powers, the authority to acquire, administer, develop and sell or lease property, including the right of eminent domain, and the right to issue debt and expend the proceeds. 60

71 The Agency's funds are invested by the County in accordance with the County's Investment Policy. See Appendix D for a summary of the County s investment portfolio as of December 31, Agency Financial Statements The Redevelopment Law requires redevelopment agencies to have an independent financial audit conducted each year. The financial audit is also required to include an opinion of the Agency s compliance with laws, regulations and administrative requirements governing activities of the Agency. The firm of Caporicci & Larson, Oakland, California, prepared a financial statement for the Agency for the fiscal year ended June 30, The firm s examination was made in accordance with generally accepted auditing standards. The Agency follows fund accounting principles reflecting the modified accrual basis of accounting in which revenue is recognized when earned or otherwise becomes available, and expenditures are recognized when incurred. The firm reported after their examination that they noted no instances of noncompliance for the fiscal year ended June 30, See APPENDIX B - Audited Financial Statements of the Agency for Fiscal Year Ended June 30, The Agency has not requested nor did the Agency obtain permission from Caporicci & Larson to include the audited financial statements as an appendix to this Official Statement. Accordingly, Caporicci & Larson has not performed any post-audit review of the financial condition or operations of the Agency. Agency Indebtedness As described under SECURITY FOR THE BONDS Loan Agreements and Parity Obligations, the Agency currently has the following outstanding indebtedness (see APPENDIX B - Audited Financial Statements of the Agency for Fiscal Year Ended June 30, 2006 hereto for additional information relating to the payment of indebtedness of the Agency): 1995, 1999 and 2003 Loans. As described in THE FINANCING PLAN Prepayment of Certain Agency Obligations, the 1995 Loans and the 2003B Loans will be prepaid with proceeds of the Bonds and the remaining 1995 Bonds and 2003B Bonds will be redeemed in their entirety. In addition, a portion of the 1999 Loans and 2003A Loans will be prepaid with proceeds of the Bonds and a portion of the 1999 Bonds and 2003A Bonds, respectively, will be redeemed. The 2007 Contra Costa Centre Loan will be secured by a pledge of Tax Revenues generated in the Project Area on a parity with the outstanding 1999 and 2003A Contra Costa Centre Loans. The 2007 North Richmond Loan will be secured by a pledge of Tax Revenues generated in the Project Area on a parity with outstanding 1999 North Richmond Loan. The 2007 Bay Point Loan will be secured by a pledge of Tax Revenues generated in the Project Area on a parity with the outstanding 1999 Bay Point Loan. The 2007 Rodeo Loan will be secured by a pledge of Tax Revenues generated in the Project Area on a parity with the, and the outstanding 1999 Rodeo Loan. Other Loans and Obligations. The County has made advances for the Contra Costa Centre Housing Capital Projects Fund, the North Richmond Housing Capital Projects Fund and for other governmental purposes of the Agency. The pledge of tax increment funds to the County to repay such advances is subordinate to any pledge of funds that the Agency has made in connection with the Loans. 61

72 In addition, the Agency has property tax pass-through agreements with various taxing agencies (see the subheading Tax Sharing Agreements in the sections for each Project Area) and has entered into disposition and development agreements with several landowners. As of the pricing date, the Agency has subordinated the pass-through payments to debt service on the outstanding Loans. The Agency is also obligated to make certain statutory pass-through payments (see the subheading Statutory Pass-Through Obligations in the sections for each Project Area). The statutory pass-through obligations have been subordinated to payments of debt service on the Loans. 62

73 THE PROJECT AREAS The Project Areas consist of the Contra Costa Centre, North Richmond, Bay Point, Rodeo and Montalvin Manor Redevelopment Project Areas. The Redevelopment Plans for each of the Project Areas were adopted by the County Board of Supervisors (the Board ) as follows: Project Area Adoption Date Ordinance Number Contra Costa Centre* July 10, North Richmond July 14, Bay Point December 29, Rodeo July 10, Montalvin Manor July 8, *Formerly Pleasant Hill BART. Amended and Restated Redevelopment Plan was adopted on July 19, 1998 pursuant to Ordinance No Each of the Redevelopment Plans, including certain financial time limits, has been amended. For a description of the various amendments to the Redevelopment Plans, see THE CONTRA COSTA CENTRE PROJECT AREA The Contra Costa Centre Redevelopment Plan, THE NORTH RICHMOND PROJECT AREA The North Richmond Redevelopment Plan, THE BAY POINT PROJECT AREA The Bay Point Redevelopment Plan, THE RODEO PROJECT AREA The Rodeo Redevelopment Plan and THE MONTALVIN MANOR PROJECT AREA The Montalvin Manor Redevelopment Plan. The current financial time limits for each of the Project Areas are shown below. Limit Contra Costa Centre Original Contra Costa Centre Amendment North Richmond Debt Establishment Deleted Deleted Deleted Plan Effectiveness 7/10/2026 7/10/2026 7/14/2028 Debt Repayment 7/10/2036 7/10/2036 7/14/2038 Bond Debt Limit $160 million combined $30 million Cumulative Tax Inc. $423 million combined $60 million Bay Point Rodeo Montalvin Manor Debt Establishment Deleted Deleted 7/8/2023 Plan Effectiveness 12/29/2028 7/10/2031 7/8/2034 Debt Repayment 12/29/2038 7/10/2041 7/8/2049 Bond Debt Limit $60 million $60 million $50 million Cumulative Tax Inc. $116 million $125 million Not Required The following table shows the amounts of tax increment received for each of the Project Areas (except the Montalvin Manor Project Area) through the end of fiscal year : Project Area Contra Costa Centre North Richmond Bay Point Rodeo Cumulative Tax Increment $57.2 Million $10.8 Million $22.1 Million $10.7 Million The tax increment projections provided in the Fiscal Consultant Report indicate that the Agency may reach the tax increment limit for the North Richmond Project Area by fiscal year and for the Bay Point Project Area by fiscal year (assuming 2% annual growth in assessed values). A portion of Bond proceeds will be held in Escrow Funds pending amendment of the North Richmond and Bay Point Redevelopment Plans to increase their 63

74 respective cumulative tax increment limits. See THE FINANCING PLAN. The Contra Costa Centre and Rodeo Project Areas are not projected to reach the tax increment limit prior to the last date to repay debt (assuming 2% annual growth in assessed values). Because the Montalvin Manor Redevelopment Plan was adopted after January 1, 1994, the Montalvin Manor Project Area is not subject to a cumulative tax increment limit. 64

75 THE CONTRA COSTA CENTRE PROJECT AREA General General. The Contra Costa Centre (formerly Pleasant Hill BART) Project Area consists of approximately 125 acres. Located in central Contra Costa County, the Contra Costa Centre Project Area lies in an area with a high level of regional accessibility, provided by Interstate 680 and the Bay Area Rapid Transit System ( BART ), a commuter train system that links key locations in the San Francisco Bay Area. The focal point of the Contra Costa Centre Project Area is the Pleasant Hill BART Station. Existing Land Uses. According to the fiscal year County secured tax roll, approximately 60% of the developed land in the Contra Costa Centre Project Area is used for commercial purposes, 25% for residential uses and 2.5% for other uses as shown below. TABLE 2 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (Contra Costa Centre Project Area) Land Use Category Summary Contra Costa Centre Project Area Taxable % of Parcels Value Total Residential 220 $151,505, % Commercial ,054, % Industrial % Vacant Land 5 14,301, % Other 25 1,445, % Total Secured ,306, % Unsecured / State Assessed 77,345, % Grand Total $610,652, % Source: Fiscal Consultant. To date, approximately $60 million in infrastructure improvements and property acquisition necessary for future infrastructure improvements have been financed in the Contra Costa Centre Project Area. These funds were generated through Agency tax increment revenues, assessment district bonds, special tax bonds, private developer fees and property dedications. Major improvements to Treat Boulevard, Oak Road, Buskirk Avenue and Las Juntas Way have been completed. The Agency expects to continue implementing additional infrastructure improvements, including completion of a BART patron parking garage, and public improvements related to the Transit Village project on the BART site. Development Activities. The projection of Tax Revenues to be generated in the Contra Costa Centre Project Area incorporates development of the Transit Village project. The project includes development of 516 housing units and 35,160 square feet of retail that are projected to add value to the fiscal year through tax roll. There are no other significant under-construction or fully-entitled developments in the Contra Costa Centre Project Area. 65

76 Possible Annexation. The Contra Costa Centre Project Area is in the sphere of influence of the City of Walnut Creek. Annexation of all or a portion of the Contra Costa Centre Project Area into the City of Walnut Creek is a possibility. The Agency does not believe that partial annexation or total annexation (in which case the City could assume the Agency s obligations with respect to the Contra Costa Centre Project Area) would adversely affect repayment of the Contra Costa Centre Loan. The Contra Costa Centre Redevelopment Plan The Board adopted the Redevelopment Plan establishing the Contra Costa Centre (formerly Pleasant Hill BART) Project Area (the Initial Project Area ) by Ordinance No on July 10, At that time, the Redevelopment Plan was consistent with the County s Pleasant Hill BART Station Area General Plan Amendment/Specific Plan that was adopted in On July 19, 1988, the Board amended the Specific Plan to change the land uses in the area in order to promote the development of high density housing to enhance the balance of jobs and housing opportunities in and around the Contra Costa Centre Project Area. Accordingly, the Redevelopment Plan was amended and restated on July 19, 1988 by in order to conform with the amended Specific Plan. The amended Redevelopment Plan (as amended, the Contra Costa Centre Redevelopment Plan ), among other things, added territory (the Amendment Area ) to the Initial Project Area. The principal goals and objectives of the Contra Costa Centre Redevelopment Plan are to (i) improve land use and development, (ii) improve transportation and circulation of traffic and (iii) promote urban design which will project a positive image and have high regional and local identity. The Contra Costa Centre Redevelopment Plan was subsequently amended by: Ordinance No , adopted on December 6, 1994 pursuant to AB 1290 which extended the time period during which the Plan will be in effect, the time period during which the Agency may establish indebtedness and the amount of tax increment revenues that may be allocated to the Agency, Ordinance No , adopted on February 23, 1999 pursuant to AB 1342, which extended the time to receive tax increment by an additional ten years, Ordinance No , adopted on May 24, 2005 pursuant to SB 211 and SB 1045 which increased the tax increment and bond limit, eliminated the debt incurrence time limit and extended the effectiveness and receipt time limits by one year, and Ordinance No adopted on July 18, 2006 pursuant to SB 1096, which extended the time limit on effectiveness and the time limits on the receipt and collection of tax increment by one additional year. See THE PROJECT AREAS for the current Contra Costa Centre Redevelopment Plan limitations. The Contra Costa Centre Project Area is substantially contiguous to the area covered by the County s Contra Costa Centre Area Specific Plan (the Contra Costa Centre Specific Plan ). 66

77 Redevelopment Plan Limitations As amended, the Contra Costa Centre Redevelopment Plan permits the Agency to collect a cumulative total of $423,000,000 of tax increment revenues, and to have outstanding bonded indebtedness of up to $160,000,000 in the Contra Costa Centre Project Area. See THE PROJECT AREAS for the Contra Costa Centre Redevelopment Plan limitations. According to the records of the Agency, from the time of adoption of the Contra Costa Centre Redevelopment Plan through the end of fiscal year , the Agency has received $57.2 million in tax increment revenue from the Contra Costa Centre Project Area. The Fiscal Agent does not project that the Contra Costa Centre Project Area will reach the tax increment limit prior to the last date to repay debt (assuming 2% annual growth in assessed values). However, from fiscal year to , the assessed incremental value in the Contra Costa Centre Project Area increased at an average of 3.86% annually. If the assessed values were to continue increasing at that rate, the Contra Costa Centre Project Area could reach the tax increment limit by fiscal year See APPENDIX C Financial Consultant Report. Tax Sharing Agreements Pursuant to former Section of the Redevelopment Law, the Agency has entered into certain fiscal or pass-through agreements with respect to the Contra Costa Centre Project Area, described as follows. County of Contra Costa Consolidated Fire Protection District. The Agency entered into a Tax Sharing Agreement for the Contra Costa Centre Project Area with the Consolidated Fire Protection District (the Fire District ) on July 19, 1988 with regard to the Amendment Area. Pursuant to this agreement, the Fire District is to receive 100% of tax increment revenue that the Fire District would have received from the Amendment Area, without regard to the division and allocation of tax increment revenue pursuant to Health and Safety Code Section Contra Costa County Mosquito Abatement District. The Agency entered into a Tax Sharing Agreement for the Contra Costa Centre Project Area with the Contra Costa County Mosquito Abatement District (the Mosquito District ) dated September 20, 1988 with regard to the Amendment Area. The terms of this tax sharing agreement are similar to those of the Fire District Tax Sharing Agreement, and allows the Mosquito District to receive 100% of tax increment revenue that the Mosquito District would have received from the Amendment Area, without regard to the division and allocation of tax increment revenue pursuant to Health and Safety Code Section Contra Costa County Superintendent of Schools. The Agency entered into a Tax Sharing Agreement for the Contra Costa Centre Project Area with the Contra Costa County Superintendent of Schools (the School Superintendent ) dated September 20, 1988 with regard to the Amendment Area. Pursuant to this agreement, the School Superintendent is to receive a percentage of the amount equal to 75% of tax increment revenue that the School Superintendent would have received from the Amendment Area, without regard to the division and allocation of tax increment revenue pursuant to Health and Safety Code Section Such percentage is calculated by dividing the number of Approved Units by the number of Occupied Units, as both terms are defined in the School Superintendent Tax Sharing Agreement. To date, approximately 100% of the Approved Units have been built and occupied. 67

78 All of the above-discussed Tax Sharing Agreements provide for their subordination to the Contra Costa Centre Loans provided the Agency demonstrates to the affected taxing agencies that the Agency has sufficient Tax Revenues to pay debt service on the Contra Costa Centre Loans and other obligations and make the payments provided by the respective tax sharing agreements. As of the pricing date, the Agency has subordinated the payments under the Tax Sharing Agreements to the payments on the Contra Costa Centre Loans. The above-discussed Tax Sharing Agreements also provide that the County Auditor- Controller may withhold such amount from the amount to be paid to the Agency, and pay such amounts to the affected taxing agencies directly. None of the three above-discussed agreements provide for any additional payments with regard to the Initial Project Area. Section Allocations Section of the Redevelopment Law allows taxing entities to receive additional property taxes in a redevelopment project area above the base year revenue amount. See LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING LIMITATIONS - Section Allocations. Section does not apply to the Contra Costa Centre Project Area, but the Contra Costa Centre Redevelopment Plan provides for such payments. Currently, all of the taxing entities in the Contra Costa Centre Project Area (28 in the Initial Project Area and 12 in the Amendment Area) are receiving allocations of property taxes as described in Section The projection of net tax increment revenues set forth in Table 8 assumes that the payments will continue to be made to these taxing entities and that the payments will be made on a basis senior to Loan repayment. See APPENDIX C - Fiscal Consultant Report and LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING LIMITATIONS - Property Tax Collection Procedure. Statutory Pass-Through Obligations Pursuant to Section of the Redevelopment Law, applicable to the Contra Costa Centre Redevelopment Plan because it was amended after January 1, 1994 to remove the Project Area s debt establishment time limitations, the Tax Revenues generated in the Contra Costa Centre Project Area are subject to certain statutory pass-throughs. The payments of the Contra Costa Centre Initial Project Area are structured as follows: Beginning in Fiscal Year through the life of the Initial Project Area: The Agency must pay 20% of gross tax increment revenue received by the Agency (net of Housing Set-Aside) derived from growth in assessed value in excess of the assessed value of the Initial Project Area in fiscal year Beginning in Fiscal Year through the life of the Initial Project Area: The Agency must pay an additional 16.8% of the tax increment revenue received by the Agency (net of Housing Set-Aside) derived from growth in assessed value in excess of the assessed value of the Initial Project Area in fiscal year The payments of the Contra Costa Centre Amendment Area are structured as follows: Beginning in Fiscal Year through the life of the Amendment Area: The Agency must pay 20% of gross tax increment revenue received by the Agency (net of Housing Set-Aside) derived from growth in assessed value in excess of the assessed value of the Amendment Area in fiscal year

79 Beginning in Fiscal Year through the life of the Amendment Area: The Agency must pay an additional 16.8% of the tax increment revenue received by the Agency (net of Housing Set-Aside) derived from growth in assessed value in excess of the assessed value of the Amendment Area in fiscal year Under the Redevelopment Law, the Agency may subordinate the payment of statutory pass-through payments to the repayment of indebtedness. The Agency has subordinated the statutory pass-through payments to debt service on the Contra Costa Centre Loans. Low and Moderate Income Housing The Agency has established a Low and Moderate Income Housing Account for the Contra Costa Centre Project Area. As discussed in LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING LIMITATIONS Low and Moderate Income Housing, moneys deposited into the Low and Moderate Income Housing Account for the Contra Costa Centre Project Area are not available to repay the Contra Costa Centre Loans or pay debt service on either Series of the Bonds. Historic Assessed Value and Tax Revenues Set forth in the table below is a summary of Contra Costa Centre Project Area historical assessed values for fiscal years through TABLE 3 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (Contra Costa Centre Project Area) Historic Assessed and Incremental Value Fiscal Year Locally- Assessed Secured Value Unsecured Value Total Taxable Value Percentage Change Total Incremental Value (1) $533,306,546 $77,345,574 $610,652,120 10% $582,004, ,879,492 52,022, ,902, ,254, ,313,581 34,634, ,947, ,299, ,498,778 41,866, ,365, ,717, ,037,980 42,703, ,741, ,093,899 Total percentage change: 16.37% Average percentage change: 3.86% (1) Taxable Value above base year value of $28,647,997. Source: County Auditor-Controller Office. Between fiscal years and , secured taxable values in the Contra Costa Centre Project Area decreased by $38 million. The major reason for the drop was that an office building (valued at approximately $59 million) purchased by the California State Teachers Retirement System ( Cal STRS ) was incorrectly shown as being taxable on the fiscal year tax roll and was then shown as tax exempt on both the fiscal years and tax roll. Between fiscal years and , the assessor added the leasehold interest in the Cal STRS building to the unsecured tax roll causing the unsecured roll in the Contra Costa Centre Project Area to increase by $41 million. In addition, PMI Plaza LLC received a Proposition 8 reduction of $20.2 million on the secured roll; however, this reduction was offset by three Proposition 8 reversals that added $22.5 million to the tax roll. 69

80 The following table shows, for each of the most recent four fiscal years: (i) the levy on incremental taxable value, (ii) actual receipts, (iii) the percentage of current year collections relative to the amount levied, (iv) receipts including supplemental taxes and (v) the percentage of current year collections including supplemental taxes. The County has elected to follow the procedures of Sections 4701 et seq. of the California Revenue and Taxation Code, known as the Teeter Plan as to general taxes entered and collected on the secured tax roll. Therefore, property tax revenues in the Project Area reflect levies rather than actual collections. In addition, the County does not usually allocate or adjust revenue to the Agency to reflect roll corrections which may result from successfully appealed valuations, late assessments or corrected assessments. As a result, the Agency is not impacted by negative adjustments. TABLE 4 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (Contra Costa Centre Project Area) Historic Receipts (1) Tax Increment Total Tax % of Levy per Receipts Less % of Levy Increment Levy County (2) Supplementals Received Supplementals Receipts Received $5,203,298 $5,196, % $372,904 $5,569, % ,706,325 5,706, ,758 5,946, ,091,751 5,091, ,608 5,534, ,816,943 4,817, ,030 5,190, Average 99.97% % (1) Receipts per Agency records after reduction for property tax administration fees and Section allocations. (2) Initial levy reported by the County. Source: Fiscal Consultant. 70

81 Major Taxable Property Owners The following table lists the ten largest taxpayers within the Contra Costa Centre Project Area. Based on fiscal year locally assessed taxable valuations, the top ten taxable property owners in the Project Area represent approximately 72.7% of the total Project Area taxable value of $610,652,120 and approximately 76.2% of the incremental value of $582,004,123. TABLE 5 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (Contra Costa Centre Project Area) Ten Largest Taxable Property Owners for Fiscal Year % of Total % of Inc Assessee Parcels Type of Use Taxable Value (1) Value (2) Value (2) 1) CA Treat Towers LP 3 Commercial $113,690, % 19.53% 2) Park Regency Partners 5 Residential 81,309, ) PMI Plaza LLC 4 Commercial 59,911, ) Walnut Creek Properties Inc. 2 Commercial 47,146, ) James Tong & Mei Fong 2 Commercial 43,887, ) MIP Walnut Creek LLC 1 Commercial 32,248, ) Kenneth & Martha Hofmann Trust 1 Commercial 22,732, ) Pera Urban West Corp. 2 Commercial 17,628, ) SPK-Oak Road I 3 Vacant Land 13,645, ) Central Garden & Pet Co. 4 Unsecured 11,485, Total 27 $443,687, % 76.23% (1) Based on ownership of locally-assessed secured and unsecured property. (2) Based on Project Area taxable value of $610,652,120 and incremental value of $582,004,123. Source: County Records. CA Treat Towers LP. The property owned by CA Treat Towers LP consists of two buildings, each an approximately 187,500 square foot commercial office building. The masterplanned business park surrounds the Pleasant Hill BART station. The buildings are currently fully occupied. Major tenants include Nextel Communications, GeneSys Telecommunications Lab, Fireman s Fund, Investors Bank & Trust, and State Compensation Insurance. CA Treat Towers LP is owned by Teachers Insurance and Annuity Association of America, a New York corporation, and Equity Office Properties Trust ( Equity Office ). Equity Office manages the property and is one of the nation s largest office building owner and managers and one of the largest real estate investment trusts in the United States of America (NYSE: EOP). Equity Office was acquired by Blackstone Real Estate Partners ( Blackstone ) in February At this time, it is uncertain whether Blackstone will continue to manage the property or sell its interest in the property. The acquisition of Equity Office by Blackstone may trigger a reassessment of the property whether or not Blackstone retains ownership of its interest in the buildings. Park Regency Partners. The property owned by Park Regency Partners is an 892 apartment complex of which 134 units are affordable (low and moderate income) housing units subsidized by the Agency through the Low and Moderate Income Housing Account for the Contra Costa Centre Project Area. 71

82 Park Regency Partners is a partnership, the primary partners of which are principals of Domino Realty. Park Regency Apartments manages the building. PMI Plaza LLC. The property owned by PMI Plaza LLC is a seven-story, 195,000 square foot office building that serves as the corporate headquarters of The PMI Group, Inc. ( PMI Group ). PMI Group offers residential mortgage insurance and credit enhancement products, financial guaranty insurance, and financial guaranty reinsurance. A portion of the property is currently unoccupied, but PMI Group intends to occupy those offices in the future. Walnut Creek Properties Inc. The property owned by Walnut Creek Properties is an approximately 50,580 square foot commercial office building. The current occupancy is approximately 82.1%. Major tenants include Fidelity National Title and Alarm Promotions, Inc. Walnut Creek Properties is a locally based development company. James Tong & Mei Fong. The property owned by James Tong & Mei Fong is developed with a 175-room Marriott Renaissance Hotel and 70,000 square foot Club Sport health club facility. It is located across the street from the Pleasant Hill BART station. Leisure Sports has a long term lease for the property and manages the hotel and health club facility. MIP Walnut Creek LLC. The property owned by MIP Walnut Creek LLC is a 248-room Embassy Suite Hotel located adjacent to the Pleasant Hill BART Station. MIP Walnut Creek LLC was formed to own the property. Appeals of Assessed Values There are no appeals currently pending on properties within the Contra Costa Centre Project Area. The projection of assessed value for fiscal year in the Contra Costa Centre Project Area shown in Table 7 assumes no reduction in value due to assessment appeal reductions. See LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING LIMITATIONS - Appeals of Assessed Values for general information relating to appeals. 72

83 Projected Tax Revenues The following tables summarize the tax increment revenue projections for the Contra Costa Centre Project Area, as prepared by the Fiscal Consultant. In projecting Tax Revenues and debt service coverage, the Fiscal Consultant assumed the following: The tax rates in the Project Area include the basic 1% levy plus certain debt service tax rates and were % (and % on incremental land value) for fiscal year In projecting Tax Revenues for the Project Area, the Fiscal Consultant did not include post-january 1, 1989 debt service tax rates and estimated the decline in pre-january 1, 1989 debt service tax rates. See LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING LIMITATIONS - Exclusion of Tax Revenues for General Obligation Bonds Debt Service. The fiscal year real property assessed value of the Project Area will increase 2% per year. There is an additional increase in real property assessed value of $3.2 million in fiscal year resulting from changes in ownership. There is an additional increase in real property assessed value resulting from the development of Transit Village as described in Development Activities above. Personal property and nonunitary utility values will remain constant at fiscal year values. Unitary values will remain constant at fiscal year values. There are no supplemental property taxes received for the Project Area. The Contra Costa Centre Loan will mature on June 1, 2036 (during fiscal year ). The County administrative fee is equal to 0.99% of gross tax increment and will be paid from non-housing tax increment allocated to the Agency prior to payment of debt service. The Agency will not be obligated to make ERAF payments in the future. There will be no successful appeals of assessed valuation in the Project Area. Statutory pass-through payments to taxing entities are subordinated to debt service. Pass-through payments under Tax Sharing Agreements to taxing entities are subordinated to debt service. 73

84 TABLE 6 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (Contra Costa Centre Project Area) Tax Increment Revenue Estimate Local Secured Land $ 117,434,527 Improvements 419,468,145 Personal Property 3,081,739 Gross Local Secured 539,984,411 Exempt 6,677,865 Net Local Secured 533,306,546 State Assessed 0 Unsecured Land 7,351,720 Improvements 48,192,844 Personal Property 21,801,010 Total Unsecured 77,345,574 Exempt 0 Net Unsecured 77,345,574 Total Value $610,652,120 Base Year Taxable Value 28,647,997 Incremental Taxable Value 582,004,123 Tax Increment 5,907,057 Unitary Tax Increment 29,164 Total Tax Increment Revenue 5,936,221 Adjustments to Tax Increment Revenue: Property Tax Administration Fees (2) 58,586 Section Allocations (3) 123,307 Liens on Tax Increment Housing Set-Aside (4) 1,162,583 Tax Revenues 4,591,744 AB 1290 Tax Sharing (5) 3,245 Taxing Sharing Payments (6) 114,099 Net Tax Increment Revenue 4,474,400 (1) Based on taxable values per Contra Costa County. (2) Estimated based on the percentage that prior year fees represented to total tax increment. (3) Additional allocations to the taxing entities pursuant to former Section of the Redevelopment Law. (4) Based on 20% of total tax increment revenue net of Section allocations. (5) Required payments per Section of the Redevelopment Law. (6) Payments per Section Tax Sharing Agreements Source: Fiscal Consultant. 74

85 TABLE 7 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (Contra Costa Centre Project Area) Projection of Gross Incremental Tax Revenue (000s Omitted) Fiscal Year Real Property (1) New Devlpmt Other Property (2) Total Value Value over Base Tax Increment (3) Unitary Tax Revenue (4) Total Tax Increment $585,769 N/A $24,883 $610,652 $582,004 $5,907 $29 $5, ,485 3,228 24, , ,948 6, , , , , ,962 6, , ,982 31,626 24, , ,842 6, , , ,526 24, , ,500 7, , ,290 42,450 24, , ,975 8, , , , , ,170 8, , , , , ,709 8, , , , , ,598 9, , , , , ,845 9, , , , , ,458 9, , , , , ,442 9, , , ,883 1,012, ,806 9, , ,007, ,883 1,032,206 1,003,558 10, , ,027, ,883 1,052,352 1,023,704 10, , ,048, ,883 1,072,902 1,044,254 10, , ,068, ,883 1,093,862 1,065,214 10, , ,090, ,883 1,115,241 1,086,593 10, , ,112, ,883 1,137,049 1,108,401 11, , ,134, ,883 1,159,292 1,130,644 11, , ,157, ,883 1,181,980 1,153,332 11, , ,180, ,883 1,205,122 1,176,474 11, , ,203, ,883 1,228,727 1,200,079 12, , ,227, ,883 1,252,804 1,224,156 12, , ,252, ,883 1,277,362 1,248,714 12, , ,277, ,883 1,302,412 1,273,764 12, , ,303, ,883 1,327,962 1,299,314 12, , ,329, ,883 1,354,024 1,325,376 13, , ,355, ,883 1,380,607 1,351,959 13, , ,382, ,883 1,407,721 1,379,073 13, ,820 (1) Prior Year Real Property increased by 2% per year. (2) Includes the value of secured and unsecured personal property, and state-assessed railroad and non-unitary property. (3) Based on the application of Project Area tax rates to incremental taxable value. (4) As reported by the County Auditor-Controller. Source: Fiscal Consultant. 75

86 TABLE 8 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (Contra Costa Centre Project Area) Projection of Net Incremental Tax Revenue (000s Omitted) AB 1290 Tax Sharing (4) Net Inc. Tax Revenue Fiscal Year Total Tax Increment Adjustmt (1) SB 2557 Fees (2) Housing Set Aside (3) Tax Revenue Tax Sharing Agreemts (5) $5,936 $123 $59 $1,163 $4,592 $3 $114 $4, , ,188 4, , , ,204 4, , , ,287 5, , , ,572 6, , , ,686 6, , , ,719 6, , , ,753 6, , , ,787 7, , , ,821 7, , , ,857 7, , , ,893 7, , , ,930 7, , , ,968 7, , , ,006 7,923 1, , , ,045 8,078 1, , , ,085 8,236 1, , , ,126 8,398 1, , , ,168 8,562 1, , , ,210 8,730 1, , , ,254 8,901 1, , , ,298 9,075 1, , , ,343 9,253 1, , , ,389 9,435 1, , , ,436 9,620 1, , , ,484 9,809 1, , , ,533 10,002 2, , , ,582 10,198 2, , , ,633 10,399 2, , , ,685 10,603 2, ,086 (1) Allocations to the taxing entities pursuant to former Redevelopment Law Section (2) Per SB 2557, reflects Project Area share of Contra Costa County s property tax administrative costs. (3) Total housing set-aside calculated at 20% of total tax increment less the Section allocations. (4) Required payments per Section of the Redevelopment Law. (5) Reflects tax sharing payments required in the Amended portion of the Project Area. Source: Fiscal Consultant. 76

87 Estimated Loan Payment Coverage The following table shows the debt service coverage on the Contra Costa Centre Loans, based on estimated Tax Revenues from the Contra Costa Centre Project Area. The portion of the 1999 Contra Costa Centre Loan and the 2003A Contra Costa Centre Loan not being prepaid with proceeds of the 2007A Contra Costa Centre Loan will be payable by the Agency from Tax Revenues on a parity with the 2007A Contra Costa Centre Loan Loan Debt Service TABLE 9 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (Contra Costa Centre Project Area) Estimated Loan Payment Coverage 2003A Loan Debt Service 2007A Loan Debt Service Aggregate Debt Service Loan Coverage Ratio Fiscal Year Tax Revenues (1) $667,829 $309,643 $0 $977,473 $4,592, , ,086 2,330,932 3,778,722 4,692, , ,711 2,306,893 3,761,560 4,756, , ,511 2,297,293 3,746,505 5,083, , ,436 2,287,293 3,739,270 6,211, , ,911 2,281,893 3,738,925 6,661, , ,786 2,400,893 3,730,810 6,790, , ,269 2,401,743 3,735,143 6,922, , ,019 2,406,293 3,736,043 7,056, , ,519 2,399,293 3,734,018 7,194, , ,249 2,436,193 3,768,841 7,334, , ,799 2,434,493 3,767,860 7,477, , ,799 2,436,218 3,768,473 7,623, , ,249 2,430,418 3,764,729 7,772, , ,874 2,432,438 3,766,024 7,923, , ,949 2,722,250 3,767,986 8,078, , ,199 2,601,500 3,767,211 8,236, , ,764 2,608,500 3,771,276 8,398, , ,036 2,607,000 3,764,974 8,562, , ,016 2,607,250 3,768,554 8,730, , ,411 2,599,000 3,766,211 8,901, , ,514 2,597,500 3,767,964 9,075, ,031 2,952,250 3,768,281 9,253, ,156 2,950,250 3,766,406 9,435, ,313 2,948,250 3,767,563 9,620, ,219 2,946,000 3,766,219 9,809, ,875 2,943,250 3,767,125 10,002, ,764,750 3,764,750 10,198, ,759,000 3,759,000 10,399, Totals: $18,331,541 $14,027,343 $73,889,029 $106,247,913 $226,782,000 (1) From Table 8. 77

88 THE NORTH RICHMOND PROJECT AREA General General. The North Richmond Project Area consists of approximately 900 acres. Located in the western portion of Contra Costa County, the North Richmond Project Area is an unincorporated contiguous area bordered on the south, east and north by the City of Richmond and on the west by the San Francisco Bay. Although the area was historically subject to seasonal flooding, the completion of a flood control project that channeled San Pablo and Wildcat Creeks allowed for the removal of adjacent lands from the flood plain. Existing Land Uses. According to the fiscal year County secured tax roll, approximately 45% of the developed land in the North Richmond Project Area is used for residential purposes, 31% for industrial purposes and 5% for commercial purposes, as shown below. TABLE 10 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (North Richmond Project Area) Land Use Category Summary North Richmond Project Area Taxable % of Parcels Value Total Residential 660 $128,183, % Commercial 31 14,062, % Industrial 73 87,903, % Vacant Land ,775, % Other 96 1,025, % Total Secured 1, ,950, % Unsecured / State Assessed 26,249, % Grand Total $287,199, % Source: Fiscal Consultant. Development Activities. Development of 173 single family housing units is currently underway in the North Richmond Project Area. As of December 31, 2006, 24 of these units had been competed and sold and are included in the projection of Tax Revenues for fiscal year An additional 43 units are under construction and are included in the projection of Tax Revenues for fiscal year The projection of Tax Revenues to be generated in the North Richmond Project Area does not incorporate value of the 107 units that are not yet under construction. The projection of Tax Revenues to be generated in the North Richmond Project Area does not incorporate value of the following development activities in the North Richmond Project Area: 78

89 Signature Properties. Homebuilder Signature Properties is planning to develop a 370- unit subdivision in the North Richmond Project Area. The entitlements for the project and the required general plan amendment were approved in spring The North Richmond Redevelopment Plan The Board adopted the Redevelopment Plan establishing the North Richmond Project Area by Ordinance No on July 14, The principal goals and objectives of the North Richmond Redevelopment Plan are to (i) revitalize and expand industrial and employment related development in the northern portion of the North Richmond Project Area, (ii) develop a neighborhood commercial district and expansion of community facilities in the southern portion of the North Richmond Project Area, and (iii) upgrade deteriorated housing and to stimulate the construction of new affordable housing in the North Richmond Project Area. The North Richmond Redevelopment Plan is consistent with the North Richmond General Plan Amendment to the County s General Plan. The North Richmond Redevelopment Plan was subsequently amended by: Ordinance No , adopted on December 6, 1994 pursuant to AB 1290 which extended the time period during which the Plan will be in effect, the time period during which the Agency may establish indebtedness and the amount of tax increment revenues that may be allocated to the Agency, Ordinance No , adopted on February 23, 1999 pursuant to AB 1342 which extended the time to receive tax increment by an additional ten years, Ordinance No , adopted on June 8, 1999 which extended the time period during which the Agency may commence eminent domain proceedings, and Ordinance No , adopted on July 18, 2006 pursuant to SB 211 and SB 1045 for the purpose of extending the effectiveness, receipt and collection time limits for an additional year and to remove the debt establishment time limit. See THE PROJECT AREAS for the North Richmond Redevelopment Plan time and indebtedness limitations. North Richmond Redevelopment Plan Limitations The North Richmond Redevelopment Plan permits the Agency to collect a cumulative total of $60,000,000 of tax increment revenues, and to have outstanding bonded indebtedness of up to $30,000,000 in the North Richmond Project Area. See THE PROJECT AREAS for the North Richmond Redevelopment Plan time and indebtedness limitations. According to the records of the Agency, from the time of adoption of the North Richmond Redevelopment Plan through the end of fiscal year , the Agency has received $10.8 million in tax increment revenue from the North Richmond Project Area. The Fiscal Consultant estimates that the Agency may reach the tax increment limit for the North Richmond Project Area by fiscal year (assuming 2% annual growth in assessed values). However, from fiscal year to , the assessed incremental value in the North Richmond Project Area increased at an average of 15.87% annually. If the assessed values were to continue increasing at that rate, the North Richmond Project Area could reach the tax increment limit by fiscal year A portion of the Bond proceeds will be deposited in the North Richmond Escrow Fund and will not initially be loaned to the Agency under the North Richmond Loan Agreement but is 79

90 expected to be loaned by the Authority to the Agency after amendment of the North Richmond Redevelopment Plan increasing the cumulative tax increment limit for such Project Area. See THE FINANCING PLAN. The Agency has covenanted in the North Richmond Loan Agreement that the aggregate amount of annual debt service remaining to be paid on the Loan and any Parity Debt shall at no time exceed 95% of the aggregate amount of Tax Revenues which the Agency is permitted to receive under the Redevelopment Plan and to take certain actions in the event that the aggregate amount of annual debt service remaining to be paid on the Loan and any Parity Debt at any time equals or exceeds 95% of the aggregate amount of Tax Revenues which the Agency is permitted to receive under the Redevelopment Plan. See APPENDIX A Summary of Certain Provisions of the Principal Legal Documents. Tax Sharing Agreements The Agency has not entered into any Tax Sharing Agreements with respect to the North Richmond Project Area. Section Allocations Section of the Redevelopment Law allows taxing entities to receive additional property taxes in a redevelopment project area above the base year revenue amount. See LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING LIMITATIONS - Section Allocations. Currently, there are 13 taxing entities receiving allocations of property taxes under Section in the North Richmond Project Area. The projection of tax increment revenues set forth in Table 16 assumes that the payments will continue to be made to these taxing entities and that the payments will be made on a basis senior to Loan repayment. See APPENDIX C - Fiscal Consultant Report and LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING LIMITATIONS - Property Tax Collection Procedure. Statutory Pass-Through Obligations Pursuant to Section of the Redevelopment Law, applicable to the North Richmond Redevelopment Plan because it was amended after January 1, 1994 to remove the Project Area s debt establishment time limitations, the Tax Revenues generated in the North Richmond Project Area are subject to certain statutory pass-throughs. The payments of the North Richmond Project Area are structured as follows: Beginning in Fiscal Year through the life of the Project Area: The Agency must pay 20% of gross tax increment revenue received by the Agency (net of Housing Set-Aside) derived from growth in assessed value in excess of the assessed value of the Project Area in fiscal year Beginning in Fiscal Year through the life of the Project Area: The Agency must pay an additional 16.8% of the tax increment revenue received by the Agency (net of Housing Set-Aside) derived from growth in assessed value in excess of the assessed value of the Project Area in fiscal year Under the Redevelopment Law, the Agency may subordinate the payment of statutory pass-through payments to the repayment of indebtedness. The Agency has subordinated the statutory pass-through payments to debt service on the North Richmond Loans. 80

91 Low and Moderate Income Housing The Agency has established a Low and Moderate Income Housing Account for the North Richmond Project Area. As discussed in SECURITY FOR THE BONDS Limited Cross- Collateralization, moneys deposited into the Low and Moderate Income Housing Account for the North Richmond Project Area will be available, subject to certain limitations, to repay the portion of the 1999 North Richmond Loan used for low and moderate income housing purposes (21%), the 2007B North Richmond Loan as well as certain of the 1999 Loans and 2007B Loans relating to the other Cross-Collateralized Project Areas. Historic Assessed Values and Tax Revenues Set forth in the table below is a summary of North Richmond Project Area historical assessed values for fiscal years through TABLE 11 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (North Richmond Project Area) Historic Assessed and Incremental Values Locally- State- Total Fiscal Assessed Unsecured Assessed Taxable Percentage Incremental Year Secured Value Value Value Value Change Value (1) $260,950,748 $24,775,031 $1,923,846 $287,649,625 19% $229,080, ,812,072 29,412,052 1,960, ,184, ,615, ,043,338 26,362,384 1,835, ,241, ,672, ,051,608 26,440,421 5,558, ,050, ,481, ,758,433 29,606, , ,575, ,006,587 Total percentage change: 80.26% Average percentage change: 15.87% (1) Taxable Value above base year value of $58,569,094. Source: County Auditor-Controller Office. 81

92 The following table shows, for each of the most recent four fiscal years: (i) the levy on incremental taxable value, (ii) actual receipts, (iii) the percentage of current year collections relative to the amount levied, (iv) receipts including supplemental taxes and (v) the percentage of current year collections including supplemental taxes. The County has elected to follow the procedures of Sections 4701 et seq. of the California Revenue and Taxation Code, known as the Teeter Plan as to general taxes entered and collected on the secured tax roll. Therefore, property tax revenues in the Project Area reflect levies rather than actual collections. TABLE 12 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (North Richmond Project Area) Historic Receipts (1) Tax Increment Total Tax % of Levy per Receipts Less % of Levy Increment Levy County (2) Supplementals Received Supplementals Receipts Received $1,631,476 $1,629, % $338,398 $1,967, % ,236,577 1,236, ,765 1,476, , , ,073 1,139, , , , , Average 99.88% % (1) Receipts per Agency records after reduction for property tax administration fees and Section allocations. (2) Initial levy reported by Contra Costa County. Source: Fiscal Consultant. 82

93 Major Taxable Property Owners The following table lists the ten largest taxpayers within the North Richmond Project Area. Based on fiscal year locally assessed taxable valuations, the top ten taxable property owners in the Project Area represent approximately 33.99% of the total Project Area taxable value of $287,649,625 and approximately 42.67% of the incremental assessed value of $229,080,531. TABLE 13 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (North Richmond Project Area) Ten Largest Taxable Property Owners for Fiscal Year % of Total Incremental Assessee Parcels Type of Use Taxable Value (1) Value (2) Value 1) Republic Services 9 Indus./ Transfer Facility/Landfill $37,272, % 16.27% 2) KB Home South Bay Inc. 175 SF Housing Devlpmt 15,238, ) NSV Development LLC 6 Industrial 12,163, ) IMACC Corporation 2 Industrial / Steel Drums 6,428, ) Richmond Land Group LLC 1 Industrial 6,433, ) 7th & Market LLC (3) 3 Indus. / Pharmaceutical 4,741, ) Nove Investment 2 Industrial / Vacant 4,702, ) Estate of Thomas Miyamot 5 Commercial 3,767, ) Color Spot Nurseries Inc. 1 Nursery 3,734, ) Overaa Family Limited Partnership 2 Office/Industrial 3,268, Total Valuation 206 $97,751, % 42.67% (1) Based on ownership of locally-assessed secured and unsecured property. (2) Based on fiscal year Project Area taxable value of $287,649,625 and incremental value of $229,080,531. (3) This property owner has assessment appeals outstanding and has requested total reductions of $1.9 million. Source: County Records. Republic Services. The property owned by Republic Services, Inc. includes a 60,000 square foot source reduction and recycling processing facility situated on approximately 16.9 acres. The facility employs 34 employees and serves as the recycled materials successor facility for the West Contra Costa Sanitary landfill. The West County Integrated Resource Recovery Facility (IRRF) receives all the recycled wastestream for West Contra Costa County and other contracted communities. The IRRF collects the wastestream and sends it to numerous locations both domestic and international, depending on the product. The West Contra Costa Sanitary landfill is also owned by Republic Services, Inc. The landfill was filled and closed in 2006, but Republic Services, Inc. continues to conduct operations at the landfill site. Republic Services, Inc. is a provider of services in the domestic, non-hazardous solid waste industry with approximately 13,000 employees and operations in 21 states. KB Home South Bay, Inc. This property is being developed by KB Home South Bay, Inc. ( KB Home ) as a single family residential neighborhood known as Bella Flora. As of December 31, 2006, 24 units had been completed and an additional 43 units were under construction. As KB Home develops the property and sells homes to individual homebuyers, the concentration of KB Home s property ownership in the North Richmond Project Area will decrease. See -Projected Tax Revenues below for the Fiscal Consultant s assumptions regarding the effect of the development on Tax Revenues. 83

94 NSV Development LLC. NSV Development LLC ( NSV ) and the Scotts Valley Band of Pomo Indians (the Band ) propose to construct a 225,000 square foot casino complex with 2,000 slot machines and other gaming activities, ancillary restaurants/amenities and 3,550 parking spaces on the 30 acre property. The Band has petitioned the Bureau of Indian Affairs to designate the property as its reservation, and the County has filed its opposition to the Band s request. If the application is granted and the property is designated as the Band s reservation, the property will not be subject to County property taxes. The application is currently pending before the Bureau of Indian Affairs. The Agency does not know when a decision will be made on the application. Appeals of Assessed Values There are two appeals currently pending on properties within the North Richmond Project Area. The aggregate original value of these two properties is $7,783,306, and the Fiscal Consultant has estimated the resolved value to be $5,925,390 (based on the assumption in the absence of historical data that 50% of the requested deduction would be approved). The projection of assessed value for fiscal year in the North Richmond Project Area shown in Table 15 assumes a reduction in value of $1,857,916 resulting from expected assessment appeal reductions. See LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING LIMITATIONS - Appeals of Assessed Values for general information relating to appeals. 84

95 Projected Tax Revenues The following tables summarize the tax increment revenue projections for the North Richmond Project Area, as prepared by the Fiscal Consultant. In projecting Tax Revenues and debt service coverage, the Fiscal Consultant assumed the following: The tax rates in the Project Area include the basic 1% levy plus certain debt service tax rates and were % for fiscal year In projecting Tax Revenues for the Project Area, the Fiscal Consultant did not include post- January 1, 1989 debt service tax rates and estimated the decline in pre-january 1, 1989 debt service tax rates. See LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING LIMITATIONS - Exclusion of Tax Revenues for General Obligation Bonds Debt Service. The fiscal year real property assessed value of the Project Area will increase 2% per year. There is an additional increase in real property assessed value of $11.8 million in fiscal year resulting from changes in ownership. There is an additional increase in real property assessed value projected from development of 173 single family housing units as described under Development Activities above. Personal property and nonunitary utility values will remain constant at fiscal year values. Unitary revenue will remain constant at fiscal year amounts. There are no supplemental property taxes received for the Project Area. The North Richmond Loans will mature on June 1, 2036 (during fiscal year ). The County administrative fee is equal to 0.90% of gross tax increment and will be paid from non-housing tax increment allocated to the Agency prior to payment of debt service. The Agency will not be obligated to make ERAF payments in the future. In fiscal year , there is a reduction in value of $1,857,916 resulting from expected assessment appeals. Statutory pass-through payments to taxing entities are subordinated to debt service. 85

96 TABLE 14 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (North Richmond Project Area) Tax Increment Revenue Estimate (1) Local Secured Land $142,164,296 Improvements 123,022,910 Personal Property 1,515,791 Gross Local Secured 266,702,997 Exempt 5,752,249 Net Local Secured 260,950,748 State Assessed 1,923,846 Unsecured Land 546,715 Improvements 8,076,938 Personal Property 16,151,378 Total Unsecured 24,775,031 Exempt 0 Net Unsecured 24,775,031 Total Value 287,649,625 Base Year Taxable Value 58,569,094 Incremental Taxable Value 229,080,531 Tax Increment 2,310,277 Unitary Tax Increment 3,868 Total Tax Increment Revenue 2,314,145 Adjustments to Tax Increment Revenue: Property Tax Administration Fees (2) 20,827 Section Allocations (3) 217,066 Liens on Tax Increment Housing Set-Aside (4) 419,416 Tax Revenues 1,656,836 (1) Based on taxable values per Contra Costa County. (2) Estimated based on the percentage that prior year fees represented to total tax increment. (3) Additional allocations to various taxing entities pursuant to former Section of the Redevelopment Law. (4) Based on 20% of total tax increment revenue net of Section allocations. Source: Fiscal Consultant. 86

97 TABLE 15 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (North Richmond Project Area) Projection of Gross Incremental Tax Revenue (000s Omitted) Fiscal Year Real Property (1) New Devlpmt Other Property (2) Total Value Value over Base Tax Increment (3) Unitary Tax Revenue (4) Total Tax Increment $268, $19,591 $287,650 $229,081 $2,310 $4 $2, ,525 17,519 19, , ,065 2, , ,824 28,984 19, , ,830 2, , , , , ,307 2, , , , , ,912 2, , , , , ,650 3, , , , , ,523 3, , , , , ,533 3, , , , , ,683 3, , , , , ,976 3, , , , , ,415 3, , , , , ,003 3, , , , , ,743 3, , , , , ,637 3, , , , , ,689 3, , , , , ,903 3, , , , , ,280 3, , , , , ,826 3, , , , , ,542 4, , , , , ,432 4, , , , , ,500 4, , , , , ,750 4, , , , , ,184 4, , , , , ,808 4, , , , , ,623 4, , , , , ,635 4, , , , , ,848 4, , , , , ,264 4, , , , , ,889 5, , , , , ,726 5, , , , , ,780 5, ,252 (1) Prior Year Real Property increased by 2% per year. The value for has been reduced for the potential impact of appeals. (2) Includes the value of secured and unsecured personal property, and state-assessed railroad and non-unitary property. (3) Based on the application of Project Area tax rates to incremental taxable value. (4) As reported by the County Auditor-Controller. Source: Fiscal Consultant. 87

98 TABLE 16 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (North Richmond Project Area) Projection of Net Incremental Tax Revenue (000s Omitted) Fiscal Year Total Tax Increment Adjustmt (1) SB 2557 Fees (2) Housing Set Aside Tax Revenues AB 1290 Payments (3) Net Inc. Tax Revenues $2,314 $217 $21 $419 $1, $1, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,686 (1) Allocations to the taxing entities pursuant to Redevelopment Law Section (2) Per SB 2557, reflects Project Area share of Contra Costa County s property tax administrative costs. (3) Required payments per Section of the Redevelopment Law. Source: Fiscal Consultant. 88

99 Estimated Loan Payment Coverage The following table shows the debt service coverage on the North Richmond Loans, based on estimated Tax Revenues from the North Richmond Project Area. The table does not reflect debt service on the portion of the 2007A North Richmond Loan allocable to the Escrow Bonds and the North Richmond Escrow Fund. Interest payments on the portion of the Bonds deposited into the North Richmond Escrow Fund will be paid by interest earned on such funds and a capitalized interest deposit that will be made from proceeds of the 2007A North Richmond Loan. Interest has been capitalized on such amount through August 1, 2009, on which date (unless extended under the Indenture) moneys will either be released from the North Richmond Escrow Fund based upon satisfaction of the conditions described in SECURITY FOR THE BONDS - Escrow Funds or used to redeem Escrow Bonds as described in THE BONDS - Mandatory Redemption Upon Transfers from Escrow Funds. The outstanding 1999 North Richmond Loan will be payable by the Agency from Tax Revenues on a parity with the 2007 North Richmond Loans. A portion of the 1999 North Richmond Loan is payable from Tax Revenues, excluding the Housing Set-Aside. The 2007B North Richmond Loan and a portion of the 1999 North Richmond Loan (the North Richmond Housing Loans ) are payable from the Housing Set-Aside portion of Tax Revenues, but are also secured by and payable from the non-housing Set-Aside portion of Tax Revenues. However, the column Tax Revenues Coverage Ratio in the following table does not include the debt service for the North Richmond Housing Loans. In addition, the North Richmond Housing Loans are subject to the limited cross-collateralization with respect to the Low and Moderate Income Housing Account as described in SECURITY FOR THE BONDS - Limited Cross-Collateralization. 89

100 Fiscal Year 1999 Non-Housing Loan Debt Service 2007A Loan Debt Service TABLE 17 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (North Richmond Project Area) Estimated Loan Payment Coverage Aggregate Debt Service Tax Revenues Tax Revenues Coverage Ratio 1999 Housing Loan Debt Service 2007B Loan Debt Service Total Housing Debt Service Housing Set-Aside Housing Set-Aside Coverage Ratio $105,347 $0 $105,347 $1,657, $32,718 $0 $32,718 $419, , ,741 1,130,734 1,809, , , , , ,004 1,048,148 1,198,151 2,070, , , , , ,949 1,038,148 1,195,096 2,105, , , , , ,386 1,038,148 1,191,534 2,141, , , , , ,543 1,032,748 1,187,290 2,182, , , , , ,443 1,042,148 1,192,590 2,224, , , , , ,443 1,044,448 1,190,890 2,267, , , , , ,363 1,030,998 1,188,360 2,311, , , , , ,494 1,032,005 1,189,499 2,356, , , , , ,369 1,037,328 1,189,696 2,401, , , , , ,244 1,041,715 1,193,959 2,448, , , , , ,863 1,040,135 1,191,998 2,495, , , , , ,225 1,042,838 1,194,063 2,544, , , , , ,188 1,038,850 1,194,038 2,593, , , , , ,625 1,124,100 1,192,725 2,644, , , , , ,263 1,134,150 1,195,413 2,695, , , , , ,163 1,127,500 1,196,663 2,747, , , , , ,538 1,124,863 1,191,400 2,801, , , , , ,913 1,091,013 1,189,925 2,855, , , , , ,450 1,082,350 1,176,800 2,911, , , , , ,988 1,092,763 1,192,750 2,968, , , , , ,196,250 1,196,250 3,026, , , , ,193,050 1,193,050 3,085, , , , ,193,138 1,193,138 3,145, , , , ,191,250 1,191,250 3,207, , , , ,187,388 1,187,388 3,269, , , , ,191,575 1,191,575 3,333, , , , ,193,650 1,193,650 3,398, , , , ,193,288 1,193,288 3,465, , , , ,195,488 1,195,488 3,533, , , , Totals: $2,806,788 $32,997,206 $35,803,994 $82,685,000 $783,486 $8,676,410 $9,459,896 $20,937,000 90

101 THE BAY POINT PROJECT AREA General General. The Bay Point Project Area consists of approximately 1,550 contiguous acres located in the eastern portion of Contra Costa County. It is generally bounded by the City of Pittsburg on the east, State Route 4 on the south, Port Chicago Highway on the west, and Suisun Bay and the Sacramento Northern Railroad right-of-way on the north. Existing Land Uses. According to the fiscal year County secured tax roll, within the Bay Point Project Area, approximately 80.7% of the land is residential, 10.9% is industrial and 4.7% is commercial, as shown below. TABLE 18 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (Bay Point Project Area) Land Use Category Summary Bay Point Project Area Taxable % of Parcels Value Total Residential 2,849 $497,285, % Commercial 73 28,885, % Industrial 13 67,100, % Vacant Land 115 9,152, % Other 109 6,803, % Total Secured 3, ,227, % Unsecured / State Assessed 6,915, % Grand Total $616,142, % Source: Fiscal Consultant. Development Activities. The projection of Tax Revenues to be generated in the Bay Point Project Area does not incorporate the following under-construction or entitled developments in the Bay Point Project Area: Solano Mixed Use Project: Development of a 16-lot subdivision, nine condominium units, three commercial units in a three-story mixed-use building and four units in two duets. The site is located on an L-shaped, approximately.922 acre (40,162 sq. ft.) property fronting the north side of Willow Pass Road and the west side of Solano Avenue. The project was approved in May Bay Point Venture One Commerce Center: Development of 45 acres of vacant land, located at the northeast intersection of Port Chicago Highway and Pacifica Avenue. The proposed project includes 23 lots ranging from.93 acres to 3.07 acres, with a total of acres of developable area. Based on allowable floor area ratios and lot coverage, the project could consist of a maximum of 1,157,554 square feet of building space, generally comprised of warehouse and office uses. The project was approved in July

102 Johnston Estates: Tentative Map approval for subdivision of two existing lots into four lots and the development of single-family homes on each of the parcels. The site is located at Bella Vista Avenue at Sara Court. The project was approved in November Mountain View Townhomes: Development of a 10-unit townhouse project consisting of two buildings (six units in building one and four units in building two), with 10 covered singlecar garages and 10 uncovered off-street parking places. The project site is a 0.43 acre (18,730 sq. ft.) parcel located at the intersection of Willow Pass Road and Mountain View Avenue. The project was approved in September 2004 (design review) and August 2006 (subdivision). Orbisonia Heights-Pittsburg/Bay Point BART Station Area Specific Plan: Land assemblage of older single-family properties and vacant lots for the proposed development of 304 townhouses, 16 live-work units and approximately 12,000 sq. ft. of commercial space. The Specific Plan was adopted in June 2002 and the re-zoning was approved in February Land assemblage and improvements in this area will be paid for in part with proceeds of the 2007 Bay Point Loans. The Bay Point Redevelopment Plan The Board adopted the Redevelopment Plan establishing the West Pittsburg Project Area by Ordinance No on December 29, The West Pittsburg Project Area was subsequently renamed the Bay Point Project Area. The principal goals and objectives of the Bay Point Redevelopment Plan are to (i) stimulate the construction of new affordable housing, (ii) upgrade and rehabilitate existing housing units and the development of neighborhood parks and amenities, (iii) provide major infrastructure improvements, (iv) expand and revitalize commercial development and (v) stimulate new industrial development. The Bay Point Redevelopment Plan is consistent with the County s General Plan. The Bay Point Redevelopment Plan was subsequently amended by: Ordinance No , adopted on December 6, 1994 pursuant to AB 1290 which extended the time period during which the Plan will be in effect, the time period during which the Agency may establish indebtedness and the amount of tax increment revenues that may be allocated to the Agency, Ordinance No on February 23, 1999 pursuant to AB 1342 which extended the time to receive tax increment by an additional ten years, Ordinance No on October 19, 1999 which extended the time period during which the Agency may commence eminent domain proceedings, and Ordinance No , adopted on July 18, 2006, pursuant to SB 211 and SB 1045 for the purpose of extending the effectiveness, receipt and collection time limits for an additional year and to remove the debt establishment time limit. See THE PROJECT AREAS for the Bay Point Project Area financial time limitations. Bay Point Redevelopment Plan Limitations The Bay Point Redevelopment Plan permits the Agency to collect a cumulative total of $116,000,000 of tax increment revenues, and to have outstanding bonded indebtedness of up to $60,000,000 in the Bay Point Project Area. See THE PROJECT AREAS for the Bay Point Project Area financial time limitations. According to the records of the Agency, from the time of 92

103 adoption of the Bay Point Redevelopment Plan through the end of fiscal year , the Agency has received $22.1 million in tax increment revenue from the Bay Point Project Area. The Fiscal Consultant estimates that the Bay Point Project Area will reach the tax increment limit by (assuming 2% annual growth in assessed value). However, from fiscal year to , the assessed incremental value in the Bay Point Project Area increased at an average of 13.61% annually. If the assessed values were to continue increasing at that rate, the Bay Point Project Area could reach the tax increment limit by fiscal year A portion of the Bond proceeds will be deposited in the Bay Point Escrow Fund and will not initially be loaned to the Agency under the Bay Point Loan Agreement but is expected to be loaned by the Authority to the Agency after amendment of the Bay Point Redevelopment Plan to increase the cumulative tax increment limit for such Project Area. See THE FINANCING PLAN. Tax Sharing Agreement Pursuant to former Section of the Redevelopment Law, the Agency has entered into one pass-through agreement with respect to the Bay Point Project Area, described as follows. Riverview Fire Protection District of Contra Costa County. The Agency entered into a Tax Sharing Agreement (the Riverview Tax Sharing Agreement ) for the Bay Point Project Area with the Riverview Fire Protection District of Contra Costa County (the Riverview District ) on December 29, Pursuant to this agreement, the Riverview District is to receive 100% of tax increment revenue that the Riverview District would have received from the Bay Point Project Area, without regard to the division and allocation of tax increment revenue pursuant to Health and Safety Code Section The Riverview Tax Sharing Agreement also provides that the County Auditor-Controller may withhold such amount from the amount to be paid to the Agency, and pay such amounts to the Fire Protection directly. It should be noted that the Riverview District has been consolidated into the Consolidated Fire Protection District, which has assumed the obligations and liabilities of the Riverview District. The Riverview Tax Sharing Agreement provides for subordination to the Bay Point Loan provided the Agency demonstrates to the Riverview District that the Agency has sufficient Tax Revenues to pay debt service on the Bay Point Loans and other obligations and make the payments provided by the tax sharing agreement. The Agency has subordinated payments under the Tax Sharing Agreements to the payments on the Bay Point Loans. Section Allocations Section of the Redevelopment Law allows taxing entities to receive additional property taxes in a redevelopment project area above the base year revenue amount. See LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING LIMITATIONS - Section Allocations. Currently, there are 17 taxing entities receiving allocations of property taxes under Section in the Bay Point Project Area. The projection of tax increment revenues set forth in Table 24 below assumes that the payments will continue to be made to these taxing entities and that the payments will be made on a basis senior to Loan repayment. See APPENDIX C - Fiscal Consultant Report and LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING LIMITATIONS - Property Tax Collection Procedure. 93

104 Statutory Pass-Through Obligations Pursuant to Section of the Redevelopment Law, applicable to the Bay Point Redevelopment Plan because it was amended after January 1, 1994 to remove the Project Area s debt establishment time limitations, the Tax Revenues generated in the Bay Point Project Area are subject to certain statutory pass-throughs. The payments of the Bay Point Project Area are structured as follows: Beginning in Fiscal Year through the life of the Project Area: The Agency must pay 20% of gross tax increment revenue received by the Agency (net of Housing Set-Aside) derived from growth in assessed value in excess of the assessed value of the Project Area in fiscal year Beginning in Fiscal Year through the life of the Project Area: The Agency must pay an additional 16.8% of the tax increment revenue received by the Agency (net of Housing Set-Aside) derived from growth in assessed value in excess of the assessed value of the Project Area in fiscal year Under the Redevelopment Law, the Agency may subordinate the payment of statutory pass-through payments to the repayment of indebtedness. The Agency has subordinated the statutory pass-through payments to debt service on the Bay Point Loans. Low and Moderate Income Housing The Agency has established a Low and Moderate Income Housing Account for the Bay Point Project Area. As discussed in SECURITY FOR THE BONDS Limited Cross- Collateralization, moneys deposited into the Low and Moderate Income Housing Account for the Bay Point Project Area will be available, subject to certain limitations, to repay the portion of the 1999 Bay Point Loan used for low and moderate income housing purposes (30%) and the 2007B Bay Point Loan as well as certain of the 1999 Loans and 2007B Loans relating to the other Cross-Collateralized Project Areas. Historic Assessed Value and Tax Revenues Set forth below in the table below is a summary of Bay Point Project Area historical assessed values for fiscal years through

105 TABLE 19 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (Bay Point Project Area) Historic Assessed and Incremental Values Total Locally-Assessed Unsecured Total Percentage Incremental Fiscal Year Secured Value Value Taxable Value Change Value (1) $609,227,466 $4,935,048 $616,142,579 22% $438,320, ,242,197 4,925, ,834, ,011, ,611,083 7,158, ,437, ,614, ,378,197 7,628, ,669, ,846, ,081,798 6,024, ,892, ,070,208 Total percentage change: 66.57% Average percentage change: 13.61% (1) Taxable Value above base year value of $177,822,390. Source: County Auditor-Controller Office. The following table shows, for each of the most recent four fiscal years: (i) the levy on incremental taxable value, (ii) actual receipts, (iii) the percentage of current year collections relative to the amount levied, (iv) receipts including supplemental taxes and (v) the percentage of current year collections including supplemental taxes. The County has elected to follow the procedures of Sections 4701 et seq. of the California Revenue and Taxation Code, known as the Teeter Plan as to general taxes entered and collected on the secured tax roll. Therefore, property tax revenues in the Project Area reflect levies rather than actual collections. TABLE 20 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (Bay Point Project Area) Historic Receipts (1) Tax Increment Total Tax % of Levy per Receipts Less % of Levy Increment Levy County (2) Supplementals Received Supplementals Receipts Received $2,777,982 $2,777, % $531,685 $3,309, % ,086,871 2,086, ,450 2,497, ,883,512 1,882, ,769 2,172, ,564,499 1,564, ,379 1,799, Average 99.99% % (1) Receipts per Agency records after reduction for property tax administration fees and Section allocations. (2) Initial levy reported by the County. Source: Fiscal Consultant. 95

106 Major Taxable Property Owners The following table lists the ten largest taxpayers within the Bay Point Project Area. Based on fiscal year locally assessed taxable valuations, the top ten taxable property owners in the Project Area represent approximately 14.98% of the total Project Area taxable value of $616,142,579 and 21.05% of the incremental value of $438,320,189. TABLE 21 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (Bay Point Project Area) Ten Largest Taxable Property Owners for Fiscal Year % of Total % of Inc Assessee Parcels Type of Use Taxable Value (1) Value (2) Value (2) 1) LP Catalyst Holdings Inc. 4 Industrial/Petroleum $41,421, % 9.45% 2) Dexter Hysol Aerospace 6 Industrial/Adhesives 21,007, ) Emerald Park House Corp. 5 Residential 6,577, ) Energy Group Tower 5 Comm./Gas Stations 5,715, ) Richard Rodriguez 8 Residential 4,826, ) Illinois Tool Works Inc. 1 Industrial 3,010, ) Li Grace Samantha (3) 2 Commercial 2,900, ) Joyce L. Trost 3 Commercial/ Marina 2,354, ) Bay Point Partners 4 Residential 2,256, ) Bay Point Venture One LLC 2 Dry Farm 2,216, Total 39 $92,285, % 21.05% (1) Based on ownership of locally-assessed secured and unsecured property. (2) Based on Project Area taxable value of $616,142,579 and incremental value of $438,320,189. (3) As of November 11, 2006, this property is owned by Siu Patrick Man Kit and Li Honna Man Han. Source: County Records. LP Catalyst Holdings Inc. The property owned by LP Catalyst Holdings Inc. ( LP Catalyst ) is an approximately 240,000 square foot manufacturing and distribution facility situated on approximately 28 acres. The facility employs approximately 110 employees. LP Catalyst is an affiliated entity of CRI/Criterion Inc. ( Criterion ). Criterion is a joint venture partnership owned by Shell Oil, Royal Dutch /Shell, and Cytec Industries with headquarters in Houston. At the Bay Point facility, Criterion manufactures hydrotreating catalysts, a chemical filter, used in oil processing and cleaning. The plant also manufactures styrene, a catalyst used in Styrofoam. Appeals of Assessed Values There are no appeals currently pending on properties within the Bay Point Project Area. The projection of assessed value for fiscal year in the Bay Point Project Area shown in Table 23 assumes no reduction in value due to assessment appeal reductions. See LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING LIMITATIONS - Appeals of Assessed Values for general information relating to appeals. 96

107 Projected Tax Revenues The following tables summarize the tax increment revenue projections for the Bay Point Project Area, as prepared by the Fiscal Consultant. In projecting Tax Revenues and debt service coverage, the Fiscal Consultant assumed the following: The tax rates in the Project Area include the basic 1% levy plus certain debt service tax rates and were % (plus % on incremental land value) for fiscal year In projecting Tax Revenues for the Project Area, the Fiscal Consultant did not include post-january 1, 1989 debt service tax rates and estimated the decline in pre-january 1, 1989 debt service tax rates. See LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING LIMITATIONS - Exclusion of Tax Revenues for General Obligation Bonds Debt Service. The fiscal year real property assessed value of the Project Area will increase 2% per year. There is an additional increase in real property assessed value of $31.7 million in fiscal year resulting from changes in ownership. There is no additional increase in real property assessed value resulting from new development. Personal property and nonunitary utility values will remain constant at fiscal year values. Unitary revenue will remain constant at fiscal year amounts. There are no supplemental property taxes received for the Project Area. The Bay Point Loan will mature on June 1, 2036 (during fiscal year ). The County administrative fee is equal to 0.84% of gross tax increment and will be paid from non-housing tax increment allocated to the Agency prior to payment of debt service. The Agency will not be obligated to make ERAF payments in the future. There will be no successful appeals of assessed valuation in the Project Area. Statutory pass-through payments to taxing entities are subordinated to debt service. Pass-through payments under Tax Sharing Agreements to taxing entities are subordinated to debt service. 97

108 TABLE 22 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (Bay Point Project Area) Tax Increment Revenue Estimate (1) Local Secured Land $281,601,769 Improvements 362,457,436 Personal Property 5,832,440 Gross Local Secured 649,891,645 Exempt 40,664,179 Net Local Secured 609,227,466 State Assessed 1,980,065 Unsecured Land 6,659 Improvements 1,711,062 Personal Property 3,217,327 Total Unsecured 4,935,048 Exempt 0 Net Unsecured 4,935,048 Total Value 616,142,579 Base Year Taxable Value 177,822,390 Incremental Taxable Value 438,320,189 Tax Increment 4,430,132 Unitary Tax Increment 7,807 Total Tax Increment Revenue 4,437,939 Adjustments to Tax Increment Revenue: Property Tax Administration Fees (2) 37,175 Section Allocations (3) 546,612 Liens on Tax Increment Housing Set-Aside (4) 778,265 Tax Revenues 3,075,887 Taxing Sharing Payments (5) 657,480 Net Tax Increment Revenue 2,418,406 (1) Based on taxable values per Contra Costa County. (2) Estimated based on the percentage that prior year fees represented to total tax increment. (3) Additional allocations to the taxing entities pursuant to former Section of the Redevelopment Law. (4) Based on 20% of total tax increment revenue net of Section allocations. (5) Payments per Section Tax Sharing Agreements. Source: Fiscal Consultant 98

109 TABLE 23 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (Bay Point Project Area) Projection of Gross Incremental Tax Revenue (000s Omitted) Fiscal Year Real Property (1) New Devlpmt Other Property (2) Total Value Value over Base Tax Increment (3) Unitary Tax Revenue (4) Total Tax Increment $605, $11,030 $616,143 $438,320 $4,430 $8 $4, ,215 31,668 11, , ,090 4, , , , , ,068 4, , , , , ,305 5, , , , , ,807 5, , , , , ,579 5, , , , , ,627 5, , , , , ,955 5, , , , , ,570 5, , , , , ,477 5, , , , , ,683 6, , , , , ,192 6, , , , , ,012 6, , , , , ,148 6, , , , , ,607 6, , , , , ,395 6, , , , , ,519 7, , , , , ,985 7, , , , , ,800 7, , , , , ,972 7, , , , , ,507 7, , , , , ,413 7, , , , , ,698 8, , ,003, ,030 1,014, ,367 8, , ,023, ,030 1,034, ,431 8, , ,043, ,030 1,054, ,895 8, , ,064, ,030 1,075, ,769 8, , ,085, ,030 1,096, ,060 9, , ,107, ,030 1,118, ,777 9, , ,129, ,030 1,140, ,928 9, , ,152, ,030 1,163, ,523 9, ,863 (1) Prior Year Real Property increased by 2% per year. (2) Includes the value of secured and unsecured personal property, and state-assessed railroad and non-unitary property. (3) Based on the application of Project Area tax rates to incremental taxable value. (4) As reported by the County Auditor-Controller. Source: Fiscal Consultant. 99

110 TABLE 24 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (Bay Point Project Area) Projection of Net Incremental Tax Revenue (000s Omitted) Fiscal Year Total Tax Increment Adjustmt (1) SB 2557 Fees (2) Housing Set Aside (3) Tax Revenues AB 1290 Tax Sharing (4) Tax Sharing Agreemts (5) Net Inc. Tax Revenues $4,438 $547 $37 $778 $3, $657 $2, , , , , , , , , , , , , , , , , , , , , , , , , , ,009 3, , , ,030 4, , , ,052 4, , ,408 1, ,075 4, , ,569 1, ,098 4, , ,734 1, ,121 4, ,009 3, ,902 1, ,145 4, ,034 3, ,073 1, ,170 4, ,060 3, ,248 1, ,195 4, ,086 3, ,426 1, ,220 4, ,113 3, ,608 1, ,246 4, ,140 3, ,793 1, ,273 5, ,168 3, ,982 1, ,300 5, ,196 3, ,175 1, ,327 5, ,225 3, ,371 1, ,355 5, ,255 3, ,572 1, ,384 5, ,285 3, ,777 1, ,413 5,580 1,054 1,315 3, ,985 1, ,443 5,697 1,119 1,347 3, ,198 1, ,474 5,817 1,186 1,379 3, ,416 1, ,505 5,940 1,254 1,411 3, ,637 1, ,536 6,064 1,323 1,444 3, ,863 2, ,569 6,192 1,394 1,478 3,390 (1) Allocations to the taxing entities pursuant to Redevelopment Law Section (2) Per SB 2557, reflects Project Area share pf Contra Costa County s property tax administrative costs. (3) Reflects total housing set-aside. (4) Required payments per Section of the Redevelopment Law. (5) Payments per tax sharing agreements. Source: Fiscal Consultant. 100

111 Estimated Loan Payment Coverage The following table shows the debt service coverage on the Bay Point Loans, based on estimated Tax Revenues from the Bay Point Project Area. The table does not reflect debt service on the portion of the 2007 Bay Point Loans allocable to the Escrow Bonds and the Bay Point Escrow Fund. Interest payments on the portion of the Bonds deposited into the Bay Point Escrow Fund will be paid by interest earned on such funds and a capitalized interest deposit that will be made from proceeds of the 2007 Bay Point Loans. Interest has been capitalized on such amount through August 1, 2009, on which date (unless extended under the Indenture) moneys will either be released from the Bay Point Escrow Fund based upon satisfaction of the debt service coverage conditions described in SECURITY FOR THE BONDS - Escrow Funds or used to redeem Escrow Bonds as described in THE BONDS - Mandatory Redemption Upon Transfers from Escrow Funds. The outstanding 1999 Bay Point Loan will be payable by the Agency from Tax Revenues on a parity with the 2007 Bay Point Loans. The 2007A Bay Point Loan and a portion of the 1999 Bay Point Loan are payable from Tax Revenues, excluding the Housing Set-Aside. The 2007B Bay Point Loan and a portion of the 1999 Bay Point Loan (the Bay Point Housing Loans ) are payable from the Housing Set-Aside portion of Tax Revenues, but are also secured by and payable from the non-housing Set-Aside portion of Tax Revenues. However, the column Tax Revenues Coverage Ratio in the following table does not include the debt service for the Bay Point Housing Loans. In addition, the Bay Point Housing Loans are subject to the limited cross-collateralization with respect to the Low and Moderate Income Housing Account as described in SECURITY FOR THE BONDS - Limited Cross-Collateralization. 101

112 1999 Non- Housing Loan Debt Service 2007A Loan Debt Service Aggregate Debt Service TABLE 25 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (Bay Point Project Area) Estimated Loan Payment Coverage Tax Revenues Coverage Ratio 1999 Housing Loan Debt Service 2007B Loan Debt Service Total Housing Debt Service Housing Set-Aside Coverage Ratio Fiscal Year Tax Revenues Housing Set-Aside $200,614 $0 $200,614 $3,076, $149,478 $0 $149,478 $778, ,053 1,626,337 1,907,389 3,388, , , , , ,763 1,647,160 1,937,922 3,453, , , , , ,653 1,637,448 1,927,100 3,519, , , , , ,240 1,632,575 1,920,815 3,586, , , , , ,065 1,632,340 1,918,405 3,662, , , , , ,634 1,631,277 1,919,910 3,740, , , , , ,884 1,623,246 1,914,130 3,820, , , , , ,469 1,629,793 1,917,262 3,901, , , , , ,756 1,634,925 1,923,681 3,984, , , ,665 1,009, ,531 1,628,561 1,918,092 4,069, , , ,424 1,030, ,794 1,626,388 1,916,182 4,157, , , ,676 1,052, ,544 1,632,281 1,916,825 4,246, , , ,358 1,075, ,038 1,641,407 1,925,445 4,337, , , ,783 1,098, ,750 1,633,266 1,921,016 4,429, , , ,840 1,121, ,675 1,794,035 1,924,710 4,524, , , ,005 1,145, ,213 1,794,831 1,926,043 4,620, , , ,593 1,170, ,488 1,793,422 1,924,910 4,719, , , ,040 1,195, ,500 1,789,824 1,921,324 4,819, , , ,909 1,220, ,250 1,743,958 1,925,208 4,921, , , ,452 1,246, ,113 1,737,528 1,925,641 5,026, , , ,336 1,273, ,188 1,738,845 1,923,032 5,132, , , ,694 1,300, ,922,457 1,922,457 5,241, , ,964 1,327, ,923,847 1,923,847 5,352, , ,503 1,355, ,921,602 1,921,602 5,465, , ,783 1,384, ,925,767 1,925,767 5,580, , ,870 1,413, ,925,824 1,925,824 5,697, , ,764 1,443, ,921,726 1,921,726 5,817, , ,463 1,474, ,925,080 1,925,080 5,940, , ,614 1,505, ,922,682 1,922,682 6,064, , ,192 1,536, ,924,525 1,924,525 6,192, , ,882 1,569, Totals: $5,306,210 $52,562,958 $57,869,168 $142,476,000 $3,536,845 $11,815,347 $15,352,192 $36,074,

113 THE RODEO PROJECT AREA General General. The Rodeo Project Area consists of approximately 650 acres bounded on the west and south by the City of Hercules, on the north by San Pablo Bay and on the east by Interstate 80. The Rodeo Project Area is largely residential with commercial strips located along the major corridors. Existing Land Uses. Land use in the Rodeo Project Area is primarily residential. According to the fiscal year County secured tax roll, within the Rodeo Project Area, approximately 88.6% of the land is residential and 7.8% is commercial, as shown below. TABLE 26 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (Rodeo Project Area) Land Use Category Summary Rodeo Project Area Taxable % of Parcels Value Total Residential 1,291 $282,693, % Commercial 74 24,824, % Industrial 2 42, % Vacant Land 73 6,936, % Other 52 1,248, % Total Secured 1, ,745, % Unsecured / State Assessed 3,261, % Grand Total $319,006, % Source: Fiscal Consultant. Development Activities. There are currently no significant under-construction or fullyentitled developments in the Rodeo Project Area. The Rodeo Redevelopment Plan The Board adopted the Redevelopment Plan establishing the Rodeo Project Area by Ordinance No on July 10, The principal goals and objectives of the Rodeo Redevelopment Plan are to (i) fund circulation and transportation improvements, (ii) provide or upgrade public and community facilities, (iii) provide infrastructure improvements, including drainage improvements and utility upgrading, (iv) upgrade existing older residential neighborhoods through rehabilitation of a substantial number of existing housing units, and (v) stimulate new employment generating land use development. The Rodeo Redevelopment Plan is consistent with the County s General Plan. The Rodeo Redevelopment Plan was subsequently amended by: Ordinance No , adopted on December 6, 1994 pursuant to AB 1290 which extended the time period during which the Plan will be in effect, the time period 103

114 during which the Agency may establish indebtedness and the amount of tax increment revenues that may be allocated to the Agency, Ordinance No , adopted on February 23, 1999 pursuant to AB 1342 which extended the time to receive tax increment by an additional ten years, Ordinance No , adopted on May 21, 2002 which extended the time period during which the Agency may commence eminent domain proceedings, and Ordinance No , adopted on July 18, 2006, pursuant to SB 211 and SB 1045 for the purpose of extending the effectiveness, receipt and collection time limits for an additional year and to remove the debt establishment time limit. See THE PROJECT AREAS for a description of the current Rodeo Redevelopment Plan limitations. Rodeo Redevelopment Plan Limitations The Rodeo Redevelopment Plan permits the Agency to collect a cumulative total of $125,000,000 of tax increment revenues, and to have outstanding bonded indebtedness of up to $60,000,000 in the Rodeo Project Area. See THE PROJECT AREAS for the Rodeo Redevelopment Plan limitations. According to the records of the Agency, from the time of adoption of the Rodeo Redevelopment Plan through the end of fiscal year , the Agency has received $10.7 million in tax increment revenue from the Rodeo Project Area. The Fiscal Consultant projects that the Rodeo Project Area will not reach the cumulative tax limit prior to the last year to repay debt (assuming 2% assessed value growth per year). However, between fiscal year and fiscal year , assessed values in the Project Area grew an average of 11.13% per year. If assessed values were to continue to grow at that rate, the Project Area would reach the cumulative tax increment limit in fiscal year See APPENDIX C Financial Consultant Report. The Agency has covenanted in the Rodeo Loan Agreement to annually cause to be prepared a report which sets forth the total amount of Tax Revenues remaining available to be received by the Agency under the Redevelopment Plan cumulative tax increment limitations, as well as future cumulative debt service on the Loan and other obligations of the Agency payable from Tax Revenues (including any Subordinate Debt). The Agency has covenanted that it will not accept Tax Revenues greater than the aggregate annual debt service payable by the Agency in any year on all its obligations if such acceptance will cause the amount remaining under the tax increment limit to fall below remaining cumulative debt service, except for the purpose of depositing such revenues in escrow for future debt service or to prepay the Loan. 104

115 Tax Sharing Agreements Pursuant to former Section of the Redevelopment Law, the Agency has entered into Tax Sharing Agreements relating to the Rodeo Project Area dated May 8, 1990 with the following entities: (i) (ii) (iii) (iv) the Contra Costa Mosquito Abatement District, the Contra Costa Community College District, the Contra Costa Office of Education, and the Rodeo Fire Protection District. The terms of the Tax Sharing Agreements with each of these taxing agencies (the Affected Agencies ) generally provide that the Affected Agency is to receive 100% of tax increment revenue that the Affected Agency would have received from the Rodeo Project Area, without regard to the division and allocation of tax increment revenue pursuant to Health and Safety Code Section The Agency is required to pay to the Affected Agencies during the following periods: Rodeo Fire Protection District: Beginning in fiscal year and continuing throughout the life of the Redevelopment Plan. Mosquito Abatement District, Contra Costa County Office of Education and Community College District: Ten years following the adoption of the Redevelopment Plan (fiscal year ) and continuing throughout the life of the Redevelopment Plan. All of the above-discussed Tax Sharing Agreements provide that the County Auditor- Controller may withhold such amounts from the amount to be paid to the Agency, and pay such amounts to the affected taxing agencies directly. The above-discussed Tax Sharing Agreements also provide for subordination to the Rodeo Loans provided the Agency demonstrates to the Affected Agencies that the Agency has sufficient Tax Revenues to pay debt service on the Rodeo Loans and other obligations and make the payments provided by the Tax Sharing Agreements. The Agency has subordinated payments under the Tax Sharing Agreements to the payments on the Rodeo Loans. In addition, the Agency has entered into a Tax Sharing Agreement with the East Bay Regional Park District. The Agency has agreed to fund $500,000 of improvements to Lone Tree Point Park, an East Bay Regional Park District facility. No improvements have been funded to date. This Tax Sharing Agreement provides for subordination to the Rodeo Loans and other indebtedness. Section Allocations Section of the Redevelopment Law allows taxing entities to receive additional property taxes in a redevelopment project area above the base year revenue amount. See LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING LIMITATIONS - Section Allocations. Currently, there are 8 taxing entities receiving allocations of property taxes under Section in the Rodeo Project Area. The projection of net tax increment revenues set forth in Table 32 assumes that the payments will continue to be made to these taxing entities and that the payments will be made on a basis senior to Loan repayment. See APPENDIX C - Fiscal Consultant Report and LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING LIMITATIONS - Property Tax Collection Procedure. 105

116 Statutory Pass-Through Obligations Pursuant to Section of the Redevelopment Law, applicable to the Rodeo Redevelopment Plan because it was amended after January 1, 1994 to remove the Project Area s debt establishment time limitations, the Tax Revenues generated in the Rodeo Project Area are subject to certain statutory pass-throughs. The payments of the Rodeo Project Area are structured as follows: Beginning in Fiscal Year through the life of the Project Area: The Agency must pay 20% of gross tax increment revenue received by the Agency (net of Housing Set-Aside) derived from growth in assessed value in excess of the assessed value of the Project Area in fiscal year Beginning in Fiscal Year through the life of the Project Area: The Agency must pay an additional 16.8% of the tax increment revenue received by the Agency (net of Housing Set-Aside) derived from growth in assessed value in excess of the assessed value of the Project Area in fiscal year Under the Redevelopment Law, the Agency may subordinate the payment of statutory pass-through payments to the repayment of indebtedness. The Agency has subordinated the statutory pass-through payments to debt service on the Loans. Low and Moderate Income Housing The Agency has established a Low and Moderate Income Housing Account for the Rodeo Project Area. As discussed in SECURITY FOR THE BONDS Limited Cross- Collateralization, moneys deposited into the Low and Moderate Income Housing Account for the Rodeo Project Area will be available, subject to certain limitations, to repay the portion of the 1999 Rodeo Loan used for low and moderate income housing purposes (30%), the 2007B Rodeo Loan as well as certain of the 1999 Loans and 2007B Loans relating to the other Cross- Collateralized Project Areas. 106

117 Historic Assessed Value and Tax Revenues Set forth below in the table below is a summary of Rodeo Project Area historical assessed values for fiscal years through TABLE 27 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (Rodeo Project Area) Historic Assessed and Incremental Value Total Locally-Assessed Unsecured Total Percentage Incremental Fiscal Year Secured Value Value Taxable Value Change Value (1) $315,745,564 $3,214,698 $319,006,985 14% $221,206, ,439,301 2,860, ,356, ,555, ,430,144 3,399, ,940, ,139, ,842,467 4,507, ,448, ,648, ,238,963 4,795, ,127, ,326,892 Total percentage change: 52.54% Average percentage change: 11.13% (1) Taxable Value above base year value of $97,800,753. Source: County Auditor-Controller Office. The following table shows, for each of the most recent four fiscal years: (i) the levy on incremental taxable value, (ii) actual receipts, (iii) the percentage of current year collections relative to the amount levied, (iv) receipts including supplemental taxes and (v) the percentage of current year collections including supplemental taxes. The County has elected to follow the procedures of Sections 4701 et seq. of the California Revenue and Taxation Code, known as the Teeter Plan as to general taxes entered and collected on the secured tax roll. Therefore, property tax revenues in the Project Area reflect levies rather than actual collections. TABLE 28 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (Rodeo Project Area) Historic Receipts (1) Tax Increment Total Tax % of Levy per Receipts Less % of Levy Increment Levy County (2) Supplementals Received Supplementals Receipts Received $1,660,952 $1,660, % $133,154 $1,794, % ,337,474 1,337, ,681 1,556, ,124,984 1,124, ,776 1,231, , , ,827 1,084, Average 99.99% % (1) Receipts per Agency records after reduction for property tax administration fees and Section allocations. (2) Initial levy reported by the County. Source: Fiscal Consultant. 107

118 Major Taxable Property Owners The following table lists the ten largest taxpayers within the Rodeo Project Area. Based on fiscal year locally assessed taxable valuations, the top ten taxable property owners in the Project Area represent approximately 8.2% of the total Project Area taxable value of $319,006,985 and approximately 11.8% of the incremental assessed value of $221,206,232. TABLE 29 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (Rodeo Project Area) Ten Largest Taxable Property Owners for Fiscal Year % of Total % of Inc Assessee Parcels Type of Use Taxable Value (1) Value (2) Value (2) 1) York Sing & Lok Kin Mock Trust 6 Commercial/Retail $ 7,477, % 3.38% 2) John Bessolo 15 Residential/Apartments 3,934, ) Tosco Corporation (3) 11 Vacant Land/Buffer (3) 3,690, ) Amrik & Amritpal Singh Trust 3 Residential/Apartments 2,264, ) Bradeson Family Trust 1 Commercial 2,030, ) Richard Spencer 6 Residential 1,452, ) Santiago & Karen Bravo 1 Residential 1,428, ) Yashar Erler 1 Residential 1,324, ) David Kory 2 Residential 1,226, ) Harjap Singh 2 Commercial 1,192, Total 48 $26,022, % 11.76% (1) Based on ownership of locally-assessed secured and unsecured property. (2) Based on Project Area taxable value of $319,006,985 and incremental value of $221,206,232. (3) Vacant and currently serving as a buffer for the refinery. Source: County Records. Appeals of Assessed Values There are no appeals currently pending on properties within the Rodeo Project Area. The projection of assessed value for fiscal year in the Rodeo Project Area shown in Table 31 assumes no reduction in value due to assessment appeal reductions. See LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING LIMITATIONS - Appeals of Assessed Values for general information relating to appeals. 108

119 Projected Tax Revenues The following tables summarize the tax increment revenue projections for the Rodeo Project Area, as prepared by the Fiscal Consultant. In projecting Tax Revenues and debt service coverage, the Fiscal Consultant assumed the following: The tax rates in the Project Area include the basic 1% levy plus certain debt service tax rates and were % for fiscal year In projecting Tax Revenues for the Project Area, the Fiscal Consultant did not include post- January 1, 1989 debt service tax rates and estimated the decline in pre-january 1, 1989 debt service tax rates. See LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING LIMITATIONS - Exclusion of Tax Revenues for General Obligation Bonds Debt Service. The fiscal year real property assessed value of the Project Area will increase 2% per year. There is an additional increase in real property assessed value of $20.7 million in fiscal year resulting from changes in ownership. There is no additional increase in real property assessed value resulting from new development. Personal property and nonunitary utility values will remain constant at fiscal year values. Unitary revenues will remain constant at fiscal year amounts. There are no supplemental property taxes received for the Project Area. The Rodeo Loan will mature on June 1, 2036 (during fiscal year ). The County administrative fee is equal to 0.94% of gross tax increment and will be paid from non-housing tax increment allocated to the Agency prior to payment of debt service. The Agency will not be obligated to make ERAF payments in the future. There will be no successful appeals of assessed valuation in the Project Area. Statutory pass-through payments to taxing entities are subordinated to debt service. Pass-through payments under Tax Sharing Agreements to taxing entities are subordinated to debt service. 109

120 TABLE 30 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (Rodeo Project Area) Tax Increment Revenue Estimate (1) Local Secured Land $147,429,751 Improvements 180,306,338 Personal Property 117,783 Gross Local Secured 327,853,872 Exempt 12,108,308 Net Local Secured 315,745,564 State Assessed 46,723 Unsecured Land 19,939 Improvements 1,865,137 Personal Property 1,422,143 Total Unsecured 3,307,219 Exempt 92,521 Net Unsecured 3,214,698 Total Value 319,006,985 Base Year Taxable Value 97,800,753 Incremental Taxable Value 221,206,232 Tax Increment 2,230,865 Unitary Tax Increment 3,492 Total Tax Increment Revenue 2,234,357 Adjustments to Tax Increment Revenue: Property Tax Administration Fees (2) 21,003 Section Allocations (3) 163,706 Liens on Tax Increment Housing Set-Aside (4) 414,130 Tax Revenues 1,635,518 Taxing Sharing Payments (5) 451,733 Net Tax Increment Revenue 1,183,785 (1) Based on taxable values per Contra Costa County. (2) Estimated based on the percentage that prior year fees represented to total tax increment. (3) Additional allocations to the taxing entities pursuant to former Section of the Redevelopment Law. (4) Based on 20% of total tax increment revenue net of Section allocations. (5) Payments per Section Tax Sharing Agreements. Source: Fiscal Consultant. 110

121 TABLE 31 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (Rodeo Project Area) Projection of Gross Incremental Tax Revenue (000s Omitted) Fiscal Year Real Property (1) New Devlpmt Other Property (2) Total Value Value over Base Tax Increment (3) Unitary Tax Revenue (4) Total Tax Increment $317, $1,494 $319,007 $221,206 $2,231 $3 $2, ,777 20,742 1, , ,213 2, , , , , ,083 2, , , , , ,091 2, , , , , ,239 2, , , , , ,530 2, , , , , ,967 2, , , , , ,552 2, , , , , ,289 2, , , , , ,181 3, , , , , ,231 3, , , , , ,442 3, , , , , ,817 3, , , , , ,359 3, , , , , ,073 3, , , , , ,960 3, , , , , ,025 3, , , , , ,272 3, , , , , ,704 3, , , , , ,324 3, , , , , ,136 4, , , , , ,145 4, , , , , ,354 4, , , , , ,768 4, , , , , ,389 4, , , , , ,223 4, , , , , ,274 4, , , , , ,545 4, , , , , ,042 4, , , , , ,769 5, , , , , ,731 5, ,141 (1) Prior Year Real Property increased by 2% per year. The value for has been reduced for the impact of assessment appeals. (2) Includes the value of secured and unsecured personal property, and state-assessed railroad and non-unitary property. (3) Based on the application of Project Area tax rates to incremental taxable value. (4) As reported by the County Auditor-Controller. Source: Fiscal Consultant. 111

122 TABLE 32 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (Rodeo Project Area) Projection of Net Incremental Tax Revenue (000s Omitted) Fiscal Year Total Tax Increment Adjustmt (1) SB 2557 Fees (2) Housing Set Aside Tax Revenue AB 1290 Tax Sharing (3) Tax Sharing Agreemt Net Inc. Tax Revenue $2,234 $164 $21 $414 $1, $452 $1, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,011 1, , , ,035 1,934 (1) Allocations to the taxing entities pursuant to Redevelopment Law Section (2) Per SB 2557, reflects Project Area share of Contra Costa County s property tax administrative costs. (3) Required payments per Section of the Redevelopment Law. Source: Fiscal Consultant. 112

123 Estimated Loan Payment Coverage The following table shows the debt service coverage on the Rodeo Loans, based on estimated Tax Revenues from the Rodeo Project Area. The outstanding 1999 Rodeo Loan will be payable by the Agency from Tax Revenues on a parity with the 2007 Rodeo Loans. The 2007A Rodeo Loan and a portion of the 1999 Rodeo Loan are payable from Tax Revenues, excluding the Housing Set-Aside. The 2007B Rodeo Loan and a portion of the 1999 Rodeo Loan (the Rodeo Housing Loans ) are payable from the Housing Set-Aside portion of Tax Revenues, but are also secured by and payable from the non-housing Set-Aside portion of Tax Revenues. However, the column Tax Revenues Coverage Ratio in the following table does not include the debt service for the Rodeo Housing Loans. In addition, the Rodeo Housing Loans are subject to the limited cross-collateralization with respect to the Low and Moderate Income Housing Account as described in SECURITY FOR THE BONDS - Limited Cross-Collateralization. 113

124 Fiscal Year 1999 Non-Housing Loan Debt Service 2007A Loan Debt Service TABLE 33 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (Rodeo Project Area) Estimated Loan Payment Coverage Aggregate Debt Service Tax Revenues Tax Revenues Coverage Ratio 1999 Housing Loan Debt Service 2007B Loan Debt Service Total Housing Debt Service Housing Set-Aside $151,391 $0 $151,391 $1,636, $70,168 $0 $70,168 $414, Housing Set-Aside Coverage Ratio , , ,691 1,829, , , , , , , ,861 1,870, , , , , , , ,676 1,911, , , , , , , ,226 1,953, , , , , , , ,351 2,000, , , , , , , ,020 2,048, , , , , , , ,770 2,098, , , , , , , ,950 2,148, , , , , , , ,606 2,199, , , , , , , ,506 2,251, , , , , , , ,900 2,304, , , , , , , ,538 2,358, , , , , , , ,425 2,414, , , , , , , ,438 2,470, , , , , , , ,688 2,528, , , , , , , ,925 2,587, , , , , , , ,388 2,647, , , , , , , ,850 2,708, , , , , , , ,288 2,770, , , , , , , ,713 2,834, , , , , , , ,113 2,898, , , , , , ,250 2,965, , , , , ,500 3,032, , , , , ,500 3,101, , , , , ,250 3,171, , , , , ,750 3,243, , , , , ,750 3,316, , , , , ,250 3,390, , , , , ,250 3,466, , , , , ,500 3,544, , , , Totals: $3,359,813 $19,764,500 $23,124,313 $79,689,000 $1,497,134 $8,708,462 $10,205,596 $20,186,

125 THE MONTALVIN MANOR PROJECT AREA General General. The Montalvin Manor Project Area is a primarily residential area consisting of approximately 211 contiguous acres. It is an unincorporated area in the western portion of the County bounded on the north by the San Pablo Bay. Montalvin Manor Project Area is located along San Pablo Avenue, near Richmond Parkway and can be accessed from I-80 through the Richmond Parkway and from San Pablo Avenue. Existing Land Uses. Land use in the Montalvin Manor Project Area is primarily residential. According to the fiscal year County secured tax roll, within the Montalvin Manor Project Area, approximately 82.8% of the land is residential, 8.6% is industrial, and 6.7% is commercial, as shown below. TABLE 34 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (Montalvin Project Area) Land Use Category Summary Montalvin Manor Project Area Taxable % of Parcels Value Total Residential 638 $115,003, % Commercial 4 9,313, % Industrial 1 11,965, % Vacant Land 4 1,359, % Other , % Total Secured ,076, % Unsecured / State Assessed 901, % Grand Total $138,978, % Source: Fiscal Consultant. Development Activities. There are currently no significant under-construction or fullyentitled developments in the Montalvin Manor Project Area. The Montalvin Manor Redevelopment Plan The Board adopted the Redevelopment Plan establishing the Montalvin Manor Project Area by Ordinance No on July 8, The principal goals and objectives of the Montalvin Manor Redevelopment Plan are (i) elimination of blighting conditions within the Project Area, (ii) elimination of substandard buildings and those that conflict with the uses proposed in the General Plan and applicable County standards and guidelines, (iii) installation and improvement of public improvements and public utilities in the Project Area, including without limitation, parks, community centers and schools, (iv) the creation of the residential opportunities for all segments of the community, including the provision of housing affordable to low and moderate income households, especially through rehabilitation and new construction, (v) a strong commercial incentive program to encourage upgrading of commercial buildings and 115

126 to attract new commercial users in the area, (vi) installation, improvement and enhancement of improvements to promote pedestrian and bicycle utilization, and (vii) programs to increase employment opportunities for Project Area residents. The Montalvin Manor Redevelopment Plan is consistent with the County s General Plan and was amended on July 18, 2006 by Ordinance pursuant to SB 1045 for the purpose of extending the effectiveness, receipt and collection time limits for an additional year. Montalvin Manor Redevelopment Plan Limitations The Montalvin Manor Redevelopment Plan permits the Agency to have outstanding bonded indebtedness of up to $50,000,000 in the Montalvin Manor Project Area. Because the Montalvin Manor Redevelopment Plan was adopted after January 1, 1994, the Montalvin Manor Project Area is not subject to a cumulative tax increment limit. See THE PROJECT AREAS for a description of the Montalvin Manor Redevelopment Plan limitations. The Agency has covenanted in the Montalvin Manor Loan Agreement to comply with all requirements of law to insure the allocation and payment to it of the Tax Revenues, including without limitation the timely filing of any necessary statements of indebtedness with appropriate officials of the County. Statutory Pass-Through Obligations Pursuant to Section of the Redevelopment Law, applicable to the Montalvin Manor Redevelopment Plan because it was adopted after January 1, 1994, the Tax Revenues generated in the Montalvin Manor Project Area are subject to certain statutory pass-throughs. The payments of the Montalvin Manor Project Area are structured as follows: For the life of the Project Area: The Agency must pay 20% of gross tax increment revenue received by the Agency (net of Housing Set-Aside). Beginning in Fiscal Year through the life of the Project Area: The Agency must pay an additional 16.8% of the tax increment revenue received by the Agency (net of Housing Set-Aside) derived from growth in assessed value in excess of the assessed value of the Project Area in Fiscal Year Beginning in Fiscal Year ) through the life of the Project Area: The Agency must pay an additional 11.2% of the tax increment revenue received by the Agency (net of Housing Set-Aside) derived from growth in assessed value in excess of the assessed value of the Project Area in fiscal year The County has elected not to take its share of statutory pass-through payments in Montalvin Manor Project Area. Under the Redevelopment Law, the Agency may subordinate the payment of statutory pass-through payments to the repayment of indebtedness. The Agency has subordinated the statutory pass-through payments to debt service on the Montalvin Manor Loans. Tax Sharing Agreements The Agency has not entered into any Tax Sharing Agreements with respect to the Montalvin Manor Project Area. 116

127 Section Allocations For projects areas established prior to January 1, 1994, Section of the Redevelopment Law allows taxing entities to receive additional property taxes in a redevelopment project area above the base year revenue amount. Because the Montalvin Manor Project Area was established in 2003, there are no entities receiving Section payments in the Project Area. Low and Moderate Income Housing The Agency has established a Low and Moderate Income Housing Account for the Montalvin Manor Project Area. As discussed in SECURITY FOR THE BONDS Limited Cross-Collateralization, moneys deposited into the Low and Moderate Income Housing Account for the Montalvin Manor Project Area will be available, subject to certain limitations, to repay the 2007B Montalvin Manor Loan as well as certain of the 2007B Loans relating to the other Cross-Collateralized Project Areas. Historic Assessed Value and Tax Revenues Set forth below in the table below is a summary of Montalvin Manor Project Area historical assessed values for fiscal years through TABLE 35 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (Montalvin Manor Project Area) Historic Assessed and Incremental Value Total Locally-Assessed Unsecured Total Percentage Incremental Fiscal Year Secured Value Value Taxable Value Change Value (1) $138,076,388 $819,475 $138,978,359 14% $52,504, ,148, , ,037, ,562, ,320, , ,732, ,258,561 Total percentage change from base year values: 60.72% Average percentage change: 12.59% (1) Taxable Value above base year value of $86,474,201. Source: County Auditor-Controller Office. 117

128 The following table shows, for each of the fiscal years in which taxes were received in the Montalvin Manor Project Area: (i) the levy on incremental taxable value, (ii) actual receipts, (iii) the percentage of current year collections relative to the amount levied, (iv) receipts including supplemental taxes and (v) the percentage of current year collections including supplemental taxes. The County has elected to follow the procedures of Sections 4701 et seq. of the California Revenue and Taxation Code, known as the Teeter Plan as to general taxes entered and collected on the secured tax roll. Therefore, property tax revenues in the Project Area reflect levies rather than actual collections. TABLE 36 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (Montalvin Manor Project Area) Historic Receipts Tax Increment (2) Total Tax % of Levy per Receipts Less % of Levy Increment Levy County (1) Supplementals Received Supplementals Receipts Received $354,163 $354, % $77,453 $431, % , , , , Average % % (1) Initial levy reported by the County, less property tax administrative fees. (2) Receipts per Agency records, less property tax administrative fees. Source: Fiscal Consultant. 118

129 Major Taxable Property Owners The following table lists the ten largest taxpayers within the Montalvin Manor Project Area. Based on fiscal year locally assessed taxable valuations, the top ten taxable property owners in the Project Area represent approximately 18.5% of the total Project Area taxable value of $138,978,359 and 48.9% of incremental assessed value of $52,504,158. TABLE 37 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (Montalvin Manor Project Area) Ten Largest Taxable Property Owners for Fiscal Year % of Total % of Inc Assessee Parcels Type of Use Taxable Value (1) Value (2) Value (2) 1) Security Public Storage LLC 1 Industrial $11,965, % 22.79% 2) Spectrum San Pablo LLC 1 Commercial 6,018, ) Pacific Mobile IV LP 3 Commercial 3,131, ) Valero Refining Company CA 1 Unsecured 494, ) James H. Belford 2 Miscellaneous 816, ) Erwin & Judith Escobar 2 Residential 789, ) Mae Y. Chan 2 Residential 707, ) David & Rosie Wong Trust 1 Vacant Land 667, ) Aldo & Olga Lara 2 Residential 564, ) Jaime & Almadelia Pimentel 1 Residential 525, Total 16 $25,679, % 48.91% (1) Based on ownership of locally-assessed secured and unsecured property. (2) Based on fiscal year Project Area taxable value of $138,978,359 and incremental value of $52,504,158. Source: County Records. Security Public Storage LLC. The property owned by Security Public Storage LLC is a public self-storage facility consisting of three buildings. The total facility is 86,950 square feet that includes 637 public storage units. It is located at the intersection of Kay Road and Madeline Street. Spectrum San Pablo LLC. The property owned by Spectrum San Pablo LLC is an approximately 41,760 square foot commercial building. The major tenant is the Spectrum Center School, which is a school for developmentally disabled youth. The other tenants are small, individually owned businesses. The property is located within the Tara Hills Shopping Center. Pacific Mobile IV LP. The properties owned by Pacific Mobile IV LP consist of a mobile home park and two vacant properties. The mobile home park is an approximate 1,182,200 square foot lot that consists of approximately 180 mobile home units. The two other vacant properties are respectively designated for commercial/residential mixed-use and industrial use with no imminent plans for development. All three properties are located near the west intersection of San Pablo Avenue and Tara Hills Drive. 119

130 Appeals of Assessed Values There are no appeals currently pending on properties within the Montalvin Manor Project Area. The projection of assessed value for fiscal year in the Montalvin Manor Project Area shown in Table 39 assumes no reduction in value due to assessment appeal reductions. See LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING LIMITATIONS - Appeals of Assessed Values for general information relating to appeals. Projected Tax Revenues The following tables summarize the tax increment revenue projections for the Montalvin Manor Project Area, as prepared by the Fiscal Consultant. In projecting Tax Revenues and debt service coverage, the Fiscal Consultant assumed the following: The tax rates in the Project Area include the basic 1% levy plus certain debt service tax rates and were % for fiscal year In projecting Tax Revenues for the Project Area, the Fiscal Consultant did not include post- January 1, 1989 debt service tax rates and estimated the decline in pre-january 1, 1989 debt service tax rates. See LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING LIMITATIONS - Exclusion of Tax Revenues for General Obligation Bonds Debt Service. The fiscal year real property assessed value of the Project Area will increase 2% per year. There is an additional increase in real property assessed value of $6.1 million in fiscal year resulting from changes in ownership. There is no additional increase in real property assessed value resulting from new development. Personal property and nonunitary utility values will remain constant at fiscal year values. There are no unitary tax revenues received in the Project Area. There are no supplemental property taxes received for the Project Area. The Montalvin Manor Loan will mature on June 1, 2036 (during fiscal year ). The County administrative fee is equal to 1.5% of gross tax increment and will be paid from non-housing tax increment allocated to the Agency prior to payment of debt service. The Agency will not be obligated to make ERAF payments in the future. There will be no successful appeals of assessed valuation in the Project Area. Statutory pass-through payments to taxing entities are subordinated to debt service, and the County will continue to elect not to take its share of statutory pass-through payments. 120

131 TABLE 38 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (Montalvin Manor Project Area) Tax Increment Revenue Estimate Local Secured Taxable Value (1) Land $ 79,725,098 Improvements 58,633,231 Personal Property 0 Total Secured 138,358,329 Exempt 281,941 Net Local Secured 138,076,388 State Assessed 82,496 Unsecured Land 0 Improvements 479,639 Personal Property 339,836 Total Unsecured 819,475 Exempt 0 Net Unsecured 819,475 Total Value 138,978,359 Base Year Taxable Value 86,474,201 Incremental Taxable Value 52,504,158 Tax Increment Revenue 529,504 Adjustments to Tax Increment Revenue: Property Tax Administration Fees (2) 5,201 Liens on Tax Increment Housing Set-Aside (3) 105,901 Tax Revenues 418,403 Statutory Pass-Through Obligations (4) 90,863 Net Tax Increment Revenues 327,540 (1) Based on taxable values per Contra Costa County Auditor-Controller. (2) Estimated based on 1.5% of Tax Increment Revenue. (3) Based on 20% of total tax increment revenue. (4) Statutory Pass-Through Obligations. The County has elected to not take its share of the payments. Source: Fiscal Consultant. 121

132 TABLE 39 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (Montalvin Manor Project Area) Projection of Gross Incremental Tax Revenue (000s Omitted) Fiscal Year Real Property (1) New Devlpmt Other Property (2) Total Value Value over Base Tax Increment (3) $138, $422 $138,978 $52,504 $ ,327 6, ,811 61, , ,759 64, , ,766 67, , ,833 70, , ,961 73, , ,152 76, , ,406 79, , ,726 83, , ,112 86, , ,566 90, , ,089 93, , ,682 97, , , ,873 1, , , ,611 1, , , ,425 1, , , ,314 1, , , ,282 1, , , ,328 1, , , ,456 1, , , ,666 1, , , ,960 1, , , ,341 1, , , ,808 1, , , ,366 1, , , ,014 1, , , ,755 1, , , ,591 1, , , ,524 1, , , ,556 1, , , ,688 1,757 (1) Prior Year Real Property increased by 2% per year. (2) Includes the value of secured and unsecured personal property and state-assessed railroad and nonunitary property. (3) Based on the application of tax rate to incremental taxable value. Source: Fiscal Consultant. 122

133 TABLE 40 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (Montalvin Manor Project Area) Projection of Net Incremental Tax Revenue (000s Omitted) Fiscal Year Total Tax Increment SB 2557 Fees (1) Housing Set Aside Tax Revenue Tax Sharing Agreemt (2) Net Inc. Tax Revenue $530 $5 $106 $418 $91 $ , , , , , , , , , , , , , , , , , , , , , , , , , , , , , (1) Per SB 2557, reflects Project Area share of the County s property tax administrative costs. (2) Payments required per AB The County has elected to not take its share of the payments. Source: Fiscal Consultant. 123

134 Estimated Loan Payment Coverage The following table shows the debt service coverage on the Montalvin Manor Loans, based on estimated Tax Revenues from the Montalvin Manor Project Area. The 2007A Montalvin Manor Loan is payable from Tax Revenues, excluding the Housing Set-Aside. The 2007B Montalvin Manor Loan (the Montalvin Manor Housing Loan ) is payable from the Housing Set-Aside portion of Tax Revenues, but is also secured by and payable from the non-housing Set-Aside portion of Tax Revenues. However, the column Tax Revenues Coverage Ratio in the following table does not include the debt service for the Montalvin Manor Housing Loan. In addition, the Montalvin Manor Housing Loan is subject to the limited cross-collateralization with respect to the Low and Moderate Income Housing Account as described in SECURITY FOR THE BONDS - Limited Cross-Collateralization. 124

135 2007A Loan Debt Service TABLE 41 CONTRA COSTA COUNTY REDEVELOPMENT AGENCY (Montalvin Manor Project Area) Estimated Loan Payment Coverage Tax Revenues Coverage Ratio 2007B Loan Debt Service Housing Set- Aside Coverage Ratio Fiscal Year Tax Revenues Housing Set-Aside $0 $418, $0 $106, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,000 1,017, , , ,750 1,051, , , ,250 1,085, , , ,750 1,121, , , ,000 1,157, , , ,000 1,193, , , ,750 1,231, , , ,250 1,269, , , ,500 1,308, , , ,250 1,348, , , ,750 1,388, , , Total $4,290,700 $27,324,000 $1,732,598 $6,918,

136 RISK FACTORS The following information should be considered by prospective investors in evaluating the Bonds. However, the following does not purport to be an exhaustive listing of risks and other considerations which may be relevant to investing in the Bonds. In addition, the order in which the following information is presented is not intended to reflect the relative importance of any such risks. To estimate the revenues available to pay debt service on the Loans, the Agency has made certain assumptions with regard to the assessed valuation in the Project Areas, future tax rates and percentage of taxes collected. The Agency believes these assumptions to be reasonable, but to the extent that the assessed valuation, the tax rates or the percentage of taxes collected are less than the Agency's assumptions, the Tax Revenues available to pay debt service on the Loans will, in all likelihood, be less than those projected. Reduction in Taxable Value Tax Revenues allocated to the Agency are determined by the amount of incremental taxable value in the Project Areas and the current rate or rates at which property in the Project Areas is taxed. The reduction of taxable values of property caused by economic factors beyond the Agency's control, such as a relocation out of a Project Area by one or more major property owners, or the complete or partial destruction of such property caused by, among other eventualities, an earthquake (see Seismic Factors, below), flood or other natural disaster, could cause a reduction in the Tax Revenues, and consequently, Revenues securing the Bonds. Property owners may also appeal to the County Assessor for a reduction of their assessed valuations or the assessor may reduce the assessed value on its own. Such a reduction of assessed valuations and the resulting decline in Tax Revenues or the resulting refund of property taxes could have an adverse effect on the Agency's ability to make timely payments of principal of and interest on the Loans. Application of the provisions of Article XIIIA(2(d) of the California Constitution and California Revenue and Taxation Code Section 68 may also result in a significant reduction of the assessed valuation of a property within a redevelopment project area. These provisions permit a person who is displaced from property by eminent domain proceedings or by governmental action resulting in a judgment of inverse condemnation to transfer the adjusted base year value of the property from which the person is displaced to another comparable property anywhere within the State. Persons acquiring replacement property must request assessment pursuant to these provisions within four (4) years of the date the property was acquired by eminent domain or purchase or the date the judgment of inverse condemnation becomes final. Any such assessment pursuant to these provisions of Article XIIIA(2)(d) and California Revenue and Taxation Code Section 68 could result in a substantial and completely unexpected reduction in the assessed valuation of a property within the applicable Project Area. 126

137 Reduction in Inflationary Rate As described in greater detail below, Article XIIIA of the California Constitution provides that the full cash value of real property used in determining taxable value may be adjusted from year to year to reflect the inflationary rate, not to exceed a 2% increase for any given year, or may be reduced to reflect a reduction in the consumer price index or comparable local data. Such measure is computed on a calendar year basis. Because Article XIIIA limits inflationary assessed value adjustments to the lesser of the actual inflationary rate or 2%, there have been years in which the assessed values were adjusted by actual inflationary rates, which were less than 2%. The Agency is unable to predict if any adjustments to the full cash value of real property within the Project Area, whether an increase or a reduction, will be realized in the future. Levy and Collection The Agency does not have any independent power to levy and collect property taxes. Any reduction in the tax rate or the implementation of any constitutional or legislative property tax decrease could reduce the Tax Revenues, and accordingly, could have an adverse impact on the ability of the Agency to repay the Loans. Likewise, delinquencies in the payment of property taxes could have an adverse effect on the Agency's ability to make timely Loan payments. The County has elected to follow the procedures of Sections 4701 et seq. of the California Revenue and Taxation Code, known as the Teeter Plan as to general taxes entered and collected on the secured tax roll. Therefore, property tax revenues in the Project Area reflect levies rather than actual collections. Parity Debt As described in SECURITY FOR THE BONDS Loan Agreements and Parity Obligations, the Agency s pledge of Tax Revenues generated in certain Project Areas as security for its obligation to repay certain 2007 Loans is on a parity with its pledge of such Tax Revenues to its obligation to repay certain outstanding obligations. In addition, the Agency may issue or incur obligations payable from Tax Revenues on a parity with its pledge of Tax Revenues to repayment of the 2007 Loans. The existence of and the potential for such obligations increases the risks associated with the Agency's repayment of the 2007 Loans, and consequently, the Authority s payment of debt service on the Bonds, in the event of a decrease in the Agency's collection of Tax Revenues. Bankruptcy The enforceability of the rights and remedies of the owners of the Bonds and the obligations of the Authority and the Agency may become subject to the following: the federal bankruptcy code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors rights generally, now or hereafter in effect; usual equitable principles which may limit the specific enforcement under state law of certain remedies; the exercise by the United States of America of the powers delegated to it by the federal Constitution; and the reasonable and necessary exercise, in certain exceptional situations of the police power inherent in the sovereignty of the State of California and its governmental bodies in the interest of servicing a significant and legitimate public purpose. Bankruptcy proceedings, or the exercise of powers by the federal or state government, if initiated, could subject the owners of the Bonds to judicial discretion and interpretation of their rights in bankruptcy or otherwise and consequently may entail risks of delay, limitation, or modification of their rights. 127

138 State Budget Deficit and ERAF Shift The State of California faces significant budget issues for fiscal year and possibly beyond. In connection with its approval of former budgets, the State Legislature enacted legislation, that among other things, reallocated a portion of funds from redevelopment agencies to school districts by shifting a portion of each agency s tax increment to school districts ( ERAF shifts). The State Budget included a transfer by redevelopment agencies to the applicable ERAFs of $250 million in each of fiscal years and The Agency's share of the annual $250 million shift for fiscal years and was $806,279. The Agency paid its ERAF payments for fiscal years and on a timely basis. The Agency is not required to make an ERAF payment in and the Governor s budget for fiscal year does not require an ERAF transfer of tax increment revenues by redevelopment agencies. Although the State s voters approved a constitutional amendment on the November 2004 ballot (the Local Government Initiative ), which purports to prohibit any further transfers of non-education local government property taxes for the benefit of the State, the Local Government Initiative does not purport to change existing law with respect to the State s ability to transfer redevelopment agencies property tax revenues. The Agency cannot predict whether the State Legislature will enact legislation impacting future Tax Revenues. Given the level of the State s budget deficit problems, it is possible that tax increment available for payment of the Loans may be reduced in the future by actions of the State Legislature. Information about the State budget and State spending is available at various Statemaintained websites. Text of the budget may be found at the website of the Department of Finance, under the heading California Budget. An impartial analysis of the budget is posted by the Office of the Legislative Analyst at In addition, various State of California official statements for its various debt obligations, many of which contain a summary of the current and past State budgets, may be found at the website of the State Treasurer, All of such websites are provided for general informational purposes only and the material on such sites is in no way incorporated into this Official Statement. Secondary Market There can be no guarantee that there will be a secondary market for the Bonds, or, if a secondary market exists, that the Bonds can be sold for any particular price. Occasionally, because of general market conditions or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon the then prevailing circumstances. Such prices could be substantially different from the original purchase price. Loss of Tax Exemption As discussed under the caption TAX MATTERS, interest on the Series A Bonds or on the Series B Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date the Series A Bonds and the Series B Bonds were issued as a 128

139 result of future acts or omissions of the Agency or the Authority in violation of its covenants contained in the Loan Agreements and in the Indenture. Should such an event of taxability occur, the Series A Bonds and the Series B Bonds are not subject to special redemption or any increase in interest rate and may remain outstanding until maturity. Hazardous Substances An additional environmental condition that may result in the reduction in the assessed value of property would be the discovery of a hazardous substance that would limit the beneficial use of taxable property within the Project Area. In general, the owners and operators of a property may be required by law to remedy conditions of the property relating to releases or threatened releases of hazardous substances. The owner or operator may be required to remedy a hazardous substance condition of property whether or not the owner or operator has anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the property within the Project Area be affected by a hazardous substance, could be to reduce the marketability and value of the property by the costs of remedying the condition and/or other amounts. Seismic Factors and Flooding None of the Project Areas is located in an Alquist-Priolo Earthquake Fault Zone. The occurrence of severe seismic activity and/or flooding in a Project Area could result in substantial damage to property located in such Project Area, and could lead to successful appeals for reduction of assessed values of such property. Such a reduction could result in a decrease in Tax Revenues collected by the Agency. Risk Factors Uniquely Relating to the Subordinate Bonds In addition to the risks described above, there are additional risks that are relevant to an investment in the Subordinate Bonds. The Subordinate Bonds are not insured by the MBIA Policy (but they are insured by the Radian Policy) and are subordinate to the Senior Bonds in right of payment. On any Interest Payment Date, Revenues will be available to pay obligations on the Subordinate Bonds only after all payments and deposits in respect of the Senior Bonds have been made on such date as described herein. In certain circumstances, there may not be sufficient Revenues available to pay interest or principal due on any or all of the Subordinate Bonds then Outstanding. For these reasons, investments in the Subordinate Bonds involve a high degree of risk and are not appropriate for all investors. VERIFICATION OF MATHEMATICAL ACCURACY Causey Demgen & Moore, Denver, Colorado, Certified Public Accountants, upon delivery of the Bonds, will deliver a report on the mathematical accuracy of certain computations, contained in schedules provided to them which were prepared by the Underwriter, relating to the sufficiency of the anticipated receipts from the Federal Securities and uninvested moneys deposited in the 1995 North Richmond Refunding Fund, 1995 Bay Point Refunding Fund, 1999 Refunding Fund and the 2003 Refunding Fund to pay, when due, the principal, whether at maturity or upon prior prepayment, interest and prepayment premium requirements of the 1995 North Richmond Loan, 1995 Bay Point Loan, the 1999 Loans and the 2003 Loans, respectively, being prepaid. 129

140 The report of Causey Demgen & Moore, will include the statement that the scope of their engagement is limited to verifying the mathematical accuracy of the computations contained in such schedules provided to them, and that they have no obligation to update their report because of events occurring, or data or information coming to their attention, subsequent to the date of their report. LITIGATION There is no litigation pending with respect to which the Agency has been served with process or, to the Agency 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 Indenture, the Loan Agreements or any proceedings of the Authority or the Agency with respect thereto. In the opinion of counsel to the Authority and the Agency, there are no lawsuits or claims pending against the Authority or the Agency which will materially affect the Authority s or the Agency's finances so as to impair the ability to pay principal of and interest on the Bonds when due. RATINGS Standard and Poor s ( S&P ) has assigned its rating of AAA to the Senior Bonds with the understanding that upon delivery of the Bonds, a policy of municipal bond insurance insuring payment of principal of and interest on the Senior Bonds will be issued by the Senior Bonds Insurer. S&P has assigned its rating o AA to the Subordinate Bonds with the understanding that upon delivery of the bonds, a policy of municipal bond insurance insuring payment of principal of and interest on the Subordinate Bonds will be issued by the Subordinate Bonds Insurer. In addition, S&P assigned an underlying rating to the Senior Bonds of A- and an underlying rating to the Subordinate Bonds of BBB. Such ratings reflect only the views of S&P and an explanation of the significance of such rating may be obtained from S&P. There is no assurance that such ratings will continue for any given period of time or that such ratings will not be revised downward or withdrawn entirely by such organization, if in its judgment circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Bonds. TAX MATTERS In the opinion of Quint & Thimmig LLP, San Francisco, California, Bond Counsel, under existing law, subject to the Authority s and the Agency s compliance with certain covenants, interest on the Series A Bonds and on the Series B Bonds is excludable from gross income of the owners thereof for federal income tax purposes under section 103 of the Internal Revenue Code if 1986, as amended (the Code ) and, under section 55 of the Code, is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations under the Code but it is taken into account in computing an adjustment used in determining the federal alternative minimum tax for certain corporations. Failure by the Authority or Agency to comply with one or more of such covenants could cause interest on the Series A Bonds and on the Series B Bonds to not be excludable from gross income under section 103 of the Code for federal income tax purposes retroactively to the date of issuance of the Bonds. In the further opinion of Bond Counsel, interest on the Bonds is exempt from California personal income taxes. 130

141 Bondowners should also be aware that the ownership or disposition of, or the accrual or receipt of interest on, the Bonds might have tax consequences other than that as described above. Bond Counsel expresses no opinion regarding any collateral tax consequences arising with respect to the Bonds other than as expressly described above. The Series A-T Bonds are subject to all applicable federal income taxation. The complete text of Bond Counsel s proposed opinion is set forth in Appendix E hereto. Backup Withholding Payments of principal of and interest (including original issue discount) on the Bonds, as applicable, may be subject to the backup withholding tax under Section 3406 of the Code if recipients of such payments (other then foreign investors who have properly provided certifications described below) fail to furnish to the payer certain information, including their taxpayer identification numbers, or otherwise fail to establish an exemption from such tax. Any amounts deducted and withheld from a payment to a recipient would be allowed as a credit against the federal income tax of such recipient. Foreign Investors An owner of a Bond that is not a United States person (as defined below) and is not subject to federal income tax as a result of any direct or indirect connection to the United States of America in addition to its ownership of a Bond will generally not be subject to United States income or withholding tax in respect of a payment on a Bond, provided that the owner complies to the extent necessary with certain identification requirements (including delivery of a statement, signed by the owner under penalties of perjury, certifying that such owner is not a United States person and providing the name and address of such owner). For this purpose, the term United States person means a citizen or resident of the United States, a corporation, partnership or other entity created or organized in or under the laws of the United States of America or any political subdivision thereof, or an estate or trust whose income from sources within the United States is includable in gross income for United States of America income tax purposes regardless of its connection with the conduct of a trade or business within the United States of America. Except as explained in the preceding paragraph and subject to the provisions of any applicable tax treaty, a 30% United States withholding tax will apply to interest paid and original issue discount accruing on Bonds owned by foreign investors. In those instances in which payments of interest on the Bonds continue to be subject to withholding, special rules apply with respect to the withholding of tax on payments of interest on, or the sale or exchange of Bonds having original issue discount and held by foreign investors. Potential investors that are foreign persons should consult their own tax advisors regarding the specific tax consequences to them of owning a Bond. ERISA Considerations The Employee Retirement Income Security Act of 1974, as amended ( ERISA ), and the Code generally prohibit certain transactions between a qualified employee benefit plan under ERISA or tax qualified retirement plans and individual retirement accounts under the Code (collectively, the Plans ) and persons who, with respect to a Plan, are fiduciaries or other parties in interest within the meaning of ERISA or disqualified persons within the meaning of 131

142 the Code. All fiduciaries of Plans, in consultation with their advisors, should carefully consider the impact of ERISA and the Code on an investment in the Bonds. Other Matters Affecting the Bonds From time to time, there are legislative proposals in the United States Congress that, if enacted, could alter or amend the federal income tax consequences referred to above or could adversely affect the market value of the Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether, if enacted, any such proposal would apply to Bonds issued prior to enactment. Each purchaser of the Bonds should consult his or her own tax advisor regarding any pending or proposed federal tax legislation. Bond Counsel expresses no opinion regarding any pending or proposed federal tax legislation. CERTAIN LEGAL MATTERS The legal opinion of Bond Counsel, approving the validity of the Bonds, in substantially the form attached hereto as Appendix E, will be made available to purchasers at the time of original delivery of the Bonds, and a copy thereof will accompany each Bond. Certain matters will be passed upon for the Agency by Goldfarb & Lipman, Oakland, California, as Agency Counsel. Payment of the fees of Quint & Thimmig LLP, as Bond Counsel to the Authority, and Jones Hall, A Professional Law Corporation, as disclosure counsel to the Authority, is contingent upon issuance of the Bonds. UNDERWRITING Stone & Youngberg LLC (the Underwriter ) has agreed to purchase the Bonds at a purchase price of $106,028,771.25, consisting of: the principal amount of the Series A Bonds ($62,205,000) plus an original issue premium of $2,325, and less underwriter's discount of $436,442.51; the principal amount of the Series A-T Bonds ($25,500,000) net of an original issue discount of $191, and underwriter's discount of $137,513.97; and the principal amount of the Series B Bonds ($16,665,000) plus an original issue discount of $239, and less underwriter's discount of $141, The initial public offering prices of the Bonds may be changed from time to time by the Underwriter. The purchase contract relating to the Bonds provides that the Underwriter will purchase all the Bonds if any are purchased, and that the obligation to make such purchase is subject to certain terms and conditions set forth in the purchase contract, including, among others, the approval of certain legal matters by counsel. 132

143 MISCELLANEOUS All summaries of the Indenture, the Loan Agreements, the Escrow Agreements, applicable legislation, agreements and other documents are made subject to the provisions of such documents and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the Authority for further information in connection therewith. Any statements made in this Official Statement involving matters of opinion or of estimates, whether or not expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized. The execution and delivery of this Official Statement has been duly authorized by the Authority. COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY By: /s/ James Kennedy Redevelopment Director 133

144 (This page intentionally left blank)

145 APPENDIX A SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL LEGAL DOCUMENTS The following is a brief summary of the provisions of the Indenture and the Loan Agreements not otherwise summarized in the text of this Official Statement. This summary is not intended to be definitive, and reference is made to the complete text of such documents for the complete terms thereof. DEFINITIONS Except as otherwise defined in this Summary, the terms previously defined in this Official Statement have the respective meanings previously given. In addition, the following terms have the following meanings when used in this Summary: Additional Revenues means, as the date of calculation, the amount of Tax Revenues which, as shown in the Report of an Independent Redevelopment Consultant, are estimated to be receivable by the Agency within the Fiscal Year following the Fiscal Year in which such calculation is made as a result of increases in the assessed valuation of taxable property in the Project Area due to transfer of ownership or any other interest in real property which has been recorded but which is not then reflected on the tax rolls. For purposes of this definition, the term increases in the assessed valuation means the amount by which the assessed valuation of taxable property in the Project Area is estimated to increase above the assessed valuation of taxable property in the Project Area (as evidenced in the written records of the County) as of the date on which such calculation is made. Bond Counsel means (a) Quint & Thimmig LLP, or (b) any other attorney or firm of attorneys appointed by or acceptable to the Agency of nationally-recognized experience in the issuance of obligations the interest on which is excludable from gross income for federal income tax purposes under the Tax Code. Bond Law means the Marks-Roos Local Bond Pooling Act of 1985, constituting Article 4 of the Act (commencing with Section 6584), as in existence on the Closing Date or as thereafter amended from time to time. Bond Year means each twelve-month period extending from August 2 in one calendar year to August 1 of the succeeding calendar year, both dates inclusive; except that the first Bond Year shall begin on the Closing Date and end on August 1, Bonds means, collectively, the Senior Bonds and the Subordinate Bonds. Business Day means a day of the year, other than a Saturday or Sunday, or legal holiday on which banks in the State of California are required or authorized to remain closed. A-1

146 Business Inventory Tax Subvention means all amounts payable by the State to the Agency under and pursuant to the provisions of Chapter 1.5 of Part 1 of Division 4 of Title 2 (commencing with Section 16110) of the Government Code of the State. Certificate of the Authority means a certificate in writing signed by the Chair, Executive Director, Assistant Executive Director, Deputy Executive Director, Secretary or Treasurer of the Authority, or by any other officer of the Authority duly authorized by the Board for that purpose, written notice of which shall be given to the Trustee. Closing Date means the date of delivery of the Bonds to the original purchasers thereof. Continuing Disclosure Certificate shall mean the Continuing Disclosure Certificate executed by the Agency and dated the date of issuance and delivery of the Bonds, as originally executed and as it may be amended from time to time in accordance with the terms thereof. Costs of Issuance means all expenses incurred in connection with the authorization, issuance, sale and delivery of the Bonds, the making of the Loans pursuant to the Loan Agreements and the refunding and defeasance of portions of the Prior Loan and portions of the Prior Bonds from a portion of the proceeds of the Loans, including but not limited to all compensation, fees and expenses (including but not limited to fees and expenses for legal counsel) of the Authority, the Trustee, the Agency and the Prior Trustee, compensation to any financial consultants or underwriters, legal fees and expenses, filing and recording costs, rating agency fees, costs of preparation and reproduction of documents and costs of printing. Defeasance Obligations means (a) cash, (b) U.S. Treasury certificates, notes and bonds (including State and Local Government Series), (c) direct obligations of the Treasury which have been stripped by the Treasury itself, CATS, TIGRS and similar securities, (d) the interest component of Resolution Funding Corp. ( REFCORP ) strips which have been stripped by request to the Federal Reserve Bank of New York in book entry form; (e) obligations listed in (b)(i), (ii), (iii), (v), (vii) and (viii) of the definition of Permitted Investments; or (f) pre-refunded municipal obligations rated AAA and Aaa by S&P and Moody s, respectively; if, however, the issue is only rated by S&P, then the prerefunded bonds must have been pre-refunded with cash, direct U.S. or U.S.-guaranteed obligations, or AAA rated pre-refunded municipals). Escrow Bonds means the Bonds identified as such in the Indenture. Fair Market Value means, with respect to any investment, the price at which a willing buyer would purchase such investment from a willing seller in a bona fide, arm s length transaction (determined as of the date the contract to purchase or sell the investment becomes binding) if the investment is traded on an established securities market (within the meaning of Section 1273 of the Tax Code) and, otherwise, the term Fair Market Value means the acquisition price in a bona fide arm s length transaction (as described above) if (i) the investment is a certificate of deposit that is acquired in accordance with applicable regulations under the Tax Code, (ii) the investment is an agreement with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate (for example, a guaranteed investment contract, a forward supply contract or other investment agreement) that is acquired in accordance with applicable regulations under the Tax Code, (iii) the investment is a United States Treasury Security - State and Local Government Series that is acquired in accordance with applicable regulations of the United States Bureau of Public Debt, or (iv) any commingled investment fund in which the A-2

147 Authority and related parties do not own more than a ten percent (10%) beneficial interest therein if the return paid by the fund is without regard to the source of the investment. Federal Securities means: (a) any direct general obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America), the payment of principal of and interest on which are unconditionally and fully guaranteed by the United States of America; (b) obligations of any agency or department of the United States of America which represent the full faith and credit of the United States of America or the timely payment of the principal of and interest on which are secured or guaranteed by the full faith and credit of the United States of America; and (c) any obligations issued by the State of California or any political subdivision thereof the payment of and interest and premium (if any) on which are fully secured by Federal Securities described in the preceding clauses (a) or (b), as verified by an independent certified public accountant. Fiscal Year means any twelve-month period extending from July 1 in one calendar year to June 30 of the succeeding calendar year, both dates inclusive, or any other twelvemonth period selected and designated by the Authority or the Agency, as applicable, as its official fiscal year period. Guaranty Agreement Senior means a Financial Guaranty Agreement, between the Agency and the Insurer Senior Bonds pertaining to a Surety Bond Senior. Guaranty Agreement Subordinate means a Financial Guaranty Agreement, between the Agency and the Insurer Subordinate Bonds pertaining to a Surety Bond Subordinate. Independent Accountant means any certified public accountant or firm of certified public accountants appointed and paid by the Authority, and who, or each of whom (a) is in fact independent and not under domination of the Authority, the County or the Agency; (b) does not have any substantial interest, direct or indirect, in the Authority, the County or the Agency; and (c) is not connected with the Authority, the County or the Agency as an officer or employee of the Authority, the County or the Agency but who may be regularly retained to make annual or other audits of the books of or reports to the Authority, the County or the Agency. Independent Redevelopment Consultant means any consultant or firm of such consultants appointed by or acceptable to the Agency, and who, or each of whom: (a) is judged by the Agency to have experience in matters relating to the collection of Tax Revenues or otherwise with respect to the financing of redevelopment projects; (b) is in fact independent and not under the domination of the Agency; (c) does not have any substantial interest, direct or indirect, with the Agency, other than as original purchaser of the Bonds or any Parity Debt; and (d) is not connected with the Agency as an officer or employee of the Agency, but who may be regularly retained to make reports to the Agency. Insurance Policy Senior Bonds means the financial guaranty insurance policy issued by the Insurer Senior Bonds guaranteeing the scheduled payment of principal and interest on the Senior Bonds when due. Insurance Policy Subordinate Bonds means the financial guaranty insurance policy issued by the Insurer Subordinate Bonds insuring the payment when due of the principal of and interest on the Subordinate Bonds as provided therein. Insurance Trustee Subordinate Bonds means The Bank of New York. A-3

148 Insurer Senior Bonds means the provider of the Insurance Policy Senior Bonds, being MBIA Insurance Corporation, or any successor thereto or assignee thereof. Insurer Subordinate Bonds means Radian Asset Assurance Inc., a corporation organized under the laws of the State of New York or any successor thereto. Loan Agreements means, collectively, the Pleasant Hill Loan Agreement, the West Pittsburg Loan Agreement, the Rodeo Loan Agreement, the North Richmond Loan Agreement and the Montalvin Manor Loan Agreement. Loan Fund means the fund by that name established and held by the Trustee pursuant to the applicable Indenture. Loans means, collectively, the five 2007A Loans and the four 2007B Loans made by the Authority to the Agency under, pursuant to and as such terms are defined in the Loan Agreements. Maximum Annual Debt Service under the Indenture means, as of the date of calculation, the maximum amount obtained by totaling, for the current or any future Bond Year, the sum of: (a) the principal amount of all Outstanding Bonds maturing in such Bond Year; (b) the aggregate principal amount of all Outstanding Term Bonds scheduled to be redeemed by operation of mandatory sinking fund deposits in such Bond Year, together with any premium thereon; and (c) the interest which would be due during such Bond Year on the aggregate principal amount of Bonds which would be Outstanding in such period if the Bonds are retired as scheduled, but deducting and excluding from such aggregate principal amount the aggregate principal amount of Bonds no longer Outstanding. Maximum Annual Debt Service under any Loan Agreement means, as of the date of calculation, the largest amount obtained by totaling, for the current or any future Bond Year, the sum of (a) the amount of interest payable on the applicable Loan under such Loan Agreement and all outstanding Parity Debt under such Loan Agreement in such Bond Year, assuming that principal thereof is paid as scheduled and that any mandatory sinking fund payments are made as scheduled, and (b) the amount of principal payable on the Loan and on all outstanding Parity Debt under such Loan Agreement in such Bond Year, including any principal required to be prepaid by operation of mandatory sinking fund payments. For purposes of such calculation, there shall be excluded a pro rata portion of each installment of principal of any Parity Debt under such Loan Agreement, together with the interest to accrue thereon, in the event and to the extent that the proceeds of such Parity Debt are deposited in an escrow fund from which amounts may not be released to the Agency unless the Tax Revenues for the current Fiscal Year (as evidenced in the written records of the County), plus at the option of the Agency the Additional Revenues, at least equal one hundred twenty percent (120%) of the amount of Maximum Annual Debt Service. Montalvin Manor Loan Agreement means the agreement by that name, dated as of May 1, 2007, between the Agency and the Authority, as supplemented by the First Supplement to Montalvin Manor Loan Agreement, dated as of May 1, 2007, between the Agency and the Authority. Moody s means Moody s Investors Service, its successors and assigns. North Richmond Loan Agreement means the agreement by that name, dated as of May 1, 1992, between the Agency and the Authority, as supplemented by (a) the First Supplement to North Richmond Loan Agreement, dated as of June 1, 1995, between the A-4

149 Agency and the Authority, (b) the Second Supplement to North Richmond Loan Agreement, dated as of March 1, 1999, between the Agency and the Authority, (c) the Third Supplement to North Richmond Loan Agreement, dated as of August 1, 2003, between the Agency and the Authority, (d) the Fourth Supplement to North Richmond Loan Agreement, dated as of August 1, 2003, between the Agency and the Authority, (e) the Fifth Supplement to North Richmond Loan Agreement, dated as of May 1, 2007, between the Agency and the Authority, and (f) the Sixth Supplement to North Richmond Loan Agreement, dated as of May 1, 2007, between the Agency and the Authority; and as it may from time to time be further supplemented, modified or amended in accordance with its terms. Owner, when used with respect to any Bond, means the person in whose name the ownership of such Bond is registered on the Bond registration books of the Trustee. Parity Debt means (a) any loans, bonds, notes, advances or indebtedness payable from Tax Revenues on a parity with a Loan to finance the related Redevelopment Project, issued or incurred pursuant to and in accordance with the respective Loan Agreement, or (b) any Refunding Debt issued or incurred in accordance with the provisions of the respective Loan Agreement. Parity Debt Instrument means any resolution, indenture of trust, trust agreement or other instrument authorizing the issuance of any Parity Debt. Participating Underwriter shall have the meaning ascribed thereto in the Continuing Disclosure Certificate. Permitted Investments means any of the following which at the time of investment are legal investments under the laws of the State for the moneys proposed to be invested therein: (a) direct obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury, and CATS and TIGRS) or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America; (b) bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself): (i) direct obligations or fully guaranteed certificates of beneficial ownership of the U.S. Export-Import Bank; (ii) certificates of beneficial ownership of the Farmers Home Administration; (iii) obligations of the Federal Financing Bank; (iv) Federal Housing Administration debentures; (v) participation certificates of the General Services Administration; (vi) guaranteed mortgage-backed bonds or guaranteed passthrough obligations of the Government National Mortgage Association; (vii) guaranteed Title XI financings of the U.S. Maritime Administration; (viii) project notes, local authority bonds, new communities debentures and U.S. public housing notes and bonds of the U.S. Department of Housing and Urban Development; (c) bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non-full faith and credit U.S. government agencies: (i) senior debt obligations of the Federal Home Loan Bank System; (ii) participation certificates and senior debt obligations of the Federal Home Loan Mortgage Corporation; (iii) mortgaged-backed securities and senior debt obligations A-5

150 of the Federal National Mortgage Association; (iv) obligations of the Resolution Funding Corporation, and (v) consolidated systemwide bonds and notes of the Farm Credit System; (d) money market funds registered under the Investment Company Act of 1940, whose shares are registered under the Securities Act of 1933, and having a rating by S&P of AAAm-G, AAA-m or Aam, and if rated by Moody s rated Aaa, Aa1 or Aa2 (such funds may include funds for which the Trustee, its affiliates or subsidiaries provide investment advisory or other management services); (e) certificates of deposit (including those of the Trustee and its affiliates) secured at all times by collateral described in (a) or (b) above, which are issued by commercial banks, savings and loan associations or mutual savings banks, and which collateral must be held by a third party and provided that the Bond Owners must have a perfected first security interest in such collateral; (f) certificates of deposit, savings accounts, deposit accounts or money market deposits (including those of the Trustee and its affiliates) which are fully insured by FDIC, including BIP and SAIF; (g) investment agreements, including guaranteed investment contracts, forward purchase agreements and reserve fund put agreements, acceptable to the Insurer Senior Bonds; (h) commercial paper rated, at the time of purchase, Prime-1 by Moody s and A-1 or better by S&P; (i) bonds or notes issued by any state or municipality which are rated by Moody s and S&P in one of the two highest rating categories assigned by such agencies; (j) federal funds or bankers acceptances with a maximum term of one year of any bank which an unsecured, uninsured and unguaranteed obligation rating of Prime-1 or A3 or better by Moody s and A-1 or A or better by S&P; (k) repurchase agreements for thirty days or less which provide for the transfer of securities from a dealer bank or securities firm (seller/borrower) to the Trustee and the transfer of cash from the Trustee to the dealer bank or securities firm with an agreement that the dealer bank or securities firm will repay the cash plus a yield to the Trustee in exchange for the securities at a specified date, which satisfy the following criteria (unless otherwise approved by the Insurer Senior Bonds): (i) repurchase agreements must be between the Trustee and (A) a primary dealer on the Federal Reserve reporting dealer list which is rated A or better by Moody s and S&P, or (B) a bank rated A or better by Moody s and S&P; (ii) the written repurchase agreement contract must include the following: (A) securities acceptable for transfer, which may be direct U.S. government obligations, or federal agency obligations backed by the full faith and credit of the U.S. government (including FNMA and the FHLMC); (B) the term of the repurchase agreement may be up to 30 days; (C) the collateral must be delivered to the Trustee or a third party acting as agent for the Trustee before or simultaneous with payment (perfection by possession of A-6

151 certificated securities); (D) the securities must be valued weekly, marked-tomarket at current market price plus accrued interest and the value of collateral must be equal to at least 104% of the amount of cash transferred by the Trustee to the dealer bank or securities firm under the repurchase agreement plus accrued interest (unless the securities used as collateral are obligations of the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, in which case the collateral must be equal to at least 105% of the amount of cash transferred by the Trustee to the dealer bank or securities firm under the repurchase agreement plus accrued interest); and (iii) a legal opinion must be delivered to the Trustee and the Authority to the effect that the repurchase agreement meets guidelines under state law for legal investment of public funds; (l) the Local Agency Investment Fund of the State of California, created pursuant to section of the California Government Code, to the extent the Trustee is authorized to register such investment in its name; (m) shares in a California common law trust established pursuant to Title 1, Division 7, Chapter 5 of the California Government Code which invests exclusively in investments permitted by Section of Title 5, Division 2, Chapter 4 of the California Government Code, as it may be amended, including but not limited to the California Arbitrage Management Program (CAMP); and (n) any other investments permitted in writing by the Insurer Senior Bonds. Plan Limitations means the limitations contained or incorporated in a Redevelopment Plan on (a) the aggregate principal amount of indebtedness payable from Tax Revenues which may be outstanding at any time, (b) the aggregate amount of taxes which may be divided and allocated to the Agency pursuant to the Redevelopment Plan, and (c) the period of time for establishing or repaying indebtedness payable from Tax Revenues. Pleasant Hill Loan Agreement means the agreement by that name, dated as of May 1, 1992, between the Agency and the Authority, as supplemented by (a) the First Supplement to Pleasant Hill Loan Agreement, dated as of March 1, 1999, between the Agency and the Authority, (b) the Second Supplement to Pleasant Hill Loan Agreement, dated as of August 1, 2003, between the Agency and the Authority, and (c) the Third Supplement to Pleasant Hill Loan Agreement, dated as of May 1, 2007, between the Agency and the Authority; and as it may from time to time be further supplemented, modified or amended in accordance with its terms. Prior Bay Point Bonds means the Authority s County of Contra Costa Public Financing Authority 1995 Tax Allocation Revenue Bonds, Series B (Bay Point Redevelopment Project Area) issued and outstanding under the Indenture of Trust, dated as of December 1, 1995, between the Authority and the Prior Trustee. Prior Bonds means, collectively, the Prior Bay Point Bonds, the Prior North Richmond Bonds, the Prior 1999 Bonds and the Prior 2003 Bonds. Prior Loans means, collectively, the portions of the outstanding loans under the Loan Agreements made from proceeds of the Prior Bonds, which are being prepaid with a portion of the proceeds of the Bonds, as further identified in the Escrow Agreements. A-7

152 Prior 1999 Bonds means the Authority s County of Contra Costa Public Financing Authority 1999 Tax Allocation Revenue Bonds (Pleasant Hill BART, North Richmond, Bay Point, Oakley and Rodeo Redevelopment Project Areas) issued and outstanding under the Indenture of Trust, dated as of March 1, 1999, between the Authority and the Prior Trustee. Prior North Richmond Bonds means the Authority s County of Contra Costa Public Financing Authority 1995 Tax Allocation Revenue Bonds, Series A (North Richmond Project Area) issued and outstanding under the Indenture of Trust, dated as of June 1, 1995, between the Authority and the Prior Trustee. Prior Trustee means U.S. Bank National Association, in its capacity as successor trustee for the Prior 1999 Bonds, the Prior Bay Point Bonds and/or the Prior North Richmond Bonds, as applicable, and in its capacity as trustee for the Prior 2003 Bonds. Prior 2003 Bonds means, collectively, (i) the Authority s County of Contra Costa Public Financing Authority 2003 Tax Allocation Revenue Bonds, Series A (Multiple Project Areas) issued and outstanding under the Indenture of Trust, dated as of August 1, 2003, between the Authority and the Prior Trustee pursuant to which such bonds were issued; and (ii) the Authority s County of Contra Costa Public Financing Authority 2003 Tax Allocation Revenue Bonds, Series B (Multiple Project Areas Housing Set Aside Revenues) issued and outstanding under the Indenture of Trust, dated as of August 1, 2003, between the Authority and the Prior Trustee pursuant to which such bonds were issued. Program Fund means the fund by that name established and held by the Trustee pursuant to the Indenture. Qualified Reserve Fund Credit Instrument means (A) a Surety Bond, as such term is used in the Loan Agreements; or (B) an irrevocable standby or direct-pay letter of credit or surety bond (and not any guaranteed investment contract or similar instrument) issued by a commercial bank or insurance company and deposited with the Trustee pursuant to a Loan Agreement provided that all of the following requirements are met: (i) the long-term credit rating of such bank or insurance company is in the highest rating category by Moody s and S&P, or the claims paying ability of such insurance company is rated in the highest rating category by A.M. Best & Company; (ii) such letter of credit or surety bond has a term of at least twelve (12) months; (iii) such letter of credit or surety bond has a stated amount at least equal to the portion of the respective Reserve Requirement with respect to which funds are proposed to be released pursuant to the applicable Loan Agreement; and (iv) the Trustee is authorized pursuant to the terms of such letter of credit or surety bond to draw thereunder an amount equal to any deficiencies which may exist from time to time in the amounts available to repay the principal of and interest on the respective Loan. Record Date means, with respect to any Interest Payment Date, the fifteenth (15th) calendar day of the month immediately preceding such Interest Payment Date, whether or not such day is a Business Day. Refunding Debt means any loan, bond, note, advance or indebtedness payable from the applicable Tax Revenues on a parity with a Loan; provided that the proceeds thereof are used to refund all or a portion of such Loan or any Parity Debt related thereto (and to pay costs of issuance of and fund a reserve fund for such Refunding Debt), and the debt service due on such Refunding Debt in any Bond Year in which such Loan or such Parity Debt is Outstanding is not greater than the debt service due on the portion of such Loan or any Parity Debt refunded with the proceeds of such Refunding Debt. A-8

153 Reimbursement Agreements means, collectively, any agreements entered into by the Agency which are permitted under a Loan Agreement, under which the Agency is obligated to pay or cause to be paid to other entities amounts which would otherwise be treated as Tax Revenues, as defined in the respective Loan Agreement. Reserve Requirement Senior means, as of any calculation date under any respective Loan Agreement, an amount equal to Maximum Annual Debt Service (as defined in such Loan Agreement taking into account only amounts due on the unpaid portion of the Loan under such Loan Agreement attributable to the 2007A Bonds, and not amounts due on the portion of the unpaid Loan under such Loan Agreement attributable to the 2007B Bonds, or any other Parity Debt. Reserve Requirement Subordinate means, as of any date of calculation under any respective Loan Agreement, an amount equal to (i) Maximum Annual Debt Service (as defined in such Loan Agreement) taking into account only amounts due on the Loan under such Loan Agreement (and not amounts due on any other Parity Debt), less (ii) the then amount of the Reserve Requirement Senior. Revenues means: (a) all amounts payable by the Agency pursuant to the loan repayment provisions of the Loan Agreements relating to the 2007A Loan and any 2007B Loan; (b) all moneys deposited and held from time to time by the Trustee in the funds and accounts established under the Indenture, other than in the Program Fund or in the Rebate Account; and (c) income and gains with respect to the investment of amounts on deposit in the funds and accounts established under the Indenture, other than the Rebate Account, the Program Fund and the Costs of Issuance Fund. Rodeo Loan Agreement means the agreement by that name, dated as of March 1, 1999, between the Agency and the Authority, as supplemented by (a) the First Supplement to Rodeo Loan Agreement, dated as of August 1, 2003, between the Agency and the Authority, (b) the Second Supplement to Rodeo Loan Agreement, dated as of August 1, 2003, between the Agency and the Authority, (c) the Third Supplement to Rodeo Loan Agreement, dated as of May 1, 2007, between the Agency and the Authority, and (d) the Fourth Supplement to Rodeo Loan Agreement, dated as of May 1, 2007, between the Agency and the Authority; and as it may from time to time be further supplemented, modified or amended in accordance with its terms. S&P means Standard & Poor s Ratings Services, its successors and assigns. Subordinate Debt means any loans, advances or indebtedness issued or incurred by the Agency in accordance with the requirements of a Loan Agreement, which are either: (a) payable from, but not secured by a pledge of or lien upon, the related Tax Revenues; or (b) secured by a pledge of or lien upon such Tax Revenues which is subordinate to the pledge of and lien upon the Tax Revenues under such Loan Agreement for the security of the related Loan and any Parity Debt with respect thereto. Senior Bonds means, collectively, the Series A Bonds and the Series A-T Bonds. Series A Bonds means the County of Contra Costa Public Financing Authority 2007 Taxable Tax Allocation Revenue Bonds, Series A (Contra Costa Centre, North Richmond, Bay Point, Rodeo and Montalvin Manor Project Areas) authorized by and at any time Outstanding pursuant to the Bond Law and the Indenture. Series A-T Bonds means the County of Contra Costa Public Financing Authority 2007 Taxable Tax Allocation Revenue Bonds, Series A-T (North Richmond, Bay Point, A-9

154 Rodeo and Montalvin Manor Project Areas) authorized by and at any time Outstanding pursuant to the Bond Law and the Indenture. Series B Bonds means the County of Contra Costa Public Financing Authority 2007 Tax Allocation Revenue Bonds, Subordinate Series B (Contra Costa Centre, North Richmond, Bay Point, Rodeo and Montalvin Manor Project Areas) authorized by and at any time Outstanding pursuant to the Bond Law and the Indenture. State means the State of California. Subordinate Bonds means the Series B Bonds. Surety Bond means a Debt Service Reserve Surety Bond issued by the Insurer pertaining to a 2007A Loan. Supplemental Indenture means any indenture, agreement or other instrument duly executed by the Authority and the Trustee in accordance with the provisions of the Indenture. Tax Code means the Internal Revenue Code of 1986, as amended. Any reference to a provision of the Tax Code shall include the applicable Tax Regulations with respect to such provision. Tax Regulations means temporary and permanent regulations promulgated under or with respect to Section 103 and Sections 141 through 150, inclusive, of the Tax Code. Tax Revenues means all taxes annually allocated to the Agency with respect to a Project Area following the Closing Date pursuant to Article 6 of Chapter 6 (commencing with Section 33670) of the Redevelopment Law and Section 16 of Article XVI of the Constitution of the State and as provided in the related Redevelopment Plan, including (a) all payments, subventions and reimbursements (if any) to the Agency specifically attributable to ad valorem taxes lost by reason of tax exemptions and tax rate limitations, and (b) all amounts of such taxes required to be deposited into the Low and Moderate Income Housing Fund of the Agency in any Fiscal Year pursuant to Section of the Redevelopment Law, to the extent permitted to be applied to the payment of principal, interest and premium (if any) with respect to the related Loan and any Parity Debt with respect thereto; but excluding (w) amounts of such taxes required to be deposited into the Low and Moderate Income Housing Fund of the Agency in any Fiscal Year pursuant to Section of the Redevelopment Law, to the extent not permitted to be applied to the payment of principal, interest and premium (if any) with respect to such Loan and/or any Parity Debt with respect thereto, (x) all other amounts of such taxes required to be deposited into the Low and Moderate Income Housing Fund and Investment Earnings, and also excluding all amounts required to be paid to taxing entities pursuant to Sections and of the Redevelopment Law unless such payments are subordinated to payments due under a Loan Agreement pursuant to Section (e) of the Redevelopment Law, (y) all amounts of such taxes required to be paid by the Agency pursuant to the Reimbursement Agreements, except and to the extent that any amounts so payable are payable on a basis subordinate to the payment of such Loan and/or any Parity Debt, as applicable, and (z) the Business Inventory Tax Subvention. Tax Revenue Certif icate means a certificate of the Agency identifying the amount of all Tax Revenues received or to be received by the Agency in the then current Fiscal Year, based on assessed valuation of property in the Project Area as evidenced in the written records of the County. A-10

155 Trust Office means the corporate trust office of the Trustee at the address set forth in the Indenture, and such office as the Trustee may designate in writing to the Authority from time to time as the place for transfer, exchange or payment of the Bonds. Trustee means U.S. Bank National Association and its successors and assigns, and any other corporation or association which may at any time be substituted in its place as provided in the Indenture. West Pittsburg Loan Agreement means the agreement by that name, dated as of May 1, 1992, between the Agency and the Authority, as supplemented by (a) the First Supplement to West Pittsburg Loan Agreement, dated as of December 1, 1995, between the Agency and the Authority, (b) the Second Supplement to West Pittsburg Loan Agreement, dated as of March 1, 1999, between the Agency and the Authority, (c) the Third Supplement to West Pittsburg Loan Agreement, dated as of August 1, 2003, between the Agency and the Authority, (d) the Fourth Supplement to West Pittsburg Loan Agreement, dated as of August 1, 2003, between the Agency and the Authority, (e) the Fifty Supplement to West Pittsburg Loan Agreement, dated as of May 1, 2007, between the Agency and the Authority, and (f) the Sixth Supplement to West Pittsburg Loan Agreement, dated as of May 1, 2007, between the Agency and the Authority; and as it may from time to time be further supplemented, modified or amended in accordance with its terms. THE INDENTURE Establishment of Funds and Accounts; Flow of Funds The Indenture provides for the following funds and accounts: Loan Fund. The Trustee shall establish and maintain a separate fund to be known as the Loan Fund under the Indenture and within such fund a Tax-Exempt Account and a Taxable Account into which shall be deposited a portion of the proceeds of sale of the Bonds pursuant to the Indenture. The Trustee shall disburse all amounts in the Loan Fund on the Closing Date in the amounts specified in the Indenture to the related Loan Disbursement Funds established under the Loan Agreements. Costs of Issuance Fund. There is established under the Indentures an account to be held by the Trustee known as the Costs of Issuance Fund into which shall be deposited a portion of the proceeds of the Loans in the aggregate amount specified in the Indenture, pursuant to each of the Loan Agreements. The moneys in the Costs of Issuance Fund shall be used to pay Costs of Issuance from time to time upon receipt of a Request of the Authority. On November 1, 2007, or upon the earlier receipt by the Trustee of a Request of the Authority stating that all applicable Costs of Issuance have been paid, the Trustee shall transfer all remaining amounts in the Costs of Issuance Fund to the Authority, to be used to pay any administrative expenses of the Authority related to the Bonds, the Prior Bonds, the Loan Agreements or the Prior Loans. North Richmond Escrow Fund. The Trustee shall establish and maintain a separate fund to be known as the North Richmond Escrow Fund under the Indenture into which shall be deposited a portion of the proceeds of the Bonds pursuant to the Indenture, and within said fund a separate account to the known as the Capitalized Interest Account North Richmond into which shall be deposited a portion of the proceeds of the Loan made under the North Richmond Loan Agreement. The North Richmond Escrow Fund and the A-11

156 Capitalized Interest Account North Richmond shall be held by the Trustee in trust for the benefit of the owners of the Bonds and amounts on deposit therein shall be used and applied as described below. (b) Amounts in the North Richmond Escrow Fund shall be applied as follows: (i) At any time prior to the date on which no further transfers may be made from the North Richmond Escrow Fund to the Loan Fund under clause (ii) below, the Agency may file with the Trustee (with a copy of the Authority) a Tax Revenue Certificate accompanied by (A) a Written Certificate of the Agency to the effect that the Redevelopment Plan (as defined in the North Richmond Loan Agreement) has been amended, such that the Plan Limitations (as defined in the North Richmond Loan Agreement) have been increased as necessary to allow for the payment of additional debt of the North Richmond Project Area in an amount at least equal to the amount then proposed to be released from the North Richmond Escrow Fund and otherwise on the dates referenced in the revised loan payment scheduled described in clause (B)(2) below; and (B) a Report of an Independent Redevelopment Consultant which (1) identifies the amount then proposed to be released from the North Richmond Escrow Fund (which shall be an integral multiple of $5,000), (2) sets forth a new loan payment schedule for the North Richmond Loan Agreement which increases the loan payments referenced therein as necessary to repay the portion of the Escrow Bonds that represent the portion of the monies in the North Richmond Escrow Fund proposed to be released, and (3) which identifies the Maximum Annual Debt Service (as defined in the North Richmond Loan Agreement) which will be in effect following such release, and which Report concludes that the amount of Tax Revenues (as defined in the North Richmond Loan Agreement) for the then current Fiscal Year based on the assessed valuation of property in the North Richmond Project Area, plus the Additional Revenues (as defined in the North Richmond Loan Agreement) are at least equal to one hundred twenty-five percent (125%) of the amount of Maximum Annual Debt Service identified in the Report (provided that such percentage of the amount of Maximum Annual Debt Service shall be one hundred thirty percent (130%) so long as any Loan, 1995 Loan, 1999 Loan, 2003A Loan or 2003B Loan is not fully paid, as such terms are used in the North Richmond Loan Agreement). Promptly following receipt of any Written Certificate of the Agency and Report of an Independent Redevelopment Consultant describe above, the Trustee shall withdraw from the North Richmond Escrow Fund the amount to be released as identified in the Report and transfer such amount, to provide additional funding for the North Richmond Loan, as provided in the Indenture. (ii) On June 15, 2009, the Trustee shall transfer all amounts then on deposit in the North Richmond Escrow Fund to the Principal Account, to be applied to the mandatory redemption on the succeeding August 1 of a portion of the Escrow Bonds pursuant to the Indenture, with the specific Escrow Bonds to be redeemed to be identified by the Authority in a Certificate of the Authority delivered to the Trustee, and to be such that the aggregate of the scheduled principal and interest due on the Loans which remain outstanding following such redemption will be sufficient in time and amount to timely pay the principal and interest due on the Bonds which will remain Outstanding following the redemption of the Escrow Bonds to occur under the Indenture. Notwithstanding the foregoing, the June 15, 2009 date referred to in the preceding sentence shall be changed to any succeeding December 15 or June 15 identified by the Agency in a Written Certificate of the Agency which sets forth the new date for the transfer of amounts in the North Richmond Escrow Fund to the Principal Account to be used to redeem Escrow A-12

157 Bonds pursuant to the Indenture and which is accompanied by cash in an amount (which amount the Trustee shall deposit to the Capitalized Interest Account North Richmond) which is certified by the Agency as sufficient to pay interest on the portion of the Escrow Bonds which represent the funds then on deposit in the North Richmond Escrow Fund from June 15, 2009 to the new December 15 of June 15 date for the transfer of funds in the Escrow Fund as identified in such Written Certificate of the Agency. (iii) All earnings on the investment of amounts on deposit in the North Richmond Escrow Fund shall be deposited by the Trustee in the Interest Account promptly upon receipt thereof, but no less frequently than each Interest Payment Date. Amounts in the Capitalized Interest Account North Richmond shall be transferred on each Interest Payment Date to the Interest Account in an amount sufficient to pay interest then due on the portion of the Escrow Bonds which represent the funds then on deposit in the North Richmond Escrow Fund not otherwise payable pursuant to any revised loan payment schedule described in clause (i)(b)(2) above. When all amounts have been released from the North Richmond Escrow Fund, all remaining amounts in the Capitalized Interest Account North Richmond shall be transferred to the 2007 Redevelopment Fund under the North Richmond Loan Agreement or as otherwise directed by the Agency. Bay Point Escrow Fund. The Trustee shall establish and maintain a separate fund to be known as the Bay Point Escrow Fund under the Indenture into which shall be deposited a portion of the proceeds of the Bonds pursuant to the Indenture, and within said fund a separate account to the known as the Capitalized Interest Account Bay Point into which shall be deposited a portion of the proceeds of the Loan made under the West Pittsburg Loan Agreement. The Bay Point Escrow Fund and the Capitalized Interest Account Bay Point shall be held by the Trustee in trust for the benefit of the owners of the Bonds and amounts on deposit therein shall be used and applied solely as described below. Amounts in the Bay Point Escrow Fund shall be applied as follows: (i) At any time prior to the date on which no further transfers may be made from the Bay Point Escrow Fund to the Loan Fund under clause (ii) below, the Agency may file with the Trustee (with a copy of the Authority) a Tax Revenue Certificate accompanied by (A) a Written Certificate of the Agency to the effect that the Redevelopment Plan (as defined in the West Pittsburg Loan Agreement) has been amended, such that the Plan Limitations (as defined in the West Pittsburg Loan Agreement) have been increased as necessary to allow for the payment of additional debt of the West Pittsburg Project Area in an amount at least equal to the amount then proposed to be released from the Bay Point Escrow Fund and otherwise on the dates referenced in the revised loan payment scheduled described in clause (B)(2) below; and (B) a Report of an Independent Redevelopment Consultant which (1) identifies the amount then proposed to be released from the Bay Point Escrow Fund (which shall be an integral multiple of $5,000), (2) sets forth new loan payment schedules for the West Pittsburg Loan Agreement which increases the loan payments referenced therein as necessary to repay the portion of the Escrow Bonds that represent the portion of the monies in the Bay Point Escrow Fund proposed to be released, and (3) which identifies the Maximum Annual Debt Service (as defined in the West Pittsburg Loan Agreement) which will be in effect following such release, and which Report concludes that the amount of Tax Revenues (as defined in the West Pittsburg Loan Agreement) for the then current Fiscal Year based on the assessed valuation of property in the West Pittsburg Project Area, plus the Additional A-13

158 Revenues (as defined in the West Pittsburg Loan Agreement) are at least equal to one hundred twenty-five percent (125%) of the amount of Maximum Annual Debt Service identified in the Report (provided that such percentage of the amount of Maximum Annual Debt Service shall be one hundred fifty percent (150%) so long as any Loan, 1995 Loan, 1999 Loan, 2003A Loan or 2003B Loan is not fully paid, as such terms are use in the West Pittsburg Loan Agreement). Promptly following receipt of any Written Certificate of the Agency and Report of an Independent Redevelopment Consultant describe above, the Trustee shall withdraw from the Bay Point Escrow Fund the amount to be released as identified in the Report and transfer such amount to provide additional funding for the West Pittsburg Loan, as provided in the Indenture. (ii) On June 15, 2009, the Trustee shall transfer all amounts then on deposit in the Bay Point Escrow Fund to the Principal Account, to be applied to the mandatory redemption on the succeeding August 1 of a portion of the Escrow Bonds pursuant to the Indenture, with the specific Escrow Bonds to be redeemed to be identified by the Authority in a Certificate of the Authority delivered to the Trustee, and to be such that the aggregate of the scheduled principal and interest due on the Loans which remain outstanding following such redemption will be sufficient in time and amount to timely pay the principal and interest due on the Bonds which will remain Outstanding following the redemption of the Escrow Bonds to occur under the Indenture. Notwithstanding the foregoing, the June 15, 2009 date referred to in the preceding sentence shall be changed to any succeeding December 15 or June 15 identified by the Agency in a Written Certificate of the Agency which sets forth the new date for the transfer of amounts in the Bay Point Escrow Fund to the Principal Account to be used to redeem Escrow Bonds pursuant to the Indenture and which is accompanied by cash in an amount (which amount the Trustee shall deposit to the Capitalized Interest Account Bay Point) which is certified by the Agency as sufficient to pay interest on the portion of the Escrow Bonds which represent the funds then on deposit in the Bay Point Escrow Fund from June 15, 2009 to the new December 15 of June 15 date for the transfer of funds in the Bay Point Escrow Fund as identified in such Written Certificate of the Agency. (iii) All earnings on the investment of amounts on deposit in the Bay Point Escrow Fund shall be deposited by the Trustee in the Interest Account promptly upon receipt thereof, but no less frequently than each Interest Payment Date. Amounts in the Capitalized Interest Account Bay Point shall be transferred on each Interest Payment Date to the Interest Account in an amount sufficient to pay interest then due on the portion of the Escrow Bonds which represent the funds then on deposit in the Bay Point Escrow Fund not otherwise payable pursuant to any revised loan payment schedules described in clause (i)(b)(2) above. When all amounts have been released from the Bay Point Escrow Fund, all remaining amounts in the Capitalized Interest Account Bay Point shall be transferred to the 2007 Redevelopment Fund under the Bay Point Loan Agreement or as otherwise directed by the Agency. Program Fund. There is established under the Indenture a separate fund to be known as the Program Fund and, within such fund, a Taxable Account and a Tax- Exempt Account which fund and accounts shall be held by the Trustee, and into which accounts the Trustee shall deposit the amounts described in the Indenture. The moneys in the Program Fund shall be used by the Authority from time to time to pay or reimburse the costs of public capital improvements upon submission to the Trustee of a Certificate of the Authority stating (a) the person to whom payment is to be made, (b) the amount to be paid and the account within the Program Fund from which the funds are to be withdrawn, (c) the A-14

159 purpose for which the obligation was incurred, (d) that such payment is in respect of a public capital improvement eligible under the Act to be financed by the Authority and consistent with the public hearing held pursuant to Section (a)(2) of the Bond Law with respect to the Bonds, and (e) that such amount has not been the subject of a prior disbursement from the Program Fund. When no amounts remain on deposit in either the Taxable Account or the Tax-Exempt Account of the Program Fund, the Program Fund shall be closed. Revenue Fund; Deposit and Transfer of Amounts Therein. All Revenues described in clause (a) of the definition of Revenues in the Indenture will be deposited by the Trustee in the Revenue Fund established under the Indenture promptly upon receipt. On or before each date on which interest on or principal of the Bonds becomes due and payable, the Trustee shall transfer from the Revenue Fund and deposit into the following respective accounts (each of which the Trustee shall establish and maintain within the Revenue Fund), the following amounts in the following order of priority, the requirements of each such account at the time of deposit to be satisfied before any transfer is made to any account subsequent in priority: (i) On or before each date on which interest on the Senior Bonds becomes due and payable, the Trustee shall deposit in the Interest Account an amount required to cause the aggregate amount on deposit in the Interest Account to equal the amount of interest becoming due and payable on such date on all Outstanding Senior Bonds. (ii) On or before each date on which the principal of the Senior Bonds shall be payable, the Trustee shall deposit in the Principal Account an amount required to cause the aggregate amount on deposit in the Principal Account to equal the aggregate amount of principal coming due and payable on such date on the Senior Bonds pursuant to the Indenture, or the redemption price of the Senior Bonds (consisting of the principal amount thereof and any applicable redemption premiums) required to be redeemed on such date pursuant to any of the provisions of the Indenture. (iii) On or before each date on which interest on the Subordinate Bonds becomes due and payable, the Trustee shall deposit in the Interest Account an amount required to cause the aggregate amount on deposit in the Interest Account to equal the amount of interest becoming due and payable on such date on all Outstanding Bonds. (iv) On or before each date on which the principal of the Subordinate Bonds shall be payable, the Trustee shall deposit in the Principal Account an amount required to cause the aggregate amount on deposit in the Principal Account to equal the aggregate amount of principal coming due and payable on such date on the Bonds pursuant to the Indenture, or the redemption price of the Bonds (consisting of the principal amount thereof and any applicable redemption premiums) required to be redeemed on such date pursuant to any of the provisions of the Indenture. (v) In the event that any amounts remain on deposit in the Revenue Fund on any August 1st after making all of the transfers from the Revenue Fund with respect to such date theretofore required under the foregoing provisions, the Trustee shall apply such amounts for the following purposes in the following order of priority, as shall be directed by the Authority in writing: A-15

160 (A) such amounts may, at the election of the Authority, be applied to pay or reimburse the payment of the reasonable costs and expenses incurred by the Authority to administer the Bonds and the Loans, (B) to the extent permitted under the Bond Law and as so confirmed and directed in writing by the Authority, such amounts may be used for any lawful purpose of the Authority and may be accumulated in the Revenue Fund for any such purpose as directed by the Authority to the Trustee in writing, and (C) the remainder of such amounts shall be paid to the Agency to be applied by the Agency for any lawful purpose of the Agency. Interest Account. Subject to the provisions of the Indenture, all amounts in the Interest Account shall be used and withdrawn by the Trustee solely for the purpose of paying interest on the Bonds as it shall become due and payable, including upon the redemption of any Bonds; provided that any amounts deposited to the Interest Account pursuant to clause (i) above shall only be used to pay interest on the Senior Bonds. In the event that, on any date on which interest on the Bonds is due, amounts in the Interest Account are insufficient for the foregoing purpose, amounts shall be used to pay interest due on the Senior Bonds prior to the use of monies in the Interest Account to pay interest due on the Subordinate Bonds. Any amounts on deposit in the Interest Account on any Interest Payment Date and not required to pay interest then due and payable on the Bonds shall be retained in the Interest Account and credited towards the payment of interest on the Bonds next coming due. Principal Account. Subject to the provisions of the Indenture, all amounts in the Principal Account shall be used and withdrawn by the Trustee solely to pay (i) the principal of the Bonds at the maturity thereof, (ii) the principal of the Term Bonds upon the mandatory sinking fund redemption thereof pursuant to the Indenture, and (iii) the principal of and premium (if any) on any Bonds upon the redemption thereof pursuant to the Indenture; provided that any amounts deposited to the Principal Account pursuant to clause (ii) above shall only be used to pay any such amounts owing on the Senior Bonds. In the event that, on any date on which principal on the Bonds is due, amounts in the Principal Account are insufficient for the foregoing purpose, amounts shall be used to pay such amounts due on the Senior Bonds prior to the use of monies in the Principal Account to pay such amounts due on the Subordinate Bonds. All amounts on deposit in the Principal Account on the first day of any Bond Year, to the extent not required to pay the principal of any Outstanding Bonds then having come due and payable, shall be withdrawn therefrom and transferred to the Agency to be used for any lawful purposes of the Agency. Reserve Funds. In the event that the amount on deposit in the Interest Account or the Principal Account on any date that amounts are due on the Senior Bonds are not sufficient to fully pay the interest and/or principal so due on the Senior Bonds, the Trustee shall determine the Loan or Loans that have not fully paid amounts due on such Loan or Loans on such date and shall draw on the Senior Account of the respective 2007A Reserve Fund or 2007B Reserve Fund with respect to the delinquent Loan, as applicable, an amount equal to the insufficiency to pay the Senior Bonds in full, not to exceed, with respect to any Senior Account, the lesser of the amount that is delinquent on the corresponding Loan or the amount then on deposit in the applicable Senior Account. In the event that the amounts so drawn on the Senior Accounts of the delinquent Loans are not sufficient to pay all amounts then due on the Senior Bonds, the available amounts drawn from the applicable Senior Accounts shall first be applied to the payment of interest then due on the Senior Bonds and then to the payment of principal due on the Senior Bonds. A-16

161 In the event that the amount on deposit in the Interest Account or the Principal Account on any date that amounts are due on the Subordinate Bonds are not sufficient to fully pay the interest and/or principal so due on the Subordinate Bonds, the Trustee shall determine the Loan or Loans that have not fully paid amounts due on such Loan or Loans on such date and shall draw on the Subordinate Account of the respective 2007A Reserve Fund or 2007B Reserve Fund with respect to the delinquent Loan, as applicable, an amount equal to the insufficiency to pay the Subordinate Bonds in full, not to exceed, with respect to any Subordinate Account, the lesser of (i) the amount that is delinquent on the corresponding Loan, less any transfer from the Senior Accounts of the 2007A Reserve Fund and of the 2007 Reserve Fund pursuant to the preceding paragraph on such date, or (ii) the amount then on deposit in the applicable Subordinate Account. In the event that the amounts so drawn on the Subordinate Accounts of the delinquent Loans are not sufficient to pay all amounts then due on the Subordinate Bonds, the available amounts drawn from the applicable Subordinate Accounts shall first be applied to the payment of interest then due on the Subordinate Bonds and then to the payment of principal due on the Subordinate Bonds. Rebate Account. The Trustee shall deposit in the Rebate Account established under the Indenture from time to time, from payments made by the Agency for such purpose pursuant to the respective Loan Agreements, an amount determined by the Authority to be subject to rebate to the United States of America in accordance with the Indenture. Amounts in the Rebate Account shall be applied and disbursed by the Trustee solely for the purposes and at the times set forth in Requests of the Authority filed with the Trustee pursuant to the federal rebate covenant provisions of the Indenture. Investment of Funds All moneys in any of the funds or accounts held by the Trustee under an Indenture or the related Loan Agreements will be invested by the Trustee solely in Permitted Investments as directed by the Agency in advance of the making of such investments. In the absence of any such direction of the Agency, the Trustee will invest any such moneys in Permitted Investments described in clause (d) of the definition thereof in the indentures. All interest, profits and other income received from the investment of moneys in any fund or account established pursuant to an Indenture shall be deposited in the Revenue Fund established under such Indenture, except that such interest, profits and other income (i) on amounts in a Costs of Issuance Fund shall be retained therein to be used to the purposes thereof, (ii) on amounts in the accounts within the Program Fund shall be retained in such accounts, respectively, to be used for the purposes thereof, and (iii) on amounts in a Rebate Account shall be retained therein to be used for the purposes thereof. Permitted Investments acquired as an investment of moneys in any fund established under an Indenture shall be credited to such fund. The Trustee or any of its affiliates may act as principal or agent in the making or disposing of any investment. The Trustee shall sell or present for redemption, any Permitted Investments so purchased whenever it shall be necessary to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the fund to which such Permitted Investments is credited, and the Trustee shall not be liable or responsible for any loss resulting from any investment made or sold pursuant to the Indenture. For purposes of investment, the Trustee may commingle moneys in any of the funds and accounts established under the Indenture. A-17

162 The Trustee or any of its affiliates may act as sponsor, advisor or manager in connection with any investments made by the Trustee under the Indenture. All investments of amounts deposited in any fund or account created by or pursuant to an Indenture or the Loan Agreements, or otherwise containing gross proceeds of the Bonds (within the meaning of Section 148 of the Tax Code), shall be acquired and disposed of and valued at Fair Market Value; provided, however, that investments in funds or accounts (or portions thereof) that are subject to a yield restriction under applicable provisions of the Tax Code) shall be valued at their present value (within the meaning of Section 148 of the Tax Code). Covenants of the Authority Payment of Bonds. The Authority will punctually pay or cause to be paid the principal, interest and premium (if any) to become due in respect of all the Bonds in strict conformity with the terms of such Bonds and of such Indenture, but only out of Revenues and other assets pledged for such payment as provided in the Indenture. The Authority will not create, or permit the creation of, any pledge, lien, charge or other encumbrance upon the Revenues and other assets pledged or assigned under the Indenture while any of the Bonds are Outstanding, except the pledge and assignment created by the Indenture. Extension of Payment of Bonds. The Authority shall not directly or indirectly extend or assent to the extension of the maturity of any of the Bonds or the time of payment of any claims for interest by the purchase of such Bonds or by any other arrangement, and in case the maturity of any of the Bonds or the time of payment of any such claims for interest shall be extended, such Bonds or claims for interest shall not be entitled, in case of any default under the Indenture, to the benefits of the Indenture, except subject to the prior payment in full of the principal of all of the Bonds then Outstanding and of all claims for interest thereon which shall not have been so extended. Nothing in this covenant shall be deemed to limit the right of the Authority to issue Bonds for the purpose of refunding any Outstanding Bonds, and such issuance shall not be deemed to constitute an extension of maturity of the Bonds. Accounting Records and Financial Statements. The Trustee will at all times keep, or cause to be kept, proper books of record and account, prepared in accordance with industry standards, in which complete and accurate entries will be made of all transactions relating to the proceeds of the Bonds, the Revenues and all funds and accounts established pursuant to the Indenture and the Loan Agreements. Such books of record and account will be available for inspection by the Authority and the Agency, during regular business hours with reasonable prior notice. No Additional Obligations. Except for the Bonds issued on the Closing Date under the respective Indenture, the Authority covenants that no additional bonds, notes or other indebtedness shall be issued or incurred which are payable out of the Revenues in whole or in part. Tax Covenants. The Authority will not take, nor permit nor suffer to be taken by the Trustee or otherwise, any action with respect to the proceeds of the Series A Bonds which would cause any of the Series A Bonds to be arbitrage bonds or private activity bonds within the meaning of applicable federal tax law. The Authority will cause to be calculated annually all excess investment earnings which are required to be rebated to the United States of America under applicable federal tax law, and will cause all required amounts to be rebated from payments made by the Agency under the Loan Agreements. A-18

163 Loan Agreements. The Trustee will (subject to the provisions of the Indenture) promptly collect all amounts due from the Agency on each 2007A Loan and 2007B Loan under and pursuant to the Loan Agreements. Subject to the provisions of the Indenture governing the enforcement of remedies upon the occurrence of an event of default, the Trustee shall enforce, and take all steps, actions and proceedings which the Trustee determines to be reasonably necessary for the enforcement of all of its rights thereunder as assignee of the Authority and for the enforcement of all of the obligations of the Agency under the Loan Agreements. The Authority and the Agency may at any time amend or modify a Loan Agreement pursuant to the applicable provisions thereof, but only: (a) if the Authority, the Agency or the Trustee first obtains the written consent of the Owners of a majority in aggregate principal amount of the related Bonds then Outstanding to such amendment or modification, provided, however, that no such amendment or modification shall (i) extend the maturity of or reduce the amount of interest or principal payments on a 2007A Loan or a 2007B Loan, or otherwise alter or impair the obligation of the Agency to pay the principal, interest or prepayment premiums on the 2007 Loans at the time and place and at the rate and in the currency provided in the Loan Agreement, without the express written consent of the Owner of each affected Bond, (ii) reduce the percentage of Bonds required for the written consent to any such modification or amendment thereof or of the related Indenture, or (iii) without its written consent thereto, modify any of the rights or obligations of the Trustee; or (b) without the consent of any of the Bond Owners, if such amendment or modification is for any one or more of the following purposes- (i) to add to the covenants and agreements of the Agency contained in such Loan Agreement other covenants and agreements thereafter to be observed, or to limit or surrender any rights or power therein reserved to or conferred upon the Agency so long as such limitation or surrender of such rights or powers shall not materially adversely affect the Owners of the Bonds; (ii) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained in such Loan Agreement, or in any other respect whatsoever as the Agency may deem necessary or desirable, provided under any circumstances that such modifications or amendments shall not materially adversely affect the interests of the Owners of the Bonds; (iii) to amend any provision thereof relating to the Tax Code, to any extent whatsoever but only if and to the extent such amendment will not adversely affect the exclusion from gross income for federal income tax purposes of interest on any of the Series A Bonds or any of the Series B Bonds under the Tax Code, in the opinion of Bond Counsel; (iv) to provide for the issuance of Parity Debt as defined in and under and in accordance with the provisions of such Loan Agreement; or (v) to provide for a Qualified Reserve Fund Credit Instrument for amounts held in a Reserve Fund under a Loan Agreement, as permitted by such Loan Agreement. Nothing in the Indenture shall prevent the Agency and the Authority from entering into any amendment or modification of a Loan Agreement which solely affects a particular Bond or Bonds all of the Owners of which shall have consented to such amendment or modification. The Trustee shall be entitled to rely upon the opinion of Bond Counsel A-19

164 stating that the requirements of the Indenture have been met with respect to any amendment or modification of a Loan Agreement. The Authority may sell a Loan Agreement upon written direction of the Authority to the Trustee, specifying the principal amount and purchase price of such Loan to be sold, accompanied by: (i) cash and a written direction of the Authority as to any investment of such cash in Defeasance Obligations, (ii) a certificate of the Authority specifying the maturity or maturities and principal amounts of the Bonds to be defeased (in the manner contemplated by the Indenture) with such cash and any Defeasance Obligations specified pursuant to the preceding clause (i), (iii) a written certificate of an Independent Accountant to the effect that the aggregate of the principal and interest due on the portion, if any, of the Loans to be retained by the Trustee following such sale will be sufficient in time and amount to timely pay the principal and interest due on the Bonds which will remain Outstanding following such sale, and (iv) an opinion of Bond Counsel to the effect that such sale, in itself, will not adversely affect the exclusion from the gross incomes of the Owners of the interest on the Series A Bonds or on the Series B Bonds. Upon receipt of such documents, the Trustee shall invest such cash as specified by the Authority pursuant to clause (i) above and hold such investments and any uninvested cash in an escrow fund to be used solely for payment of the Bonds defeased therewith, and shall cooperate with the Authority in the transfer of such Loan so sold to the purchaser thereof. The Authority shall not consent to the optional prepayment of the 2007A Loan under and as such term is used in a Loan Agreement, unless it shall first have obtained a certificate of an Independent Accountant which: (i) specifies (A) the premium, if any, to be paid by the Agency under the respective Loan Agreement in connection with such optional prepayment, (B) the principal amount and redemption date and price of any Bonds to be redeemed pursuant to the Indenture as a result of the optional prepayment of such 2007A Loan, (C) the date and principal amount of any sinking fund redemption payments specified in the Indenture to be reduced as a consequence of any such optional redemption under the Indenture, and (D) the date and amount of any payments specified in the respective Loan Agreement to be reduced as a consequence of the proposed optional prepayment of such 2007A Loan; and (ii) concludes that, based upon the information supplied in clauses (i)(a) through (D) above, and in reliance upon the Trustee, the Agency and the Authority implementing the redemption of the Bonds and the prepayment of such 2007A Loan in a manner consistent with such information, the aggregate of the scheduled principal and interest due on the 2007A Loans which remain outstanding following such prepayment will be sufficient in time and amount to timely pay the principal and interest due on the Series A Bonds and the Series A-T Bonds which will remain Outstanding following any redemption of the Bonds to occur under the Indenture as a result of the optional prepayment of such 2007A Loan. The Authority shall not consent to the optional prepayment of the 2007B Loan under and as such term is used in a Loan Agreement, unless it shall first have obtained a certificate of an Independent Accountant which: (i) specifies (A) the premium, if any, to be paid by the Agency under the respective Loan Agreement in connection with such optional prepayment, (B) the principal amount and redemption date and price of any Bonds to be redeemed pursuant to the Indenture as a result of the optional prepayment of such 2007B Loan, (C) the date and principal amount of any sinking fund redemption payments specified in the Indenture to be reduced as a consequence of any such optional redemption under the Indenture, and (D) the date and amount of any payments specified in the respective Loan Agreement to be reduced as a consequence of the proposed optional prepayment of such 2007B Loan; and (ii) concludes that, based upon the information supplied in clauses (i)(a) through (D) above, and in reliance upon the Trustee, the Agency and the Authority implementing the redemption of the Bonds and the prepayment of such A-20

165 2007B Loan in a manner consistent with such information, the aggregate of the scheduled principal and interest due on the 2007B Loans which remain outstanding following such prepayment will be sufficient in time and amount to timely pay the principal and interest due on the Series B Bonds which will remain Outstanding following any redemption of the Bonds to occur under the Indenture as a result of the optional prepayment of such 2007B Loan. The Authority and the Trustee may conclusively rely upon any such certificate of an Independent Accountant in connection with the redemption of the Bonds under the Indenture and the reduction of any sinking fund payments listed in the Indenture as a consequence of such optional redemption. The consent of the Authority to any such optional prepayment of a Loan may be executed and delivered by the Executive Director of the Authority, who is authorized to so execute and deliver any such consent following receipt of the certificate of an Independent Accountant described in the preceding paragraph, without the need for any further action by the Board of Directors of the Authority. No officer of the Authority shall be subject to any personal liability by reason of his execution and delivery of any such consent. Continuing Disclosure. The Authority covenants and agrees that it assist the Agency in complying with and carrying out all of the provisions of the Continuing Disclosure Certificate. Notwithstanding any other provision of the Indenture, failure of the Authority to comply with the Continuing Disclosure Certificate shall not be considered an Event of Default under the Indenture, however, the Trustee may (and, at the written request of any Participating Underwriter or the holders of at least 25% aggregate principal amount of Outstanding Bonds but only to the extent indemnified to its satisfaction from any liability or expense, including, fees of its attorneys, shall), or any Bondholder may, take such actions as may be necessary and appropriate to compel performance by the Agency under the Continuing Disclosure Certificate, including seeking mandate or specific performance by court order. The failure by the Authority to comply with the continuing disclosure provisions of the Indenture shall not be an Event of Default under the Indenture. Amendment of the Indenture The Indenture may be modified or amended at any time by a supplemental indenture, without the consent of any Bond Owners, to the extent permitted by law, but only for any one or more of the following purposes: (a) to add to the covenants and agreements of the Authority contained in the Indenture, other covenants and agreements thereafter to be observed, to pledge or assign additional security for the Bonds (or any portion thereof), or to surrender any right or power herein reserved to or conferred upon the Authority; (b) to make such provisions for the purpose of curing any ambiguity, inconsistency or omission, or of curing or correcting any defective provision, contained in the Indenture, or in any other respect whatsoever as the Authority may deem necessary or desirable, provided that such modification or amendment does not materially adversely affect the interests of the Bond Owners in the opinion of Bond Counsel; (c) to modify, amend or supplement the Indenture in such manner as to permit the qualification of the Indenture under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect, and to add such other A-21

166 terms, conditions and provisions as may be permitted by said act or similar federal statute; (d) to amend any provision thereof relating to the Tax Code, to any extent whatsoever but only if and to the extent such amendment will not adversely affect the exclusion from gross income of interest on any of the Series A Bonds or the Series B Bonds under the Tax Code, in the opinion of Bond Counsel; or (e) to facilitate the issuance of additional obligations of the Agency pursuant to a Loan Agreement. Except as described in the preceding paragraph, the Indenture and the rights and obligations of the Authority and of the Owners of the Bonds may only be modified or amended at any time by a supplemental indenture with the written consent of the Owners of a majority in aggregate principal amount of the Bonds then Outstanding. No such modification or amendment may (a) extend the maturity of or reduce the interest rate on any Bond or otherwise alter or impair the obligation of the Authority to pay the principal, interest or premiums (if any) at the time and place and at the rate and in the currency provided therein of any Bond without the express written consent of the Owner of such Bond, (b) reduce the percentage of Bonds required for the written consent to any such amendment or modification, or (c) without its written consent thereto, modify any of the rights or obligations of the Trustee. Events of Default Events of Default Defined. The following events constitute events of default under the Indenture: (a) Default in the due and punctual payment of the principal of any Bond when and as the same shall become due and payable, whether at maturity as therein expressed, by proceedings for redemption, by acceleration, or otherwise. (b) Default in the due and punctual payment of any installment of interest on any Bond when and as the same shall become due and payable. (c) Failure by the Authority to observe any of the other covenants, agreements or conditions on its part in the Indenture or in the Bonds contained, other than as referred to in the preceding clauses (a) and (b), for a period of sixty (60) days after written notice thereof, specifying such failure and requesting that it be remedied has been given to the Authority by the Trustee; provided, however, that if in the reasonable opinion of the Authority the failure stated in the notice can be corrected, but not within such sixty (60) day period, such failure shall not constitute an event of default under the Indenture if corrective action is instituted by the Authority within such sixty (60) day period and diligently pursued until such failure is corrected. (d) The filing by the Authority of a petition or answer seeking reorganization or arrangement under the federal bankruptcy laws or any other applicable law of the United States of America, or if a court of competent jurisdiction shall approve a petition, filed with or without the consent of the Authority, seeking reorganization under the federal bankruptcy laws or any other applicable law of the United States of America, or if, under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of the Authority or of the whole or any substantial part of its property. A-22

167 Remedies. Subject to the rights of the Insurer under the Indenture, upon the occurrence and during the continuance of any event of default, the Trustee may, and at the written direction of the Owners of a majority in aggregate principal amount of the Bonds at the time Outstanding shall, upon notice in writing to the Authority and the Agency, enforce any rights of the Trustee under or with respect to the Indenture. If an Event of Default shall have occurred and be continuing and if requested so to do by the Owners of a majority in aggregate principal amount of Outstanding Bonds and indemnified as provided in the Indenture, the Trustee shall be obligated to exercise such one or more of the rights and powers conferred by the Indenture, as the Trustee, being advised by counsel, shall deem most expedient in the interest of the Bond Owners. Application of Revenues and Other Funds After Default. If an Event of Default has occurred and is continuing, all amounts thereafter received by the Trustee under any of the provisions of the Indenture shall be applied by the Trustee in the following order upon presentation of the several Bonds, and the stamping thereon of the amount of the payment if only partially paid, or upon the surrender thereof if fully paid -: First, to the payment of the fees, costs and expenses of the Trustee in declaring such Event of Default and in carrying out the provisions of the Indenture, including reasonable compensation to its agents, attorneys and counsel; and Second, to the payment of the whole amount of interest on and principal of the Senior Bonds then due and unpaid, with interest on overdue installments of principal and interest to the extent permitted by law at the net effective rate of interest then borne by the Outstanding Senior Bonds; provided, however, that in the event such amounts shall be insufficient to pay in full the full amount of such interest and principal, then such amounts shall be applied in the following order of priority: (a) first, to the payment of all installments of interest on the Senior Bonds then due and unpaid, on a pro rata basis in the event that the available amounts are insufficient to pay all such interest in full, (b) second, to the payment of principal of the Senior Bonds then due and payable, such that the unpaid principal reflects, to the furthest extent possible, the unpaid portion of the Loans, in the event that the available amounts are insufficient to pay all such principal in full, and (c) third, to the payment of interest on overdue installments of principal and interest on the Senior Bonds, on a pro rata basis in the event that the available amounts are insufficient to pay all such interest in full. Third, to the payment of the whole amount of interest on and principal of the Subordinate Bonds then due and unpaid, with interest on overdue installments of principal and interest to the extent permitted by law at the net effective rate of interest then borne by the Outstanding Subordinate Bonds; provided, however, that in the event such amounts shall be insufficient to pay in full the full amount of such interest and principal, then such amounts shall be applied in the following order of priority: A-23

168 (a) first, to the payment of all installments of interest on the Subordinate Bonds then due and unpaid, on a pro rata basis in the event that the available amounts are insufficient to pay all such interest in full, (b) second, to the payment of principal of the Subordinate Bonds then due and payable, such that the unpaid principal reflects, to the furthest extent possible, the unpaid portion of the Loans, in the event that the available amounts are insufficient to pay all such principal in full, and (c) third, to the payment of interest on overdue installments of principal and interest on the Subordinate Bonds, on a pro rata basis in the event that the available amounts are insufficient to pay all such interest in full. Power of Trustee to Control Proceedings. In the event that the Trustee, upon the happening of an Event of Default, shall have taken any action, by judicial proceedings or otherwise, pursuant to its duties under the Indenture, whether upon its own discretion or upon the request of the Owners of at least a majority in aggregate principal amount of the Bonds then Outstanding, it shall have full power, in the exercise of its discretion for the best interests of the Owners of the Bonds, with respect to the continuance, discontinuance, withdrawal, compromise, settlement or other disposal of such action; provided, however, that the Trustee shall not, unless there no longer continues an Event of Default under the Indenture, discontinue, withdraw, compromise or settle, or otherwise dispose of any litigation pending at law or in equity, if at the time there has been filed with it a written request signed by the Owners of a majority in aggregate principal amount of the Outstanding Bonds opposing such discontinuance, withdrawal, compromise, settlement or other disposal of such litigation. Any suit, action or proceeding which any Owner of Bonds shall have the right to bring to enforce any right or remedy under the Indenture may be brought by the Trustee for the equal benefit and protection of all Owners of Bonds similarly situated and the Trustee is in the Indenture appointed (and the successive respective Owners of the Bonds, by taking and holding the same, shall be conclusively deemed so to have appointed it) the true and lawful attorney-in-fact of the respective Owners of the Bonds for the purpose of bringing any such suit, action or proceeding and to do and perform any and all acts and things for and on behalf of the Owners of the Bonds as a class or classes, as may be necessary or advisable in the opinion of the Trustee as such attorneyin-fact. Limitation on Bond Owners Right to Sue. No Owner of any Bond has the right to institute any suit, action or proceeding at law or in equity, for any remedy under the Indenture, unless (a) such Owner has previously given to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of a majority in aggregate principal amount of all the Bonds then Outstanding have requested the Trustee in writing to exercise its powers under the Indenture; (c) said Owners have tendered to the Trustee indemnity reasonably acceptable to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee has refused or failed to comply with such request for a period of 60 days after such written request has been received by the Trustee and said tender of indemnity is made to the Trustee; and (e) no direction inconsistent with such written request has been given to the Trustee during such 60 day period by the Owners of a majority in aggregate principal amount of the Bonds then Outstanding. A-24

169 Discharge of Indenture The Authority may pay and discharge the indebtedness on any or all of the Outstanding Bonds in any one or more of the following ways: (a) by paying or causing to be paid the principal of and interest and premium (if any) on such Bonds, as and when the same become due and payable; (b) by irrevocably depositing with the Trustee, in trust, at or before maturity, money which, together with the available amounts then on deposit in the funds and accounts established with the Trustee pursuant to the Indenture and the Loan Agreements, is fully sufficient to pay such Bonds, including all principal, interest and premiums (if any); or (c) by irrevocably depositing with the Trustee or any other fiduciary, in trust, non-callable Defeasance Obligations in such amount as an Independent Accountant or Bond Counsel shall determine will, together with the interest to accrue thereon and available moneys then on deposit in the funds and accounts established with the Trustee pursuant to the Indenture and the Loan Agreements, be fully sufficient to pay and discharge the indebtedness on such Bonds (including all principal, interest and redemption premiums) at or before their respective maturity dates. Upon such payment, and notwithstanding that any Bonds issued under the Indenture have not been surrendered for payment, the pledge of the Revenues and other funds provided for in the Indenture with respect to such Bonds, and all other obligations of the Authority under the Indenture with respect to such Bonds, shall cease and terminate, except only the obligation of the Authority to pay or cause to be paid to the Owners of such Bonds not so surrendered and paid all sums due thereon from amounts set aside for such purpose. Any funds thereafter held by the Trustee, which are not required for said purposes, shall be paid over to the Authority. Notwithstanding the foregoing, in the event that the principal of or interest on the Senior Bonds shall be paid by the Insurer pursuant to the Insurance Policy, the obligations of the Authority and the Trustee hereunder shall remain in full force and effect, and the Insurer shall be fully subrogated to the rights of all Owners of the Senior Bonds so paid. Provisions Relating to the Insurance Policy Senior Bonds As long as the Insurance Policy Senior Bonds shall be in full force and effect, the Authority and the Trustee agree to comply with the following provisions: (a) In the event that, on the second Business Day, and again on the Business Day prior to each Interest Payment Date, the Trustee has not received sufficient moneys to pay all principal and interest due on the Senior Bonds on the second following or following, as the case may be, Business Day, the Trustee shall immediately notify the Insurer Senior Bonds or its designee on the same Business Day by telephone or telegraph, confirmed in writing by registered or certified mail, of the amount of the deficiency. (b) If the deficiency is made up in whole or in part prior to or on the Interest Payment Date, the Trustee shall so notify the Insurer Senior Bonds or its designee. (c) In addition, if the Trustee has actual knowledge that any Owner of a Senior Bond has been required to disgorge payments of principal or interest on the Senior A-25

170 Bonds to a trustee in bankruptcy or creditors or others pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes a voidable preference to such Owner within the meaning of any applicable bankruptcy laws, then the Trustee shall notify the Insurer Senior Bonds or its designee of such fact by telephone or telegraphic notice, confirmed in writing by registered or certified mail. (d) The Trustee is hereby irrevocably designated, appointed, directed and authorized to act as attorney-in-fact for the Owners of the Senior Bonds as follows: (i) if and to the extent there is a deficiency in amounts required to pay interest on the Senior Bonds, the Trustee shall (A) execute and deliver to U.S. Bank Trust National Association or its successors under the Insurance Policy Senior Bonds (the Insurance Trustee ), in form satisfactory to the Insurance Trustee, an instrument appointing the Insurer Senior Bonds as agent for such Owners in any legal proceeding related to the payment of such interest and an assignment to the Insurer Senior Bonds of the claims for interest to which such deficiency relates and which are paid by the Insurer Senior Bonds, (B) receive, as designee of the respective Owners of the Senior Bonds (and not as Trustee) in accordance with the tenor of the Insurance Policy Senior Bonds, payment from the Insurance Trustee with respect to the claims for interest so assigned, and (C) disburse the same to such respective Owners of the Senior Bonds, and (ii) if and to the extent of a deficiency in amounts required to pay principal on the Senior Bonds, the Trustee shall (A) execute and deliver to the Insurance Trustee in form satisfactory to the Insurance Trustee an instrument appointing the Insurer Senior Bonds as agent for such Owners in any legal proceeding relating to the payment of such principal and an assignment to the Insurer Senior Bonds of any of the Senior Bonds surrendered to the Insurance Trustee of so much of the principal amount thereof as has not previously been paid or for which moneys are not held by the Trustee and available for such payment (but such assignment shall be delivered only if payment from the Insurance Trustee is received), (B) receive, as designee of the respective Owners (and not as Trustee) in accordance with the tenor of the Insurance Policy, payment therefor from the Insurance Trustee, and (C) disburse the same to such Owners of the Senior Bonds. (e) Payments with respect to claims for interest on and principal of the Senior Bonds disbursed by the Trustee from proceeds of the Insurance Policy Senior Bonds shall not be considered to discharge the obligation of the Authority with respect to such Senior Bonds, and the Insurer Senior Bonds shall become the owner of such unpaid Senior Bonds and claims for the interest in accordance with the tenor of the assignment made to it under the provisions of the Indenture or otherwise. (f) Irrespective of whether any such assignment is executed and delivered, the Authority and the Trustee hereby agree for the benefit of the Insurer Senior Bonds that, (i) they recognize that to the extent the Insurer Senior Bonds makes payments, directly or indirectly (as by paying through the Trustee), on account of principal of or interest on the Senior Bonds, the Insurer Senior Bonds will be subrogated to the rights of such Owners of the Senior Bonds to receive the amount of such principal and interest from the Authority, with A-26

171 interest thereon as provided and solely from the sources stated in the Indenture and the Senior Bonds; and (ii) they will accordingly pay to the Insurer Senior Bonds the amount of such principal and interest (including principal and interest recovered under subparagraph (ii) of the first paragraph of the Insurance Policy Senior Bonds, which principal and interest shall be deemed past due and not to have been paid), with interest thereon as provided in the Indenture and the Senior Bonds, but only from the sources and in the manner provided herein for the payment of principal of and interest on the Senior Bonds to Owners of the Senior Bonds, and will otherwise treat the Insurer Senior Bonds as the owner of such rights to the amount of such principal and interest. Rights of the Insurer Senior Bonds Amendments; Supplemental Indentures. The consent of the Insurer Senior Bonds shall be required for (i) any amendment to the Indenture, other than as described in Section 7.01(a), (b), (c), (d) or (e) of the Indenture; and (ii) any amendment to any of the Loan Agreements, other than as described in Section 5.09(b)(i), (ii), (iii), (iv) or (v). The consent of the Insurer Senior Bonds must be obtained prior to the execution of and Supplemental Indenture other than in connection with a refunding to obtain savings or the issuance by the Agency of Parity Debt (as defined in the Loan Agreements) pursuant to any of the Loan Agreements. Rights of Insurer Senior Bonds Upon an Event of Default. Anything in the Indenture to the contrary notwithstanding, upon the occurrence and continuation of an Event of Default, the Insurer Senior Bonds, acting alone, shall be entitled to direct the enforcement of all rights and remedies granted under the Indenture to the Owners of the Senior Bonds, or to the Trustee for the benefit of the Owners of the Senior Bonds, including but not limited to the right to approve all waivers of any Events of Default. The Insurer Senior Bonds shall be recognized as the registered owner of each Senior Bond for the purposes of exercising rights and privileges available to Senior Bondholders. Provisions Relating to the Insurance Policy Subordinate Bonds The Trustee shall not make a claim for payment on the Insurance Policy Subordinate Bonds until any and all funds held by it pursuant to the Indenture have been fully drawn to pay the debt service due on the Bonds in accordance with the priority for payment under the Indenture. As long as the Insurance Policy Subordinate Bonds shall be in full force and effect, the Trustee agrees to comply with the following provisions: (a) At least three (3) days prior to all Interest Payment Dates, the Trustee will determine whether there will be sufficient funds to pay the principal of or interest on the Subordinate Bonds on such Interest Payment Date. If the Trustee determines that there will be insufficient funds, the Trustee shall so notify the Insurance Trustee Subordinate Bonds. Such notice shall specify the amount of the anticipated deficiency, the Subordinate Bonds to which such deficiency is applicable and whether such Subordinate Bonds will be deficient as to principal or interest, or both. The Insurer Subordinate Bonds will make payments of principal or interest due on the Subordinate Bonds on or before the first (1st) day next following the date on which the Insurance Trustee Subordinate Bonds shall have received notice of nonpayment from the Trustee. A-27

172 (b) The Trustee shall, after giving notice to the Insurance Trustee Subordinate Bonds as provided in (a) above, make available to the Insurer Subordinate Bonds and the Insurance Trustee Subordinate Bonds, the registration books for the Subordinate Bonds maintained by the Trustee, and all records relating to the funds maintained under the Indenture. (c) The Trustee shall provide the Insurer Subordinate Bonds and the Insurance Trustee Subordinate Bonds with a list of registered owners of Subordinate Bonds entitled to receive principal or interest payments from the Insurer Subordinate Bonds under the terms of the Insurance Policy Subordinate Bonds, and shall make arrangements with the Insurance Trustee Subordinate Bonds (i) to mail checks or drafts to the registered owners of Subordinate Bonds entitled to receive full or partial interest payments from the Insurer Subordinate Bonds and (ii) to pay principal upon Subordinate Bonds surrendered to the Insurance Trustee Subordinate Bonds by the registered owners of Subordinate Bonds entitled to receive full or partial principal payments from the Insurer Subordinate Bonds. (d) The Trustee shall at the time it provides notice to the Insurance Trustee Subordinate Bonds pursuant to (a) above, notify registered Owners of Subordinate Bonds entitled to receive the payment of principal or interest thereon from the Insurer Subordinate Bonds (i) as to the fact of such entitlement, (b) that the Insurer Subordinate Bonds will remit to them all or part of the interest payments next coming due upon proof of Owner entitlement to interest payments and delivery to the Insurance Trustee Subordinate Bonds, in form satisfactory to the Insurance Trustee Subordinate Bonds as determined by the Insurer Subordinate Bonds, of an appropriate assignment of the registered owner's right to payment, (iii) that should they be entitled to receive full payment of principal from the Insurer Subordinate Bonds, they must surrender their Subordinate Bonds (along with an appropriate instrument of assignment in form satisfactory to the Insurer Subordinate Bonds to permit ownership of such Subordinate Bonds to be registered in the name of the Insurer Subordinate Bonds) for payment to the Insurance Trustee Subordinate Bonds, and not the Trustee and (iv) that should they be entitled to receive partial payment of principal from the Insurer Subordinate Bonds, they must surrender their Subordinate Bonds for payment thereon first to the Trustee, who shall note on such Subordinate Bonds the portion of the principal paid by the Trustee and then, along with an appropriate instrument of assignment in form satisfactory to the Insurer Subordinate Bonds, to the Insurance Trustee Subordinate Bonds, which will then pay the unpaid portion of principal. (e) In the event that the Trustee has notice that any payment of principal of or interest on a Subordinate Bond which has become due for payment and which is made to a registered Owner by or on behalf of the Authority has been deemed a preferential transfer and theretofore recovered from its registered Owner pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance with the final, nonappealable order of a court having competent jurisdiction, the Trustee shall, at the time the Insurance Trustee Subordinate Bonds is notified pursuant to (a) above, notify all registered Owners of Subordinate Bonds that in the event that any registered Owner's payment is so recovered, such registered Owner will be entitled to payment from the Insurer Subordinate Bonds to the extent of such recovery if sufficient funds are not otherwise available, and the Trustee shall furnish to the Insurance Trustee Subordinate Bonds and the Insurer Subordinate Bonds its records evidencing the payments of principal of and interest on the Subordinate A-28

173 Bonds which have been made by the Trustee and subsequently recovered from registered Owners and the dates on which such payments are made. (f) The Insurer Subordinate Bonds shall, to the extent it makes payment of principal of or interest on Subordinate Bonds, become subrogated to the rights of the recipients of such payments in accordance with the terms of the Insurance Policy Subordinate Bonds, and to evidence such subrogation (i) in the case of subrogation as to claims for past due interest, the Trustee shall note the rights of the Insurer Subordinate Bonds as subrogee on the registration books for the Subordinate Bonds maintained by the Trustee, upon receipt from the Insurer Subordinate Bonds of proof of the payment of interest thereon to the registered Owners of the Subordinate Bonds and (ii) in the case of subrogation as to claims for past due principal, the Trustee shall note the rights of the Insurer Subordinate Bonds as subrogee on the registration books for the Subordinate Bonds maintained by the Trustee upon surrender of the Subordinate Bonds by the registered Owners thereof together with proof of the payment of principal thereof. Consent of the Insurer Subordinate Bonds The consent of the Insurer Subordinate Bonds shall be required for the execution and delivery of any amendment or supplement to the Indenture. Subrogation In the event that the principal and/or interest due on the Subordinate Bonds shall be paid by the Insurer Subordinate Bonds pursuant to the Insurance Policy Subordinate Bonds, the Subordinate Bonds shall remain outstanding for all purposes, not be defeased or otherwise satisfied and not be considered paid by the Authority, and all covenants, agreements and other obligations of the Authority to the registered owners of such Subordinate Bonds shall continue to exist and shall run to the benefit of Insurer Subordinate Bonds and Insurer Subordinate Bonds shall be subrogated to the rights of such registered owners. Rights of the Insurer Subordinate Bonds Upon Default No waivers of any Event of Default shall be granted by or on behalf of the Owners of the Subordinate Bonds without the prior written consent of the Insurer Subordinate Bonds. Anything in the Indenture to the contrary notwithstanding, upon the occurrence and continuance of an Event of Default, the Insurer Subordinate Bonds shall be entitled to control and direct the enforcement of all rights and remedies granted to the Owners of the Subordinate Bonds or any trustee appointed for the benefit of the Owners of the Subordinate Bonds, including without limitation the Trustee, under the Indenture as if the Insurer Subordinate Bonds were the Owner of the Subordinate Bonds. THE LOAN AGREEMENTS The five Loan Agreements are separate and distinct from each other. The five Loans funded from the proceeds of the Series A Bonds and the Series A-T Bonds are being made pursuant to a supplement to each of the five Loan Agreements; and the four Loans funded A-29

174 from the proceeds of the Series B Bonds are being made pursuant to separate supplements to each of the Loan Agreements, other than the Pleasant Hill Loan Agreement which has no loan related to the Series B Bonds. Except as otherwise noted below, and except for the limited cross collateralization provisions applicable only to the four Loans funded with the proceeds of the Series B Bonds and the possible increase in the amount of the Loans under the North Richmond Loan Agreement and the Bay Point Loan Agreement if funds are released from the North Richmond Escrow Fund or the Bay Point Escrow Fund, respectively, the terms and provisions of the Loan Agreements are substantially similar and are described below. Terms of Loans; Payment of Principal and Interest Pursuant to the Loan Agreements, the Authority agrees to make the Loans to the Agency on the Closing Date from the proceeds of the Bonds. The principal of the Loans is payable in aggregate installments on August 1 in each of the years and in the amounts corresponding to the principal maturities of the Bonds (including payments required to fund sinking fund redemption of Term Bonds), and interest on each installment of the Loans is calculated at the rates per annum at or within a permissible range under the Bond Law above the corresponding rates of interest on the maturities of the applicable Bonds and such interest is payable on each Interest Payment Date. Principal of and interest on the Loans are payable by the Agency to the Trustee, as assignee of the Authority under the Indenture, in immediately available funds. In lieu of depositing cash with the Trustee for all or part of any principal payment relating to the mandatory sinking fund redemption of Term Bonds, the Agency has the option to tender to the Trustee for cancellation any amount of such Term Bonds, which may be purchased by the Agency at public or private sale as and when and at such prices as the Agency may in its discretion determine. Prepayment of Loans The Loans are subject to optional prepayment in whole, or in part in any integral multiple of $5,000, on any date on which the Bonds are subject to optional redemption, from any available source of funds of the Agency, at a prepayment price corresponding to the redemption price of the Bonds to be redeemed from such prepayments, as determined by the Authority pursuant to the Indenture. Application of Loan Proceeds Loan Disbursement Funds. Each Loan Agreement establishes two separate funds designated the Loan Disbursement Funds (except for the Pleasant Hill Loan Agreement that will have only one such fund related to the Series A Bonds), to be held and maintained by the Trustee. Amounts on deposit in the Loan Disbursement Funds will be derived solely from the proceeds of the Loans funded from the related Bond proceeds. The Trustee will disburse amounts on deposit in the Loan Disbursement Funds, in the amounts specified in the Loan Agreements, to the Costs of Issuance Fund, the Reserve Fund, the North Richmond and Bay Point Escrow Funds and Capitalized Interest Accounts, the Redevelopment Funds, and the Low and Moderate Housing Accounts (in the case of the proceeds of the Series B Bonds used to fund Loans). Redevelopment Funds. The Loan Agreements each establish a separate fund designated the Redevelopment Fund to be held and maintained by the Trustee. Amounts on deposit in the Redevelopment Funds will be derived from the proceeds of the Loans under the respective Loan Agreements funded from the Series A Bond and Series A-T Bond proceeds. Amounts on deposit in a Redevelopment Fund will be applied for redevelopment purposes of the Agency relating to the applicable Redevelopment Project. A-30

175 Low and Moderate Housing Accounts. The Loan Agreements (except for the Pleasant Hill Loan Agreement that will not have any such fund) each establish a separate account designated the Low and Moderate Housing Account, to be held and maintained by the Trustee. Amounts on deposit in the Low and Moderate Housing Accounts will be derived solely from the proceeds of the Loans under the respective three Loan Agreements funded from the Series B Bonds proceeds. Amounts on deposit in the Low and Moderate Housing Accounts will be applied for low and moderate income housing programs within the County and of benefit to such Project Areas, all in accordance with the Redevelopment Law. Reserve Funds. There is established under each Loan Agreement two separate funds designated the 2007A Reserve Fund and the 2007B Reserve Fund (except for the Pleasant Hill Loan Agreement that will have only one such fund related to the Series A Bonds), and within each such Reserve Fund a Senior Account and a Subordinate Account, each which shall be held by the Trustee in trust for the benefit of the Authority and the Owners of the applicable Bonds the proceeds of which funded the respective account of the respective Reserve Fund. Amounts initially deposited in a Reserve Fund shall be derived from the proceeds of the respective Loan deposited therein pursuant to the applicable Loan Agreement. The amounts on deposit in an account of the Reserve Fund shall be maintained at the respective Reserve Requirement applicable to the account at all times prior to the payment of the related Loan in full, except to the extent required for the purposes set forth below. In the event that the Agency shall fail to deposit with the Trustee the full amount required to be deposited pursuant to the Loan repayment provisions of a Loan Agreement, the Trustee shall withdraw from the Reserve Fund established under such Loan Agreement and for the applicable Loan and transfer to the Interest Account and the Principal Account for the related Bonds, in such order, the difference between the amount required to be deposited pursuant to such Loan Agreement and the amount actually deposited by the Agency; provided that amounts drawn on a Senior Account may only be used to pay Senior Bonds and amounts drawn on a Subordinate Account may only be used to pay Subordinate Bonds. In the event that the amount on deposit in an account of a Reserve Fund shall at any time be less than the applicable Reserve Requirement, the Trustee shall promptly notify the Agency of the amount required to be deposited therein to restore the balance to such Reserve Requirement. In the event that the amount on deposit in an account of a Reserve Fund on any Interest Payment Date exceeds the applicable Reserve Requirement, the Trustee shall withdraw from such account and deposit to the related Revenue Fund all amounts in excess of such Reserve Requirement, and credit such amounts towards the deposit then required to be made by the Agency pursuant to the Loan repayment provisions of the related Loan Agreement. There are separate Reserve Funds established under the Loan Agreements applicable to the Series A Bonds and the Series A-T Bonds, and applicable to the Series B Bonds (except for the Pleasant Hill Loan Agreement that will have only one such fund related to the Series A Bonds), and amounts in a Reserve Fund may only be used to pay debt service on the respective Loan which funded the related Reserve Fund; provided that amounts drawn on a Senior Account may only be used to pay Senior Bonds and amounts drawn on a Subordinate Account may only be used to pay Subordinate Bonds. The Agency may fund all or a portion of a Reserve Requirement for any one or more of the accounts within the Reserve Funds with one or more Qualified Reserve Fund Credit Instruments. Upon deposit of any Qualified Reserve Fund Credit Instrument with the Trustee, the Trustee shall pay to the Agency from amounts in the applicable Reserve Fund an amount equal to the principal of the Qualified Reserve Fund Credit Instrument. In any A-31

176 case where a Reserve Fund is funded with a combination of cash and a Qualified Reserve Fund Credit Instrument, the Trustee shall deplete all cash balances before drawing on the Qualified Reserve Fund Credit Instrument. With regard to replenishment, any available moneys should be used first to reinstate the Qualified Reserve Fund Credit Instrument and second, to replenish the cash in such Reserve Fund. In the event the Qualified Reserve Fund Credit Instrument is drawn upon, the Agency shall make payment of interest on amounts advanced under the Qualified Reserve Fund Credit Instrument after making any payments pursuant to the Loan repayment provisions of the applicable Loan Agreement. In the event the Qualified Reserve Fund Credit Instrument lapses or expires, the Agency shall draw upon such Qualified Reserve Fund Credit Instrument prior to its lapsing or expiring, make deposits from available Tax Revenues for the applicable Project Area to such Reserve Fund to increase the amount on deposit therein to the applicable Reserve Requirement or substitute such Qualified Reserve Fund Credit Instrument with another Qualified Reserve Fund Credit Instrument. Parity Debt The Agency may issue or incur Parity Debt on a parity with a Loan, subject to the following conditions: (a) No event of default has occurred and is continuing under and as defined in the related Loan Agreement, and the Agency is otherwise in compliance with all covenants set forth in the related Loan Agreement. (b) The applicable Tax Revenues for the then current Fiscal Year, as set forth in a written certificate of the Agency, based on assessed valuation of property in the related Project Area as evidenced in the written records of the County, plus at the option of the Agency the Additional Revenues, are at least equal to (x) one hundred twenty percent (120%) in the case of the Pleasant Hill and Rodeo Loan Agreements, (y) one hundred fifty percent (150%) in the case of the West Pittsburg Loan Agreement, and (z) one hundred thirty percent (130%) in the case of the North Richmond Loan Agreement, in each case of Maximum Annual Debt Service, as defined in such Loan Agreement. (c) The related Parity Debt Instrument shall provide that: (i) Interest on such Parity Debt is payable on February 1 and August 1 in each year of the term of such Parity Debt except the first twelve month period, during which interest may be payable on any February 1 or August 1 and provided that there shall be no requirement that such Parity Debt pay interest on a current basis; and (ii) the principal of such Parity Debt shall not be payable on any date other than August 1 in any year; and (iii) money (and/or a Qualified Reserve Fund Credit Instrument) shall be deposited in a reserve account created under such Parity Debt Instrument from the proceeds of said Parity Debt in an amount equal to Maximum Annual Debt Service on such Parity Debt. (d) The proceeds of such Parity Debt may be deposited into an escrow fund from which amounts may not be released to the Agency unless the Tax Revenues as defined in the applicable Loan Agreement for the most recent Fiscal Year (as evidenced in the written records of the County), plus at the option of the Agency the A-32

177 applicable Additional Revenues, at least equals one hundred twenty percent (120%) in the case of the Pleasant Hill and Rodeo Loan Agreements, and (y) one hundred twenty-five percent (125%) in the case of the West Pittsburg, North Richmond and Montalvin Manor Loan Agreements, in each case of the amount of applicable Maximum Annual Debt Service, and in the case of only the Montalvin Manor Loan Agreement such Tax Revenues and Additional Revenues less the Tax Revenues attributable to the top two (2) taxpayers in the Montalvin Manor Project Area, shall be at least equal to one hundred percent (100%) of Maximum Annual Debt Service (as defined in the Montalvin Manor Loan Agreement); provided, however, that the related Parity Debt Instrument shall provide that no amounts may be released from such escrow fund until all amounts have been released or otherwise withdrawn from any escrow fund established with respect to other applicable Parity Debt which has previously been issued. (e) The issuance of such Parity Debt shall not cause the Agency to exceed any applicable Plan Limitations. Without limiting the generality of the foregoing, the Agency shall not issue any Parity Debt in the event and to the extent that either (a) the amount of Maximum Annual Debt Service in any Bond Year following such issuance exceeds the aggregate amount of Tax Revenues which are eligible under the Redevelopment Plan to be allocated to the Agency in any Fiscal Year, or (b) the aggregate amount of debt service on all outstanding obligations of the Agency, including such Parity Debt, exceeds the aggregate amount of Tax Revenues which are eligible under the Redevelopment Plan to be allocated and paid to the Agency during the period while such outstanding obligations remain outstanding, or (c) the aggregate principal amount of all outstanding obligations of the Agency, including such Parity Debt, exceeds any applicable limit in the Redevelopment Plan on the aggregate principal amount of indebtedness which the Agency is permitted to have outstanding at any one time. (f) The Agency shall deliver to the Trustee a written certificate of the Agency certifying that the conditions precedent to the issuance of such Parity Debt set forth in subsections (a), (b), (c), (d) and (e) above have been satisfied. Notwithstanding the foregoing, the Agency may issue or incur Refunding Debt in such principal amount as shall be determined by the Agency so long as the conditions set forth in subsections (a), (c) and (e) above are met, and the Agency delivers to the Trustee a Written Certificate of the Agency certifying that such conditions precedent to the issuance of such Refunding Debt set forth in subsections (a), (c) and (e) above have been met and such Refunding Debt is otherwise in accordance with the definition of Refunding Debt in the applicable Loan Agreement. Subordinate Debt In addition to the Loans and any related Parity Debt, from time to time the Agency may issue or incur Subordinate Debt in such principal amount as shall be determined by the Agency, provided that the issuance of such Subordinate Debt does not cause the Agency to exceed any applicable Plan Limitations. Pledge and Deposit of Tax Revenues Each Loan and any related Parity Debt will be equally secured by a first pledge of and lien on all of the Tax Revenues pledged under the related Loan Agreement without preference or priority. A-33

178 Each Loan Agreement establishes a Special Fund to be held by the Agency. The Agency is required to deposit all of the applicable Tax Revenues attributable to a Project Area in the respective Special Fund until such time (if any) during any Bond Year as the amounts on deposit in such Special Fund equal the aggregate amounts required to be transferred to the Trustee under the respective Loan Agreement in such Bond Year; and any Tax Revenues received during such Bond Year in excess of such amounts shall be released from the pledge and lien of the related Loan Agreement and may be used for any lawful purposes of the Agency. In addition to the transfers required to be made pursuant to any Parity Debt Instruments, the Agency will withdraw from a Special Fund and transfer to the Trustee the following amounts at the following times and in the following order of priority: (a) Interest and Principal Deposits. No later than the fifteenth (15th) calendar day of the month preceding each date on which the principal of or interest on the related Loan or any Parity Debt becomes due and payable, including but not limited to the principal amount of such Loan to be prepaid together with any prepayment premium thereon, the Agency will withdraw from the applicable Special Fund and transfer to the Trustee an amount which, together with the amounts then held on deposit in the Interest Account, the Principal Account and the Revenue Fund attributable to the related Loan, is equal to the aggregate amount of such principal, interest and prepayment premium. (b) Reserve Fund Deposits. In the event that (i) the Trustee shall notify the Agency pursuant to a Loan Agreement that the amount on deposit in the Senior Account or the Subordinate Account of the 2007A Reserve Fund or the Senior Account or the Subordinate Account of the 2007B Reserve Fund is, in any case, less than the applicable Reserve Requirement, or (ii) any Qualified Reserve Fund Credit Instrument shall expire and not be replaced in accordance with a Loan Agreement, or (iii) the amount in any reserve account for Parity Debt shall be less than Maximum Annual Debt Service on the related Parity Debt, the Agency shall immediately withdraw from the Special Fund and transfer (x) in the case of any event described in the preceding clause (i) or (ii), to the Trustee for deposit in the accounts within the 2007A Reserve Fund or the accounts within the 2007B Reserve Fund, as applicable, an amount of money necessary to maintain the applicable Reserve Requirement in the respective accounts within the 2007A Reserve Fund or the accounts within the 2007B Reserve Fund, or to otherwise reinstate any Qualified Reserve Fund Credit Instrument or (y) in the case of an event described in the preceding clause (iii), to the trustee for such Parity Debt for deposit in the reserve account established for such Parity Debt an amount of money necessary to maintain an amount equal to Maximum Annual Debt Service on such Parity Debt in such reserve fund or to otherwise reinstate any Qualified Reserve Fund Credit Instrument. No such transfer and deposit need be made to the accounts within the 2003B Reserve Fund, the 2007A Reserve Fund or the 2007B Reserve Fund so long as there shall be on deposit therein a sum at least equal to the applicable Reserve Requirement, taking into account the amount available to be drawn on any Qualified Reserve Fund Credit Instrument held for the benefit of such fund or account. If the amount in the Special Fund is not sufficient to satisfy the transfers required by the first sentence of this paragraph, amounts shall be transferred pro rata to the respective reserve funds based upon the then Maximum Annual Debt Service on the respective corresponding loan then unpaid; provided that amounts allocated to the 2007A Reserve Fund or the 2007B Reserve Fund shall first be deposited to the Senior Accounts therein until the amount on deposit in the Senior Accounts is equal to the respective Reserve Requirement Senior with any remaining amount deposited to the Subordinate Accounts of the 2007A Reserve Fund and the 2007B Reserve Fund. A-34

179 The Trustee shall also make deposits to the Reserve Funds for the Loans funded with the proceeds of the Series B Bonds used for housing purposes from Tax Revenues pledged to other Loans proceeds of which were so used for housing purposes to the extent described in the body of this Official Statement under the heading Security for the Bonds Limited Cross Collateralization. (c) Surplus. Except as may be otherwise provided in any Parity Debt Instruments, the Agency shall not be obligated to deposit in a Special Fund in any Bond Year an amount of Tax Revenues (as defined in the related Loan Agreement) which, together with other available amounts in such Special Fund, exceeds the amounts required to be transferred to the Trustee in such Bond Year described in the preceding clauses (a) and (b). In the event that for any reason whatsoever any amounts shall remain on deposit in a Special Fund on any August 2 after making all of the transfers theretofore required to be made as described in the preceding clauses (a) and (b) and pursuant to any Parity Debt Instruments, the Agency may withdraw such amounts from such Special Fund to be used for any lawful purposes of the Agency, including but not limited to the payment of any Subordinate Debt or the payment of any amounts due and owing to the United States of America pursuant to applicable federal tax law. Other Covenants of the Agency Under each Loan Agreement, the Agency makes the following covenants with respect to the related Loans and Project Area: Limitation on Additional Debt. The Agency shall not issue any bonds, notes or other obligations, enter into any agreement or otherwise incur any indebtedness, which is in any case secured by a lien on all or any part of the Tax Revenues, excepting only Parity Debt, Subordinate Debt and permitted Reimbursement Agreements. Books and Accounts; Financial Statements. The Agency will keep, or cause to be kept, proper books of record and accounts, separate from all other records and accounts of the Agency and the County, in which complete and correct entries shall be made of all transactions relating to the Redevelopment Project, the Tax Revenues and the funds and accounts held by the Agency established under the Loan Agreement. Such books of record and accounts shall at all times during business hours be subject, upon prior written request, to the reasonable inspection of the Authority, the Trustee and the Owners of not less than ten percent (10%) in aggregate principal amount of the Bonds then Outstanding, or their representatives authorized in writing. Protection of Se curity and Rights. The Agency will preserve and protect the security of the Loan and the rights of the Trustee and the Bond Owners with respect to the Loan. From and after the Closing Date, the Loan shall be incontestable by the Agency. Taxation of Leas ed Property. All ad valorem property taxes derived by the Agency pursuant to Section of the Redevelopment Law with respect to the lease of property for redevelopment shall be treated as Tax Revenues for all purposes of the Loan Agreement. Disposition of Property. The Agency will not participate in the disposition of any land or real property in any Project Area to anyone which will result in such property becoming exempt from taxation because of public ownership or use or otherwise (except property dedicated for public right-of-way and except property planned for public ownership or use by the Redevelopment Plan in effect on the date of the Loan Agreement) so that such disposition shall, when taken together with other such dispositions, aggregate A-35

180 more than ten percent (10%) of the land area in the Project Area unless such disposition is permitted as hereinafter provided. If the Agency proposes to participate in such a disposition, it shall thereupon appoint an Independent Redevelopment Consultant to report on the effect of said proposed disposition. If the report of the Independent Redevelopment Consultant concludes that the Tax Revenues following such disposition will be at least equal to one hundred twenty percent (120%) of Maximum Annual Debt Service on the Loan, the Agency may thereafter make such disposition. If said report concludes that, following said proposed disposition, the Tax Revenues will not be at least equal to one hundred twenty percent (120%) of Maximum Annual Debt Service on the Loan, the Agency shall not participate in said proposed disposition. Maintenance of Tax Revenues. The Agency will comply with all requirements of the Redevelopment Law to insure the allocation and payment to it of the Tax Revenues, including without limitation the timely filing of any necessary statements of indebtedness with appropriate officials of the County and (in the case of supplemental revenues and other amounts payable by the State) appropriate officials of the State. The Agency will not amend the Redevelopment Plan or any of the Reimbursement Agreements, or enter into any agreement with the County or any other governmental unit, which would have the effect of reducing the amount of Tax Revenues available to the Agency for payment of the Loan, unless the Agency first obtains the report of an Independent Redevelopment Consultant stating that the Unlimited Amount of Tax Revenues for the then current Fiscal Year (calculated on the assumption that such reduction of Tax Revenues was in effect throughout such Fiscal Year), plus at the option of the Agency the Additional Revenues, are at least equal to one hundred twenty percent (120%) of Maximum Annual Debt Service on the Loan and all Parity Debt. Payment of Expenses; Lien of Trustee. The Agency shall pay to the Trustee from time to time all compensation for all services rendered under the Loan Agreement and the Indenture. Upon the occurrence of an event of default under the Loan Agreement, the Trustee shall have a first lien on the funds held by it under the Indenture to secure the payment to the Trustee of all fees, costs and expenses, including reasonable compensation to its experts, attorneys and counsel incurred in declaring such event of default and in exercising the rights and remedies set forth in the Loan Agreement. Compliance With Arbitrage Requirements. The Agency will not take, or permit or suffer to be taken by the Trustee or otherwise, any action with respect to the proceeds of the Loan which would cause any of the Bonds the proceeds of which funded the respective Loan to be arbitrage bonds or private activity bonds under federal tax law. The Agency agrees to furnish all information to, and cooperate fully with, the Authority, the Trustee and their respective officers, employees, agents and attorneys, in order to assure compliance with the provisions of federal tax law relating to the rebate of arbitrage earnings. The Agency will pay to the Trustee from available Tax Revenues or any other source of legally available funds, for deposit into the Rebate Account, all amounts determined by the Authority to be subject to such rebate. Events of Default and Remedies The following events constitute events of default under a Loan Agreement: (a) Failure by the Agency to pay the principal of or interest or prepayment premium (if any) on the respective Loan or Parity Debt related thereto when due and payable. A-36

181 (b) Failure by the Agency to observe and perform any of the covenants, agreements or conditions on its part contained in the respective Loan Agreement, other than as referred to in the preceding clause (a), for a period of 60 days after written notice specifying such failure and requesting that it be remedied has been given to the Agency by the Trustee; provided, however, that if in the reasonable opinion of the Agency the failure stated in such notice can be corrected, but not within such 60 day period, such failure shall not constitute an event of default if corrective action is instituted by the Agency within such 60 day period and diligently pursued until such failure is corrected. (c) Certain events relating to bankruptcy or insolvency of the Agency. If an event of default has occurred and is continuing under a Loan Agreement, the Trustee may, and at the written direction of the Owners of a majority in aggregate principal amount of the Outstanding Bonds the proceeds of which funded the Loan or such Parity Debt the Trustee shall exercise any other remedies available to the Trustee in law or at equity. All amounts received by the Trustee pursuant to any right given or action taken by the Trustee under the provisions of a Loan Agreement, shall be applied by the Trustee in the following order: First, to the payment of the fees, costs and expenses of the Trustee in declaring such Event of Default and in carrying out the provisions of the Loan Agreement, including reasonable compensation to its agents, attorneys and counsel; and Second, to the payment of the whole amount of interest on and principal of the related Loan and any Parity Debt then due and unpaid, with interest on overdue installments of principal and interest to the extent permitted by law at the net effective rate of interest then borne by the Outstanding Bonds the proceeds of which funded the Loan or such Parity Debt; provided, however, that in the event such amounts shall be insufficient to pay in full the full amount of such interest and principal, then such amounts shall be applied in the following order of priority: (a) first, to the payment of all installments of interest on the respective Loan and any Parity Debt then due and unpaid, on a pro rata basis in the event that the available amounts are insufficient to pay all such interest in full, (b) second, to the payment of all installments of principal of the respective Loan and any Parity Debt then due and payable, on a pro rata basis in the event that the available amounts are installments of principal in full, and (c) third, to the payment of interest on overdue installments of principal and interest, on a pro rata basis in the event that the available amounts are insufficient to pay all such interest in full. Notwithstanding the foregoing, Tax Revenues otherwise required to be deposited to the Agency s Low and Moderate Income Housing Fund shall only be used to make payments on the Loans used to fund housing purposes and to fund reserves related thereto, and may be fully expended for such purpose even though other Tax Revenues are not sufficient to make all other debt service payments under a Loan Agreement all subject to and in accordance with the terms of the Loan Agreements. A-37

182 A waiver of any default by the Trustee shall not affect any subsequent default or impair any rights or remedies on the subsequent default. No delay or omission of the Trustee to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or an acquiescence therein, and every power and remedy conferred upon the Trustee by the Redevelopment Law or by the respective Loan Agreement may be enforced and exercised from time to time and as often as shall be deemed expedient by the Trustee. Discharge of Loan Agreements If the Agency shall pay and discharge the indebtedness on a Loan or any portion thereof in any one or more of the following ways: (a) by well and truly paying or causing to be paid the principal of and interest and prepayment premiums (if any) on the applicable Loan or such portion, as and when the same become due and payable; (b) by irrevocably depositing with the Trustee, in trust, at or before maturity, cash in an amount which, together with the available amounts then on deposit in any of the funds and accounts established pursuant to the Indenture or such Loan Agreement, in the opinion or report of Bond Counsel or an Independent Accountant is fully sufficient to pay all principal of and interest and prepayment premiums (if any) on the Loan or such portion thereof; or (c) by irrevocably depositing with the Trustee or any other fiduciary, in trust, non-callable Federal Securities or Permitted Investments described in clause (b) of the definition thereof in such amount as Bond Counsel or an Independent Accountant shall determine will, together with the interest to accrue thereon and available moneys then on deposit in the funds and accounts established pursuant to the Indenture or such Loan Agreement, be fully sufficient to pay and discharge the indebtedness on the Loan or such portion thereof (including all principal, interest and prepayment premiums) at or before maturity; then, at the election of the Agency but only if all other amounts then due and payable under such Loan Agreement shall have been paid or provision for their payment has been made, the pledge of and lien upon the respective Tax Revenues and other funds provided for in such Loan Agreement and all other obligations of the Trustee, the Authority and the Agency under such Loan Agreement with respect to the Loan or such portion thereof shall cease and terminate, except only the obligation of the Agency to pay or cause to be paid to the Trustee, from the amounts so deposited with the Trustee or such other fiduciary, all sums due with respect to the Loan or such portion thereof and all expenses and costs of the Trustee. Provisions Relating to the Surety Bonds Senior As long as a Surety Bond Senior held in a Senior Account of a Reserve Fund under a Loan Agreement shall be in full force and effect, or amounts are owed under the Guaranty Agreement Senior, the Agency and the Trustee agree to comply with the following provisions: A-38

183 (a) The Trustee shall ascertain the necessity for a claim upon the Surety Bond Senior and shall provide notice to the Insurer Senior Bonds in accordance with the terms of the Surety Bond Senior and the Guaranty Agreement Senior at least three (3) Business Days prior to each Interest Payment Date. In the event and to the extent that moneys on deposit in the Special Fund, plus all amounts on deposit in and credited to the Reserve Account in excess of the amount of the Surety Bond Senior, are insufficient to pay the amount of principal and interest coming due on the related Loan, then the Trustee promptly shall take all actions necessary under the Surety Bond Senior to make a claim thereunder in the amount of the insufficiency; provided, however, if the Reserve Requirement is then satisfied by the Surety Bond Senior and any Qualified Credit Instrument, the Trustee shall draw pro rate upon the Surety Bond Senior and any such Qualified Credit Instrument. The Surety Policy Senior provides that upon one (1) day after receipt by the Insurer Senior Bonds of a demand for payment in accordance with the Surety Bond Senior (the Demand for Payment ), duly executed by the Trustee certifying that payment due under the Loan Agreement has not been made to the Trustee, the Insurer Senior Bonds will make a deposit of funds in an account with the Trustee sufficient for the payment to the Trustee of amounts which are then due to the Trustee under the Loan Agreement (as specified in the Demand for Payment) up to but not in excess of the maximum amount of the Surety Bond Senior. (b) The Trustee shall, after submitting to Insurer Senior Bonds the Demand for Payment as described in (a) above, make available to Insurer Senior Bonds all records relating to the funds and accounts maintained by it under the applicable Loan Agreement. (c) The Trustee shall, upon receipt of moneys received from the draw on the Surety Bond Senior, as specified in the Demand for Payment, credit the applicable Reserve Account to the extent of moneys received pursuant to such Demand for Payment. (d) The Senior Account of the Reserve Fund shall be replenished in the following priority: (i) principal and interest on the Surety Bond Senior and on any other Qualified Credit Instrument then held in the Senior Account of the Reserve Fund shall be paid from first available Tax Revenues on a pro rata basis; (ii) after all such amounts are paid in full, amounts necessary to fund the Senior Account of the Reserve Fund to the required level, after taking into account the amounts available under the Surety Bond Senior and any such Qualified Credit Instrument, shall be deposited from next available Tax Revenues. (e) The Loan shall not be optionally prepaid unless all amounts owed to the Insurer Senior Bonds under the Guaranty Agreement Senior have been paid in full. (f) A Loan Agreement shall not terminate until all amounts owed to the Insurer Senior Bonds under the related Guaranty Agreement Senior have been paid in full. Provisions Relating to Surety Bonds Subordinate The Loan Agreements contain provisions relating to the Surety Bonds Subordinate that are similar to those described above relative to the Surety Bonds Senior, except that the Surety Bonds Subordinate will be held for the benefit of the respective Subordinate Accounts of the Reserve Fund, created under the Loan Agreements. A-39

184 (This page intentionally left blank)

185 APPENDIX B AUDITED FINANCIAL STATEMENTS OF THE AGENCY FOR FISCAL YEAR ENDED JUNE 30, 2006 B-1

186 (This page intentionally left blank)

187

188

189

190

191

192

193

194

195

196

197

198

199

200

201

202

203

204

205

206

207

208

209

210

211

212

213

214