$10,295,000 BREA REDEVELOPMENT AGENCY 2011 TAXABLE TAX ALLOCATION HOUSING BONDS, SERIES B (REDEVELOPMENT PROJECT AB)

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1 NEW ISSUE Book-Entry Only RATING: Standard and Poor s: AA- See CONCLUDING INFORMATION Rating. In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however, to certain qualifications described herein, under existing law, the interest on the Series A Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; provided, however, that for the purposes of computing the alternative minimum tax imposed on certain corporations such interest is required to be taken into account in determining certain income and earnings. In the further opinion of Bond Counsel, interest on the Series A Bonds and the Series B Bonds is exempt from California personal income taxation. Interest on the Series B Bonds is included in gross income for federal income tax purposes. See CONCLUDING INFORMATION - Tax Matters. Dated: Date of Delivery $18,839, BREA REDEVELOPMENT AGENCY 2011 TAX ALLOCATION BONDS, SERIES A (REDEVELOPMENT PROJECT AB) $10,295,000 BREA REDEVELOPMENT AGENCY 2011 TAXABLE TAX ALLOCATION HOUSING BONDS, SERIES B (REDEVELOPMENT PROJECT AB) Due: August 1, as shown on inside cover The Brea Redevelopment Agency (the Agency ) is issuing its 2011 Tax Allocation Bonds, Series A (Redevelopment Project AB) (the Series A Bonds ) and its 2011 Taxable Tax Allocation Housing Bonds, Series B (the Series B Bonds, and together with the Series A Bonds, the Bonds ) pursuant to two Indentures of Trust, each dated as of June 1, 2011 (respectively, the Series A Indenture and the Series B Indenture, and together, the Indentures ), by and between the Agency and The Bank of New York Mellon Trust Company, N.A., as trustee. Proceeds from the sale of the Series A Bonds will be applied to (i) refund all of the Agency s remaining outstanding 2001 Subordinate Tax Allocation Refunding Bonds, Series B (Redevelopment Project AB), (ii) finance projects benefiting the Agency s Redevelopment Project AB (the Project Area ), (iii) fund a Reserve Account relating to the Series A Bonds, and (iv) pay costs of issuance of the Series A Bonds. Proceeds from the sale of the Series B Bonds will be applied to (i) finance projects in furtherance of the Agency s low and moderate income housing program of benefit to the Project Area, (ii) fund a Reserve Account relating to the Series B Bonds and (iii) pay costs of issuance of the Series B Bonds. The Series A Bonds will be comprised of current interest bonds (the Series A Current Interest Bonds ) and capital appreciation bonds (the Series A Capital Appreciation Bonds ). The Series B Bonds will be comprised of current interest bonds only. Interest on the Series A Current Interest Bonds and the Series B Bonds will be payable semiannually on February 1 and August 1 of each year, commencing February 1, Interest on each Series A Capital Appreciation Bond will compound on February 1 and August 1 of each year, commencing August 1, 2011, and will be payable solely at the maturity date of such Series A Capital Appreciation Bond. The Bonds are being issued in fully registered form, and when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company ( DTC ), New York, New York. DTC will act as securities depository for the Bonds. Individual purchases of the Bonds may be made in bookentry form only in integral multiples of (i) $5,000 principal amount for the Series A Current Interest Bonds, (ii) $5,000 Maturity Value for the Series A Capital Appreciation Bonds, or (iii) $5,000 principal amount for the Series B Bonds. Purchasers of interests in the Bonds will not receive certificates representing their interest in the Bonds purchased. Payments of principal of, premium, if any, and interest on the Bonds will be payable by the Trustee, to DTC, which is obligated in turn to remit such principal, premium, if any, and interest to the DTC Participants for subsequent disbursement to the Beneficial Owners of the Bonds. The Series A Bonds maturing on August 1, 2025 and August 1, 2034 will be subject to special mandatory redemption on July 1, 2025 and May 15, 2034, respectively. The Series B Bonds maturing on August 1, 2025 will be subject to special mandatory redemption on July 1, The Series A Current Interest Bonds, the Series A Capital Appreciation Bonds and the Series B Bonds will be subject to optional redemption prior to their maturity. The Series B Bonds maturing on August 1, 2029 will be subject to mandatory sinking fund redemption prior to their maturity. The Bonds are special obligations of the Agency payable from and secured by Non-Housing Tax Revenues or Housing Tax Revenues (as such terms are defined in the related Indenture), as applicable, each consisting of a portion of the tax increment allocated to the Agency with respect to the Project Area pursuant to the Community Redevelopment Law, constituting Part 1, Division 24 (commencing with Section 33000) of the California Health and Safety Code. The Bonds of each series, in regards to the lien on the Non-Housing Tax Revenues or Housing Tax Revenues, as applicable, rank on a parity with certain other currently outstanding Agency bonds. The Agency may issue additional obligations payable on a parity with the Series A Bonds or the Series B Bonds subject to the terms of the Indentures. THE BONDS ARE NOT A DEBT, LIABILITY OR OBLIGATION OF THE CITY OF BREA (THE CITY ), THE STATE OF CALIFORNIA (THE STATE ), OR ANY OF ITS POLITICAL SUBDIVISIONS OTHER THAN THE AGENCY, AND NONE OF THE CITY, THE STATE NOR ANY OF ITS POLITICAL SUBDIVISIONS, OTHER THAN THE AGENCY, IS LIABLE THEREFOR. NONE OF MEMBER OF THE AGENCY, THE CITY NOR ANY PERSONS EXECUTING THE BONDS OR THE INDENTURES ARE LIABLE PERSONALLY WITH RESPECT TO THE BONDS. THE OBLIGATIONS OF THE AGENCY WITH RESPECT TO THE BONDS ARE PAYABLE SOLELY FROM NON-HOUSING TAX REVENUES OR HOUSING TAX REVENUES, AS APPLICABLE, PURSUANT TO THE TERMS OF THE RESPECTIVE INDENTURE. THE AGENCY HAS NO TAXING POWER. This cover page contains certain information for general reference only. It is not intended to be a summary of all factors relating to an investment in the Bonds. Investors are advised to read the entire Official Statement to obtain information essential to the making of an informed investment decision. Capitalized terms used and not defined on this cover page have the meanings set forth in this Official Statement. For a discussion of some of the risks associated with a purchase of the Bonds, see RISK FACTORS. The Bonds are offered when, as and if issued and accepted by the Underwriter, subject to the approval as to their legality by Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel. Certain legal matters will also be passed upon for the Agency by Richards, Watson & Gershon, A Professional Corporation, as Disclosure Counsel and Agency Counsel. Certain legal matters will be passed upon for the Underwriter by its counsel Fulbright & Jaworski, LLP. It is anticipated that the Bonds will be available for delivery in book-entry form through the facilities of DTC on or about June 17, Dated: June 15, 2011

2 Maturity Date (August 1) BREA REDEVELOPMENT AGENCY MATURITY SCHEDULE $18,839, Tax Allocation Bonds, Series A (Redevelopment Project AB) $14,524, (Aggregate Initial Principal Amount) Capital Appreciation Bonds Initial Principal Amount Accretion Rate Yield to Maturity Maturity Value CUSIP (Base: ) 2013 $ 28, % 2.450% $ 30,000 KA , ,000 KB , ,000 KC , ,000 KD , ,000 KE , ,000 KF , ,000 KG , ,000 KH , ,000 KJ , ,000 LA ,548, ,320,000 KK ,374, ,260,000 KL ,242, ,260,000 KM , ,565,000 KN , ,560,000 KP , ,565,000 KQ , ,565,000 KR , ,680,000 KS , ,025,000 KT ,526, ,560,000 KU ,958, ,665,000 KV ,785, ,665,000 KW , ,005,000 KX , ,005,000 KY0 $4,315,000 Current Interest Serial Bonds Maturity Date (August 1) Principal Amount Interest Rate Yield CUSIP (Base: ) 2031 $4,315, % 5.330% JZ9 $10,295, Taxable Tax Allocation Housing Bonds, Series B (Redevelopment Project AB) $5,045,000 Serial Bonds Maturity Date (August 1) Principal Amount Interest Rate Price CUSIP (Base: ) 2013 $ 85, % 100% JH , JJ , JK , JL , JM , JN , JP , JQ , JR , JS , JT ,625, JU ,735, JV8 $5,250, % Term Bonds due August 1, 2029; Price: 100%; CUSIP JW6 CUSIP Copyright 2011, American Bankers Association. CUSIP data herein is provided by Standard & Poor s CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. The Agency does not guarantee the accuracy of the CUSIP data.

3 BREA REDEVELOPMENT AGENCY Orange County, California AGENCY BOARD/CITY COUNCIL Roy Moore, Chair/Mayor Don Schweitzer, Vice Chair/Mayor Pro Tem Ron Garcia, Member/Member/Council Member Brett Murdock, Member/Member/Council Member Marty Simonoff, Member/Member/Council Member AGENCY/CITY STAFF Tim O Donnell, Executive Director/City Manager Glenn G. Parker, City Treasurer Kathie Mendoza, CMC, Interim Assistant Agency Secretary/Interim City Clerk Bill Gallardo, Assistant Treasurer/Administrative Services Director Eric Nicoll, Deputy Executive Director/Community Development Director Lee Squire, Financial Services Manager Accounting SPECIAL SERVICES Bond Counsel Jones Hall, A Professional Law Corporation San Francisco, California Disclosure Counsel Richards, Watson & Gershon, A Professional Corporation Los Angeles, California Trustee The Bank of New York Mellon Trust Company, N.A. Los Angeles, California Fiscal Consultant Keyser Marston Associates, Inc. Los Angeles, California Verification Agent Causey Demgen Moore Inc. Denver, Colorado

4 GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT Use of Official Statement. This Official Statement is submitted in connection with the offer and sale of the Bonds and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not to be construed as a contract with the purchasers of the Bonds. Estimates and Forecasts. Certain statements included or incorporated by reference in this Official Statement and in any continuing disclosure by the Agency, any press release and in any oral statement made with the approval of an authorized officer of the Agency or any other entity described or referenced herein, constitute forward-looking statements. Such statements are generally identifiable by the terminology used such as plan, expect, anticipate, estimate, budget, or other similar words and include, but are not limited to, statements under the captions PROJECT AREA and TAX REVENUES AND DEBT SERVICE COVERAGE. The achievement of certain results or other expectations contained in such forward-looking statements involves known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. While the Agency has undertaken to provide certain on-going financial and other data pursuant to a Continuing Disclosure Certificate (see Introduction Continuing Disclosure ), the Agency does not plan to issue any updates or revisions to those forward-looking statements if or when their expectations or events, conditions or circumstances on which such statements are based change. Preparation of this Official Statement. The information contained in this Official Statement has been obtained from sources that are believed to be reliable, but is not guaranteed as to accuracy or completeness. The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. Limit of Offering. No dealer, broker, salesperson or other person has been authorized by the Agency to give any information or to make any representations in connection with the offer or sale of the Bonds other than those contained in this Official Statement and if given or made, such other information or representation must not be relied upon as having been authorized by the Agency 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. Information as of Dated Date of Official Statement. 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 of the Bonds shall, under any circumstances, create any implication that there has been no change in the affairs of the Agency or any other entity described or referenced in this Official Statement since the dated date shown on the front cover. All summaries of the documents referred to in this Official Statement are made subject to the provisions of such documents, respectively, and do not purport to be complete statements of any or all of such provisions. Stabilization of Prices. 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 in the open market. Such stabilizing, if commenced, may be discontinued at any time. The Underwriter may offer and sell the Bonds to certain dealers and others at prices lower than the public offering prices set forth on the inside front cover and said public offering prices may be changed from time to time by the Underwriter. THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXCEPTION FROM THE REGISTRATION REQUIREMENTS CONTAINED IN SUCH ACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAW OF ANY STATE.

5 REGIONAL LOCATION MAP Brea, California Brea

6 BREA REDEVELOPMENT PROJECT AREAS

7 TABLE OF CONTENTS Page INTRODUCTION...1 General...1 The City and the Agency...2 Project Area...2 Tax Allocation Financing Generally...4 Security for the Bonds...4 Continuing Disclosure...5 Other Information...5 PLAN OF FINANCING...6 Refunding of Series 2001B Bonds...6 Financing of Projects...7 Sources and Uses of Funds...7 THE BONDS...8 Description...8 Redemption...9 Book-Entry Only System...11 Annual Debt Service Schedule...13 SECURITY FOR THE BONDS...14 General...14 Tax Allocation Financing...14 Allocation of Taxes...15 Tax Sharing Agreements...18 Reserve Accounts...19 Parity Debt...19 Subordinate Debt...23 THE AGENCY...23 General...23 Agency Administration and Personnel...23 Audited Financial Statements...24 Filing of Statement of Indebtedness and Statement of Reconciliation...24 Other Project Area...25 PROJECT AREA...25 General Development in Project Area...25 Land Use of Project Area...28 Top Property Tax Assessees...29 Redevelopment Plan; Plan Limitations...29 Summary of Certain Characteristics of Each Component Area...30 TAX REVENUES AND DEBT SERVICE COVERAGE...32 Historical Assessed Valuation and Tax Increment Revenues...32 Teeter Plan...34 Assessed Values Appeals and Proposition 8 Adjustments...34 Projected Tax Revenues...36 Coverage Projections...38 RISK FACTORS...40 Limited Obligations of the Agency...40 Reduction in Taxable Value Levy and Collection State Budget Issues Natural Disasters Hazardous Substances Bankruptcy Risks; Enforceability of Remedies Secondary Market Loss of Tax Exemption with Respect to Series A Bonds LIMITATIONS ON TAX REVENUES Article XIIIA of the California Constitution.. 49 Property Tax Collection Procedure Unitary Property Article XIIIB of the California Constitution.. 52 Proposition AB 1290 and SB SB 1045 and SB Future Initiatives CONCLUDING INFORMATION Absence of Litigation Certain Legal Matters Tax Matters Continuing Disclosure Rating Underwriting Miscellaneous APPENDIX A CITY OF BREA GENERAL INFORMATION...A-1 APPENDIX B FISCAL CONSULTANT S REPORT... B-1 APPENDIX C AUDITED FINANCIAL STATEMENTS OF THE AGENCY FOR FISCAL YEAR ENDED JUNE 30, C-1 APPENDIX D SUMMARY OF PRINCIPAL LEGAL DOCUMENTS...D-1 APPENDIX E FORM OF BOND COUNSEL OPINIONS... E-1 APPENDIX F FORM OF CONTINUING DISCLOSURE CERTIFICATE...F-1 APPENDIX G DTC S BOOK-ENTRY ONLY SYSTEM...G-1 APPENDIX H TABLE OF ACCRETED VALUES...H-1 i

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9 $18,839, BREA REDEVELOPMENT AGENCY 2011 TAX ALLOCATION BONDS, SERIES A (REDEVELOPMENT PROJECT AB) $10,295,000 BREA REDEVELOPMENT AGENCY 2011 TAXABLE TAX ALLOCATION HOUSING BONDS, SERIES B (REDEVELOPMENT PROJECT AB) INTRODUCTION This Introduction does not purport to be complete, and reference is made to the body of this Official Statement, appendices and the actual documents for more complete information with respect to matters concerning the Bonds. Potential investors are encouraged to read the entire Official Statement. Capitalized terms used and not defined in this Introduction shall have the meanings assigned to them elsewhere in this Official Statement. General This Official Statement, including the cover page, the inside front cover and appendices, is provided to furnish information in connection with the sale by the Brea Redevelopment Agency (the Agency ) of its $18,839, (aggregate initial principal amount) 2011 Tax Allocation Bonds, Series A (Redevelopment Project AB) (the Series A Bonds ) and its $10,295,000 (aggregate principal amount) 2011 Taxable Tax Allocation Housing Bonds, Series B (Redevelopment Project AB) (the Series B Bonds, and together with the Series A Bonds, the Bonds ). The Bonds are being issued pursuant to the Community Redevelopment Law of the State of California (the State ), constituting Part 1 of Division 24 (commencing with Section 33000) of the California Health and Safety Code, as amended (the Redevelopment Law ), other relevant laws of the State and a resolution of the Agency, adopted on June 7, Each series of Bonds will be issued under the terms of an Indenture of Trust, dated as of June 1, 2011 (respectively, the Series A Indenture and the Series B Indenture, and together, the Indentures ), by and between the Agency and The Bank of New York Mellon Trust Company, N.A., as trustee (the Trustee ). Proceeds from the sale of the Series A Bonds will be applied to (i) refund all of the Agency s remaining outstanding 2001 Subordinate Tax Allocation Refunding Bonds, Series B (Redevelopment Project AB) (the Series 2001B Bonds ), (ii) finance projects benefiting the Agency s Redevelopment Project AB (the Project Area ), (iii) fund a Reserve Account relating to the Series A Bonds, and (iv) pay costs of issuance of the Series A Bonds. Proceeds from the sale of the Series B Bonds will be applied to (i) finance projects in furtherance of the Agency s low and moderate income housing program of benefit to the Project Area, (ii) fund a Reserve Account relating to the Series B Bonds, and (iii) pay costs of issuance of the Series B Bonds. Pursuant to the Indentures, the Bonds will be payable from, and secured by a pledge and lien on, either Non-Housing Tax Revenues or Housing Tax Revenues (defined below, see Tax Allocation Financing Generally and Security for the Bonds ), each being a portion of the tax increment with respect to the Project Area allocated to the Agency pursuant to the Redevelopment Law. The Series A Bonds will be comprised of current interest bonds (respectively, the Series A Current Interest Bonds ) and capital appreciation bonds (the Series A Capital Appreciation Bonds ). The Series B Bonds will be comprised of only current interest bonds (together with the Series A Bonds, the Current Interest Bonds ). Interest on the Current Interest Bonds will be payable semiannually on February 1 and August 1 of each year, commencing February 1, Interest on each Series A Capital Appreciation Bond will compound on February 1 and August 1 of each year, commencing August 1, 2011, and will be payable solely at the maturity date of such Series A Capital Appreciation Bond. 1

10 The Bonds of each series will be initially delivered as one fully registered certificate for each maturity (unless the Bonds of such maturity bear different interest rates, then one certificate for each interest rate among such maturity) and, when issued and delivered, will be registered in the name of Cede & Co., as nominee of the Depository Trust Company, New York, New York ( DTC ). DTC will act as the depository for the Bonds and all payments due on the Bonds will be made to Cede & Co. Ownership interests in the Bonds may be purchased only in book-entry form. So long as the Bonds are registered in the name of Cede & Co., or any other nominee of DTC, references in this Official Statement to the registered owners, or just Owners, of the Bonds shall mean Cede & Co. or such other nominee of DTC, and shall not mean the beneficial owners of the Bonds. See THE BONDS Book- Entry Only System and APPENDIX G DTC S BOOK-ENTRY ONLY SYSTEM. The City and the Agency The City of Brea (the City ) encompasses approximately 11.2 square miles and is located at the northern end of Orange County, California (the County ), just south of the Los Angeles County line. The City lies about 25 miles southeast of downtown Los Angeles and 15 miles north of the City of Santa Ana, the County seat, and 22 miles inland from the Pacific Ocean. The City s population was approximately 40,065 as of January 1, 2011, according to State of California Department of Finance estimates. The City Council is composed of five members elected at large every two years to four-year alternating terms. The Mayor is selected by the City Council from among its members. The City Council appoints the City Manager, who is responsible for the day-to-day administration of City business and the coordination of all departments of the City. For further general information regarding the City, see APPENDIX A CITY OF BREA GENERAL INFORMATION. The Agency was activated with the adoption of Ordinance No. 465 by the City Council on April 13, As permitted by the Redevelopment Law, the City Council assumes the duties and responsibilities of the Agency. The members of the City Council also serve as members of the Agency with the Mayor of the City serving as the Agency s Chair. The City Manager serves as the Agency s Executive Director. Certain other members of the City staff also serve as staff to the Agency. See THE AGENCY. The Agency is charged with the redevelopment undertakings with respect to two project areas: the Project Area and Redevelopment Project C. Redevelopment Project C, encompassing approximately 256 acres in the northern portion of the City, is significantly smaller than the Project Area. None of the Redevelopment Project C tax increment revenues is pledged as security for the Bonds. Project Area The Project Area encompasses approximately 2,177 acres and is comprised of four component areas (each, a Component Area ): (i) Redevelopment Project A, an approximately 346-acre area located in the western portion of the City, (ii) Redevelopment Project A Annex, an approximately 790- acre area located in the eastern portion of the City, (iii) Redevelopment Project B, an approximately 91-acre area located at the intersection of the Orange Freeway (State Highway 57) and Imperial Highway (State Highway 90), and (iv) Redevelopment Project AB Supplement, an approximately 950-acre area, around the Brea Boulevard corridor between Lambert Road and the City s southern border. Redevelopment Project A and Redevelopment Project B were originally two separate project areas. The original redevelopment plans for Redevelopment Project A and Redevelopment Project B were approved and adopted in In 1981, the City Council adopted ordinances to (i) add Redevelopment Project A Annex to Redevelopment Project A and (ii) merge Redevelopment Project A (including the then newly added annex) and Redevelopment Project B to create Redevelopment Project 2

11 AB. In 1983, Redevelopment Project AB Supplement was added to the Project Area. Since 1983, the redevelopment plan for the Project Area has been modified by several additional amendments. The redevelopment plan for the Project Area, as amended, is referred to in this Official Statement as the Redevelopment Plan. Pursuant to the most recent amendments to the Redevelopment Plan, adopted in March 2011, the last day that the Agency may use tax increment derived from Redevelopment Project A and Redevelopment Project B to repay debt will be July 24, 2025, that for Redevelopment Project A Annex will be May 18, 2034, and that for Redevelopment Project AB Supplement will be December 20, Because the final maturity dates for the Series A Bonds and the Series B Bonds occur in 2036 and 2029, respectively, the make-up of the properties generating Non-Housing Tax Revenues and Housing Tax Revenues supporting the Bonds will change over time as these time limits expire. See PROJECT AREA for a description of each Component Area. The assessed value of taxable property within the Project Area (including secured and unsecured values) for fiscal year totaled approximately $3.3 billion, which would have generated gross tax increment revenue of approximately $31 million for fiscal year if certain annual caps set forth in the Redevelopment Plan did not exist. The Redevelopment Plan currently imposes annual limits (the Annual TI Caps ) on the Gross Tax Revenues allocated to the Agency each fiscal year in the amounts of (i) $14 million for Redevelopment Project A, Redevelopment Project A Annex and Redevelopment B, combined (the Project A-A Annex-B TI Cap ), and (ii) $5 million for Redevelopment Project AB Supplement (the Project AB Supplement TI Cap ). Component Area Last Day to Use Tax Increment to Repay Debt FY Assessed Value (1)(2) Estimated FY Gross Tax Increment If No Annual TI Caps (2) Annual Tax Increment Caps Under Redev. Plan Redev. Project A $593,153,964 $5,992,000 7/24/2025 Redev. Project B $419,833,408 $4,369,000 $14 million Redev. Project A-Annex Redev. Project AB Supplement 5/18/2034 $1,294,011,799 $12,148,000 12/20/2036 $1,016,158,077 $8,870,000 $5 million Total $3,323,157,248 $31,379,000 $19 million (1) Does not take into account any potential reduction due to pending assessment appeals. (2) See Tables 7-B, 7-C, 7-D and 7-E of the Fiscal Consultant s Report in Appendix B. Includes secured and unsecured values. As of fiscal year , the top three uses for parcels in the Project Area, based on assessed value, are commercial (approximately 35.9 percent of total assessed value), industrial (approximately 25.5 percent of total assessed value) and single family residential (approximately 24.8 percent of total assessed value). See PROJECT AREA Land Use of Project Area. 3

12 Tax Allocation Financing Generally 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 (or a later added component area of a redevelopment project area) last equalized prior to adoption of the redevelopment plan (or, as applicable, the amendment to the redevelopment plan adding such component area to the project area), or the 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 (except such portion generated by rates levied to pay voter-approved bonded indebtedness on or after January 1, 1989 for the acquisition or improvement of real property) 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 have no authority to levy property taxes and must look specifically to the allocation of taxes produced under the Redevelopment Law. The taxes (including all payments, subventions and reimbursements, if any, specifically attributable to ad valorem taxes lost by reason of tax exemptions and tax rate limitations) eligible for allocation to the Agency pursuant to the Redevelopment Law with respect to the Project Area as provided in the Redevelopment Plan are generally referred to as tax increment revenues and are also referred to in this Official Statement as the Gross Tax Revenues. Sections and of the Redevelopment Law require the Agency to set aside not less than 20 percent of the Gross Tax Revenues allocated to the Agency in the Housing Fund to be expended for authorized low and moderate income housing purposes (the Housing Set-Aside ). Amounts on deposit in the Housing Fund may be applied to pay debt service on bonds, loans or advances used to provide financing for such low and moderate income housing purposes. Under the Indentures, the term Tax Revenues is defined as, generally, all Gross Tax Revenues, excluding the amount of such taxes which are required to be paid by the Agency pursuant to the Tax Sharing Agreements (defined below, see SECURITY FOR THE BONDS Allocation of Taxes ) or pursuant to Sections , or of the Redevelopment Law, to the extent such amounts are not subordinated to the payment of debt service on any Senior Lien Debt (defined below, see SECURITY FOR THE BONDS Parity Debt ). The term Housing Tax Revenues is defined as all of the Tax Revenues which the Agency is obligated to deposit into the Housing Fund under Section of the Redevelopment Law (i.e., the Housing Set-Aside). The term Non-Housing Tax Revenues is defined as all of the Tax Revenues other than the Housing Tax Revenues. For a more precise wording of the definition of Tax Revenues, Housing Tax Revenues and Non-Housing Tax Revenues in the Indentures, see APPENDIX D SUMMARY OF PRINCIPAL LEGAL DOCUMENTS. Security for the Bonds Because proceeds from the sale of the Series A Bonds will be used, in part, to refund obligations that were incurred to finance or refinance projects in furtherance of the Agency s low and moderate income housing program, a proportionate amount of the Series A Bonds will be payable from and secured by a first pledge of Housing Tax Revenues. Such portion of the Series A Bonds is referred to as the Housing Portion of the Series A Bonds. The remaining portion of the Series A Bonds is referred to as the Non-Housing Portion of the Series A Bonds. The Non-Housing Portion of the Series A Bonds will be payable from, and secured by a first pledge of, Non-Housing Tax Revenues. See Tables 6 and 7 under TAX REVEVENUES AND DEBT SERVICE COVERAGE for the respective debt service amounts of the Housing Portion of the Series A Bonds and the Non-Housing Portion of the Series A Bonds. 4

13 The Series B Bonds will be payable from, and secured by a first pledge of the Housing Tax Revenues. The Non-Housing Tax Revenues are not pledged to the payment of the Series B Bonds. In addition to the Series 2001B Bonds to be refunded, the following Agency bonds relating to Redevelopment Project AB currently remain outstanding: (i) the Agency s 2001 Tax Allocation Refunding Bonds, Series A (Redevelopment Project AB) (the Series 2001A Bonds ), with an outstanding principal amount of $43,435,000, as of May 1, 2011, and (ii) the Agency s 2003 Tax Allocation Bonds (Redevelopment Project AB) (the Series 2003 Bonds ) which, as of May 1, 2011, include $97,390,000 principal amount of current interest bonds and $22,640,000 maturity value ($5,987, initial principal amount at issuance) of capital appreciation bonds remain outstanding. Pursuant to the related indentures, all of the Series 2001A Bonds and the Series 2003 Bonds rank on a parity with the Non-Housing Portion of the Series A Bonds with respect to the pledge and lien on Non- Housing Tax Revenues. Furthermore, to the extent that a portion of each of the Series 2001A Bonds and the Series 2003 Bonds may be paid from the Housing Set-Aside, those portions of the Series 2001A Bonds and the Series 2003 Bonds are additionally secured by a pledge and lien on Housing Tax Revenues, on a parity with the Series B Bonds and the Housing Portion of the Series A Bonds. The Bonds are not a debt, liability or obligation of the City, the State, or any of its political subdivisions other than the Agency, and none of the City, the State nor any of its political subdivisions, other than the Agency, is liable for the Bonds. None of the members of the Agency, the City nor any persons executing the Bonds or the Indentures are liable personally with respect to the Bonds. The obligations of the Agency with respect to the Bonds are payable solely from the Non-Housing Tax Revenues or Housing Tax Revenues as set forth in the Indentures. The Agency has no taxing power. See SECURITY FOR THE BONDS. Continuing Disclosure In connection with the sale of the Bonds, the Agency will execute and deliver a Continuing Disclosure Certificate, covenanting to prepare and file an annual report and certain other notices with the Municipal Securities Rulemaking Board. See CONCLUDING INFORMATION Continuing Disclosure and APPENDIX F FORM OF CONTINUING DISCLOSURE CERTIFICATE. Other Information There follows in this Official Statement brief descriptions of the Bonds, security for the Bonds, certain risk factors, the Indentures, the Agency, the Project Area and certain other documents and information relevant to the issuance of the Bonds. All references to the Bonds, the Indentures or other documents are qualified in their entirety by reference to such documents. Unless context clearly requires otherwise, capitalized terms used but not otherwise defined in this Official Statement have the meanings assigned to them in the Indentures. See APPENDIX D SUMMARY OF PRINCIPAL LEGAL DOCUMENTS. This Official Statement speaks only as of its date as set forth on the cover hereof, and the information and expressions of opinion in this Official Statement are subject to change without notice, and neither the delivery of this Official Statement nor any sale made with respect to the Bonds shall under any circumstances create any implication that there has been no change in the affairs of the Agency since the date of this Official Statement. Unless otherwise expressly noted, references to Internet websites in this Official Statement are shown for reference and convenience only, and none of their content is incorporated by reference. 5

14 The information contained within such websites has not been reviewed by the Agency. makes no representation regarding the information presented on such websites. The Agency PLAN OF FINANCING Refunding of Series 2001B Bonds Background. In August 1991, the Brea Public Financing Authority (the Authority ) issued two series of bonds (together, the 1991 Authority Bonds ), including the Authority s 1991 Subordinate Tax Allocation Revenue Bonds, Series C (Redevelopment Project AB). Proceeds from the sale of the 1991 Authority Bonds were used to make two loans to the Agency (the 1991 Senior Lien Loan and the 1991 Junior Lien Loan, respectively). The Agency used the proceeds from the 1991 Senior Lien Loan and the 1991 Junior Lien Loan to finance redevelopment projects (including low and moderate income housing related projects) and refund certain then outstanding Agency bonds (the 1991 Refunded Bonds ). The refunding of the 1991 Refunded Bonds was, in turn, part of a succession of refundings of prior Agency debt obligations incurred to finance various redevelopment and housing projects. In 1993, the Agency issued its 1993 Tax Allocation Refunding Revenue Bonds (Redevelopment Project AB) (the Series 1993 Bonds ) to refund a portion of the 1991 Senior Lien Loan. In 2001, the Agency issued its Series 2001A Bonds to refund an additional portion of the 1991 Senior Lien Loan and its Series 2001B Bonds to refund, in full, the 1991 Junior Lien Loan. In 2003, the Agency issued the Series 2003 Bonds to refund the Series 1993 Bonds and finance additional redevelopment projects. As the result of the foregoing, immediately before the issuance of the Bonds (and the related refunding described below), the Agency s outstanding bonds secured by a pledge of Tax Revenues include the Series 2003 Bonds, the Series 2001A Bonds and the Series 2001B Bonds (with the Series 2001B Bonds secured on a junior basis relative to the other two series) Refunding. Pursuant to the Irrevocable Refunding Instructions (the Refunding Instructions ) to be given by the Agency, a portion of the proceeds of the Series A Bonds, together with certain moneys released from funds relating to the Series 2001B Bonds, will be set-aside and held by The Bank of New York Mellon Trust Company, N.A., as successor to BNY Western Trust Company, trustee for the Series 2001B Bonds (the 2001B Bond Trustee ), in an escrow fund (the Escrow Fund ). The Series 2001B Bond Trustee will apply the moneys held in the Escrow Fund pursuant to the Refunding Instructions and the indenture for the Series 2001B Bonds, for the sole benefit of the holders of the Series 2001B Bonds. The Agency will irrevocably direct the 2001B Bond Trustee to redeem and pay all of the remaining outstanding Series 2001B Bonds 30 days following the issuance of the Bonds. On such date, moneys deposited in the Escrow Fund will be used to pay the principal and interest payments then due and the redemption price for the Series 2001B Bonds. As a result of the deposit and application of funds under the Refunding Instructions, the Series 2001B Bonds will be deemed to be paid and defeased as of the date of issuance of the Bonds, and will no longer be secured by the Non-Housing Tax Revenues or the Housing Tax Revenues. The moneys held in the Escrow Fund will be held in cash, uninvested, and will not serve as security nor be available for payment of principal of or interest or premium, if any, on the Bonds. Causey Demgen Moore Inc., certified public accountants (the Verification Agent ), will verify the mathematical accuracy of certain computations included in the schedules provided on behalf of the Agency relating to the computation of forecasted receipts of principal and interest earnings on the moneys deposited in the Escrow Fund and the forecasted payments of principal, interest, and premium in connection with the redemption and payment of the Series 2001B Bonds. The report of the Verification Agent will include the statement that the scope of its engagement was limited to verifying the arithmetical accuracy of computations contained in the schedules provided to the Verification Agent and the 6

15 Verification Agent has no obligation to update its report because of events occurring, or data or information coming to the Verification Agent s attention, subsequent to the date of its report. Financing of Projects A portion of the net proceeds of the Series A Bonds will be used to finance projects for the benefit of the Project Area. Such projects are expected to include: (i) the Super Block 1 Parking Structure project, involving the construction of a multi-level parking structure at Super Block 1 (at the intersection of Brea Boulevard and Birch Street) as part of the development of Downtown restaurant row, (ii) the Eastside Community Facility project, involving the construction and improvement of community facilities that will be a part of the new La Floresta development on the east side of the City (east of Highway 57, between Birch Street and Imperial Highway), and (iii) the Tracks at Brea project, involving the use of green building principles and remediation of brownfields to create a linear park that will run through the City from east to west, by converting blighted abandoned railroad rights-of-way into an intermodal trail system connecting different parts of the City. Net proceeds of the Series B Bonds will be used to finance projects in furtherance of the Agency s low and moderate income housing program for the benefit of the Project Area. Such projects are expected to include financial assistance for the development of a 115 unit affordable rental project (tentatively called Birch Hills Affordable Apartments) for low and very low income households. The above-described projects reflect the Agency s current expectations. The Agency may use the proceeds of the Bonds for other permitted redevelopment and low and moderate income housing purposes. None of the projects financed with proceeds of the Bonds will constitute security for the Bonds. Sources and Uses of Funds The following is a summary of the anticipated sources and uses of funds relating to the Series A Bonds, moneys to be transferred from funds relating to the Series 2001B Bonds and a deposit by the Agency of moneys which would have been used for the September 1, 2011 debt service payment on the Series 2001B Bonds: 7

16 Sources: Principal Amount of Series A Bonds $18,839, Less: Original Issue Discount (174,757.50) Less: Underwriter s Discount (192,807.00) Transfer from funds relating to Series 2001B Bonds 464, Agency deposit 102, Total Sources $19,039, Uses: 2011 Redevelopment Fund $13,365, Refunding of Series 2001B Bonds 3,668, Reserve Account for the Series A Bonds 1,883, Costs of Issuance (1) 121, Total Uses $19,039, (1) To pay fees and expenses of Bond Counsel, Disclosure Counsel, Trustee and Fiscal Consultant, rating fees, costs of printing this Official Statement and other costs of issuance relating to the Series A Bonds. The anticipated sources and uses of funds relating to the Series B Bonds are as follows: Sources: Principal Amount of Series B Bonds $10,295, Less: Underwriter s Discount (85,329.16) Total Sources $10,209, Uses: 2011 Housing Project Fund $9,112, Reserve Account for the Series B Bonds 1,029, Costs of Issuance (1) 68, Total Uses $10,209, (1) To pay fees and expenses of Bond Counsel, Disclosure Counsel, Trustee and Fiscal Consultant, rating fees, costs of printing this Official Statement and other costs of issuance relating to the Series B Bonds. Description THE BONDS The Bonds will be issued as fully registered bonds, and will bear interest at the rates, and mature on August 1 on the dates and in the amounts all as set forth on the inside front cover of this Official Statement. The Bonds will be dated their date of delivery. Interest on the Current Interest Bonds will be payable semiannually on February 1 and August 1 of each year, commencing February 1, 2012 (each, an Interest Payment Date ), and will be calculated on the basis of a 360-day year composed of twelve 30-day months. Each Current Interest Bond will bear interest from the Interest Payment Date immediately preceding the date of authentication of such Current 8

17 Interest Bond, unless (i) such Current Interest Bond is authenticated on or before an Interest Payment Date and after the close of business on the preceding Record Date (i.e., the 15 th calendar day of the month preceding such Interest Payment Date) in which event it will bear interest from such Interest Payment Date; (ii) such Current Interest Bond is authenticated on or before the first Record Date, in which event interest on such Current Interest Bond will be payable from the Closing Date; or (iii) interest on such Current Interest Bond is in default as of the date of authentication, in which event interest thereon will be payable from the date to which interest has been paid in full, payable on each Interest Payment Date. Interest on Series A Capital Appreciation Bonds will compound on February 1 and August 1 of each year, commencing August 1, 2011 (each, a Compounding Date ) at the yields set forth on the inside cover page of this Official Statement. The Accreted Value of the Series A Capital Appreciation Bonds will be payable solely at maturity. Accreted Value (with respect to any Series A Capital Appreciation Bond) means, the total amount of principal of and interest on such Series A Capital Appreciation Bond, as of any Compounding Date, by reference to the Table of Accreted Values set forth on such Series A Capital Appreciation Bond. A copy of the Table of Accreted Values is attached to this Official Statement as Appendix H. The Accreted Value of any Series A Capital Appreciation Bond as of any date other than a Compounding Date will be the sum of: (a) the Accreted Value as of the Compounding Date immediately preceding the date on which the calculation is being made, plus (b) interest on the Accreted Value determined under the preceding clause (a), computed to the date of calculation at the yield to maturity set forth on such Series A Capital Appreciation Bond (based on a 360-day year of twelve 30-day months). The Bonds of each series will be initially delivered as one fully registered certificate for each maturity (unless the Bonds of such maturity bear different interest rates, then one certificate for each interest rate among such maturity) and will be delivered by means of the book-entry system of DTC. While the Bonds are held in DTC s book-entry only system, all payments of principal of, interest and premium (if any) on the Bonds will be made to Cede & Co., as the registered owner of the Bonds. See Book-Entry Only System below and APPENDIX G DTC S BOOK-ENTRY ONLY SYSTEM. Redemption Special Mandatory Redemption for Series A Bonds Maturing in 2025 and 2034, and Series B Bonds Maturing in The Series A Capital Appreciation Bonds maturing on August 1, 2025, are subject to special mandatory redemption in whole by the Agency on July 1, 2025, at a redemption price equal to 100 percent of the Accreted Value of the Series A Capital Appreciation Bonds to be redeemed (determined as of the redemption date), without premium. The Series B Bonds maturing on August 1, 2025 are subject to special mandatory redemption in whole by the Agency on July 1, 2025, at a redemption price equal to 100 percent of the principal amount of such Bonds to be redeemed, together with accrued interest thereon to such redemption date, without premium. Under the Redevelopment Plan, the last day on which the Agency may repay debt from tax increment of Redevelopment Project A and Redevelopment Project B is July 24, In light of such time limit, the Agency covenants under the Indentures that, with respect to the source of funds to pay for redemption price of the Bonds called pursuant the July 1, 2025 special mandatory redemption, the Agency will use Non-Housing Tax Revenues and Housing Tax Revenues, as applicable, from Redevelopment Project A and Redevelopment Project B first, to the greatest extent practicable, before using other available moneys for this purpose. The Series A Capital Appreciation Bonds maturing on August 1, 2034, are subject to special mandatory redemption in whole by the Agency on May 15, 2034, at a redemption price equal to 100 percent of the Accreted Value of the Series A Capital Appreciation Bonds to be redeemed (determined as of the redemption date), without premium. Under the Redevelopment Plan, the last day on which the Agency may repay debt from tax increment of Redevelopment Project A-Annex is May 18, In light 9

18 of such time limit, the Agency covenants under the Series A Indenture that, with respect to the source of funds to pay for redemption price of the Series A Capital Appreciation Bonds called pursuant the May 15, 2034 special mandatory redemption, the Agency will use Non-Housing Tax Revenues and Housing Tax Revenues, as applicable, from Redevelopment Project A-Annex first, to the greatest extent practicable, before using other available moneys for this purpose. Optional Redemption Series A Current Interest Bonds. The Series A Current Interest Bonds maturing on August 1, 2031 will be subject to redemption, at the option of the Agency, in whole or in part among maturities on such basis as designated by the Agency and by lot within a maturity, from any available source of funds, on August 1, 2021, and on any date thereafter, at a redemption price equal to 100 percent of the principal amount of Series A Current Interest Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption. Optional Redemption for Series A Capital Appreciation Bonds. The Series A Capital Appreciation Bonds maturing on or before August 1, 2021, are not subject to redemption prior to maturity. The Series A Capital Appreciation Bonds maturing on or after August 1, 2022, are subject to redemption in whole, or in part among maturities on such basis as designated by the Agency and by lot within a maturity, at the option of the Agency, from any available source of funds, on any date on or after August 1, 2021, at a redemption price equal to 100 percent of the Accreted Value of the Series A Capital Appreciation Bonds to be redeemed (determined as of the redemption date), without premium. Optional Redemption Series B Bonds. The Series B Bonds maturing on or before August 1, 2021, will not be subject to redemption prior to maturity. The Series B Bonds maturing on or after August 1, 2022 will be subject to redemption, at the option of the Agency, in whole or in part among maturities on such basis as designated by the Agency and by lot within a maturity, from any available source of funds, on August 1, 2021, and on any date thereafter, at a redemption price equal to 100 percent of the principal amount of Series B Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption. Mandatory Sinking Fund Redemption Series B Bonds. The Series B Current Interest Bonds maturing on August 1, 2029 (the Series B Term Bonds ), are subject to redemption prior to their stated maturity date, without a redemption premium, in part by lot, from mandatory sinking fund payments on each August 1, in the years and principal amounts as set forth in the following tables: Series B Term Bonds Maturing on August 1, 2029 Redemption Date (August 1) Principal Amount 2026 $1,410, ,515, ,625, (maturity) 700,000 If some but not all of the Series B Term Bonds have been optionally redeemed, the total amount of all future sinking fund payments of such Series B Term Bonds will be reduced by the aggregate principal amount of such Series B Term Bonds so redeemed, to be allocated among such sinking fund payments on such basis as determined by the Agency. Notice of Redemption. The Trustee on behalf of the Agency will send notice of any redemption to the respective Owners of any Bonds designated for redemption at their respective addresses appearing 10

19 on the Registration Books, to the Securities Depositories and the Municipal Securities Rulemaking Board, at least 30 but not more than 60 days prior to the date fixed for redemption; provided, however, that neither failure to receive any such notice so mailed nor any defect in such notice will affect the validity of the proceedings for the redemption of, or the cessation of the accrual of interest on, such Bonds. Right to Rescission of Redemption. The Agency has the right to rescind any notice of the optional redemption of Bonds by written notice to the Trustee on or prior to the date fixed for redemption. Any notice of redemption will be cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption for the payment in full of the Bonds then called for redemption, and such cancellation will not constitute an Event of Default under the Indentures. The Agency and the Trustee have no liability to the Owners or any other party related to or arising from such rescission of redemption. The Trustee will mail notice of such rescission of redemption to the Bond Owners in the same manner as the original notice of redemption was sent. Selection of Bonds for Redemption. Whenever provision is made for the redemption of less than all of the Bonds of the same series and maturity, the Trustee will select the Bonds to be redeemed by lot in any manner which the Trustee in its sole discretion deems appropriate. For purposes of such selection, all Current Interest Bonds of a series will be deemed to be comprised of separate $5,000 principal amount denominations, and the Series A Capital Appreciation Bonds will be deemed to be comprised of separate $5,000 Maturity Value denominations. Such separate denominations will be treated as separate Bonds which may be separately redeemed. Partial Redemption of Bonds. If only a portion of any Bond is called for redemption, then upon surrender of such Bond the Agency will execute and the Trustee will authenticate and deliver to the Owner thereof, at the expense of the Agency, a new Bond or Bonds of the same series and maturity date, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the Bond to be redeemed. Effect of Redemption. From and after the date fixed for redemption, if notice of redemption has been duly sent and funds available for the payment of the principal of and interest (and premium, if any) on the Bonds so called for redemption have been duly provided, such Bonds so called will cease to be entitled to any benefit under the related Indenture other than the right to receive payment of the redemption price, and no interest will accrue on such Bonds from and after the redemption date specified in such notice. Book-Entry Only System The Bonds of each series will be issued as one fully registered bond without coupons for each maturity (unless the Bonds of such maturity bear different interest rates, then one certificate for each interest rate among such maturity) and, when issued, will be registered in the name of Cede & Co., as nominee of DTC. DTC will act as securities depository of the Bonds. Individual purchases may be made in book-entry form only, in integral multiples of (i) $5,000 principal amount for the Current Interest Bonds, or (ii) $5,000 Maturity Value for the Capital Appreciation Bonds. Purchasers will not receive certificates representing their interest in the Bonds purchased. Principal and interest will be paid to DTC, which will in turn remit such principal and interest to its participants for subsequent disbursement to the beneficial owners of the Bonds as described in this Official Statement. So long as DTC s book-entry system is in effect with respect to the Bonds, notices to Owners by the Agency or the Trustee will be sent to DTC. Notices and communication by DTC to its participants, and then to the beneficial owners of the Bonds, will be governed by arrangements among them, subject to then effective statutory or regulatory requirements. So long as the Bonds are registered in the name of Cede & Co., or any other nominee of DTC, references in this Official Statement to the registered owners or use of the capitalized term 11

20 Owners mean Cede & Co. or such other nominee of DTC, and do not mean the beneficial owners of the Bonds. See APPENDIX G DTC S BOOK-ENTRY ONLY SYSTEM. In the event that such book-entry system is discontinued with respect to the Bonds, the Agency will execute and deliver replacements in the form of registered certificates and, thereafter, the Bonds will be transferable and exchangeable on the terms and conditions provided in the Indentures. The following provisions would then apply: The Trustee will pay interest on the Current Interest Bonds by check mailed by first class mail, postage prepaid, on each Interest Payment Date to the persons in whose names the ownership of the Current Interest Bonds is registered on the registration books kept by the Trustee (the Registration Books ) at the close of business on the immediately preceding Record Date, except as provided below. Interest on any Current Interest Bond which is not punctually paid or duly provided for on any Interest Payment Date is payable to the person in whose name the ownership of such Current Interest Bond is registered on the Registration Books at the close of business on a special record date for the payment of such defaulted interest to be fixed by the Trustee, notice of which is given to such Owner by first-class mail not less than 10 days prior to such special record date. At the written request of the Owner of Current Interest Bonds of a series in an aggregate principal amount of at least $1,000,000, which written request is on file with the Trustee as of any Record Date, the Trustee will pay interest on such Current Interest Bonds on each succeeding Interest Payment Date by wire transfer in immediately available funds to such account of a financial institution within the United States of America as specified in such written request, which written request will remain in effect until rescinded in writing by the Owner. The Trustee will pay principal of the Current Interest Bonds and the Accreted Value of the Capital Appreciation Bonds in lawful money of the United States of America by check of the Trustee upon presentation and surrender of such Bonds at the Office of the Trustee. 12

21 Annual Debt Service Schedule Annualized debt service on the Bonds, without regard to any optional redemption, is shown in the following table. Series A Bonds Bond Year Ending Series A (Aug. 1) Principal Interest (1) Series B Bonds Series B Total Total Principal Interest $242, $242, $797, $797, $ 28, $217, , $85, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,548, ,986, ,535, , , ,202, ,374, ,101, ,475, ,625, , ,241, (2) 1,242, ,233, ,475, ,735, , ,242, , ,249, ,780, ,410, , ,798, , ,290, ,775, ,515, , ,798, , ,334, ,780, ,625, , ,796, , ,372, ,780, , , , , ,495, ,895, ,978, ,576, ,555, ,526, ,033, ,560, ,958, ,706, ,665, (2) 1,785, ,879, ,665, , ,545, ,005, , ,583, ,005, Total $18,839, $47,542, $66,381, $10,295, $10,408, $20,703, (1) Includes current interest payable on the Series A Current Interest Bonds and the compounded interest payable upon the maturity of the Series A Capital Appreciation Bonds. (2) The Series A Bonds maturing on August 1, 2025 and August 1, 2034 will be subject to special mandatory redemption on July 1, 2025 and May 15, 2034, respectively. The Series B Bonds maturing on August 1, 2025 will be subject to special mandatory redemption on July 1, See Redemption above. 13

22 SECURITY FOR THE BONDS General Repayment of the Non-Housing Portion of the Series A Bonds will be made from, and secured by a pledge of, Non-Housing Tax Revenues. Repayment of the Series B Bonds and the Housing Portion of the Series A Bonds will be made from, and secured by a pledge of, Housing Tax Revenues. Each of the Non-Housing Tax Revenues and Housing Tax Revenues constitute a portion of Tax Revenues. The Indentures define Tax Revenues, Non-Housing Revenues and Housing Revenues as follows: Tax Revenues means as all taxes annually allocated to the Agency with respect to the Project Area following the delivery date 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 Plan, including 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. Tax Revenues do not include the amount of such taxes which are required to be paid by the Agency pursuant to the Tax Sharing Agreements (see Allocation of Taxes Tax Sharing Agreements and Tax Sharing Agreements ) or pursuant to Sections , or of the Redevelopment Law (see Allocation of Taxes AB 1290 Payments ), to the extent such amounts are not subordinated to the payment of debt service on any Senior Lien Debt (defined below, see SECURITY FOR THE BONDS Parity Debt ). Non-Housing Tax Revenues means all of the Tax Revenues other than the Housing Tax Revenues. Housing Tax Revenues means all of the Tax Revenues which the Agency is obligated to deposit into the Housing Fund under Section of the Redevelopment Law. The Bonds are not a debt, liability or obligation of the City, the State, or any of its political subdivisions other than the Agency, and none of the City, the State nor any of its political subdivisions, other than the Agency, is liable for the Bonds. The obligations of the Agency with respect to the Bonds are payable solely from the Non-Housing Tax Revenues or Housing Tax Revenues as set forth in the Indentures. The Agency has no taxing power. The Bonds do not constitute an indebtedness within the meaning of any constitutional or statutory debt limit or restriction. 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. Generally, taxes collected upon any increase in taxable valuation over the base roll (except such portion generated by rates levied to pay bonded indebtedness approved by the voters on or after January 1, 1989, for the acquisition or improvement of real property or attributable to an increase in tax rate imposed for the benefit of a taxing agency the levy of which occurs after the tax year in which the ordinance approving the project area was adopted) 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. 14

23 Redevelopment agencies have no authority to levy property taxes and must look specifically to the allocation of tax increment revenues. Allocation of Taxes General. Pursuant to the Redevelopment Plan, 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 Area each year by or for the benefit of the State, the County, the City, any district or other public corporation (collectively referred to as taxing agencies or taxing entities ) for each fiscal year beginning after the effective date (the Effective Date ) of the ordinance approving (a) with respect to Redevelopment Project A or Redevelopment Project B, the relevant original redevelopment plan, and (b) with respect to Redevelopment Project A-Annex and Redevelopment Project AB Supplement, the plan amendment adding such territory to the Project Area, are divided as follows: 1. 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 such Component 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, will be allocated to and when collected will be paid to the respective taxing agencies as taxes by or for such taxing agencies on all other property are paid (for the purpose of allocating taxes levied by or for any taxing agency or taxing agencies which did not include such territory on the Effective Date but to which such territory has been annexed or otherwise included after such Effective Date, the assessment roll of the County last equalized on the Effective Date will be used in determining the assessed valuation of the taxable property in such territory on the Effective Date); and 2. Except for the taxes which are attributable to a tax rate levy 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 or an increase in tax rate imposed for the benefit of a taxing agency the levy of which occurs after the tax year in which the ordinance approving the Component Area became effective but only to the extent the taxing agency has elected in the manner required by law to receive such allocation, which will be allocated to and when collected will be paid to such taxing agency, that portion of such levied taxes each year in excess of the amount provided in paragraph (1) above, will be allocated to and when collected will 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, redevelopment of the Component Area. Unless and until the total assessed valuation of the taxable property in the Component Area exceeds the total assessed value of the taxable property therein as shown by the last equalized assessment roll referred to in paragraph (1) above, all of the taxes levied and collected upon the taxable property in the Component Area will be paid into the funds of the respective taxing agencies. When such 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 Component Area will be paid into the funds of the respective taxing agencies as taxes on all other property are paid. Generally, the Agency is authorized to make pledges of the portion of taxes allocable to the Agency mentioned in paragraph (2) above to repay specific advances, loans and indebtedness as appropriate in carrying out the Redevelopment Plan, subject to the limitations on allocation of taxes, debt creation and bonded indebtedness contained in the Redevelopment Plan. Housing Set-Aside. The Redevelopment Law require the Agency to set aside the Housing Set- Aside, i.e., an amount not less than 20 percent of the Gross Tax Revenues with respect to the Project Area 15

24 allocated to the Agency, in the Housing Fund to be expended for authorized low and moderate income housing purposes. Amounts on deposit in the Housing Fund may also be applied to pay debt service on bonds, loans or advances used to provide financing or refinancing for such low and moderate income housing purposes. As described under the caption PLAN OF FINANCING, a portion of the sale proceeds of the Series A Bonds will be used to refund the Series 2001B Bonds. Because the Series 2001B Bonds were issued, in part, to refinance low and moderate income housing related projects, the Agency will use the Housing Set-Aside to pay a proportionate amount of the Series A Bonds. The Housing Portion of the Series A Bonds represents approximately 5.6 percent of the total debt service on the Series A Bonds. Because all of the net proceeds from the Series B Bonds will be deposited in the 2011 Housing Project Fund to be expended for low and moderate income housing program projects, the Series B Bonds are secured by a first lien and pledge on the Housing Tax Revenues pursuant to the Series B Indenture. Generally, under the Redevelopment Law, the Agency may not use the Housing Set-Aside to pay debt service on bonds, to the extent that the proceeds of such bonds were not used to finance or refinance low and moderate income housing related projects. Therefore, Housing Tax Revenues are not available to the pay debt service on Non-Housing Portion of the Series A Bonds. Pursuant to the Indentures, in the event that there are insufficient Tax Revenues to cover debt service, Housing Tax Revenues will be used to pay the amounts then unpaid and owing, ratably on the then outstanding Housing Portion of the Senior Lien Debt (defined below, see Parity Debt ). Further, pursuant to the Series A Indenture, to the extent possible taking into consideration of such application of the Housing Tax Revenues, the Agency would use the Non-Housing Tax Revenues to pay the amounts then unpaid and owing ratably on all of the then outstanding Series 2001A Bonds, Series 2003 Bonds, Series A Bonds and Additional Non-Housing Parity Debt (defined below, see Parity Debt ) issued after the delivery of the Series A Bonds. See APPENDIX D SUMMARY OF PRINCIPAL LEGAL DOCUMENTS. Tax Sharing Agreements. Before the enactment of AB 1290 (see below under AB 1290 Payments ) in 1994, a redevelopment agency could enter into an agreement to pay tax increment revenues to any taxing agency that has territory located within a redevelopment project in an amount determined by the redevelopment agency to be appropriate to alleviate any financial burden or detriment caused by the redevelopment project. These agreements normally provide for a pass-through of tax increment revenues to the affected taxing agencies and, therefore, are commonly referred to as pass-through agreements or tax sharing agreements. (As used in this Official Statement, however, the capitalized term Tax Sharing Agreements follows the definition in the Series A Indenture. The Tax Sharing Agreements include an agreement with a private entity as described below.) Pursuant to the Series A Indenture, Tax Revenues do not include amounts payable by the Agency under the Tax Sharing Agreements. Tax Sharing Agreements include: (a) the Owner Participation Agreement executed in 1988, as amended by the First Amendment to Owner Participation Agreement, executed in 1995 (as amended, the Brea Mall OPA ), each by and between the Agency and Corporate Property Investors; and (b) the Agreement, dated as of May 1, 1984 (the County Tax Sharing Agreement ), by and among the County, the Orange County Flood Control District and the Orange County Harbors, Beaches and Parks District (collectively, the County Entities ), the Agency and the City. The County Tax Sharing Agreement and the Brea OPA are further described below under the caption Tax Sharing Agreements. AB 1290 Payments. California Health and Safety Code Section and Section (the Tax Sharing Statutes ) were added to the Redevelopment Law by Assembly Bill 1290 ( AB 1290 ), enacted by the State Legislature in Section has been further amended by SB 211, Chapter 16

25 741, Statutes 2001 ( SB 211 ). The Tax Sharing Statutes, together, require that taxing entities receive an additional portion of tax increment revenues otherwise payable to the redevelopment agency (the AB 1290 Payments ), if such taxing entities were affected by (i) the adoption on or after January 1, 1994, of a new redevelopment plan for a project area or an amendment to an existing redevelopment plan that added territory to a project area, or (ii) the adoption on or after January 1, 1994 of an amendment (to a redevelopment plan that was adopted before January 1, 1994) which extends the time limit on incurring debt with respect to the project area, extends the time limits for the duration and effectiveness of the redevelopment plan or the time limit for establishing indebtedness or increases the dollar cap on the amount of tax increment revenues allocable to the redevelopment agency for the project area (unless a taxing entity already receives pass-throughs under an existing agreement). AB 1290 prohibits redevelopment agencies from entering into any new pass-through agreements. Ordinance No. 1063, adopted by the City Council on June 3, 2003 pursuant to SB 211, amended the Redevelopment Plan to eliminate the time limits for incurring debt repayable from tax increment generated by each of the four Component Areas. For each Component Area, this elimination of the time limit to incur debt triggered obligations on the part of the Agency to make AB 1290 Payments to taxing entities that do not have tax sharing agreements with the Agency (i.e., all affected taxing entities except the County Entities that receive payments under the County Tax Sharing Agreement with respect to Redevelopment Project AB Supplement). The AB 1290 Payments triggered by Ordinance No are calculated based on the increase in assessed valuation after the year in which the limitation would otherwise have become effective. See APPENDIX B FISCAL CONSULTANT S REPORT 2.2. Review of Agency Obligations b. Statutory Pass Through. The Redevelopment Law provides a procedure under which a redevelopment agency may seek approval from taxing entities to subordinate their AB 1290 Payments to bonds of the redevelopment agency before the bonds issuance. With respect to the Non-Housing Portion of the Series A Bonds, the Agency has determined to not undertake any such subordination procedures in light of the sufficiency of the projected Non-Housing Tax Revenues for debt service coverage. Therefore, as pertaining to Gross Tax Revenues of the Project Area, the Agency s obligations to make AB 1290 Payments to affected taxing entities rank senior to the Agency s obligations with respect to the Series A Bonds. Because amount that the Agency is required to deposit into the Housing Fund is not affected by the AB 1290 Payments, a subordination of the AB 1290 Payments would not be meaningful in regards to the amount of Housing Tax Revenues available to pay debt service on the Series B Bonds and the Housing Portion of the Series A Bonds. See APPENDIX B - FISCAL CONSULTANT S REPORT. Tax Revenue Sources for the Bonds. The final maturity dates for the Series A Bonds and the Series B Bonds are scheduled to be in 2036 and 2029, respectively. However, currently under the Redevelopment Plan, the time limits by the Agency may repay indebtedness using tax increment derived from three of the four Component Areas occur before the fiscal year The last day on which the Agency may repay debt from tax increment of Redevelopment Project A and Redevelopment Project B is July 24, The last day on which the Agency may repay debt from tax increment of Redevelopment Project A Annex is May 18, The last day on which the Agency may repay debt from tax increment of Redevelopment Project AB Supplement is December 20, See PROJECT AREA Redevelopment Plan; Plan Limitations. Hence, the make-up of the properties generating Non-Housing Tax Revenues and Housing Tax Revenues supporting the Bonds will change over time as these time limits expire. See PROJECT AREA for descriptions of some of the different characteristics of each Component Area. 17

26 Tax Sharing Agreements County Tax Sharing Agreement. Under the County Tax Sharing Agreement, the Agency is obligated to make certain annual pass-through payments to the County Entities from the Gross Tax Revenues derived from Redevelopment Project AB Supplement. Originally, the County Tax Sharing Agreement provided for annual pass-through payments to the County Entities that totaled percent of the Gross Tax Revenues from Redevelopment Project AB Supplement. Later, when the State Legislature mandated a shift of property tax revenues for fiscal year to fund schools and required the Agency make a deposit into the County s Educational Revenue Augmentation Fund (the FY ERAF Shift ), thereby effectively reducing the share of property taxes received by the Agency, the County adjusted the percentages pursuant to which the pass-through payments to the County Entities were calculated under the County Tax Sharing Agreement. Since the FY ERAF Shift, the County has calculated the pass-through payments under the County Tax Sharing Agreement and distributed the Gross Tax Revenues from Redevelopment Project AB Supplement each fiscal year as follows: Percent of Redev. Project AB Supplement County Taxing Entity Gross Tax Revenues Orange County General Fund % Orange County Flood Control District Orange County Library Fund Orange County Harbors, Beaches & Park District Total: % The pass-through payments under the County Tax Sharing Agreement for fiscal year totaled approximately $508,000. Because of the $5 million Project AB Supplement TI Cap (which, at fiscal year , is approximately $4 million less than the amount of tax increment that the Agency would have received if such limit was not in place), the projections by the Fiscal Consultant as shown in Tables 4 and 5 under TAX REVENUES AND DEBT SERVICE COVERAGE assume that the total payable by the Agency under the County Tax Sharing Agreement will remain $508,000 each fiscal year throughout the term of the Bonds. See PROJECT AREA Redevelopment Plan; Plan Limits, TAX REVENUES AND DEBT SERVICE COVERAGE and APPENDIX B FISCAL CONSULTANT S REPORT 2.2 Review of Agency Obligations. Brea Mall OPA. The Agency entered into Brea Mall OPA with Corporate Property Investors in connection with the expansion and renovation of the development commonly known as the Brea Mall. At that time, Corporate Property Investors was the major owner of the Brea Mall. The Brea Mall is located in Redevelopment Project B just west of State Highway 57 between Birch Street and State Highway 90. Under the agreement, the Agency is obligated to pay Corporate Property Investors (or its assignee or successor with respect to the Brea Mall OPA and the Brea Mall), an annual amount (the Brea Mall OPA Payment ), beginning in fiscal year through the end of fiscal year , that is equal to the sum of (i) 80 percent of the Net Property Tax Revenues generated by the Site which are allocated and paid to the Agency, plus (ii) $15,000. Generally Net Property Tax Revenues generated by the Site refers to the tax increment revenue generated from the Brea Mall above the base year tax increment revenue (which was $990,504), excluding increases due to any change in ownership. Simon Property Group, Inc. has been the major owner and operator of the Brea Mall since 1988 and has succeeded Corporate Property Investors with respect to the Brea Mall OPA. 18

27 Since fiscal year (when the assessed value of Redevelopment Project A, Redevelopment Project B and Redevelopment Project A-Annex first reached above the $14 million Project A-A Annex-B TI Cap), the Agency has paid Simon Property Group, Inc. $1,107,287 as the Brea Mall OPA Payment each fiscal year. (Without application of the Project A-A Annex-B TI Cap, the Brea Mall OPA Payment for fiscal year would be approximately $1.26 million.) The projections by the Fiscal Consultant as shown in Tables 4 and 5 under TAX REVENUES AND DEBT SERVICE COVERAGE assume that the Brea Mall OPA Payment will remain at $1,107,287 for each fiscal year through fiscal year , when the Agency s obligation to make such annual payment under the Brea Mall OPA terminates. See PROJECT AREA Redevelopment Plan; Plan Limits, TAX REVENUES AND DEBT SERVICE COVERAGE and APPENDIX B FISCAL CONSULTANT S REPORT 2.2 Review of Agency Obligations. Reserve Accounts The Trustee will establish and hold a separate Reserve Account for each series of Bonds (respectively, the Series A Reserve Account and the Series B Reserve Account ). With respect to the Series A Reserve Account, the Reserve Requirement means, as of date of any calculation, an amount equal to the lesser of (a) $1,883, (being ten percent of the original principal amount of the Series A Bonds), or (b) Maximum Annual Debt Service on the Series A Bonds. With respect to the Series B Reserve Account, the Reserve Requirement means, as of date of any calculation, an amount equal to the lesser of (i) $1,029,500 (being ten percent of the original principal amount of the Series B Bonds), or (ii) Maximum Annual Debt Service on the Series B Bonds. The Trustee will notify the Agency at any time the amount on deposit in a Reserve Account falls below the applicable Reserve Requirement. Upon receipt of such notice, the Agency will transfer to the Trustee an amount of Tax Revenues or Housing Tax Revenues, as applicable, so that the balance of such Reserve Account will be restored to the Reserve Requirement. So long as no Event of Default has occurred and is continuing, the Trustee will withdraw and transfer any amount in a Reserve Account that is in excess of the applicable Reserve Requirement to the related Interest Account. Parity Debt See APPENDIX D SUMMARY OF PRINCIPAL LEGAL DOCUMENTS. The 2001A Bonds (with an outstanding principal amount of $43,435,000, as of May 1, 2011) and the 2003 Bonds (which, as of May 1, 2011, include $97,390,000 principal amount of current interest bonds and $22,640,000 maturity value ($5,987, initial principal amount at issuance) of capital appreciation bonds) will remain outstanding upon issuance of the Bonds. To the extent that a portion of each of the Series 2001A Bonds and the Series 2003 Bonds may be paid from the Housing Set-Aside pursuant to the indentures relating to those bonds (together, the Prior Parity Bond Indentures ), those portions of the Series 2001A Bonds and the Series 2003 Bonds are secured by a pledge and lien on Housing Tax Revenues, on a parity with the Series B Bonds and the Housing Portion of the Series A Bonds. In addition, pursuant to the Prior Parity Bond Indentures, all of the Series 2001A Bonds and the Series 2003 Bonds rank on a parity with the Non-Housing Portion of the Series A Bonds with respect to the pledge and lien on Non-Housing Tax Revenues. As a practical matter, however, the Agency has been using, and expects to continue to use: (i) Housing Tax Revenues to pay for the debt service on the Housing Portion of the Series 2001A Bonds and the Series 2003 Bonds, and (ii) the Non-Housing Tax Revenues only to pay those portions of the Series 2001A Bonds and the Series 2003 Bonds that are not secured by Housing Tax Revenues. 19

28 The Indentures provide that the Agency may incur additional indebtedness ( Additional Housing Parity Debt ) secured by Housing Tax Revenues on a parity with the Series B Bonds and the Housing Portion of the Series A Bonds, if certain conditions have been satisfied including the following, among other conditions: (I) The Unlimited Amount of Housing Tax Revenues for the then current fiscal year based on assessed valuation of property in the Project Area as evidenced in a written document from an appropriate official of the County, plus at the option of the Agency the Additional Revenues, must be at least equal to 125 percent of Maximum Annual Debt Service on the Housing Portion of all Senior Lien Debt which will be Outstanding following the issuance of such Additional Housing Parity Debt; (II) The amount of Housing Tax Revenues allocated and paid to the Agency for the then current fiscal year based on assessed valuation of property in the Project Area as evidenced in a written document from an appropriate official of the County, plus at the option of the Agency the Additional Revenues, must be at least equal to 105 percent of Maximum Annual Debt Service on the Housing Portion of all Senior Lien Debt which will be Outstanding following the issuance of such Additional Housing Parity Debt; and (III) The amount of Housing Tax Revenues to be allocated and paid to the Agency in each Fiscal Year during the term of the Additional Housing Parity Debt as projected by an Independent Redevelopment Consultant taking into account all Plan Limitations, Tax Sharing Agreements and other factors which would cause a reduction in Housing Tax Revenues in any future fiscal year, plus at the option of the Agency the Additional Housing Revenues, must be at least equal to 125 percent of the annual amount of debt service coming due and payable in the corresponding fiscal year on the Housing Portion of all Senior Lien Debt which will be Outstanding following the issuance of such Additional Housing Parity Debt. The Series A Indenture provides that the Agency may incur additional indebtedness ( Additional Non-Housing Parity Debt ) secured by Non-Housing Tax Revenues on a parity with the Non-Housing Portion of the Series A Bonds, if certain conditions have been satisfied including the following, among other conditions: (A) The Unlimited Amount of Non-Housing Tax Revenues for the then current Fiscal Year based on assessed valuation of property in the Project Area as evidenced in a written document from an appropriate official of the County, plus at the option of the Agency the Additional Non-Housing Revenues, must be at least equal to 125 percent of Maximum Annual Debt Service on the Non-Housing Portion of all Senior Lien Debt which will be Outstanding following the issuance of such Additional Non- Housing Parity Debt. (B) The amount of Non-Housing Tax Revenues allocated and paid to the Agency for the then current Fiscal Year based on assessed valuation of property in the Project Area as evidenced in a written document from an appropriate official of the County, plus at the option of the Agency the Additional Revenues, must be at least equal to 105% of Maximum Annual Debt Service on the Non-Housing Portion of all Senior Lien Debt which will be Outstanding following the issuance of such Additional Non- Housing Parity Debt; and 20

29 (C) The amount of Non-Housing Tax Revenues to be allocated and paid to the Agency in each Fiscal Year during the term of the Additional Non-Housing Parity Debt as projected by an Independent Redevelopment Consultant taking into account all Plan Limitations, Tax Sharing Agreements and other factors which would cause a reduction in Non-Housing Tax Revenues in any future fiscal year, plus at the option of the Agency the Additional Non-Housing Revenues, must be at least equal to 125 percent of the annual amount of debt service coming due and payable in the corresponding fiscal year on the Non-Housing Portion of all Senior Lien Debt which will be Outstanding following the issuance of such Additional Non-Housing Parity Debt. Pursuant to the Indentures, the proceeds of such Additional Housing Parity Debt or Additional Non-Housing Parity Debt may be deposited into an escrow fund from which amounts may be released to the Agency to the extent the Unlimited Amount of Housing Tax Revenues or the Unlimited Amount of Non-Housing Tax Revenues, as the case may be, for the most recent fiscal year (as evidenced in the written records of the County), plus at the option of the Agency the Additional Revenues, are at least equals to 125 percent of the amount of Maximum Annual Debt Service on the Housing Portion or the Non-Housing Portion, as the case may be, of all outstanding Senior Lien Debt. The Indentures provide the following definitions: Unlimited Amount of Housing Tax Revenues and Unlimited Amount of Non- Housing Tax Revenues mean, respectively, an amount of Housing Tax Revenues or Non-Housing Tax Revenues which would be annually allocated and paid to the Agency calculated without regard to any Plan Limitations on the amount of Tax Revenues which the Agency is entitled to receive in any Fiscal Year. For purposes of computing such amount, the following requirements shall be observed: (a) the tax rate which is used to compute such amount shall be equal to the basic one percent tax rate levied under Article XIIIA of the California Constitution, plus (i) the tax rate levied by the City for paramedic services, and (ii) the tax rate levied by the Metropolitan Water District of Orange County for payments in respect of the California State Water Project which is administered by the California Department of Water Resources; and (b) such amount shall be reduced to the extent that any successful appeals of assessed valuation of properties within the Project Area have resulted in a reduction of Tax Revenues which are not reflected in the written records of the County which are used as the basis to compute the Unlimited Amount of Housing Tax Revenues or the Unlimited Amount of Non-Housing Tax Revenues, as the case may be. Housing Portion means that portion of the debt service on the Prior Parity Bonds, the Series A Bonds, the Series B Bonds and any Additional Parity Bonds which is eligible to be paid from the Housing Tax Revenues under the Redevelopment Law. The Housing Portion of the Prior Parity Bonds and the Housing Portion of the Series A Bonds consist of that portion of each payment of principal of and interest on such bonds as set forth in Appendix D of the Series A Indenture (see Table 7 of this Official Statement under TAX REVENUES AND DEBT SERVICE COVERAGE ). The Housing Portion 21

30 of the Series B Bonds consists of 100 percent of each payment of principal of and interest on the Series B Bonds. Non-Housing Portion means that portion of the debt service on the Prior Parity Bonds, the Series A Bonds and any Additional Parity Bonds which is not eligible to be paid from the Housing Tax Revenues under the Redevelopment Law. The Non-Housing Portion of the Series A Bonds consists of that portion of each payment of principal of and interest on such bonds as set forth in Appendix D of the Series A Indenture (see Table 6 of this Official Statement under TAX REVENUES AND DEBT SERVICE COVERAGE ). Senior Lien Debt means: (a) in the context of the Series A Indenture, when used with respect to the Housing Portion of the Series A Bonds or the Non-Housing Portion of the Series A Bonds, the Prior Parity Bonds, the Series A Bonds, the Series B Bonds, and any Additional Parity Debt, to the extent secured by a pledge of and lien on the Housing Tax Revenues or the Non-Housing Tax Revenues, respectively; and (ii) in the context of the Series B Indenture, the Housing Portion of each of the following collectively: (a) the Prior Parity Bonds, (b) the Series B Bonds, (c) the 2011 Series A Bonds and (d) any Additional Parity Debt. Prior Parity Bonds means, collectively, the Series 2001A Bonds and the Series 2003 Bonds. Additional Non-Housing Tax Revenues and Additional Housing Tax Revenues means, when used with respect to the Non-Housing Tax Revenues or the Housing Tax Revenues, respectively, as the date of calculation, the amount of Non- Housing Tax Revenues or the Housing Tax Revenues (as the case may be) 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 either (a) construction which has been completed but which is not then reflected on the tax rolls, or (b) 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. For a more detailed summary of the conditions to the incurrence of Additional Housing Parity Debt and Additional Non-Housing Parity Debt under the Indentures, see APPENDIX D SUMMARY OF PRINCIPAL LEGAL DOCUMENTS. 22

31 Subordinate Debt The Agency currently has debt outstanding of which the payment obligations rank subordinate to the Bonds. For a description of such subordinate debt outstanding as of the end of fiscal year , see APPENDIX C AUDITED FINANCIAL STATEMENTS FOR THE AGENCY FOR FISCAL YEAR ENDED JUNE 30, The Agency may, from time to time, incur debt secured by Non- Housing Tax Revenues or Housing Tax Revenues on a subordinate basis to the Bonds. General THE AGENCY The Agency was activated with the adoption of Ordinance No. 465 by the City Council on April 13, The Agency is charged with the authority and responsibility of redeveloping and upgrading blighted areas of the City. 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 Agency s redevelopment project areas. Agency Administration and Personnel The members of the City Council also serve as Members of the Agency with the Mayor of the City serving as the Agency s Chair. The current Members of the Agency and their terms of office are shown below: Member Term Expires Roy Moore (Chair) November 2014 Don Schweitzer (Vice Chair) November 2012 Ron Garcia November 2014 Brett Murdock November 2014 Marty Simonoff November 2012 Tim O Donnell, City Manager/Agency Executive Director. Mr. O Donnell was appointed City Manager of the City in July Prior to such appointment, he served as the City s Assistant City Manager for 10 years. Prior to working for the City, Mr. O Donnell was the Assistant City Manager for the City of Signal Hill between 1983 and He also served the City of Garden Grove as Manager, Department of Human Resources, from 1979 to 1983, and the City of Bellflower from 1976 to Mr. O Donnell holds a Bachelor of Arts degree from California State University, Los Angeles. Eric Nicoll, Community Development Director/Agency Deputy Executive Director. Mr. Nicoll was appointed as the City s Economic Development Director in March Previously, he served as the City s Redevelopment Services Manager from June 1993 to March In May 2010, the Economic Development Department merged with the Development Services Department creating the Brea Community Development Department. Now as the Community Development Director, Mr. Nicoll is responsible for the City s planning, building, economic development, redevelopment, and housing programs. Before serving the City, Mr. Nicoll served as Housing Development Manager of the City of Anaheim between 1989 and 1993 and was Redevelopment Analyst for the City of Huntington Beach from 1985 to He holds a Bachelor of Arts degree from California State University, Fullerton. 23

32 Bill Gallardo, Administrative Services Director/Agency Assistant Treasurer. Mr. Gallardo was appointed Financial Services Director in August Prior to such appointment he was the Financial Services Manager Revenue for 14 years. He served the City of Walnut from 1986 to 1990 as Administrative Assistant and Senior Management Assistant. In May 2010, as part of a reorganization plan to streamline city operations, an Administrative Services Department was created that comprised of the former Financial Services Department, plus the Information Technology Division. As Administrative Services Director, Bill oversees the Administrative, Revenue, Accounting/Auditing and Purchasing Division of the Financial Services Department, plus Information Technology. Mr. Gallardo received his Bachelor of Science Degree from California Polytechnic State University, Pomona. Lee Squire, Financial Services Manager Accounting. Mr. Squire was appointed to his position with the City in December Previously, he served the City of South Gate from 1983 to 1988 as Accounting Manager and as Director of Finance. Prior to Mr. Squire s service to South Gate, he worked with a public accounting firm. Mr. Squire received his Bachelor of Science Degree from California State University, Los Angeles. Audited 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 accounting firm of Mayer Hoffman McCann P.C., Irvine, California (the Auditors ), audited the financial statements of the Agency for the fiscal year ended June 30, See APPENDIX C AUDITED FINANCIAL STATEMENTS OF THE AGENCY FOR FISCAL YEAR ENDED JUNE 30, The Agency has not requested nor did the Agency obtain permission from the Auditors to include the audited financial statements as an appendix to this Official Statement. Accordingly, the Auditors have not performed any post-audit review of the financial condition or operations of the Agency. Filing of Statement of Indebtedness and Statement of Reconciliation Section of the Redevelopment Law requires that the Agency file, not later than the first day of October of each year with the County Auditor, a statement of indebtedness certified by the chief financial officer of the Agency for each redevelopment project for which the redevelopment plan provides for the division of taxes pursuant to Section of the Redevelopment Law. The statement of indebtedness is required to contain, among other things, the date on which bonds payable from tax increment of the redevelopment project were delivered, the principal amount, term, purpose, interest rate and total interest of the bonds, the principal amount and the interest due in the fiscal year in which the statement of indebtedness is filed and the outstanding balance and amount due on the bonds. Similar information must be given for each loan, advance or indebtedness that the Agency has incurred or entered into which is payable from tax increment. Section 33675(g) has been amended by AB 1290 to provide that payments of tax increment revenues from the county auditor to a redevelopment agency may not exceed the redevelopment agency s aggregate total outstanding debt service obligations minus the available revenues of the redevelopment agency. In such connection, a redevelopment agency is required to file annually a statement of reconciliation for each redevelopment project. Section also establishes certain procedures under which a county auditor may, in certain cases, dispute the amount of indebtedness shown on the statement of indebtedness. Payments to a trustee under a bond resolution or indenture or payments to a public agency in connection with payments by such public agency pursuant to a bond issue may not be disputed in any action under Section

33 The Agency has filed its statement of indebtedness for fiscal year for the Project Area, and has met all previous requirements with respect to the filing of its statements of indebtedness and statements of reconciliation pursuant to Section Other Project Area The Agency is charged with the redevelopment undertakings with respect to two project areas: the Project Area and Redevelopment Project C. Redevelopment Project C, encompassing approximately 256 acres in the northern portion of the City, is significantly smaller than the Project Area. The Agency has issued bonds, the repayment of which is secured by a portion of the tax increment revenues with respect to Redevelopment Project C. None of the Redevelopment Project C tax increment revenues is pledged as security for the Bonds. General Development in Project Area PROJECT AREA Historically, the City developed in two distinct phases. The first phase of development was centered around the Brea Boulevard corridor between Elm Street and Lambert Road. This area consists of older housing constructed between 1910 and 1930 for the employees of oil production companies and a downtown commercial area which served the needs of this residential base. The second phase of development was stimulated by the construction of the 57 Freeway to the east of the downtown area. With the freeway construction, new markets were opened and the City aggressively pursued the development of high-quality residential areas, a regional shopping mall and several thousand acres of modem industrial, commercial and office developments. The Project Area encompasses approximately 2,177 acres and is comprised of four Component Areas: (i) Redevelopment Project A, in the western portion of the City, (ii) Redevelopment Project A Annex, in the eastern portion of the City, (iii) Redevelopment Project B, at the intersection of the Orange Freeway (State Highway 57) and Imperial Highway (State Highway 90), and (iv) Redevelopment Project AB Supplement around the Brea Boulevard corridor between Lambert Road and the City s southern border. Redevelopment Project A. Redevelopment Project A is an approximately 346-acre industrial area located in the western portion of the City. Redevelopment Project A is bounded by the cities of Fullerton and La Habra on the west, Lambert Road on the north, Brea Canyon Channel on the east and Imperial Highway on the south. Major users within Redevelopment Project A include Albertson Distribution Center, NCR, Mercury Insurance Group, and the Lambert Commerce Center. Redevelopment Project B. Redevelopment Project B is an approximately acre area located at the intersection of the Orange Freeway (State Highway 57) and Imperial Highway (State Highway 90). Redevelopment Project B includes the following major developments: The Brea Mall. The Brea Mall is an enclosed regional shopping center anchored by four major department stores: Sears, Nordstrom, Macy s, and JC Penney. The mall targets the high-end fashion trade and maintains a strong position in the highly competitive Orange County retail sector. 25

34 Brea Civic & Cultural Center. Located adjacent to the Brea Mall, the Brea Civic & Cultural Center currently houses, in addition to the City Hall, a County Library branch, performing arts theatre, art gallery, conference and meeting rooms, City Council Chambers, TV studio, the administrative offices of the Brea-Olinda Unified School District, a law office and the Brea Chamber of Commerce. Embassy Suites Hotel. Opened in 1990, the 229-room Embassy Suites Hotel includes 30,000 square feet of retail space and is one of the top business conference locations in this hotel chain. Redevelopment Project A Annex. The Redevelopment Project A Annex is an approximately 790- acre industrial area located in the eastern portion of the City. Redevelopment Project A Annex is bordered by Birch Street on the north, Rose Drive on the east, the City s border on the south and the Glenbrook neighborhood on the west. Major existing users within the Redevelopment Project A Annex include Suzuki Motor Corporation, Beckman Coulter Inc., St. Jude Wellness Center, Harte Hanks PennySaverUSA, Allstate Insurance, and Chase Suite Hotels, a 92-unit all-suites hotel. Major developments within the Redevelopment Project A Annex include: Fairway Center. Fairway Center is a 100,000 square foot office complex. Brea Corporate Plaza and Brea Corporate Park. These two office parks encompass over 350,000 square feet of office and industrial space. Brea Union Plaza. The Union Plaza Shopping Center is a 60-Acre parcel with 600,000 square feet of high quality retail space anchored by WalMart and Home Depot. It was completed in Imperial Center East. Built in 1989 directly across Imperial Highway from Brea Union Plaza, this convenient shopping center includes T.J. Maxx, Sport Chalet, Dress Barn, Albertsons grocery store, both independent and chain restaurants and a variety of retail shops. Artisan Walk. Completed in 2000, this development features 27 single family homes, 3 of which were sold to moderate income households. La Floresta. A major new development now underway, La Floresta encompasses a total of approximately 212 acres at two sites and is currently planned to include over 1,300 dwelling units, 156,800 square feet of commercial space, an updated 18-hole golf course, and numerous community amenities such as a perimeter trail, public gathering areas and linear neighborhood park. The current development agreement for La Floresta, as approved by the City Council, contemplates that all building permits for the project will be pulled within the next 15 years. Based on the planned number of dwelling units, the size of the commercial space and the estimated selling price for such units and commercial space (based on estimated current market value), the Agency anticipates that La Floresta will add approximately $574 million of assessed value to the Project Area. Redevelopment Project AB Supplement. At a time, with emphasis on the new development areas within the City, the original housing areas and strip commercial centers began to experience deterioration and enjoyed only modest investment from the private sector. On December 20, 1983, these original 26

35 housing areas and the downtown commercial district were incorporated into Redevelopment Project AB with the addition of approximately 950 acres known as the Redevelopment Project AB Supplement. In an effort to revitalize the downtown core of the City, the Agency redeveloped approximately 65 acres of Downtown Brea located within the Redevelopment Project AB Supplement into a major mixed-use project, incorporating retail, entertainment, office and for-sale and for-rent residential components. Major developments within this area include: Birch Street. The redevelopment of Birch Street in the new Downtown is complete (100 percent occupied), which revitalized a portion of the City s original downtown core into a pedestrian-oriented retail and entertainment area, with specialty retail and restaurants, a 22-screen Edwards Theater, small-lot single family homes and 62 loft apartments above retail shops. Ash Street Cottage Homes. In order to create the synergies necessary for a successful mixed-use project, a for-sale housing component was included in the downtown project. This component consists of 96 for-sale homes. 22-Acre Gateway Neighborhood Shopping Center. This 202,000 square foot traditional neighborhood center, completed in 1994, was the first component of the downtown project. Founders Plaza. A strip commercial center, Founder s Plaza includes a bank, office and retail projects. Brea North Point Business Park and Brea Gaslight Square. Both completed in 1991, the Brea North Point Business Park added 23,000 square feet and Brea Gaslight Square added 27,000 square feet of office space to the Redevelopment Project AB Supplement. Laurel Creek Townhouses and Courtyard Apartments. Several residential projects were constructed during , totaling approximately 424 new units in the area. Two of these projects are Laurel Creek Townhouses and the Courtyard Apartments. Laurel Creek is a development of 30 townhouses. The Agency participated in ensuring that 5 of the units would be sold as affordable housing. The Courtyard Apartments is a 40-unit multifamily apartment complex completed in South Brea Lofts. Completed in 2007, this mixed-use live/work complex features 47 live units, with 10 sold as affordable to moderate income households. Most units have 600 square foot attached work space and an additional 7,500 square feet of separately owned retail space is located on the ground floor along Brea Boulevard. Each homebuyer received a Neighborhood Electric Vehicle and the project received numerous awards for innovation. The Arbors. Adjacent to the Brea Community Center, this development includes 27 single family homes completed in Five of the homes were designated for sale to moderate income households. North Brea Boulevard. A new bank building and photo processing center were constructed in 1999, resulting in 23,000 square feet of new commercial space. 27

36 City Walk Townhomes. This 40-unit condominium project was completed and sold out quickly in Of the 40 units, 20 were sold to moderate income homebuyers under the Agency s Affordable Housing Program. Superblock Development. Three blocks within the new Downtown were developed in 2001 and include major tenants such as Old Navy, Improv Comedy Club and several upscale restaurants. A new fire station on the north end of the Superblocks was completed in These blocks have recently undergone major investments including the addition of new restaurants and other infrastructure upgrades. City Hall Park. The City s oldest park, built in 1929, houses the municipal pool, Scout Center, and the Brea Museum and Heritage Center. The park has recently been improved with period light fixtures, a remodeled bandstand, enhanced landscaping, new monument sign, mosaic art embedded in the sidewalk and the addition of an archival storage building for the museum. The Downtown Collection. This mixed-use project across the street from City Hall Park, now under construction, includes 3 single family homes, 8 duplexes and 19 live/work units. Stone Valley Townhomes. Also new to the neighborhood, this project features 22 for sale two and three bedroom condos, all to be sold to moderate income households. Land Use of Project Area Set forth below is a summary of the assessed value of property, categorized by land use, in the Project Area. Table 1 BREA REDEVELOPMENT AGENCY Redevelopment Project Area AB Land Use Fiscal Year Record Count % of Total AV Land Use Assessed Valuation Secured Commercial 340 $1,192,231, % Industrial ,812, Residential Single Family 2, ,523, Other Uses Multifamily/Other ,216, Miscellaneous, Rural or Vacant 32 24,542, Public & Government Owned Unsecured 1, ,830, Total 5,777 $3,323,157, % Source: Keyser Marston Associates, Inc. 28

37 Top Property Tax Assessees The following tables provide a summary of the top ten property tax assesses with respect to the entire Project Area. Table 2 BREA REDEVELOPMENT AGENCY Redevelopment Project Area AB Top Ten Property Tax Assessees by Assessed Valuation Fiscal Year % of Total Incremental Assessee Component Area Description No. of Secured Parcels Unsec. Record Count Assessed Value % of Total Assessed Value (1) Value (2) Retail Property Trust (3) B Regional 6 $206,140, % 6.86% Shopping Center Beckman Instruments Inc. A-Annex Commercial & 2 155,545, Vacant New Albertsons Inc A & Industrial ,908, A-Annex Acquiport Brea LP A-Annex Industrial 2 122,301,390 (4) La Floresta LLC A-Annex Industrial & 8 89,988,888 (4) Agricultural Brea Union Plaza A-Annex Commercial 13 78,865, ICE Holdings LLC A-Annex Commercial 3 49,180, Abbey III Brea LLC A-Annex Commercial ,604,094 (4) Evangelical Christian A Commercial ,015, American Suzuki Motor A-Annex Commercial ,680,602 (4) Total $973,231, % 32.41% (1) total assessed valuation (secured and unsecured): $3,323,157,248. (2) Incremental value (i.e., assessed value less base year value): $3,002,973,827. (3) A subsidiary of Simon Property Group, Inc. Parcels owned by Retail Property Trust are part of the Brea Mall, subject to the Brea Mall OPA. See SECURITY FOR THE BONDS Tax Sharing Agreements Brea Mall OPA. (4) Does not take into account potential reduction based on pending appeal. See TAX REVENUES AND DEBT SERVICE COVERAGE Appeals of Assessed Values and APPENDIX B FISCAL CONSULTANT S REPORT (in particular Tables 3 and 4, and discussions under 4. Assessment Appeal ). Source: Keyser Marston Associates, Inc. Redevelopment Plan; Plan Limitations Redevelopment Project A and Redevelopment Project B were originally two separate project areas. The original redevelopment plans for Redevelopment Project A and Redevelopment Project B were approved pursuant to Ordinance Nos. 502 and 503, respectively, each adopted by the City Council to the City on July 24, On May 19, 1981, the City Council adopted Ordinance No. 714, adding Redevelopment Project A Annex to Redevelopment Project A. On the same day, the City Council also adopted Ordinance No. 715, merging Redevelopment Project A (including the then newly added annex) and Redevelopment Project B to create Redevelopment Project AB. On December 20, 1983, the City Council adopted Ordinance No. 752, further adding Redevelopment Project AB Supplement. Since 1983, the redevelopment plan for the Project Area has been modified by several additional amendments, including Ordinance No. 1063, adopted by the City Council on June 3, 2003, which eliminated the time 29

38 limits for incurring debt repayable from tax increment of all four Component Areas (see SECURITY FOR THE BONDS Allocation of Taxes AB 1290 Payments ). Most recently, the City Council adopted Ordinance Nos and 1150 (the 2011 Amendments ), on March 1, As further discussed under RISK FACTORS State Budget Issues the State Legislature has from time to time enacted legislation which require redevelopment agencies to make payments to the counties Education Revenue Augmentation Funds (thereby shifting a portion of each redevelopment agency s tax increment to school districts). Under the State legislation mandating such payments for fiscal years , and , redevelopment agencies may, subject to the requirements prescribed by the relevant legislation, extend certain redevelopment plan time limits in conjunction with such payments. See LIMITATIONS ON TAX REVENUES SB 1045 and SB In connection with the Agency s making of such payments for fiscal years , and , the 2011 Amendments extended the effectiveness of the Redevelopment Plan and the time limit to repay indebtedness from tax increment with respect to each Component Area by three years. The table below summarizes the limitations set forth in the Redevelopment Plan, after the adoption of the 2011 Amendments: Component Area Last Day of Redev. Plan Effectiveness Last Day to Receive Tax Increment & Repay Debt Max. Outstanding Bonded Debt Maximum Annual Tax Increment Redev. Project A 7/4/2015 7/24/2025 Redev. Project B $140 million $14 million Redev. Project A Annex 5/18/2024 5/18/2034 Redev. Project AB Supplement 12/20/ /20/2036 $50 million $5 million Total $190 million $19 million Upon issuance of the Bonds, the aggregate outstanding principal amount of the Series 2001A Bonds, the Series 2003 Bonds and the Bonds will total $175,947, (based on the currently outstanding principal amount of current interest bonds and the initial principal amount of the capital appreciation bonds). Summary of Certain Characteristics of Each Component Area Because the final maturity dates for the Series A Bonds and the Series B Bonds are scheduled to be in 2036 and 2029, respectively, the make-up of the properties generating Non-Housing Tax Revenues and Housing Tax Revenues that support the Bonds will change over time as the tax increment revenues from Redevelopment Project A and Redevelopment Project B become no longer available after July 24, 2025, and those from Redevelopment Project A Annex become no longer available after May 18, The following table provides a summary of some of the characteristics of each Component Area, based on fiscal year assessed valuation: 30

39 Component Area Approx. Acreage Table 3 BREA REDEVELOPMENT AGENCY Redevelopment Project Area AB Summary of Component Area Characteristics Based on Fiscal Year Assessed Valuation (1) FY Assessed Value Redev. Project A 346 $593,153,964 Redev. Project B Redev. Project A Annex Redev. Project AB Supplement 91 $419,833, $1,294,011, $1,016,158,077 Proj. Area Total 2,177 $3,323,157,248 Top Two Land Uses (% of Component Area Total AV) Industrial (68.7%) Commercial (13.0%) Commercial (80.7%) Unsecured (19.3%) Commercial (42.9%) Industrial (33.3%) Residential- Single Family (62.0%) Commercial (21.8%) Top Two Property Tax Assessees (% of Component Area Total AV) New Albertsons Inc. (24.94%) Evangelical Christian (2) (6.91%) Retail Property Trust (3) (49.10%) Nesbitt Partners Brea (7.46%) Beckman Instruments Inc. (12.02%) Aquiport Brea LP (9.45%) Brea Gateway Center (2.31%) Edwards Theaters Circuit (1.81%) (1) Per information included in Tables 2-A, 2-B, 2-C, 2-D, 3-A, 3-B, 3C and 3-D of the Fiscal Consultant s Report. See Appendix B. (2) Commercial property, according to County records. (3) Owned by Simon Property Group, Inc.; representing properties that are a part of the Brea Mall, subject to the Brea Mall OPA. See SECURITY FOR THE BONDS Tax Sharing Agreements Brea Mall OPA. 31

40 TAX REVENUES AND DEBT SERVICE COVERAGE The following section presents a summary of the historical and projected assessed valuation and tax increment revenues with respect to the Project Area, based on information provided by the Fiscal Consultant. The Agency believes the assumptions upon which the projections are based are reasonable. However, some assumptions may not materialize and unanticipated events and circumstances may occur. See RISK FACTORS. The projections do not include an allowance for property tax appeals and related refunds or delinquencies by taxpayers. The Non-Housing Tax Revenues and Housing Tax Revenues available for debt service during the forecast period may vary from the projections and the variations may be material. Historical Assessed Valuation and Tax Increment Revenues Generally, tax increment revenues are generated from increases in the total assessed value of a redevelopment project area above its base year value. Each year, the County Auditor-Controller provides a report of the current year and base year values for the Project Area. Set forth below is a summary the assessed values and increment receipts for fiscal years through for the entire Project Area. 32

41 Table 4 BREA REDEVELOPMENT AGENCY Redevelopment Project Area AB Historical Assessed Values and Tax Increment Revenues Fiscal Years to Secured (1) $2,805,265,151 $2,860,600,321 $2,976,728,159 $3,006,771,764 $3,002,912,011 Unsecured (1) 293,094, ,167, ,556, ,657, ,830,452 State assessed 2,392,531 2,095, , , ,785 Total assessed value $3,100,751,813 $3,169,862,932 $3,287,699,769 $3,327,844,426 $3,323,157,248 Less: Base year value (2) (322,829,046) (321,963,926) (320,357,163) (320,183,421) (320,183,421) Incremental value $2,777,922,767 $2,847,899,006 $2,967,342,606 $3,007,661,005 $3,002,973,827 Percent change from prior FY % 4.19% 1.36% -0.16% If no Annual TI Caps: Gross tax increment (3) $28,465,734 $30,101,737 $31,214,852 $31,887,722 $31,904,358 Housing set-aside (4) $5,693,147 $6,020,347 $6,242,970 $6,377,544 $6,380,872 Application of Annual TI Caps: Gross tax increment (5) $19,000,000 $19,000,000 $19,000,000 $19,000,000 $19,000,000 Housing set-aside (6) $3,800,000 $3,800,000 $3,800,000 $3,800,000 $3,800,000 (1) As reported by the Orange County Auditor-Controller in August of each fiscal year. Includes home owner exemptions; net of all other exemptions. (2) Based on Orange County s practice: decreases in the base year value resulting from acquisitions of privately held properties by public entities; increases in the Base Year value resulting from dispositions of publicly held properties to private ownership. See APPENDIX B FISCAL CONSULTANT S REPORT 3.4. Base Year Assessed Value. (3) Computed based on the actual rate applied by the County, which included the basic one percent tax rate, plus additional rates due to tax levied to repay indebtedness approved by voters before January 1, 1989 (the overrides ). Does not include reductions for County administrative fees, supplemental taxes, prior year redemption payments, tax refunds and pass-through payments. See APPENDIX B FISCAL CONSULTANT S REPORT 5. Tax Allocation and Disbursement. (4) Equals 20 percent of gross tax increment. (5) Based on the $14 million Project A-A Annex-B TI Cap, plus the $5 million Project AB Supplement TI Cap. See further discussion below. (6) Equals 20 percent of gross tax increment. Source: Keyser Marston Associates, Inc. Because of the $14 million Project A-A Annex-B TI Cap and the $5 million Project AB Supplement TI Cap, the Agency expects that the amount of Gross Tax Revenues through fiscal year will be $19 million each fiscal year. Given this, the Housing Set-Aside is expected to be $3.8 million each fiscal year and the Non-Housing Tax Revenues (i.e., after deduction of County administrative fees [see LIMITATIONS ON TAX REVENUES Property Tax Collection Procedure ], AB 1290 Payments and payments under the County Tax Sharing Agreement and the Brea Mall OPA [see SECURITY FOR THE BONDS Allocation of Taxes ]) is expected to be approximately $13.2 million each fiscal year, absent an amendment to the Redevelopment Plan or a significant decrease in the assessed 33

42 value of the Project Area below its assessed value. Revenues. See Table 5 under Projected Tax As shown in Table 8-A of the Fiscal Consultant s Report in Appendix B, if the Project A-A Annex-B TI Cap did not exist, the Gross Tax Revenues allocated to the Agency with respect to such three Component Areas, combined, for fiscal year would be approximately $7 million over the $14 million cap. As shown in Table 8-E of the Fiscal Consultant s Report, if the Project AB Supplement TI Cap did not exist, the Gross Tax Revenues allocated to the Agency with respect to Project AB Supplement for fiscal year would be approximately $3.8 million over $5 million cap. As discussed under PROJECT AREA Redevelopment Plan; Plan Limitations, currently under the Redevelopment Plan, the last day on which the Agency may repay debt from tax increment of Redevelopment Project A and Redevelopment Project B is July 24, The last day on which the Agency may repay debt from tax increment of Redevelopment Project A Annex is May 18, The last day on which the Agency may repay debt from tax increment of Redevelopment Project AB Supplement is December 20, For projected debt service coverage purposes, the Fiscal Consultant has assumed that Gross Tax Revenues will be (i) $19 million each fiscal year through the end of fiscal year (when the time limit to repay debt from Redevelopment Project A and Redevelopment Project B tax increment expires), (ii) $16,230,968 each fiscal year between fiscal years through (inclusive), and (iii) $5 million in each of fiscal years and (during which the Agency will only receive tax increment from Redevelopment Project AB Supplement). Property value in the Project Area will be subject to the fluctuation of the real estate market throughout the term of the Bonds. There is no guarantee that assessed value of the Project Area will continue to increase, or that it will never drop below the level during the years before the final maturity of the Bonds. See RISK FACTORS Reduction in Taxable Value. Teeter Plan The County has implemented the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the Teeter Plan ), as provided for in Section 4701 et seq. of the California Revenue and Taxation Code. Pursuant to the Teeter Plan, the County apportions to the participating local agencies, including the Agency, amounts equal to 100 percent of the taxes levied regardless of the amount actually collected. The County retains all penalties and interest which are collected with delinquent taxes. The County may discontinue the Teeter Plan at any time. If the Teeter Plan is discontinued subsequent to its implementation, secured property taxes would be allocated to political subdivisions, including the Agency, for which the County acts as the tax-levying or taxcollecting agency on an actual collections basis. Assessed Values Appeals and Proposition 8 Adjustments General. Pursuant to California law, property owners may apply for a reduction of their property tax assessment by filing a written appeal. After the applicant and the assessor have presented their arguments, the applicable local appeals board makes a final decision on the proper assessed value. The appeals board may rule in the assessor s favor, rule in the applicant s favor, or 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 which was appealed. Current year values may also be adjusted as a result of a successful appeal of prior year values. Any 34

43 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 two percent 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 (a Proposition 8 Adjustment ) 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 a roll reduction is granted under this section, the property is reviewed on an annual basis to determine its full cash value and the valuation is adjusted accordingly. This may result in further reductions or in value increases. Such increases must be in accordance with the full cash value of the property and may exceed the maximum annual inflationary growth rate allowed on other properties under Article XIIIA of the State Constitution. Once the property has regained its prior value, adjusted for inflation, it once again is subject to the annual inflationary factor growth rate allowed under Article XIIIA. The 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. Any assessment appeal that is pending or which may be filed in the future, if successful, will result in a reduction of the assessed value of the subject property. A reduction of assessed valuation due to appeals, if significant, and the resulting property tax refunds could adversely impact the amount of Tax Revenues available to pay debt. Orange County Assessor Proactive Review. As discussed under RISK FACTORS Reduction in Taxable Value, the real estate market has experienced a significant down-turn since about 2006 relative to the few preceding years, when there was a signigicant market boom. The market value of some residential properties purchased during the boom years have even fallen below their purchase price. In lieu of adjusting the assessed value solely upon a property owner s request, the Orange County Assessor s Office has initiated proactive reviews of single family homes, condominiums, townhomes, multifamily and commercial and industrial properties. According to information published by the County Assessor s Office, 317,000 properties were reviewed and approximately 190,000 properties received Proposition 8 Adjustment reductions. Impact on Project Area Based on Appeals. For its Report (see Appendix B), the Fiscal Consultant reviewed the status of assessment appeals with respect to properties in the Project Area based on the information available from the database of the Orange County Assessment Appeals Board (the AAB ) as of April The Fiscal Consultant then estimated the fiscal impact on the fiscal year assessed value of the Project Area, based on certain assumptions and historical patterns. From this review and analysis, the Fiscal Consultant estimated that, with respect to the properties in the Project 35

44 Area, there will be: (i) for fiscal year , approximately $1,771,000 of tax refunds, and (ii) fiscal year , approximately $125,705,000 in secured assessed value reduction, and approximately $3,355,000 in unsecured assessed value reduction. See APPENDIX B FISCAL CONSULTANT REPORT 3.3. Proposition 8 Temporary Decline in Value and 4. Assessment Appeals for more detailed discussions of the data reviewed and the assumptions and analysis used by the Fiscal Consultant in arriving at these estimates. The projections set forth in Tables 5, 6 and 7 below and in the Fiscal Consultant Report in Appendix B reflect such estimated reductions, but do not include an allowance for other potential future appeals. In any event, because of the Annual TI Caps, the reductions due to the currently pending appeals are not expected to have any impact on the actual amount of Gross Tax Revenues to be received by the Agency. Projected Tax Revenues Table 5 shows the projected assessed values for the Project Area, the Housing Set-Aside (i.e., Housing Tax Revenues) and the Non-Housing Tax Revenues from fiscal years to , as provided by the Fiscal Consultant. The projections are calculated based on the values for fiscal year (see Table 4 above). The Fiscal Consultant has assumed fiscal year secured assessed value for the Project Area will increase by 0.75 percent relative to fiscal year , fiscal year secured assessed value will increase by one percent relative to fiscal year , and thereafter, secured assessed value will increase by two percent each fiscal year, compounded annually. The projected secured assessed value in each of fiscal years and also includes an additional amount from anticipated new developments in the Project Area. See APPENDIX B FISCAL CONSULTANT S REPORT 6.2. New Development Value Added. In light of the assessment appeals described under Appeals of Assessed Values above, the Fiscal Consultant assumed a property tax refund of $1,771,000 for fiscal year , a reduction of secured assessed value by $125,705,000 commencing in fiscal year , and a reduction of unsecured assessed value by $3,355,000 commencing in fiscal year No other property tax appeals and related refunds are assumed in the projections. In contrast to Table 5, for the purposes of showing debt service coverage projections, the Non- Housing Tax Revenues and the Housing Tax Revenues shown in Tables 6 and 7 are calculated with the assumption that assessed values of properties in the different Component Areas will not increase above their fiscal year amounts, but will be affected by the pending assessment appeals as described in the preceding paragraph. The projections in Tables 5, 6 and 7 do not take into account any potential State imposed reallocation of property taxes affecting the Agency but see RISK FACTORS State Budget Issues. While the Agency believes that these assumptions are reasonable, the assessed values, the Housing Tax Revenues and the Tax Revenues during the forecast period may vary from the projections and the variations may be material. See RISK FACTORS. 36

45 Table 5 BREA REDEVELOPMENT AGENCY Redevelopment Project Area AB Projected Tax Revenues Fiscal Years to (000 s Omitted) Prior fiscal year secured value $2,902,447 $2,797,567 $2,825,543 $2,882,054 $2,939,695 Projected secured value increase 20,826 (1) 27,976 (2) 56,511 (3) 57,641 (3) 58,794 (3) Less: Appeals reduction - secured (4) (125,705) Unsecured/State assessed 420, , , , ,906 Less: Appeals reduction - unsecured (4) (3,355) New value added unsecured (5) 4, Total assessed value $3,219,723 $3,248,448 $3,304,959 $3,362,600 $3,421,394 Less: Base year value (320,183) (320,183) (320,183) (320,183) (320,183) Incremental value $2,899,539 $2,928,265 $2,984,776 $3,042,417 $3,101,211 If no Annual TI Caps: Gross tax increment (6) $30,539 $30,839 $31,429 $32,032 $32,646 Housing set-aside (7) $6,108 $6,168 $6,286 $6,406 $6,529 Application of Annual TI Caps: Gross tax increment (8) $19,000 $19,000 $19,000 $19,000 $19,000 Less: County admin. fee (9) (293) (296) (301) (307) (313) Less: AB 1290 Payments (10) (93) (93) (93) (93) (93) Less: County Tax Sharing Agreement (11) (508) (508) (508) (508) (508) Less: Brea Mall OPA (12) (1,107) (1,107) (1,107) (1,107) (1,107) Tax Revenues (13) $16,999 $16,996 $16,990 $16,985 $16,979 Housing set-aside (14) $3,800 $3,800 $3,800 $3,800 $3,800 Non-Housing Tax Revenues $13,199 $13,196 $13,190 $13,185 $13,179 (1) Equals 0.75 percent of prior fiscal year secured assessed value. (2) Equals one percent of prior fiscal year secured assessed value. (3) Equals two percent of prior fiscal year secured assessed value. (4) Estimate by Fiscal Consultant based on review of data from the Orange County Assessment Appeals Board and historical patterns. See Appeals of Assessed Values and APPENDIX B FISCAL CONSULTANT REPORT 3.3. Proposition 8 Temporary Decline in Value and 4. Assessment Appeals. (5) Based on Agency-identified completed construction or transfers of ownership not yet reflected on fiscal year tax roll. See APPENDIX B FISCAL CONSULTANT S REPORT 6.2. New Development Value Added. (6) Includes estimated unitary tax of $241,000. (7) Equals 20 percent of gross tax increment. (8) Equals the Project A-A Annex-B TI Cap of $14 million, plus the Project AB Supplement TI Cap of $5 million. See Historical Assessed Valuation and Tax Increment Revenues. (9) Assumed to be approximately 0.92 percent of Gross Tax Revenues. Payable to the County pursuant to California Revenue and Taxation Code Section See LIMITATIONS ON TAX REVENUES Property Tax Collection Procedure. (10) See SECURITY FOR THE BONDS Allocation of Taxes AB 1290 Payments. (11) See SECURITY FOR THE BONDS Tax Sharing Agreements County Tax Sharing Agreement. (12) See SECURITY FOR THE BONDS Tax Sharing Agreements Brea Mall OPA. (13) May not equal column total because of rounding. (14) Equals 20 percent of gross tax increment. Source: Keyser Marston Associates, Inc. 37

46 Coverage Projections Fiscal Year Ending (June 30) Non-Housing Portion of Series 2001A Table 6 BREA REDEVELOPMENT AGENCY Redevelopment Project Area AB Estimated Non-Housing Debt Service Coverage Non-Housing Portion of Series 2003 Non-Housing Portion of Series A IF NO ANNUAL TI CAPS Non-Housing Tax Rev. if no Annual Non-Housing Tax Revenues (1)(2) Bonds (3)(4)(5) Bonds (3)(4)(6) Bonds (3)(7) Total Debt Service Debt Service Coverage (8) TI Caps (9) 2011 $13,189,471 $ 3,574,270 $ 6,739,948 $10,314, x $23,285, x ,200,677 3,576,070 6,742,348 $242,119 10,560, x 22,257, x ,200,600 3,574,470 6,739, ,750 10,559, x 22,263, x ,200,600 3,571,390 6,745, ,750 10,558, x 22,263, x ,200,600 3,573,710 6,741, ,750 10,556, x 22,263, x ,200,600 3,576,640 6,741, ,750 10,558, x 22,263, x ,200,600 3,571,540 6,678, ,750 10,560, x 22,263, x ,200,600 3,570,140 6,425, ,750 10,555, x 22,263, x ,200,600 3,574,740 6,418, ,750 10,559, x 22,263, x ,200,600 3,575,340 6,421, ,750 10,557, x 22,263, x ,200,600 3,575,800 6,420, ,750 10,557, x 22,263, x ,200,600 3,162,600 6,739, ,750 10,558, x 22,263, x 2023 (11) 14,307,887 6,438,600 1,470,015 3,535,750 11,444, x 23,371, x ,307,887 7,970,015 3,475,750 11,445, x 23,371, x ,307,887 7,970,515 3,475,750 11,446, x 23,371, x ,307,887 7,970,585 1,780,750 9,751, x 15,261, x ,191,482 7,974,285 1,775,750 9,750, x 15,261, x ,191,482 7,970,430 1,780,750 9,751, x 15,261, x ,191,482 7,970,430 1,780,750 9,751, x 15,261, x ,191,482 7,970,430 1,780,750 9,751, x 15,261, x ,191,482 2,792,958 6,955,750 9,748, x 15,261, x ,191,482 2,794,038 6,955,000 9,749, x 15,261, x ,191,482 9,750,000 9,750, x 15,261, x ,191,482 9,750,000 9,750, x 15,261, x ,408,113 2,725,000 2,725, x 6,478, x ,408,113 2,725,000 2,725, x 6,478, x Debt Service Coverage (10) (1) Equals Gross Tax Revenues (after application of the Annual TI Caps) less Housing Set-Aside, County administrative fees, AB 1290 Payments and payments under the County Tax Sharing Agreement and the Brea Mall OPA. See SECURITY FOR THE BONDS Allocation of Taxes AB 1290 Payments and Tax Sharing Agreements. No potential ERAF payment or any other State mandated reallocation included for any year. See RISK FACTORS State Budget Issues. (2) In light of the Annual TI Caps and the time limits to repay debt with tax increment from the Component Areas, assumes Gross Tax Revenues each fiscal year will equal: (i) $19 million through fiscal year , (ii) $16,230,968 between fiscal years through (inclusive), and (iii) $5 million thereafter. See Historical Assessed Valuation and Tax Increment Revenues. (3) Based on scheduled debt service for the corresponding Bond Year, assuming no optional redemption prior to maturity. (4) Represents the portion that the Agency expects to pay using Non-Housing Tax Revenues. See SECURITY FOR THE BONDS Parity Debt regarding the pledge of Non-Housing Tax Revenues for the Series 2001A Bonds and the Series 2003 Bonds. (5) Column total equals approximately 80 percent of the total scheduled debt service on the Series 2001A Bonds. (6) Column total equals approximately percent of the total scheduled debt service on the Series 2003 Bonds. (7) Column total equals approximately 94.4 percent of the total scheduled debt service on the Series A Bonds. (8) Equals Non-Housing Tax Revenues divided by Total Debt Service. (9) Based on fiscal year gross tax increment if the Redevelopment Plan did not impose the Annual TI Caps. Assumes no further growth and a reduction due to pending assessment appeals. See Assessed Values Appeals and Proposition 8 Adjustments Impact on Project Area Based on Appeals. County administration fee assumed to decrease correspondingly due to such reduction. (10) Equals Non-Housing Tax Revenues if no Annual TI Caps divided by Total Debt Service. (11) Increase of Non-Housing Tax Revenues due to termination of Agency s payment obligations to under the Brea Mall OPA. Source: Stone & Youngberg, LLC, based on Tax Revenue projections provided by Keyser Marston Associates, Inc. 38

47 Fiscal Year Ending (June 30) Housing Tax Revenues (1)(2) Housing Portion of Series 2001A Table 7 BREA REDEVELOPMENT AGENCY Redevelopment Project Area AB Estimated Debt Service Coverage (Housing Tax Revenues) Housing Portion of Series 2003 Housing Portion of Series A Debt Service Coverage (7) IF NO ANNUAL TI CAPS Housing Tax Revenues if no Annual TI Caps (8) Debt Service Coverage (9) Series B Total Debt Bonds (3)(4) Bonds (3)(4) Bonds (3)(6) Bonds (3) Service 2011 $3,800,000 $893,568 $1,344,978 $2,238, x $6,324, x ,800, ,018 1,347,178 $797,832 3,039, x 6,064,244 2.x ,800, ,618 1,348, ,939 3,037, x 6,065,844 2.x ,800, ,848 1,347, ,132 3,034, x 6,065,844 2.x ,800, ,428 1,346, ,642 3,036, x 6,065,844 2.x ,800, ,160 1,343, ,236 3,036, x 6,065,844 2.x ,800, ,885 1,346, ,165 3,038, x 6,065,844 2.x ,800, ,535 1,347, ,425 3,039, x 6,065,844 2.x ,800, ,685 1,345, ,923 3,038, x 6,065,844 2.x ,800, ,835 1,346, ,503 3,037, x 6,065,844 2.x ,800, ,950 1,345, ,502 3,034, x 6,065,844 2.x ,800, ,650 1,347, ,898 3,035, x 6,065,844 2.x ,800,000 1,609, ,525 1,202,978 3,039, x 6,065,844 2.x ,800, ,525 2,241,612 3,038, x 6,065,844 2.x ,800, ,015 2,242,136 3,039, x 6,065,844 2.x ,246, ,133 1,798,080 2,594, x 4,013, x ,246, ,853 1,798,853 2,592, x 4,013, x ,246, ,150 1,796,864 2,592, x 4,013, x ,246, , ,744 1,546, x 4,013, x ,246, ,740 $115, , x 4,013, x ,246, , , , x 4,013, x ,246, , , , x 4,013, x ,246, , , x 4,013, x ,246, , , x 4,013, x ,000, , , x 1,767, x ,000, , , x 1,767, x (1) Equals 20 percent of Gross Tax Revenues (after application of Annual TI Caps). (2) In light of the Annual TI Caps and the time limits to repay debt with tax increment from the Component Areas, assumes Gross Tax Revenues each fiscal year will equal: (i) $19 million through fiscal year , (ii) $16,230,968 between fiscal years through (inclusive), and (iii) $5 million thereafter. See Historical Assessed Valuation and Tax Increment Revenues. (3) Based on scheduled debt service for the corresponding Bond Year, assuming no optional redemption prior to maturity. (4) Total equals approximately 20 percent of the total scheduled debt service on the Series 2001A Bonds.. (5) Total equals approximately 14 percent of the total scheduled debt service on the Series 2003 Bonds. (6) Total equals approximately 5.6 percent of the total scheduled debt service on the Series A Bonds (7) Equals Housing Tax Revenues divided by Total Debt Service. (8) Based on fiscal year gross tax increment if the Redevelopment Plan did not impose the Annual TI Caps. Assumes no further growth and a reduction due to pending assessment appeals. See Assessed Values Appeals and Proposition 8 Adjustments Impact on Project Area Based on Appeals. County administration fee assumed to decrease correspondingly due to such reduction. (9) Equals Housing Tax Revenues if no Annual Caps divided by Total Debt Service. Source: Stone & Youngberg, LLC, based on Tax Revenue projections provided by Keyser Marston Associates, Inc. 39

48 RISK FACTORS Investment in the Bonds involves elements of risk. The following section describes certain specific risk factors affecting the payment and security of the Bonds. The following discussion of risks is not meant to be an exhaustive list of the risks associated with the purchase of the Bonds and the order of discussion of such risks does not necessarily reflect the relative importance of the various risks. Potential investors are advised to consider the following factors along with all other information in this Official Statement in evaluating the Bonds. There can be no assurance that other risk factors not discussed under this caption will not become material in the future. Limited Obligations of the Agency The Bonds are limited obligations of the Agency. The Bonds are not a debt, liability or obligation of the City, the State of California, or any of its political subdivisions other than the Agency, and none of the City, the State nor any of its political subdivisions, other than the Agency, is liable therefor. The principal of, premium, if any, and interest on the Bonds are payable solely from Non- Housing Tax Revenues or Housing Tax Revenues, as applicable, allocated to the Agency from the Project Area and amounts in certain funds and accounts held under the respective Indenture. 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 Non-Housing Tax Revenues or Housing Tax Revenues that would otherwise be available to pay debt service on the Bonds. See SECURITY FOR THE BONDS. Reduction in Taxable Value The projected Non-Housing Tax Revenues and Housing Tax Revenues shown in this Official Statement are based on the certain assumptions, taking into consideration the Annual TI Caps and the time limits set forth in the Redevelopment Plan to repay indebtedness from tax increment derived the different Component Areas. See PROJECT AREA Redevelopment Plan; Plan Limitations and TAX REVENUES Historical Assessed Valuation and Tax Increment Revenues. No assurances can be given that the assessed value of properties in the Project Area will never fall below the values estimated by the Fiscal Consultant for the projections shown in Tables 4, 5 and 6 and the Fiscal Consultant s Report. However, because of the application of the Annual TI Caps under the Redevelopment Plan, assessed value of the Project Area would have to decrease by approximately 34 percent from the fiscal year assessed value in order for the gross tax increment for the Project Area to fall below the fiscal year level. Property values, and correspondingly assessed values, are impacted by many factors which are beyond the Agency s control. After multiple years of increases in home sales volume and prices, many cities throughout the State have experienced a significant down-turn in the real estate market since around The market values of many properties that were bought within the few years before the real estate market down-turn have fallen, some even below their purchase prices. In addition, during the residential housing boom, lenders reportedly made mortgage loans to some borrowers whose credit profiles were such that, in prior times, these borrowers might not have qualified for the same loans. The credit market in the last three years has considerably tightened relative to the preceding few years. All of these factors led to an increase of risk of defaults and foreclosures when the housing boom ended. It is generally expected that, for many areas in the State, the real estate market value will not return to the prices seen during boom years in the immediate future. 40

49 With respect to commercial properties, often, periodic improvement and reinvestment are required to maintain their value. The willingness of an owner to upgrade and maintain a commercial property, and in some circumstances make timely property tax payments, can be affected by the property s vacancy rate and rental receipts. The Agency is not aware of any significant vacancy with respect to available rental spaces in the commercial developments of the Project Area. However, the Agency has not undertaken to assess the financial conditions of the current owners of the commercial or residential properties within the Project Area or to make inquiries into the means by which such owners financed their properties. Property value and development growth in the Project Area will be subject to the fluctuation of the real estate market throughout the term of the Bonds. In addition to the real estate market fluctuation discussed above, a relocation out of a Component Area by one or more major property owners, the discovery of hazardous substances on a property within the Project Area (see Hazardous Substances below) or the complete or partial destruction of property caused by, among other possibilities, an earthquake, flood or other natural disaster (see Natural Disasters below or any other event which would permit a reassessment of property at lower values), could cause a reduction in the assessed value of properties in the Project Area. Future initiatives or legislation may be approved by the electorate or the legislature which would further limit the increase of assessed value of property or reduce the tax rate applicable to the property, could cause a reduction in the Tax Revenues and Housing Tax Revenues. See State Budget Issues below. Property owners may also appeal to the County Assessor for a reduction of their assessed valuations or the County Assessor could order a blanket reduction in assessed valuations based on then current economic conditions. The projections set forth in Table 5 and in the Fiscal Consultant Report in Appendix B already included an estimated reduction based on the appeals on record prior to the close of fiscal year See TAX REVENUES AND DEBT SERVICE COVERAGE Appeals of Assessed Values. However, the projections do not take into account any assessed value reduction or tax refund for other future appeals. A reduction of assessed valuation that causes a decline in Non-Housing Tax Revenues and Housing Tax Revenues or the resulting property tax refunds could have an adverse effect on the Agency s ability to make timely repayments on the Bonds. See LIMITATIONS ON TAX REVENUES. 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. So long as the County s Teeter Plan remains in effect with respect to the Project Area, the receipt of tax increment by the Agency with respect to the Project Area is protected from risks relating to property tax delinquencies. See TAX REVENUES AND DEBT SERVICE COVERAGE Teeter Plan. However, the County is entitled, and under certain circumstances could be required, to terminate its Teeter Plan with respect to all or part of the local agencies, including the Agency. A termination of the Teeter Plan with respect to the Agency, coupled with significant property delinquencies, could have a material adverse effect on the amount of Non-Housing Tax Revenues and Housing Tax Revenues to be collected by the Agency. State Budget Issues Transfers to Educational Revenue Augmentation Fund (ERAF) In connection with its approval of the budget for the , , , , , , , and fiscal years, the State Legislature enacted legislation which, among other things, reallocated funds from redevelopment agencies to school districts by shifting a portion of each agency s tax increment to school districts for such fiscal years for deposit in the Educational Revenue Augmentation Fund ( ERAF ) established in each county treasury throughout the State. The aggregate amount for the transfers for all redevelopment agencies in the State in each such fiscal year was 41

50 respectively, as follows: $205 million ( ), $65 million ( ), $65 million ( ), $75 million ( ), $135 million ( ), $250 million ( ), $250 million ( ), and $350 million ( ). The amount required to be paid by a redevelopment agency under such legislation was apportioned among all of its redevelopment project areas on a collective basis, and was not allocated separately to individual project areas. The legislation adopted by the State Legislature, and signed by the Governor of the State, to implement the ERAF shift for fiscal year was Assembly Bill No. 1389, Chapter 751, Statutes 2008 ( AB 1389 ). On April 30, 2009 (prior to the May 10, 2009 payment deadline for the ERAF transfers), a California superior court in California Redevelopment Association v. Genest (County of Sacramento) (Case No ) held that the required payment by redevelopment agencies into ERAF in fiscal year pursuant to AB 1389 violated the California constitution and invalidated and enjoined the operation of the California Health and Safety Code section requiring such payment. On May 26, 2009, the State filed a notice that it would appeal the decision of the superior court. On or about September 28, 2009, the State withdrew its appeal of the superior court s decision in California Redevelopment Association v. Genest. Transfers to Supplemental Educational Revenue Augmentation Fund (SERAF) In connection with various legislation related to the budget for the State for its fiscal year , in late July 2009 the State Legislature adopted, and the Governor signed, Assembly Bill No. 26, Chapter 21, Statutes of 2009 ( ABX 26 ). ABX 26 mandates that redevelopment agencies in the State make deposits to the Supplemental Educational Revenue Augmentation Fund ( SERAF ) that is established in each county treasury throughout the State, in the aggregate amount of $1.7 billion for fiscal year , which was due before May 10, 2010, and $350 million for fiscal year , which is due before May 10, Similar to the ERAF legislation, each transfer required to be paid by a redevelopment agency under ABX 26 is apportioned among all of its redevelopment project areas on a collective basis, and is not allocated separately to individual project areas. On October 8, 2010, the State Legislature adopted, and the Governor signed, the budget for the State for its fiscal year. The State s budget does not require any additional transfer from redevelopment agencies to the ERAF or SERAF other than the existing transfer required under ABX 26 for fiscal year , due prior to May 10, The California Redevelopment Association, the Union City Redevelopment Agency and the Fountain Valley Redevelopment Agency filed a lawsuit in Sacramento Superior Court on October 20, 2009 challenging the constitutionality of the SERAF transfer provisions of ABX 26. Subsequently, the Court certified all redevelopment agencies in the State as a class of plaintiffs in the lawsuit. The Court announced its ruling in the case on May 4, 2010, in which it upheld the constitutionality of SERAF transfer provisions of ABX 26. On August 30, 2010, the California Redevelopment Association and the other plaintiffs in the lawsuit challenging the SERAF transfer provisions of ABX 26 filed an appeal to the Court s May 4, 2010 decision. The Agency cannot predict the ultimate outcome of such appeal. The Agency made the required $8,983,768 SERAF payment for fiscal year and $1,849,599 SERAF payment for fiscal year from funds on hand on a timely basis. Proposition 22 On November 2, 2010, the voters of the State approved Proposition 22, which amended the California Constitution to prohibit the State, even during a period of severe fiscal hardship, from delaying the distribution of tax revenues for transportation, redevelopment, or local government projects and services. As amended by Proposition 22, Article XIII of the California Constitution prohibits the State 42

51 Legislature from enacting a statute that requires a community redevelopment agency (i) to pay, remit, loan, or otherwise transfer, directly or indirectly, tax increment allocated to the agency to or for the benefit of the State, any agency of the State, or any jurisdiction, or (ii) to use, restrict, or assign a particular purpose for tax increment allocated to the agency for the benefit of the State, any agency of the State, or any jurisdiction, except for statutory tax sharing, and for the purpose of increasing, improving, and preserving the supply of low and moderate income housing available at affordable housing cost. See SECURITY THE BONDS Tax Allocation Financing and Allocation of Taxes. The effect of Proposition 22 generally is to preclude the State Legislature from enacting legislation to require future ERAF or SERAF shifts or other legislation reducing the tax increment revenues allocated to redevelopment activities. Governor s Proposed Budget: Disestablishment of Redevelopment Agencies* On January 10, 2011, California Governor Brown released the proposed fiscal year State budget. The Governor s Budget Summary for the proposed fiscal year State budget (the Budget Summary ) projects that the State will face a budget gap of $25.4 billion in fiscal year One of the proposed measures to close the budget gap is the elimination of redevelopment agencies and the redistribution of property tax that the agencies would otherwise have received. According to the Budget Summary, the proposed budget calls for prohibiting redevelopment agencies from creating new contracts or obligations or modifying existing contracts on or after the date urgency legislation is adopted. The proposed budget also calls for disestablishing existing agencies, and establishing successor local agencies which would be required to use the property tax that the agencies would otherwise have received to retire pre-existing agency debts and contractual obligations in accordance with existing payment schedules. In this regard, the Budget Summary states, No existing obligations will be impaired. This is a reference to provisions in the federal and state constitutions that, subject to certain exceptions, generally prohibit states from passing a law that impairs the obligations of contracts. Two essentially identical bills, Senate Bill 77 ( SB 77 ) and Assembly Bill 101 ( AB 101 ), were introduced on January 10, 2011 in a shell format and amended on March 15, 2011 to set forth the specific proposed legislation that would implement the Governor s proposal to dissolve redevelopment agencies. SB 77 and AB 101 were trailer bills. As described by the State Department of Finance, in a proposed or approved State budget there are generally changes that necessitate modifications to existing law in order to implement the budget changes. Trailer bills are separate bills introduced to implement these changes and are heard concurrently with the proposed budget bill. As stated in the text of the bills, each of AB 101 and SB 77 required a two-thirds vote of each house of the State Legislature for passage, [b]ecause [the] measure would provide property tax revenues that would otherwise be received by enterprise special districts from former redevelopment tax increment allotments instead be received by the respective county, and may result in property tax moneys in the Redevelopment Property Tax Trust Fund not being allocated to the county if it declines to administer the Public Health and Safety Fund. On March 16, 2011, AB 101 came to a vote on the floor of the State Assembly. By the time of the bill s last call that evening, the vote remained 53-23, one vote short of the two-thirds needed for passage. On May 16, 2011, the Governor released the May revision to the proposed fiscal year State budget (the May Revision ). The May Revision reflects revised revenue and spending forecasts since the budget that the Governor released on January 10, With respect to redevelopment * The discussion under the caption Governor s Proposed Budget: Disestablishment of Redevelopment Agencies has been substantially revised since the Preliminary Official Statement, dated June 9, 2011, to reflect developments since June 9,

52 agencies, the May Revision maintained the Governor s Budget proposal to eliminate redevelopment agencies. Two additional sets of trailer bills, Senate Bill 14 ( SBX 14 ) and Senate Bill 15 ( SBX 15 ) of the First Extraordinary Session of the State Senate and Assembly Bill 26 ( ABX 26 ) and Assembly Bill 27 ( ABX 27 ) of the First Extraordinary Session of the State Assembly, were introduced in shell formats in May 2011 and then amended on June 14, 2011 to set forth the specific proposed legislation. SBX 14 and ABX 26 are essentially identical. SBX 14 and ABX 27 are also nearly identical. SBX 14 and ABX 26 contain many of the same provisions as SB 77 and AB 101, with certain changes, including changes intended to require a majority vote (instead of a two-thirds vote) for passage. Together, SBX 14, SBX 15, ABX 26 and ABX 27 mandate each city or county that has a redevelopment agency to choose one of the following options: (i) make a payment (the SBX 15 Payment ) each fiscal year to the county auditor-controller for deposit into the county s Special District Allocation Fund and ERAF (see Transfers to Educational Revenue Augmentation Fund (ERAF) above) pursuant to SBX 15 and ABX 27, or (ii) subject the redevelopment agency to dissolution pursuant to SBX 14 and ABX 26. On June 15, 2011, both houses of the State Legislature voted on various bills as part of the fiscal year State Budget. Each of ABX 26 and ABX 27 was put to a vote in the State Senate and the State Assembly and passed by majority vote in each house. On June 16, 2011, Governor Brown issued a statement that he decided to return SB 69 and AB 98 (the primary bills for the fiscal year State Budget) to the State Legislature unsigned. Governor Brown stated: Unfortunately, the budget I have received is not a balanced solution. It continues big deficits for years to come and adds billions of dollars of new debt. It also contains legally questionable maneuvers, costly borrowing and unrealistic savings. Finally, it is not financeable and therefore, will not allow us to meet our obligations as they occur. As of the printing of this Official Statement, none of SBX 14, SBX 15, ABX 26 and ABX 27 have been signed by the Governor, and therefore, have not become effective. The legislative process involves negotiations, compromises and changes. The Agency cannot predict when the Governor and the State Legislature will come to an agreement regarding the State Budget, and whether SBX 14, SBX 15, ABX 26 and ABX 27, in their current or any modified forms, will eventually be adopted and become effective law. In their current forms, under SBX 15 and ABX 27, if the City chooses to not subject the Agency to dissolution under SBX 14 and ABX 26, then the City may either (i) enact an ordinance (the SBX 15 Ordinance ) on or before October 1, 2011 to make the SBX 15 Payments, or (ii) adopt a non-binding resolution before October 1, 2011 indicating the City s intent to adopt the AB 15 Ordinance, and enact the AB 15 Ordinance by November 1, The amount of the SBX 15 Payment for each fiscal year will be determined by the State Director of Finance based on the methods prescribed in SBX 15 and ABX 27. The City may make an appeal regarding the amount of the SBX 15 Payment determined by the State Director of Finance, but the State Director of Finance has sole discretion to approve or reject the appeal, in whole or in part. If the City chooses to make the SBX 15 Payment in any particular fiscal year, the City may enter into an agreement (an SBX 15 Reimbursement Agreement ) with the Agency under which the Agency will promise to transfer tax increment derived from the Project Area to the City in an amount not to exceed the SBX 15 Payment for that fiscal year, for the purposes of financing activities within the Project Area that are related to accomplishing the Agency s project goals. (In order to comply with its covenants under the Indentures, the Agency s payment obligations under the SBX 15 Reimbursement Agreement would have to be subordinate to the Bonds or otherwise subject to the parity 44

53 debt test set forth in the Indentures.) For fiscal year only, if the City makes the SBX 15 Payment, SBX 15 and ABX 27 exempts the Agency from making the full allocation into the Housing Fund pursuant to Section , and of the Redevelopment Law, if the Agency finds that there are insufficient other moneys to meet the Agency s debt and other obligations, currently priority program needs or its obligations pursuant to the SBX 15 Reimbursement Agreement. So long as the City continues to make SBX 15 Payments, then the dissolution of the Agency under SBX 14 and ABX 26 would be suspended. If the City begins to make the SBX 15 Payments but then fails to do so in a later year, then upon determination by the State Director of Finance, the Agency will be immediately subject to the dissolution requirements of SBX 14 and ABX 26, except that certain dates and deadlines would be modified in accordance with the provisions in SBX 14 and ABX 26. For example, January 1, 2011 in parts of SBX 14 and ABX 26 would be read to mean January 1 of the year preceding the year that the Agency became subject to SBX 14 and ABX 26. Under SBX 14 and ABX 26, the Agency would be prohibited from entering into any new contracts with, or incurring obligations or making commitments to, any entity, individual or groups of individuals upon the effectiveness of SBX 14 or ABX 26 as law, unless and until the City chooses to enact a SBX 15 Ordinance before November 1, The Agency would be dissolved as of October 1, 2011 and unless the City elects otherwise, the City would become the successor entity to the Agency (the Successor Agency ) to settle the affairs of the Agency. Generally, all assets, properties, contracts, leases, books and records, buildings and equipment of the former Agency would be transferred to the control of the Successor Agency on October 1, The Successor Agency would be subject to the direction of an oversight board (the Oversight Board ), to be composed of seven members, with a member appointed by the City, through its Mayor and the remaining members appointed by the County Board of Supervisors (two members), by the County Superintendent or Board of Education (one member), by the largest special district (by property tax share) with territory within the territorial jurisdiction of the former Agency (one member), by the Chancellor of the California Community Colleges to represent community college districts in the County (one member), and by the Mayor of the City but from the recognized employee organization representing the largest number of former Agency employees employed by the Successor Agency at the time of appointment, to represent employees of the former Agency (one member). Commencing on July 1, 2016, in each county where more than one Oversight Board was created by the enactment of SBX 14 or ABX 26 as law, the various Oversight Boards within a county would be replaced by a single Oversight Board. The members of this successor Oversight Board would be appointed by similar entities as those with the power to appoint the original Oversight Boards, as described above. However, instead of one member being appointed by the City that formed the Agency, such member would be appointed instead by the city selection committee established pursuant to Section of the California Government Code. Such a city selection committee consists of the mayor of each incorporated city within a county. Also, as to Oversight Board member previously representing the recognized employee organization of former Agency employees, such position for the replacement Oversight Board would be appointed by the recognized employee organization representing the largest number of successor agency employees in the county. Under SBX 14 and ABX 26, the Successor Agency would be charged with preparing Recognized Obligation Payment Schedules which document the minimum payments and due dates of payments required by enforceable obligations for each half-year fiscal period. The establishment of the Recognized Obligation Payment Schedules would be subject to the Oversight Board s approval. Actions of the Oversight Board would be subject to review by the State Department of Finance. Enforceable obligations include, among other things, bonds issued pursuant to the Redevelopment Law (including the required debt service, reserve set-asides and any other payments required under the indenture or similar documents governing the issuance of outstanding bonds of the former Agency). SBX 14 and ABX 26 each provide that payments due before January 1, 2012 will be made from revenues received in the spring 45

54 of 2011 property tax distribution and from other revenues and balances transferred to the Successor Agency. Commencing January 1, 2012, only those payments listed in the Recognized Obligation Payment Schedule may be made by the Successor Agency from funds specified in the Recognized Obligation Payment Schedule. The Oversight Board will be required to direct the Successor Agency to dispose of, generally, all assets and properties of the former Agency and cease performance in connection with and terminate all existing agreements that do not qualify as enforceable obligations. As earlier discussed, if SBX 14 or ABX 26 become applicable to the Agency at a later year because the City at first makes the SBX 15 Payments but subsequently discontinues such payments, then the dates referenced in the preceding two paragraphs will be modified in accordance with the provisions of SBX 14 and ABX 26. SBX 14 and ABX 26 lengthen the statute of limitations for any action that is brought on or after January 1, 2011, to determine the validity of bonds issued by the Agency, from 60 days to two years after the date of the triggering event. While the Agency does not believe there is any defect in the proceedings for the issuance of the Bonds that could give rise to a successful challenge and Bond Counsel is providing its opinions with respect to the Bonds as set forth in Appendix D, due to the heightened scrutiny that may occur with respect to redevelopment agency activities, there could be an increased risk of a challenge, which could also affect the market price of the Bonds. Each of SBX 14 and ABX 26, in their respective current forms, states that the intent of the Legislature is to do all of the following: (1) Bar existing redevelopment agencies from incurring new obligations, prior to their dissolution. (2) Allocate property tax revenues to successor agencies for making payments on indebtedness incurred by the redevelopment agency prior to its dissolution and allocate remaining balances in accordance with applicable constitutional and statutory provisions. (3) Beginning October 1, 2011, allocate these funds according to the existing property tax allocation within each county to make the funds available for cities, counties, special districts, and school and community college districts. (4) Require successor agencies to expeditiously wind down the affairs of the dissolved redevelopment agencies and to provide the successor agencies with limited authority that extends only to the extent needed to implement a winddown of redevelopment agency affairs. Each of SBX 14 and ABX 26, as well as SBX 15 and ABX 27, implements the above-described intent of the Legislature through a complex series of provisions, and appears to contain several inconsistencies and drafting problems. Provisions of SBX 14 and ABX 26, such as the restriction on the Successor Agency s ability to exercise an optional redemption of the Bonds and the altered flow of revenues mentioned in the preceding paragraph, may be subject to challenge in court on the basis of alleged violations of federal and state constitutional provisions or other bases. The Agency cannot predict whether or not a court would uphold the validity of SBX 14, ABX 26, SBX 15 or ABX 27, as a whole, any particular provision therein, or any similar legislation based on an exception to the general federal or state constitutional prohibitions on the Legislature s impairment of contracts, or otherwise. Protection of the rights of Bond Owners and enforcement of the terms of the Indentures, if necessary, could involve significant expense and delay. 46

55 No assurance can be given that SBX 14 and ABX 26 would not have an adverse impact on the price of the Bonds or the ability to sell the Bonds in the secondary market. Although, as described above, each of SBX 14 and ABX 26 provides that the Successor Agencies will be required to make payments for enforceable obligations listed in the Recognized Obligation Payment Schedules, both bills provide for a flow of revenues to repay Agency bonds in a manner and priority order different from the flow of tax increment current provided in the Redevelopment Law and in the Indentures. The Agency cannot predict how this process will work. The full text of each State Senate and Assembly bill cited above may be obtained from the Official California Legislative Information website maintained by the Legislative Counsel of the State of California pursuant to State law, at the following web link: Information about the State budget and State spending is available at various State maintained websites. Text of the Budget Summary, the Governor s proposed State budget, the May Revision, the current State budget, and other documents related to the State budget may be found at the website of the Department of Finance, A nonpartisan analysis of the budget is posted by the Legislative Analyst s Office at In addition, various State official statements, many of which contain a summary of the current and past State budgets may be found at the website of the State Treasurer, The CRA s website can be found at None of the websites or webpages referenced above is in any way incorporated into this Official Statement. They are cited for informational purposes only. The Agency makes no representation whatsoever as to the accuracy or completeness of any of the information on such websites. Potential investors should be aware that both the Agency and the Underwriter have the right not to proceed with the issuance of the Bonds if SB 77, AB 101, SBX 14, ABX 26, or legislation similar to such bills that would adversely affect the enforceability of the sale contracts relating to the Bonds is signed into law after the sale date and prior to the closing date for the Bonds. Natural Disasters The value of the property in the Project Area in the future can be adversely affected by a variety of additional factors, particularly those which may affect infrastructure and other public improvements and private improvements on property and the continued habitability and enjoyment of such private improvements. Such additional factors include, without limitation, geologic conditions such as earthquakes, topographic conditions such as earth movements, landslides, fire storms and floods and climatic conditions such as droughts. In the event that one or more of such conditions occur, such occurrence could cause damages of varying seriousness to the land and improvements and the value of property in the Project Area could be diminished in the aftermath of such events. A substantial reduction of the value of such properties could affect the ability or willingness of the property owners to pay the property taxes. The City, like most communities in California, is an area of unpredictable seismic activity, and therefore, is subject to potentially destructive earthquakes. Two major faults traverse through the City, the Whittier fault and the Elysian Park thrust fault. The Whittier fault cuts across the hills and through the eastern half of the City in a northwesterly direction. Several traces of the Whittier fault are still active. The Elysian Park thrust fault is buried approximately six to ten miles below the ground surface of the City. The San Andreas fault lies 33 miles from the City. California is, from time to time, subject to spells of dry weather. With the State receiving sufficient rain and snowfall during the winter season after multiple years of below-average 47

56 precipitation, Governor Brown finally rescinded the declaration of statewide drought in a declaration which was initially made in 2008 by then-governor Schwarzenegger. Drought conditions in Southern California during the dry periods, combined with higher than average temperatures and Santa Ana winds, have created conditions that are from time to time conducive to wildfires. For example, between October 20 and October 22, 2007, close to 20 separate wildfires started in seven counties in Southern California (Santa Barbara County, Ventura County, Los Angeles County, San Bernardino County, Orange County, Riverside County and San Diego County). Similarly, in November of 2008 wildfires burned along the freeway in the City. The City was not affected by the October 2007 or November 2008 fires. The northern edge of the City abutting the foothills is identified as an urban-open space interface area, which is subject to risk of wild fires. In these areas, additional conditions are imposed on developments to mitigate potential fire hazard. These conditions include: fuel modification plan to a depth of 170 feet surrounding the perimeter of developments, automatic fire sprinklers in all buildings, a minimum road width of 40 feet, hydrant spacing throughout the development, hydrant marker plan to ease visibility, restriction of cul-de-sac lengths, ignition resistant construction, and the proper selection of plant pallet. 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 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 at the 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. Bankruptcy Risks; Enforceability of Remedies The enforceability of the rights and remedies of the owners of the Bonds and the obligations of 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. Secondary Market There can be no guarantee that there will be a secondary market for the Bonds, or, if a secondary market exists, that such Bonds can be sold for any particular price. 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. 48

57 Loss of Tax Exemption with Respect to Series A Bonds Compliance by Agency. In order to maintain the exclusion of interest on the Series A Bonds from gross income for federal income tax purposes, the Agency has covenanted to comply with the applicable requirements of Section 148 and certain other sections of the Internal Revenue Code of 1986, as amended, relative to arbitrage and avoidance of characterization as hedge bonds or private activity bonds, among other things. Interest on the Series A Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date of issuance of the Series A Bonds as a result of acts or omissions of the Agency in violation of these covenants. See CONCLUDING INFORMATION Tax Matters. Future Legislation or Court Decisions. Legislation affecting the tax exemption of interest on the Series A Bonds may be considered by the United States Congress and the State legislature. Federal and state court proceedings and the outcome of such proceedings could also affect the tax exemption of interest on the Series A Bonds. No assurance can be given that legislation enacted or proposed, or actions by a court, after the date of issuance of the Series A Bonds will not have an adverse effect on the tax exemption of interest on the Series A Bonds or the market value of the Series A Bonds. Article XIIIA of the California Constitution LIMITATIONS ON TAX REVENUES 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 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 two percent 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 one percent 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 XIIIA was adopted in October 1986 by initiative which exempts from the one percent limitation any taxes levied to pay bonded indebtedness approved by two-thirds (55 percent in certain instances) of the votes cast by voters for the acquisition or improvement of real property. On September 22, 1978, the California Supreme Court upheld Proposition 13 over challenges on several state and federal constitutional grounds (Amador Valley Joint Union School District v. State Board of Equalization). The Court reserved certain constitutional issues and the validity of legislation implementing the amendment for future determination in proper cases. In subsequent elections, the voters of the State approved various measures which further amended Article XIIIA. One such amendment generally provides that the purchase or transfer of (i) real property between spouses or (ii) the principal residence and the first $1,000,000 of the full cash value of other real property between parents and children, do not constitute a purchase or change of ownership triggering reassessment under Article XIIIA. This amendment has reduced local property tax revenues. Other amendments permitted the Legislature to authorize the transfer of a property s assessed value to a replacement property under certain conditions, such as for residences of persons over 55 years old, for residences of severely disabled homeowners and for contaminated property. Other amendments have 49

58 excluded certain improvements from the definition of new construction, such as seismic retrofitting improvements or improvements utilizing earthquake hazard mitigation technologies. Challenges to Article XIIIA. California trial and appellate courts have upheld the constitutionality of Article XIIIA s assessment rules in three significant cases. The United States Supreme Court in an appeal to one of these cases upheld the constitutionality of Article XIIIA s tax assessment system. 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 on the Agency s receipt of Tax Revenues should a future decision hold unconstitutional the method of assessing property. Implementing Legislation. Legislation enacted by the California Legislature to implement Article XIIIA provides that all taxable property is shown at full assessed value as described above. In conformity with this procedure, all taxable property value included in this Official Statement (except as noted) is shown at 100 percent of assessed value and all general tax rates reflect the $1 per $100 of taxable value. Tax rates for voter approved bonded indebtedness and pension liability are also applied to 100 percent of assessed value. Future assessed valuation growth allowed under Article XIIIA (new construction, change of ownership, two percent annual value growth) is allocated on the basis of situs among the jurisdictions that serve the tax rate area within which the growth occurs, except for certain utility and railroad property assessed by the State Board of Equalization, which is allocated by a different method than the one discussed in this Official Statement. Property Tax Collection Procedure In California, property which is subject to ad valorem taxes is classified as secured or unsecured. The secured classification includes property on which any property tax levied by a county becomes a lien on that property sufficient, in the opinion of the county assessor, to secure payment of the taxes. A tax levied on unsecured property does not become a lien against the unsecured property, but may become a lien on certain other property owned by the taxpayer. Every tax which becomes a lien on secured property has priority over all other liens on the secured property, regardless of the time of creation of the other liens. Secured and unsecured property are entered on separate parts of the assessment roll maintained by the county assessor. The method of collecting delinquent taxes is substantially different for the two classifications of property. The taxing authority has four ways of collecting unsecured personal property taxes in the case of delinquency: (i) initiating a civil action against the taxpayer, (ii) 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, (iii) filing a certificate of delinquency for record in the county recorder s office to obtain a lien on certain property of the taxpayer, and (iv) seizing and selling 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 the property securing the taxes for the amount of taxes which are delinquent. A ten percent penalty is added to delinquent taxes which have been levied with respect to property on the secured roll. In addition, on or about June 30 of the fiscal year, property on the secured roll on which taxes are delinquent is declared to be in default by operation of law and declaration of the tax collector. Such property may thereafter be redeemed by payment of the delinquent taxes and a delinquency penalty, plus a redemption penalty of 1.5 percent per month to the time of redemption. If taxes are unpaid for a period of five years or more, the property is subject to sale by the county tax collector. 50

59 The valuation of property is determined as of the January 1 lien date each year and equal installments of taxes levied upon secured property are due on the following May 1 and February 1 and become delinquent on the following December 10 and April 10 respectively. Unsecured property taxes become delinquent if not paid by August 31. A bill enacted in 1983, Senate Bill 813 (Statutes of 1983, Chapter 498), provides for the supplemental assessment and taxation of property upon the occurrence of a change in ownership or completion of new construction. Previously, statutes enabled the assessment of such changes only as of the next January 1 tax lien date following the change and thus delayed the realization of increased property taxes from the new assessments for up to 16 months. As enacted, Chapter 498 provides increased revenue to redevelopment agencies to the extent that supplemental assessments of new construction or changes of ownership occur within the boundaries of redevelopment projects subsequent to the January 1 lien date. To the extent such supplemental assessments occur within the Project Area, Agency revenues may increase. In 1990, the State Legislature enacted Senate Bill 2557 (Statutes of 1990, Chapter 466) ( SB 2557 ) which allows counties to charge for the cost of assessing, collecting and allocating property tax revenues to local government jurisdictions on a prorated basis. California courts have upheld the inclusion of redevelopment agencies as a local government agency which must share the cost of property tax administration. The 1992 enactment of Senate Bill 1559 (Chapter 697) and the decision of the California Court of Appeal in Arcadia Redevelopment Agency v. Ikemoto have clarified that redevelopment agencies, such as the Agency, are to share in the cost of property tax administration charged by most California counties, including the County. During fiscal year , the County withheld approximately $301,968 from the Agency for such administrative costs with respect to the Project Area. Unitary Property Assembly Bill 454 (Statutes of 1987, Chapter 921) ( AB 454 ) provides the method of reporting and allocating property tax revenues generated from most State-assessed unitary properties (consisting mostly of the properties of public utilities, and inter-county pipelines, flumes, canals, ditches an aqueducts). Under AB 454, the State reports to each county auditor-controller only the county-wide unitary taxable value of each utility, without an indication of the distribution of the value among tax rate areas. AB 454 provides two formulas for auditor-controllers to use in order to determine the allocation of unitary property taxes generated by the county-wide unitary value, which are: (i) for revenue generated from the one percent tax rate, each jurisdiction is to receive up to 102 percent of its prior year unitary property tax increment revenue; however, if county-wide revenues generated from unitary properties are greater than 102 percent of prior year revenues, each jurisdiction receives a percentage share of the excess unitary revenues equal to the percentage of each jurisdiction s share of secured property taxes; (ii) for revenue generated from the application of the debt service tax rate to county-wide unitary taxable value, each jurisdiction is to receive a percentage share of revenue based on the jurisdiction s annual debt service requirements and the percentage of property taxes received by each jurisdiction from unitary property taxes. The provisions of AB 454 apply to all State-assessed property, except railroads and non-unitary properties the valuation of which will continue to be allocated to individual tax rate areas. AB 454 allows, generally, valuation growth or decline of State-assessed unitary property to be shared by all jurisdictions within a county. Effective January 1, 2007, ABX 2670 changed the method of assessing unitary railroad property. Before ABX 2670, the assessed value of unitary railroad property was allocated to individual tax rate 51

60 areas within a county where the property is located. ABX 2670 has converted this method of assessment for railroad property to the countywide system. The new method involves establishing a single countywide tax rate area within each county to which the assessed value of specified unitary property of a regulated railroad company would be allocated. Revenues derived from the tax on this value are allocated among local entities in the county pursuant to a specified formula. ABX 2670 also requires, with respect to a qualified facility as defined in Revenue and Taxation Code Section , that 80 percent of the value of the facility and the revenues derived from taxing this value be allocated on a countywide basis, while the remaining 20 percent of this value and resulting revenues be allocated exclusively to the local tax rate areas in the county in which the property is located. The County Auditor-Controller remitted $241,000 in unitary revenues to the Agency for the Project Area during the fiscal year. Article XIIIB of the California Constitution On November 6, 1979, California voters approved Proposition 4, which added Article XIIIB to the California Constitution which has been subsequently amended several times. 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. The base year for establishing such appropriation limit is fiscal year and the limit is to be adjusted annually to reflect changes in population, cost of living and certain increases in the cost of services provided by these public agencies. Appropriations subject to Article XIIIB include generally the proceeds of taxes levied by the State or other entity of local government, exclusive of certain State subventions, refunds of taxes, benefit payments from retirement, unemployment insurance and disability insurance funds. Effective September 30, 1980, the California Legislature added Section to the Health and Safety Code which provides 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 the agency of proceeds of taxes levied by or on behalf of the agency within the meaning of Article XIIIB or any statutory provision enacted in implementation thereof. The constitutionality of Section has been upheld by the Second and Fourth District Courts of Appeal in two decisions: Bell Community Redevelopment Agency v. Woosely and Brown v. Community Redevelopment Agency of the City of Santa Ana, which cases were not accepted for review by the California Supreme Court. Proposition 87 Under prior State law, if a taxing entity increased its tax rate to obtain revenues to repay voter approved general obligation bonds, any redevelopment project area which included property affected by the tax rate increase would realize a proportionate increase in tax increment. Proposition 87, approved by the voters of the State on November 8, 1988, requires that all revenues produced by a tax rate increase (approved by the voters on or after January 1, 1989) go directly to the taxing entity which increases the tax rate to repay the general obligation bonded indebtedness. As a result, with respect to tax rate increases approved on or after January 1, 1989, to repay voter approved general obligation debt, redevelopment agencies no longer receive an increase in tax increment. 52

61 AB 1290 and SB 211 In 1993, the California Legislature enacted AB 1290, which mandated a limitation on the period of time for incurring and repaying loans, advances and indebtedness which are payable from tax increment revenues. Senate Bill 211 ( SB 211 ), which was adopted by the California Legislature in 2001 and took effect as of January 1, 2002, allows redevelopment agencies, by ordinance, to eliminate the time limit on establishing indebtedness for any redevelopment plan originally adopted before January 1, 1994 (meaning a redevelopment agency could incur debt up to the end of the effectiveness of its redevelopment plan), but would in turn trigger statutory pass-throughs to all taxing entities with whom the redevelopment agency does not have a pass-through agreement at the time the ordinance is adopted. If a redevelopment agency were to eliminate a project area s existing time limit to incur indebtedness as permitted by SB 211, the statutory pass-throughs would apply starting in the year after what is now the final year to incur indebtedness. SB 211 also authorizes the amendment of a redevelopment plan adopted before 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. Pursuant to SB 211, the City Council adopted Ordinance No on June 3, 2003 under SB 211 to eliminate the time limits to incur debt under the Redevelopment Plan for each Component Area. See SECURITY FOR THE BONDS Allocation of Taxes AB 1290 Payments. SB 1045 and SB 1096 Senate Bill 1045 ( SB 1045 ), which was adopted by the California Legislature in 2003, mandated a shift of $135 million in tax increment revenues from California redevelopment agencies to ERAF in fiscal year Senate Bill 1096 ( SB 1096 ), which was adopted by the California Legislature in 2004, further mandated a shift of approximately $1.3 billion over a period of two years (fiscal years and ) in property taxes from local agencies to ERAF. See RISK FACTORS State Budget; ERAF. SB 1045 and SB 1096 allowed redevelopment agencies to amend redevelopment plans to extend time limits on the effectiveness of the redevelopment plans, the date by which any debt incurred under the redevelopment plan has to be repaid, and the last date on which tax increment revenues could be received by the redevelopment agency under the redevelopment plan, if the ERAF payments were made. A redevelopment agency may not adopt an SB 1096 amendment if the time limit for the effectiveness of the redevelopment plan is more than 20 years from the last day of the fiscal year in which the related ERAF payment is made. Pursuant to SB 1045 or SB 1096, the City Council to the City adopted Ordinance No and Ordinance No on March 1, 2011, to extend the duration of the effectiveness of the Redevelopment Plan and the time limit to receive tax increment revenues and repay indebtedness with respect to each Component Area by three years. 53

62 Future Initiatives Article XIIIA, Article XIIIB and certain other propositions affecting property tax levies 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. Absence of Litigation CONCLUDING INFORMATION There is no litigation pending and notice of which has been received by the Agency 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 Indentures, or any proceedings of the Agency with respect thereto. To the knowledge of the Agency, there are no lawsuits or claims pending against the Agency which will materially affect the Agency s finances so as to impair the ability to pay principal of and interest on the Bonds when due. Certain Legal Matters All of the legal proceedings in connection with the authorization and issuance of the Bonds are subject to the approval of Jones Hall, A Professional Corporation, Bond Counsel. Bond Counsel s final approving opinions with respect to the Bonds will be substantially in the respective forms set forth in Appendix E of this Official Statement. Certain matters with respect to this Official Statement will be considered on behalf of the Agency by Richards, Watson & Gershon, A Professional Corporation ( Disclosure Counsel ). Certain legal matters will also be passed upon for the Agency and the City by Richards, Watson & Gershon, A Professional Corporation, as General Counsel to the Agency. Certain legal matters will also be passed upon for Stone & Youngberg LLC, as Underwriter, by Fulbright & Jaworski, LLP, as Underwriter s Counsel. Payment of the fees of Bond Counsel, Disclosure Counsel and Underwriter s Counsel is contingent upon issuance of the Bonds. Tax Matters General. In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to the qualifications set forth below, under existing law, the interest on the Series A Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, provided, however, that, for the purpose of computing the alternative minimum tax imposed on corporations (as defined for federal income tax purposes), such interest is taken into account in determining certain income and earnings. The opinions set forth in this paragraph are subject to the condition that the Agency comply with all requirements of the Internal Revenue Code of 1986 (the Tax Code ) that must be satisfied subsequent to the issuance of the Series A Bonds in order that such interest be, or continue to be, excluded from gross income for federal income tax purposes. The Agency has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of such interest in gross income for federal income tax purposes to be retroactive to the date of issuance of the Series A Bonds. Interest on the Series B Bonds is not excluded from gross income for federal income tax purposes. 54

63 California Tax Status. In the opinion of Bond Counsel, interest on the Series A Bonds and the Series B Bonds is exempt from California personal income taxes. Tax Treatment of Original Issue Discount and Premium. If the initial offering price to the public (excluding bond houses and brokers) at which a Bond is sold is less than the amount payable at maturity thereof, then such difference constitutes original issue discount for purposes of federal income taxes and State of California personal income taxes. If the initial offering price to the public (excluding bond houses and brokers) at which each Bond is sold is greater than the amount payable at maturity thereof, then such difference constitutes original issue premium for purposes of federal income taxes and State of California personal income taxes. De minimis original issue discount is disregarded. Under the Tax Code, original issue discount is treated as interest excluded from federal gross income and exempt from State of California personal income taxes to the extent properly allocable to each owner thereof subject to the limitations described in the first paragraph of this section. The original issue discount accrues over the term to maturity of the Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straightline interpolations between compounding dates). The amount of original issue discount accruing during each period is added to the adjusted basis of such Bond to determine taxable gain upon disposition (including sale, redemption, or payment on maturity) of such Bond. The Tax Code contains certain provisions relating to the accrual of original issue discount in the case of purchasers of the Bonds who purchase the Bonds after the initial offering of a substantial amount of such maturity. Owners of such Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Bonds with original issue discount, including the treatment of purchasers who do not purchase in the original offering, the allowance of a deduction for any loss on a sale or other disposition, and the treatment of accrued original issue discount on such Bonds under federal individual and corporate alternative minimum taxes. Under the Tax Code, original issue premium is amortized on an annual basis over the term of the Bond (said term being the shorter of the Bond s maturity date or its call date). The amount of original issue premium amortized each year reduces the adjusted basis of the owner of the Bond for purposes of determining taxable gain or loss upon disposition. The amount of original issue premium on a Bond is amortized each year over the term to maturity of the Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). Amortized Bond premium is not deductible for federal income tax purposes. Owners of Premium Bonds, including purchasers who do not purchase in the original offering, should consult their own tax advisors with respect to State of California personal income tax and federal income tax consequences of owning such Bonds. Form of Bond Counsel Opinions. At the time of issuance of the Bonds, Bond Counsel expects to deliver a separate opinion for each of the Series A Bonds and the Series B Bonds in substantially the respective forms set forth in Appendix E. Other Tax Considerations. Owners of the Bonds should also be aware that the ownership or disposition of, or the accrual or receipt of interest on, the Bonds may have federal or state tax consequences other than as described above. Bond Counsel expresses no opinion regarding any federal or state tax consequences arising with respect to the Bonds other than as expressly described above. To ensure compliance with the requirements imposed by the Internal Revenue Service, purchasers and Owners of the Bonds should be aware that any federal income tax advice contained in this Official Statement (including the Appendices hereto) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Tax Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein. 55

64 Continuing Disclosure The Agency has undertaken for the benefit of holders and beneficial owners of the Bonds to provide certain financial information relating to the Agency and other data relating to the Project Area by not later than eight months after the close of each fiscal year, commencing with the report for the fiscal year (the Annual Report ), and to provide notices of the occurrence of certain enumerated events. The Annual Report and notices will be filed by the Agency or The Bank of New York Mellon Trust Company, N.A., as the Dissemination Agent on behalf of the Agency, with the Municipal Securities Rulemaking Board ( MSRB ). The specific nature of the information to be contained in the Annual Report or the notices of events is set forth in APPENDIX F FORM OF CONTINUING DISCLOSURE CERTIFICATE. This undertaking has been made in order to assist the Underwriter in complying with Rule 15c2-12(b)(5) (the Rule ) promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. The Agency has not failed to comply with its prior continuing disclosure undertakings under the Rule in any material respect in the last five years. A failure by the Agency to comply with the provisions of the Continuing Disclosure Certificate is not an event of default under the Indentures (although the holders and beneficial owners of the Bonds do have remedies at law and in equity). However, a failure to comply with the provisions of the Continuing Disclosure Certificate must be reported in accordance with the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the Bonds. Therefore, a failure by the Agency to comply with the provisions of the Continuing Disclosure Certificate may adversely affect the marketability of the Bonds on the secondary market. Rating Standard & Poor s Ratings Services, a division of The McGraw-Hill Companies, Inc. ( S&P ), has assigned a rating of AA- to the Bonds based on its assessment of the Agency s ability to make payments with respect to the Bonds. This rating reflects only the views of such organization. The explanation of the significance of the rating may be obtained from S&P. There is no assurance that the rating will continue for any given period of time or that it will not be revised downward or withdrawn entirely by such rating agency, if, in the judgment of the rating agency, circumstances so warrant. Any such downward revision or withdrawal of the rating may have an adverse effect on the market price of the Bonds. Underwriting Upon their issuance, the Bonds will be purchased by the Brea Public Financing Authority, which will in turn sell the Bonds to Stone & Youngberg LLC (the Underwriter ) for reoffering. The Underwriter has agreed to purchase the Series A Bonds at a purchase price of $$18,471, (being equal to the principal amount of the Series A Bonds, less an original issue discount of $174, and less an underwriter s discount of $192,807. The Underwriter has agreed to purchase the Series B Bonds at a purchase price of $10,209, (being equal to the principal amount of the Series B Bonds, less an underwriter s discount of $85,329.16). The purchase contracts pursuant to which the Underwriter is purchasing the Bonds provides that the Underwriter will purchase all of the Bonds if any are purchased. The obligation of the Underwriter to make such purchase is subject to certain terms and conditions set forth in such purchase contracts. 56

65 The Underwriter may offer and sell the Bonds to certain dealers and others at prices different from the prices stated on the cover page of this Official Statement. The offering prices may be changed from time to time by the Underwriter. The Underwriter has entered into an agreement (the Distribution Agreement ) with First Republic Securities Company LLC, Member FINRA/SIPC, a subsidiary of First Republic Bank, for retail distribution of certain municipal securities offerings, at the original issue prices. Pursuant to the Distribution Agreement, if applicable to the Bonds, the Underwriter will share a portion of its underwriting compensation with respect to the Bonds, with First Republic Securities Company LLC. Miscellaneous All summaries of the Indentures, the Redevelopment Plan, the Redevelopment Law and other applicable legislation, agreements and other documents are made subject to the provisions of such documents respectively and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the Agency for further information in connection therewith. This Official Statement does not constitute a contract with the purchasers of the Bonds. Any statements made in this Official Statement involving matters of opinion or 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 Agency. BREA REDEVELOPMENT AGENCY By /s/ Tim O Donnell Executive Director 57

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67 APPENDIX A CITY OF BREA GENERAL INFORMATION The following information concerning the City of Brea (the City ) and surrounding areas is included for informational purposes only. The Bonds are special obligations of the Agency payable from Non-Housing Tax Revenues or Housing Tax Revenues pursuant to the respective Indenture. The Bonds are not a debt of the City, the State of California or any of its political subdivisions (other than the Agency), and none of the City, the State nor any of its political subdivisions (other than the Agency) is liable therefor. Geography The City encompasses 11.2 square miles and is located at the northern end of Orange County (the County ), just south of the Los Angeles County line. It is approximately 25 miles southeast of downtown Los Angeles, 15 miles north of Santa Ana, the County Seat, and 22 miles inland of the Pacific Ocean. Neighboring communities include Fullerton, Placentia, La Habra and Yorba Linda. Municipal Government The City, a general law city, was incorporated in 1917, the eighth city in the County. The City has a Council-Manager form of municipal government. The City Council appoints the City Manager who is responsible for the day-to-day administration of City business and the coordination of all departments of the City. The City Council is composed of five members elected every two years at large to four-year alternating terms. The Mayor is selected by the City Council from among its members. As of May 1, 2011, the City has approximately 337 full-time employees. Population The following table shows the estimated population growth for the City, the County and the State of California for the years shown. Calendar Year City of Brea City of Brea City, County and State Population Growth (1) Calendar Years 1980, 1990, 2000, 2010 % Change from Prior Period County of Orange % Change from Prior Period State of California % Change from Prior Period , % (2) 1,932, % (2) 23,782, % (2) , ,398, ,558, , ,831, ,721, , ,008, ,223, , ,029, ,510, (1) As of January 1 of each year. (2) Percent change since Source: State of California Department of Finance. A-1

68 City s Taxable Valuation A summary of the City s taxable valuation for fiscal years through is set forth below. These figures are presented for historical comparison, with reference only to the time frame of the years shown. City of Brea Assessed Values of All Taxable Property Fiscal Years through Fiscal Year Secured Value Public Utility Unsecured Value Total Assessed Value Percent Change $5,271,472,553 $2,703,295 $513,610,767 $5,787,786, % ,944,721,908 2,616, ,307,118 6,494,645, ,246,693,514 2,212, ,712,522 6,805,618, ,517,950,648 1,085, ,356,651 7,041,392, ,472,516,828 1,085, ,479,661 6,979,081,662 (0.88) ,510,286, , ,281,949 7,025,192, Source: City of Brea, based on information provided by the Orange County Auditor-Controller Office. Construction Activity The number of construction permits issued in the City and the related values during fiscal years through are shown below. City of Brea Construction Permits Fiscal Years through Fiscal Year Permits Issued Percent Change Estimated Valuation Percent Change ,671 (6.9)% $70,203, % ,327 (20.6) 57,153,181 (18.6) ,063 (19.9) 64,180, (40.5) 45,180,084 (29.6) (61.0) 45,321, ,712,280 (47.7) Source: City of Brea Development Services Department. The fluctuation in building permits issued reflects large scale tract development which is cyclical and given the City s size (approximately 11 square miles) occurs intermittently. See the discussions in the forepart of this Official Statement under the caption TAX REVENUES AND DEBT SERVICE COVERAGE Historical Assessed Valuation and Tax Increment Revenues. Employment According to the State of California Employment Development Department, the March 2011 preliminary, estimated unemployment rate for the City was 6.2 percent, and that for the County was 9.1 percent. The following table shows certain employment statistics for the City and the County for calendar years 2000 through A-2

69 City of Brea City and County Employment Statistics Calendar Years 2000 through 2010 (1) City County Year Labor Force Employed Unemployment Rate Unemployment Rate ,000 19, % 3.5% ,400 19, ,600 19, ,000 20, ,200 20, ,500 21, ,800 21, ,900 21, ,000 21, ,100 19, ,900 19, (1) Not seasonally adjusted. Source: State of California, Employment Development Department. The following table lists the major employers within the City and their estimated number of employees. City of Brea Top Ten Employers as of the end of Fiscal Year Company Product or Service No. of Employees Bank of America financial services 3,000 Mercury Insurance Group insurance services 1,800 Beckmans Coulter, Inc. manufacturing - biomedical instruments 1,000 Albertsons Distribution Warehouse retail - grocer 900 Kirkhill - TA Company manufacturing - aircraft parts 650 Brea Olinda Unified School District public agency 500 Harte-Hanks Communications marketing 500 Veterinary Pet Insurance Co. insurance services 463 ITT Hartford Insurance Group insurance services 450 Avery Dennison Administrative manufacturing - office products 392 Source: City of Brea Comprehensive Annual Financial Report for fiscal year ended June 30, The following table summarizes the civilian labor force in the County (for the calendar years 2005 through These figures are county-wide statistics and may not necessarily accurately reflect employment trends in the City. A-3

70 Orange County Annual Average Employment by Industry (1) Calendar Years 2005 through 2009 Industry Private, non-farm Goods producing: Mining and logging Construction 99, , ,100 91,200 73,600 Manufacturing durable goods 128, , , , ,900 Manufacturing non-durable goods 54,600 54,700 54,200 51,500 45,600 Service Providing: Wholesale trade 83,000 83,700 86,900 86,700 80,100 Retail trade 158, , , , ,900 Transport., warehousing and utilities 28,700 28,200 28,900 29,300 27,900 Information 32,800 31,900 31,200 30,100 27,400 Financial activities 138, , , , ,600 Professional and business services 264, , , , ,000 Educational and health services 133, , , , ,100 Leisure and hospitality 165, , , , ,700 Other services 48,400 47,700 47,400 46,500 42,800 Subtotal 1,335,600 1,362,200 1,356,200 1,320,900 1,214,200 Government 155, , , , ,300 Farm 5,600 5,300 5,000 4,600 3,900 Total 1,496,500 1,524,300 1,520,500 1,486,200 1,375,400 (1) Employment reported by place of work; does not include persons involved in labor-management disputes. Figures are rounded to the nearest hundred. Columns may not add due to rounding. Based on March 2009 benchmark. Not seasonally adjusted. Source: State of California, Employment Development Department. Per Capita Personal Income The following table shows the annual per capita personal income for the County, the State and the United States from 2004 through Orange County, California and the United States Per Capita Personal Income Calendar Years 2004 through 2008 Year County State U.S $44,085 $36,904 $33, ,141 38,767 35, ,997 41,567 37, ,009 43,402 39, ,894 43,852 40,166 (1) Per capita personal income is the total personal income divided by the total midyear population estimates of the U.S. Bureau of the Census. Estimates reflect county population estimates available as of April Source: U.S. Department of Commerce, Bureau of Economic Analysis Commercial Activity The following table summarizes the annual volume of taxable transactions within the City for calendar years 2004 through A-4

71 City of Brea Taxable Transactions Calendar Years 2004 through 2008 (in Thousands of Dollars) Retail Outlets Apparel store $166,169 $174,823 $181,020 $176,306 $213,230 General merchandise stores 332, , , , ,411 Food stores 28,905 32,920 33,630 33,497 27,756 Eating & drinking places 151, , , , ,689 Home furn. & appliances 75,322 80,577 70,601 69,978 53,183 Auto dealers & supplies 6,957 8,168 11,186 22,704 23,237 Service stations 46,430 50,623 62,490 64,646 86,783 Other retail stores 264, , , , ,027 Subtotal 1,073,037 1,129,482 1,191,378 1,235,983 1,139,316 All Other Outlets 394, , , , ,264 All Outlets $1,467,636 $1,582,264 $1,657,090 $1,666,298 $1,560,580 Source: Compiled from data published by State of California Board of Equalization. Transportation The City is well served by area transportation routes and offers access to several airports. The Orange Freeway (State Highway 57), a major north-south corridor, crosses centrally through the City. The City is also within minutes of the Pomona Freeway (State Route 60), the Riverside Freeway (State Route 91) and the Santa Ana Freeway (Interstate 5). Air cargo and passenger flight services are provided at the John Wayne Airport (25 miles southeast), Ontario International Airport (22 miles northeast), Los Angeles International Airport (48 miles west), and the Long Beach Municipal Airport (17 miles southwest). Commercial and passenger rail services are provided by Union Pacific, South Pacific, Atchison, Topeka and Santa Fe Railway Co., and Amtrak lines. Trucking services are provided through numerous common and contract earners. Public Utilities Electrical service is provided by Southern California Edison. Southern California Gas provides natural gas. Water services are provided by the City s Water Department. The City s drinking water is a blend of surface water imported by the Metropolitan Water District of Southern California and ground water imported from California Domestic Water Company in Whittier. Metropolitan s imported water sources are the Colorado River and the State Water Project, which draws water from the San Francisco- San Joaquin Bay Delta. California Domestic water originates from the San Gabriel Basin. Sewer services are provided by the City s Maintenance Services Department, which maintains over 108 miles of sewer main lines. The sewer distribution system flows into Orange County Sanitation District trunk system until it is treated at their secondary treatment facility in Fountain Valley. Trash collection services are provided by the City through Brea Disposal, a private contractor. A-5

72 Education The City s students are served by the Brea Olinda Unified School District presided over by a separately elected board. The system includes six elementary schools, one junior high school, one high school and one alternative high school. Brea-Olinda High School has a professional performing arts center and complete athletic facilities. The City also has several private pre-schools, two Christian schools and a Roman Catholic school serving grades K-8. Colleges, universities and a number of technical and vocational schools are located in and around Brea. California State University, Fullerton College, Pacific Christian College, Hope University, an optometry school and a law school are located in nearby Fullerton, and the University of California at Irvine, Chapman College, and Cal Poly Pomona are within easy freeway access. Community Facilities St. Jude Medical Center in Fullerton and Placentia-Linda Hospital in Placentia are full-service hospitals that are located within five miles of the City. The City s Parks and Recreation Department is responsible for designing, operating and maintaining public facilities that include the City Hall Recreation Center, a community center, gymnasium, 13 parks and playgrounds, an equestrian center and ball fields, and provides a spectrum of recreation, sport, educational and equestrian programs for children, teens, adults and families. Brea maintains 15 parks and recreation facilities within its boundaries. The Brea Community Services Department coordinates park activities and the City owns Brea Creek Golf Course, operated by the Chapman Investment Company in partnership with Billy Casper Golf. The City has senior and family resource center operated by the City with participation by charitable, non-profit corporations. Public Safety Law enforcement services are provided by the Brea Police Department which provides full services to both the City and the neighboring City of Yorba Linda. Fire services are provided by the Brea Fire Services Department, which has three fire stations and one annex located throughout the City. Street and highway maintenance is provided for under the supervision of the City s Maintenance Services Department. Building inspection and code enforcement services are provided by the City. A-6

73 APPENDIX B FISCAL CONSULTANT S REPORT

74 (THIS PAGE INTENTIONALLY LEFT BLANK)

75 FISCAL CONSULTANT REPORT BREA PROJECT AREA AB Prepared for REDEVELOPMENT AGENCY OF THE CITY OF BREA June 6, 2011

76 FISCAL CONSULTANT REPORT REDEVELOPMENT PROJECT AREA AB Prepared for the: CITY OF BREA REDEVELOPMENT AGENCY Prepared by: Keyser Marston Associates, Inc. 500 South Grand Avenue, Suite 1480 Los Angeles, California June 6, 2011

77 1. INTRODUCTION Keyser Marston Associates, Inc. (KMA) has been retained as Fiscal Consultant to the Redevelopment Agency of the City of Brea (the Agency) to prepare a projection of tax increment revenues for the Redevelopment Project Area AB (the Project Area). The Project Area consists of four component subareas: Old A, Old B, AB Annex and AB Supplement. The Agency is proposing to issue tax allocation bonds to be secured by tax increment revenues from the Project Area. The California Community Redevelopment Law (CRL) provides for the creation of a redevelopment agency for the purpose of eliminating blight. To achieve this purpose, the CRL, along with Article 16, Section 16 of the California Constitution, authorizes the Agency to receive that portion of property tax revenue generated from the increase of the current year project taxable values over the Base Year taxable values that existed at the time of the Project Area's adoption. This portion of property tax revenue is referred to as tax increment revenue. The CRL provides that the tax increment revenue may be pledged by the Agency for the repayment of Agency indebtedness. This Fiscal Consultant Report will examine the Project Area valuations that provide the basis from which a multi-year tax increment revenue projection is created. The projected taxable values and resulting tax increment revenues for the Project Area are based on assumptions determined by a review of the taxable value history of the Project Area; Agency identified developments recently completed, presently under construction or proposed for the Project Area; and the property tax assessment and property tax apportionment procedures of Orange County. 2. REVIEW OF THE PROJECT AREA 2.1 Redevelopment Plan Limitations The Project Area, as amended, consists of 2,177 acres and was established by the City Council of Brea which adopted the following ordinances: Old A - established by Ordinance No. 502 adopted July 24, 1972; Old B - established by Ordinance No. 503 adopted July 24, 1972; AB Annex - established by Ordinance No. 714 adopted May 19, 1981; Ordinance No. 715, adopted May 19, 1981, merged Old A, Old B and the AB Annex); AB Supplement - established by Ordinance No. 752 adopted December 20, The CRL requires the Agency to impose specific time limitations on the incurrence of debt, the redevelopment plan effectiveness and the collection of tax increment revenue to repay debt. Under SB 1045 and SB 1096, the Agency may extend the time limit on the effectiveness of the Plan and the time limit for the repayment of indebtedness by one year for each year a payment is required to the Educational Revenue Augmentation Fund (ERAF). The attached projections reflect the maximum time extensions allowed by current legislation. For the qualifying Brea Redevelopment Agency Area AB Keyser Marston Associates, Inc. Fiscal Consultant Report Page Brea:GSH:gbd /6/6/11

78 component project areas, the Agency adopted the SB 1045 summary ordinance (FY ERAF) and the SB 1096 summary ordinance (FY and ERAF) allowing for the time extensions. Adoption Date Plan Effectiveness Limit Debt Repayment Limit Old A July 24, 1972 July 4, 2015 July 24, 2025 Old B July 24, 1972 July 4, 2015 July 24, 2025 AB Annex May 19, 1981 May 18, 2024 May 18, 2034 AB Supplement Dec 20, 1983 Dec 20, 2026 Dec 20, 2036 Redevelopment project areas adopted prior to January 1, 1994, were required to establish limits on the amount of bonded indebtedness that may be outstanding at any time and limits on the amount of tax increment revenue that could be received over the life of the component project area. The Redevelopment Plan established an annual tax increment revenue limit of $14 million imposed upon the AB Merger (Old A, Old B and AB Annex) and an annual tax increment revenue limit of $5 million imposed upon the AB Supplement, for a combined Project Area wide annual cap of $19 million. The Project Area has already reached the respective annual tax increment revenue thresholds. 2.2 Review of Agency Obligations a. County Administrative Fees Chapter 466, Statutes of 1990, (referred to as SB 2557) permits the County to withhold a portion of annual tax revenues for the recovery of County charges related to property tax administration services to cities in an amount equal to their property tax administration costs proportionately attributable to cities. SB 2557, and subsequent legislation under SB 1559 (Statutes of 1992), permitted counties to charge all jurisdictions, including redevelopment agencies, on a year-to-year basis. Based upon the actual fee charge of $301,968 levied by the County Auditor-Controller in FY , the tax increment revenue projection assumes an annual administrative charge of approximately 1% of computed gross tax increment (prior to the annual cap) in subsequent fiscal years. b. Housing Set Aside The CRL requires redevelopment agencies to annually set aside 20% of all tax increment revenues into a Low and Moderate Income Housing Set Aside Fund. Under the CRL, the set aside requirement could be reduced or eliminated if the redevelopment agency finds that: (1) no need exists in the community to improve or increase the supply of low and moderate income housing; (2) that some stated percentage less than 20% of the tax increment is sufficient to meet the housing need; or (3) that other substantial efforts, including the obligation of funds from certain local, state or federal sources for low and moderate income housing, of equivalent impact are being provided for in the community. Brea Redevelopment Agency Area AB Keyser Marston Associates, Inc. Fiscal Consultant Report Page Brea:GSH:gbd /6/6/11

79 c. County Pass Through Agreement (AB Supplement) Under the terms of a tax sharing agreement between the Agency and the County of Orange, the County Flood Control District, the County Library Fund and the County Harbors, Beaches and Parks District (the County Entities), the Agency is responsible for allocating % of net tax increment revenues generated in the AB Supplement to the County taxing entities. Originally, the County tax sharing agreement provided for annual passthrough payments to the County Entities that totaled 18.26% of the Gross Tax Revenues from the AB Supplement. When the State Legislature mandated a shift of property tax revenues for FY to fund schools and required the Agency make a deposit into the County s Educational Revenue Augmentation Fund (the FY ERAF Shift), thereby effectively reducing the share of property taxes received by the Agency, the County adjusted the percentages pursuant to which the pass-through payments to the County Entities were calculated under the County tax sharing agreement. Since the FY ERAF Shift, the County has calculated the pass-through payments each fiscal year as follows: Percent Share County Taxing Entity to County Entities Orange County General Fund % Orange County Flood Control District % Orange County Library Fund % Orange County Harbors, Beaches & Park District % Total to County Entities: % The pass-through payment under the County Tax Sharing Agreement for FY totals to $508,273. Because AB Supplement has reached its annual tax increment revenue cap of $5 million, the revenue projections assume that the subsequent allocations to the County Entities will remain at $508,273 each fiscal year throughout the term of the projections. d. Statutory Pass Through For project areas adopted before January 1, 1994, a statutory pass through obligation is triggered when the Agency elects to increase a tax increment revenue cap limit, or that lengthens the period during which the redevelopment plan is effective, or that increases or eliminates the time limit on the establishing of loans, advances or indebtedness. Under SB 211, the last election noted above provided for a simple summary ordinance adoption by the Agency. The triggered statutory pass through obligations (set forth under Health and Safety Code Section ) commence the first year following the fiscal year in which the repealed debt incurrence time limit would have taken effect for the respective project areas. Taxing agencies that have existing pass through agreements with the Agency continue to Brea Redevelopment Agency Area AB Keyser Marston Associates, Inc. Fiscal Consultant Report Page Brea:GSH:gbd /6/6/11

80 receive their allocations set forth by the respective agreements. Taxing agencies, including the City, that do not have existing pass through agreements will be eligible to receive their allocation of the resulting triggered statutory pass through. In consideration of the fact that the Redevelopment Plan imposes an annual tax increment revenue cap, the County Auditor-Controller has computed the statutory pass through based upon the difference between the amount of annual tax increment revenue allocated to the Agency and the amount of tax increment revenue allocated in the respective Adjusted Base Years. Since the Agency s allocation of tax increment revenue is capped annually, the resulting statutory pass through requirement in any subsequent fiscal year is therefore projected to be as follows: AB Merger AB Supplement Tax Increment Allocated (Annual Cap) $14,000,000 $5,000,000 Adjusted Base Year Adjusted Base Year Revenue $13,537,055 $5,000,000 Variance Over Adjusted Base $462,945 $ -0- Statutory Pass Through (at 20%) $92,589 $ -0- e. Brea Mall Owner Participation Agreement (Old B) The Agency entered into an Owner Participation Agreement with Corporate Property Investors (Brea Mall OPA) in connection with the expansion and renovation of the Brea Mall, located in the Old B component area. At that time, Corporate Property Investors was the major owner of the Brea Mall. Under the agreement, beginning in FY through FY , the Agency is obligated to pay Corporate Property Investors (or its assignee or successor with respect to the Brea Mall OPA and the Brea Mall), an annual amount equal to the sum of (i) 80 percent of the Net Property Tax Revenues generated by the Site, plus (ii) $15,000. Net Property Tax Revenues generated by the Site refers to the tax increment revenue generated from the Brea Mall site above the FY base year tax increment revenue of $990,504, excluding valuation increases due to any change in ownership. Simon Property Group, Inc. has been the major owner and operator of the Brea Mall since 1988 and has succeeded Corporate Property Investors with respect to the Brea Mall OPA. Since FY (when component areas Old A, Old B and AB Annex first reached the combined annual tax increment cap of $14 million), the Agency has paid $1,107,287 as the Brea Mall OPA payment each fiscal year. The tax increment revenue projections assume that the Brea Mall OPA payment will remain $1,107,287 each fiscal year throughout the term of the projection. Brea Redevelopment Agency Area AB Keyser Marston Associates, Inc. Fiscal Consultant Report Page Brea:GSH:gbd /6/6/11

81 3. REVIEW OF PROJECT ASSESSED VALUES 3.1 Current Year Assessed Values The Project Area assessed values are prepared by the County Assessor and, until , have reflected the March 1st lien date. Commencing with the fiscal year, the property tax lien date has been changed to January 1. Each property assessment is assigned a unique Assessor Parcel Number (APN) that correlates to assessment maps prepared by the County. The corresponding assessed values for each parcel are then encoded to Tax Rate Areas (TRAs) which are geographic subareas with common distribution of taxes and which are contained within the Project Area boundaries. There are 20 TRAs in the Project Area. The County Auditor-Controller is responsible for the aggregation of the assessed values assigned by the Assessor for properties within the boundaries of the Project Area. This results in the reported total current year Project Area assessed value and becomes the basis for determining tax increment revenues due to the Agency. The reported values of the Project Area for the fiscal year are as follows: FY Value % of Total % of Total Secured Value $3,002,912, % State Non-Unitary Value 414, % Unsecured Value 319,830, % Total Current Year Value $3,323,157, % Less Base Year Value 320,183, % Incremental Value $3,002,973, % Secured Property includes property on which any property tax levied by the County becomes a lien on that property. Unsecured Property typically includes the value of tenant improvements, trade fixtures and personal property. The taxes levied on Unsecured Property are levied at the previous year's Secured Property tax rate. 3.2 Real and Personal Property Real Property, as referred to in this Report, is defined to represent land and improvement assessed values. Annual increases in the assessed value of Real Property are limited to an annual inflationary increase of up to 2%, as governed by Article XIIIA of the State Constitution (passed by voters as Proposition 13). Real Property values are also permitted to increase or decrease as a result of a property's change of ownership or new construction activity. For property tax purposes, the Proposition 13 inflation factor is subject to the State s Consumer Price Index (CPI) inflation adjustment of up to 2% per year. The CPI adjustment is based on the change in the CPI from October to October. As of the January 1, 2010 property tax lien date for FY , the Proposition 13 property tax assessments was Brea Redevelopment Agency Area AB Keyser Marston Associates, Inc. Fiscal Consultant Report Page Brea:GSH:gbd /6/6/11

82 reduced due to a reported negative CPI inflation adjustment of %. The FY inflation adjustment is anticipated to be 0.75%. For purposes of this projection, it is assumed that the FY factor will increase to 1% and commencing in FY the factor would stabilize at 2% per year. The annual CPI factor has been less than 2% only six other times since the enactment of Proposition 13: % % % % % % The assessed value of Personal Property is not subject to the Proposition 13 inflation factor and is subject to annual appraisal, either upward or downward. State assessed Non-Unitary properties assessed by the State Board of Equalization (SBE) also may be revalued annually and such assessments are not subject to the annual 2% inflation limitation of Article XIIIA. The County Auditor-Controller is responsible for the aggregation of the assessed values assigned by the Assessor for properties within the boundaries of the Project Area. This results in the reported total current year assessed value and becomes the basis for determining tax increment revenues due to the Agency. In FY , secured properties account for over 90% of the total assessed value of the Project Area and unsecured properties account for approximately 9.6% of assessed value. 3.3 Proposition 8 Temporary Decline In Value In 1978, a Constitutional amendment was passed by the California voters (Proposition 8) that provides for a temporary reduction in assessed value when the Proposition 13 value of a property exceeds its actual market value. The property owner is entitled to the lower of two values: (1) the property s existing Proposition 13 value, which is the purchase price and/or the cost of new construction, annually adjusted for inflation not to exceed 2% per year; or (2) the property s market value as of the January 1 property tax lien date. Once this temporary reduction in assessed value has been granted by the County Assessor, the Assessor must review the property s value annually until it is fully restored to its Proposition 13 value. Depending on the market value determined by such future reviews, the assessed value may be further adjusted, left unchanged, be partially increased or be fully restored to its Proposition 13 value. As a result of the declining market value of residential properties in the County, the Assessor s office began a proactive review of single-family residences and condominiums for the FY tax roll based on an analysis of residential market trends to determine whether or not such parcels qualified for the temporary decline in value adjustment. Residential Brea Redevelopment Agency Area AB Keyser Marston Associates, Inc. Fiscal Consultant Report Page Brea:GSH:gbd /6/6/11

83 properties sold between December 31, 2001 and December 31, 2009 were included in this review, which included 317,000 parcels County-wide. The review resulted in a temporary decline in value involving approximately 148,000 parcels for the FY tax roll. A similar review was conducted for commercial and industrial properties, in which 13,000 parcels were reviewed and 2,500 qualified for a temporary decline in value for the FY tax roll. County database information as to how many parcels in the Project Area were involved in the adjustment was not available to KMA. 3.4 Base Year Assessed Value The Orange County Auditor-Controller has adopted an internal administrative policy to annually review and revise the Base Year assessed values of redevelopment project areas to the extent that properties within a redevelopment project area are acquired for public uses by taxexempt public taxing agencies. The precedent for this action stems from the 1963 case of Redevelopment Agency of the City of Sacramento vs. Malaki, 216 Cal.Appl.2d 480, and subsequent related cases. Since FY , the historic Base Year values of the Project Area have been reported as follows: $322,906, ,829, ,963, ,357, ,183, ,183,421 The Base Year assessed value incorporated into the attached tax increment revenue projection reflects the FY reported value and is assumed to remain constant for the remainder of the projection. 3.5 Historic Taxable Values Aggregated historic to current year Project Area values are summarized on Table 1 covering fiscal years to The historic values by each component area are summarized on Tables 1-A to 1-D. The values reported by the County Auditor-Controller for the Project Area reflects an overall average annual increase of 4.2% for the period, with an overall gain of 23%. 3.6 Land Use Composition by Value Based upon a review of the FY Project Area values, a distribution of values by property use in the Project Area was prepared and summarized on Table 2. The land use composition by value for each component area are summarized as Tables 2-A to 2-D. The Table 2 summary identifies the amount of reported assessed value represented by residential, commercial, industrial and other uses in the Project Area. The review indicates that over 35% Brea Redevelopment Agency Area AB Keyser Marston Associates, Inc. Fiscal Consultant Report Page Brea:GSH:gbd /6/6/11

84 of the Project Area values contain designated commercial uses, with over 28% containing designated residential uses and over 25% containing designated industrial uses. The remaining values are represented by unsecured assessments and undesignated miscellaneous uses. 3.7 Ten Largest Tax Payers The ten largest property owners in the Project Area were identified by KMA based upon a review of the FY locally assessed secured and unsecured taxable valuations reported by the County Assessor. The aggregated total assessed value of the identified ten largest tax payers in the Project Area is shown on Table 3 and includes the assessee name, property use, parcel count, assessed value, percentage share of the total reported and incremental assessed value, and the potential value impact due to identified outstanding appeals reported by the County. Tables 3-A to 3-D represent summaries for the component areas. The Table 3 list of ten taxpayers represent 29.3% of the total Project Area value for and represent primarily commercial and industrial uses. When compared against the incremental assessed value of the Project Area, these ten taxpayers represent 32.4% of the total incremental assessed value. 4. ASSESSMENT APPEALS Property taxable values determined by the County Assessor may be subject to an appeal by the property owner. Assessment appeals are annually filed with the County Assessment Appeals Board for a hearing and resolution. The resolution of an appeal may result in a reduction to the Assessor's original taxable value and a tax refund to the property owner. The reduction in future Project Area taxable values and the refund of taxes affects all taxing entities, including the Agency. September 15 of each year marks the last day a property owner can file for an assessment appeal with the County. As stated previously, the County Assessor has proactively reviewed the value of singlefamily residences and condominiums purchased between December 31, 2002 and December 31, These County-wide reviews and temporary decline in value reductions may result in fewer individual assessment appeal filings of single-family residential and condominium property assessments. 4.1 Estimated Value Reductions KMA researched the status of assessment appeals filed by property owners in the Project Area based upon the latest information available from the County Appeals Board database as of April Table 4 represents the results of this survey and contains a listing of properties having an outstanding or recently stipulated appeal filed with the Assessor. The listing identifies the fiscal year, parcel number, application number, subarea, applicant name, status of the appeal, hearing date, contested value, applicant s opinion of value, assumed Brea Redevelopment Agency Area AB Keyser Marston Associates, Inc. Fiscal Consultant Report Page Brea:GSH:gbd /6/6/11

85 resolved value, the projected value reduction and the resolution assumption incorporated by KMA. Unless a particular pattern from parcel-specific prior year filings is seen, it is difficult to project with any degree of certainty which appeal filings would ultimately be withdrawn, denied, invalidated or revoked due to non-appearance. Therefore, the projected tax refunds and valuation reductions shown on Table 4 assume that all outstanding appeals will be subject to a reduction based upon one of several methods listed below: 1. If the parcel assessment was reduced by stipulation or Appeals Board action, the contested value was reduced to the reported resolved value; 2. For contested Secured Property values greater than $1 million, a reduction to the higher of either the applicant s opinion of value or 78% of the contested value was used (this 22% reduction was determined from the average percentage reduction experienced by a sampling of 47 stipulated appeals in the City whose contested values were greater than $1 million); 3. For contested Secured Property values less than $1 million, a reduction to the higher of either the applicant s opinion of value or 89% of the contested value was used (this 12% reduction was determined from the average percentage reduction experienced by a sampling of 59 stipulated appeals in the City whose contested values were less than $1 million); and 4. For contested Unsecured Personal Property values, a reduction to the higher of either the applicant s opinion of value or 67% of the contested value was used (this 33% reduction was determined from the average percentage reduction experienced by a sampling of 11 stipulated unsecured appeals in the City). 4.2 Estimated Fiscal Impact Tax refunds payable from resolved appeals (to the extent applicants are not delinquent in their property tax payments) are deducted by the County Auditor-Controller from current year gross tax increment allocations before the County s application of the annual tax increment revenue caps. As shown on Table 4, if all of the open appeals were stipulated to the values estimated by KMA, then the projected tax refunds debited against FY revenues and the projected FY future year reductions to value are as follows: Tax Refund (rounded) Tax Refunds FY $1,771,000 Value Reduction (rounded) Secured Value Reductions FY $125,705,000 Unsecured Value Reductions FY ,355,000 Brea Redevelopment Agency Area AB Keyser Marston Associates, Inc. Fiscal Consultant Report Page Brea:GSH:gbd /6/6/11

86 However, actual resolution of appeals are determined by a number of factors including vacancy and rental rates, circumstances of hardship and other real estate comparables, all of which are unique to the individual assessment. Therefore, actual reductions, if any, may be higher or lower than the reductions incorporated in the projection. An appeal may be withdrawn by the applicant, the Appeals Board may deny or modify the appeal at hearing or by stipulation, or the final value may be adjusted to an amount other than the stated opinion of value. 4.3 Actual Appeal Filing Outcomes The intentional decision to assume that every identified appeal shown on Table 4 will result in an assessed value reduction and tax refund is a very conservative approach since historically every filed appeal did not result in an assessed value reduction. To measure the historic patterns of success rates from appeals filed in the City, KMA conducted a database extraction of assessment appeal records found throughout the City. A total of 595 records for the period ranging from FY to FY were identified. Based upon the distribution of appeals shown on the table below, historic statistical patterns between FY and FY indicate that 28% of all appeal filings were reduced or stipulated, while 63% of all filed appeals subsequently were withdrawn, denied, deemed invalid or the applicant fails to appear and 9% remain pending. Fiscal Year Total Filings Stipulated or Reduced % Denied, Invalid, Withdrawn or Non-appearance % Open Appeals % % % % % % % 8 3.8% 6 5.0% 5 7.0% Combined to % % % 4.4 Actual Overall Net Value Impact A secondary historic analysis was conducted from the redevelopment project area parcel extraction to determine the assessed valuation reduction impact experienced from all prior year secured and unsecured resolved filings (excluding any appeals with an open status designation). The average percentage reductions of assessed values resulting from stipulated appeals, combined with the unchanged assessed values from appeals withdrawn, denied, deemed invalid or not heard because of the non-appearance by the applicant, are Brea Redevelopment Agency Area AB Keyser Marston Associates, Inc. Fiscal Consultant Report Page Brea:GSH:gbd /6/6/11

87 reflected in the table below. The corresponding contested and resolved values 1 were then aggregated and the average percentage reductions were determined. The resulting historic percentage reductions experienced for the period analyzed are as follows: Fiscal Year Resolved Records Resolved & Closed Records Contested Value Represented Resolved Value Represented % Reduction Secured $259,727,103 $254,217, % ,809, ,791, % ,785, ,930, % ,380, ,919, % ,988, ,872, % Combined $2,733,691,440 $2,505,732, % Unsecured % ,497,521 19,497,521 0% ,489,002 24,957, % ,195,627 34,872, % ,425,250 29,649, % Combined $113,607,400 $108,977, % For the historic period reviewed, properties that were the subject of assessment appeal filings only resulted in an overall average net secured value reduction of 8% and an overall average net unsecured value reduction of 4%. Therefore, the projected assessed value reductions and tax refunds estimated for this review and utilizing the approach discussed above represents a conservative scenario of future impacts resulting from the identified assessment appeal filings reported as of April TAX ALLOCATION AND DISBURSEMENT 5.1 Tax Rates The tax rates which are applied to incremental taxable values consist of two components: the General Tax Rate of $1.00 per $100 of taxable values and the Override Tax Rate which is levied to pay voter approved indebtedness. The basic levy tax rate may not exceed 1% ($1.00 of $100 taxable value) in accordance with Article XIIIA. An amendment to the Constitution prohibits redevelopment agencies from receiving taxes generated by new Override Tax Rates, which are reflective of debt approved after December 31, Based upon the County s reported override tax rates for FY , the current and assumed future tax rate is represented as follows: 1 The resolved value of appeals withdrawn, denied, invalid or a no show is the same as the value contested since no reduction was approved by the Assessment Appeals Board. Brea Redevelopment Agency Area AB Keyser Marston Associates, Inc. Fiscal Consultant Report Page Brea:GSH:gbd /6/6/11

88 Basic Tax Levy % Brea City 1978 Paramedics 0.045% Total Tax Rate 1.045% The identified overrides represent on-going annual indebtedness to fund City paramedic services which continue beyond the term of the projections. Therefore, for purposes of projecting the subsequent year tax rates, the Override Tax Rate is assumed to continue over the term of the attached revenue projections. 5.2 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 lien date for property within the boundaries of the Project Area. This results in the reported total current year Project Area taxable value and becomes the basis for determining tax increment revenues due to the Agency. Tax increment revenue is disbursed to the Agency based upon actual collections within the Project TRAs. Although adjustments to taxable values for property within the Project Area may occur throughout the fiscal year, such adjustments are not assumed in the tax increment projection prepared by KMA. Since , the County Auditor-Controller distributes 100% of tax increment revenues to the Agency (referred to as the teeter plan method of allocation). Under this method, the Agency s tax increment revenues are held harmless from delinquent property tax payments that may occur within the Project Area. Secured tax increment revenues are typically disbursed by the County in eight monthly payments beginning in November. Approximately 50% of the total tax increment revenues due to the Agency are allocated through December, reflecting the first installment collections. By the end of April, approximately 90% to 95% of the total Tax Increment Revenues are allocated to the Agency, reflecting second installment collections. Final Teeter Plan reconciliation payments are made in July. Unsecured tax increment revenues representing nearly 60% to 80% of the annual allocation are disbursed in September. Additional unsecured reconciliation payments are then made in January and July. 5.3 Tax Receipts to Tax Levy Tax increment revenues are allocated to the Agency based upon allocation formulas implemented under the County s teeter plan. Table 5 represents a summary comparison of computed tax levy to actual tax receipts reported by the County s year-end tax ledgers. This comparison, summarized on Table 5, was reviewed for FY through FY , and estimated for FY based on preliminary County tax ledger data. Even though the County Auditor-Controller allocates tax increment revenues to the Agency based on the Teeter Plan, the historic tax ledgers of the County provide the year-end amounts of tax Brea Redevelopment Agency Area AB Keyser Marston Associates, Inc. Fiscal Consultant Report Page Brea:GSH:gbd /6/6/11

89 increment revenues that are actually delinquent. The secured and unsecured delinquent unpaid taxes are incorporated into Table 5 to identify the percentage delinquency before application of the Teeter Plan and the annual $19 million tax increment revenue cap. 6. TAX INCREMENT REVENUE PROJECTION 6.1 Tax Increment Revenues Property tax revenues in excess of the amount resulting from the valuation shown on the assessment roll for the base year of the Project Area is referred to as tax increment. The base year for the Project Area represents the fiscal year in which taxable property was last equalized prior to the effective date of the ordinance approving the Project Area's Redevelopment Plan. The projections of tax increment revenues shown on Table 7 (and Tables 7-A to 7-E) are based upon the FY assessed values reported by the County Auditor- Controller. The application of the Proposition 13 inflationary increase to Real Property values, plus any anticipated values added from new developments identified by Agency staff, results in the estimate of future Project Area values. For purposes of this projection, projected values in FY are adjusted to reflect estimated valuation changes resulting from identified assessment appeals. The annual tax increment revenues have also been adjusted to reflect the maximum annual receipt limit of $19 million imposed on the Project Area. 6.2 New Development Value Added Valuation increases resulting from Agency-identified completed construction projects or transfers of ownership which have occurred, but have not yet been reflected on the FY property tax roll have been incorporated into the tax increment revenue projection. The listing of qualified value increases (based on those receiving a Certificate of Occupancy) is summarized on Table 6 and represent a listing prepared by the City Building and Safety Department. The amount of new value anticipated to be added to the future property tax rolls is based on building permit information. 6.3 Unitary Tax Revenue Commencing in , the reporting of public utility values assessed by the SBE was modified pursuant to legislation enacted in 1986 (Chapter 1457) and 1987 (Chapter 921). Previously, property assessed by the SBE was assessed State-wide and was allocated according to the location of individual components of a utility in a TRA. Hence, public utility values located within a redevelopment project area were fully reflected in the Project Area s annual taxable value. Since the County no longer included the taxable value of unitary properties as part of the reported taxable values in a redevelopment project, a base year reduction was made equal to the amount of unitary taxable value that existed originally in the base year. The values of most public utility properties are now assessed as a single unit on a Brea Redevelopment Agency Area AB Keyser Marston Associates, Inc. Fiscal Consultant Report Page Brea:GSH:gbd /6/6/11

90 County-wide basis (referred to as Unitary values). Railroad properties and utility owned parcels not included by SBE in the Unitary assessment are referred to as Non-Unitary assessments. According to the County Auditor-Controller, the Agency will be allocated $241,000 in Unitary tax revenues in FY For purposes of this projection, it is assumed that the Unitary tax revenues will stabilize at this amount in subsequent fiscal years. 6.4 Tax Increment Revenue Projection Table 7 Property tax revenues in excess of the amount resulting from the valuation shown on the assessment roll for the base year value of the Project Area are referred to as tax increment. The base year for a project area represents the fiscal year in which taxable property was last equalized prior to the effective date of the ordinance approving the redevelopment plans for the respective redevelopment projects. The projections of tax increment revenues shown on Table 7 are based upon the FY assessed values and base year assessed values reported by the County Auditor- Controller. The projection is separated into Real Property value and Personal Property value. Net tax increment revenue represents the gross tax increment revenue less the County's administrative fees, Housing Set Aside and statutory pass through payments. As stated previously, the Redevelopment Plan provides for an annual tax increment revenue cap of $19 million. 6.5 No Growth Tax Increment Revenue Projection Table 8 A conservative no growth projection of the tax increment revenues is presented on Table 8 to reflect how current tax increment revenues are adjusted over time as the redevelopment plans for the component project areas terminate and the Agency ceases to collect tax increment revenue from those component areas. The no growth projection only assumes the assessed valuation growth from Agency-identified completed construction projects or transfers of ownership which have occurred but have not yet been reflected on the FY property tax roll, as summarized from Table SERAF The California State Legislature adopted Assembly Bill 26-4x to take $1.7-billion from local redevelopment funds in FY and an additional $350-million in FY , and shift the tax increment funds to the Supplemental Education Revenue Augmentation Fund (SERAF) to offset State deficits to K-12 schools and community college districts. According to Agency staff (pursuant to estimates provided by the California Director of Finance) the Agency s FY SERAF exposure was $8,983,768, which the Agency funded fully from Project Area AB. For FY , the Agency s exposure was $1,849,599, which the Agency funded fully from its Project Area C. A lawsuit filed with the Sacramento Superior Court by the California Redevelopment Association in October 2009 challenged the constitutionality of AB 26-4x and in May 2010 the Court ruled in favor of the Sate. The decision is under appeal and until a decision Brea Redevelopment Agency Area AB Keyser Marston Associates, Inc. Fiscal Consultant Report Page Brea:GSH:gbd /6/6/11

91 to the appeal is handed down, the Agency has a potential exposure to the SERAF demand by the State for Future year demands from the State are not assumed in the projection. 7. CAVEAT The projection reflects assumptions based on KMA's understanding of the assessment and tax apportionment procedures employed by the County. The County procedures are subject to change as a reflection of policy revisions or administrative, regulatory or legislative mandate. While we believe our estimates to be reasonable, taxable values resulting from actual appraisals may vary from the amounts assumed in the projections. Assumptions have also been made that legislatively-mandated payments to the State will not be required in future fiscal years and no changes to State legislation are enacted to change or eliminate the Agency s ability to receive tax increment revenue. These assumptions are based on existing State policies and are subject to future regulatory or legislative changes. No assurances are provided by KMA as to the certainty of the projected tax increment revenues shown on the attached tables. Actual revenues may be higher or lower than what has been projected and are subject to valuation changes resulting from new developments or transfers of ownership not specifically identified herein, actual resolution of outstanding appeals, future filing of appeals, changes in assessor valuation standards, or the non-payment of taxes due. The accuracy or completeness of assessment appeals identified in the attached table are based solely upon information provided by the County Assessor s office as of the date of the original review of said data by KMA. Attachments Brea Redevelopment Agency Area AB Keyser Marston Associates, Inc. Fiscal Consultant Report Page Brea:GSH:gbd /6/6/11

92 Table 1 Historic Project Area Assessed Values Redevelopment Project Area AB Brea Redevelopment Agency % % % % % Avg % Chg Chg Chg Chg Chg Chg I. Secured: Land 982,424,914 1,344,131, % 1,373,399, % 1,438,554, % 1,435,471, % 1,419,572, % 7.64% Improvements 1,404,681,556 1,430,838, % 1,442,685, % 1,510,875, % 1,560,669, % 1,540,593, % 1.86% Personal Property 51,466,519 54,437, % 69,544, % 59,164, % 56,934, % 100,465, % 14.31% Exemptions 23,274,054 24,142, % 25,029, % 31,867, % 46,303, % 57,718, % 19.92% Total Secured 2,415,298,935 2,805,265, % 2,860,600, % 2,976,728, % 3,006,771, % 3,002,912, % 4.45% II. State Assessed: Land 2,261,106 2,231, % 2,095, % 414, % 414, % 414, % % Improvements 124, , % % % % % -100% Personal Property 71,248 58, % % % % % -100% Exemptions % % % % % 0.00% Total State 2,456,811 2,392, % 2,095, % 414, % 414, % 414, % % III. Unsecured: Land 3,870,140 1,923, % 2,685, % 7,747, % 6,200, % 4,020, % 0.76% Improvements 102,067, ,779, % 103,737, % 113,799, % 123,537, % 131,504, % 5.20% Personal Property 176,541, ,530, % 200,960, % 189,206, % 191,146, % 186,251, % 1.08% Exemptions 117, , % 216, % 196, % 226, % 1,946, % 75.31% Total Unsecured 282,361, ,094, % 307,167, % 310,556, % 320,657, % 319,830, % 2.52% IV. Project Value: Land 988,556,160 1,348,287, % 1,378,180, % 1,446,716, % 1,442,086, % 1,424,007, % 7.57% Improvements 1,506,873,605 1,537,719, % 1,546,423, % 1,624,675, % 1,684,207, % 1,672,098, % 2.10% Personal Property 228,079, ,026, % 270,505, % 248,371, % 248,080, % 286,717, % 4.68% Exemptions 23,391,608 24,282, % 25,246, % 32,063, % 46,530, % 59,665, % 20.60% Total Project 2,700,117,568 3,100,751, % 3,169,862, % 3,287,699, % 3,327,844, % 3,323,157, % 4.24% V. Reported Base Value 322,906, ,829, % 321,963, % 320,357, % 320,183, % 320,183, % Incremental Value 2,377,210,674 2,777,922, % 2,847,899, % 2,967,342, % 3,007,661, % 3,002,973, % 4.78% Source: Orange County Auditor-Controller Prepared by Keyser Marston Associates, Inc. Filename: Brea Hist : HIST: GSH

93 Historic Base & Increment Value Historic Value by Component Area 3,500,000,000 3,500,000,000 3,000,000,000 3,000,000,000 2,500,000,000 2,500,000,000 2,000,000,000 2,000,000,000 1,500,000,000 1,500,000,000 1,000,000,000 1,000,000, ,000, ,000, Base Value Increment Value Old A Old B Annex Supplement Source: Orange County Auditor-Controller Prepared by Keyser Marston Associates, Inc. Filename: Brea Hist : HIST: GSH

94 Table 2 FY Assessed Values by Land Use Project Area AB Brea Redevelopment Agency Record Land Use Assessed Value % of Total Count 1 Commercial 1,192,231, % Industrial 845,812, % Residential Single Family 822,523, % 2,858 4 Residential Multi-Family/Other 118,216, % Miscellaneous, Rural or Vacant 24,542, % 32 6 Public & Government-Owned - 0.0% 78 7 Unsecured 319,830, % 1,991 8 Total Project Area AB 3,323,157, % 5,777 Industrial 25% Commercial 36% Residential Single Family 25% Unsecured 10% Residential Multi- Family/Other 3% Miscellaneous, Rural or Vacant 1% Public & Government- Owned 0% Source: Orange County Assessor Prepared by Keyser Marston Associates, Inc. Filename: Brea Uses : Sec Uses: 6/6/2011: GSH

95 Table 3 Ten Largest Taxpayers FY Project Area AB Brea Redevelopment Agency 2010 Est Est. % of % of Appeal Appeal Total Project Reduction Reduction No. of Parcels Assessed Project Incremental Exposure Exposure Assessee Name Area Description Sec Uns Value Value (1) Value (2) (Table 4) (Table 4) 1 Retail Property Trust Old B Regional Shopping Center 6 $206,140, % 6.86% 2 Beckman Instruments Inc Annex Commerical & Vacant 2 155,545, % 5.18% 3 New Albertsons Inc Old A & Annex Industrial ,908, % 4.93% 4 Acquiport Brea LP Annex Industrial 2 122,301, % 4.07% (26,652,075) 5 La Floresta LLC Annex Industrial & Agricultural 8 89,988, % 3.00% (40,362,672) 6 Brea Union Plaza Annex Commercial 13 78,865, % 2.63% 7 ICE Holdings LLC Annex Commercial 3 49,180, % 1.64% 8 Abbey III Brea LLC Annex Commercial ,604, % 1.49% (12,970,030) 9 Evangelical Christian Old A Commercial ,015, % 1.37% 10 American Suzuki Motor Annex Commercial ,680, % 1.25% (7,150,548) TOTAL PROJECT AREA AB $973,231, % 32.41% ($33,802,623) ($53,332,702) Source: Orange County Assessor and Orange County Auditor-Controller. (1) Based upon Fiscal Year project value of $3,323,157,248. (2) Based upon Fiscal Year incremental value of $3,002,973,827. Prepared by Keyser Marston Associates, Inc. Filename: Brea Top : 1011 Sum: 6/6/2011: NYM

96 Table 4 Open Assessment Appeal Estimated Impacts Project AB Redevelopment Project Area Brea Redevelopment Agency Appeal Number APN Bill Number Roll Year RP Applicant Name Total Contested Value Applicant Opinion of Value Estimated Resolved Value Variance KMA Comments Unique Records UNSECURED APPEALS AB Old A ** WITHHELD ** 4,791 3,849 4,224 (567) Resolved: Assessor Reduction AB Consol ** WITHHELD ** 4,861 3,905 4,286 (575) Resolved: Assessor Reduction Annex A ** WITHHELD ** 8,132 6,533 7,170 (962) Resolved: Assessor Reduction Annex A ** WITHHELD ** 15,579 12,516 13,737 (1,842) Resolved: Assessor Reduction AB Consol ** WITHHELD ** 3,043 2,445 2,683 (360) Resolved: Assessor Reduction Annex A ** WITHHELD ** 14,672 11,787 12,937 (1,735) Resolved: Assessor Reduction Annex A ** WITHHELD ** 3,987 3,605 3,516 (471) Resolved: Assessor Reduction Annex A ** WITHHELD ** 11,604 9,322 10,232 (1,372) Resolved: Assessor Reduction Annex A ** WITHHELD ** 2,906 2,335 2,562 (344) Resolved: Assessor Reduction AB Old A ** WITHHELD ** 3,184 2,558 2,807 (377) Resolved: Assessor Reduction Annex A ** WITHHELD ** 5,932 4,766 5,231 (701) Resolved: Assessor Reduction AB Old A ** WITHHELD ** 4,034 3,026 2,611 (1,423) Resolved: Assessor Reduction AB Consol ** WITHHELD ** 4,094 3,071 2,649 (1,445) Resolved: Assessor Reduction Annex A ** WITHHELD ** 13,455 9,915 8,708 (4,747) Resolved: Assessor Reduction AB Consol ** WITHHELD ** 2,628 1,937 1,701 (927) Resolved: Assessor Reduction Annex A ** WITHHELD ** 9,455 7,306 6,119 (3,336) Resolved: Assessor Reduction Annex A ** WITHHELD ** 5,005 1,112 3,239 (1,766) Resolved: Assessor Reduction AB Old B AE RETAIL WEST LLC 577, ,660 (188,721) Decreased per comparable reductions in past appeals AB Old B AE RETAIL WEST LLC 551, ,055 (180,172) Decreased per comparable reductions in past appeals AB Old B AE RETAIL WEST LLC 531, ,536 (173,608) Decreased per comparable reductions in past appeals AB Old B AE RETAIL WEST LLC 512, ,703 (167,377) Decreased per comparable reductions in past appeals AB Consol AL COPELAND INVESTMENTS I 1,643, ,000 1,106,398 (537,230) Decreased per comparable reductions in past appeals AB Consol AL COPELAND INVESTMENTS I 1,575, ,000 1,060,571 (514,978) Decreased per comparable reductions in past appeals AB Consol AL COPELAND INVESTMENTS I 1,469, , ,401 (480,421) Decreased per comparable reductions in past appeals (1) Annex A AMCOR SUNCLIPSE INC DBA MANUFACTU 5,351,096 2,675,548 3,602,057 (1,749,039) Decreased per comparable reductions in past appeals AB Old B APPLE INC. 1,978, ,760 1,331,815 (646,685) Decreased per comparable reductions in past appeals AB Old B APPLE INC. 2,136, ,461 1,438,187 (698,336) Decreased per comparable reductions in past appeals (5) AB Old A APRIA HEALTHCARE, INC. 3,104,869 2,077,847 2,055,322 (1,049,547) Resolved: Assessor Reduction AB Old A APRIA HEALTHCARE, INC. 3,176,395 2,124,416 2,103,021 (1,073,374) Resolved: Assessor Reduction AB Old A APRIA HEALTHCARE, INC. 3,176,219 2,383,974 2,103,114 (1,073,105) Resolved: Assessor Reduction AB Old A CARRIER COMMERCIAL REFRIGERATION I 1,171, ,894 (383,061) Decreased per comparable reductions in past appeals AB Old A CARRIER COMMERCIAL REFRIGERATION I 1,117, ,023 (365,157) Decreased per comparable reductions in past appeals AB Old A CARRIER COMMERCIAL REFRIGERATION I 1,095, ,528 (358,119) Decreased per comparable reductions in past appeals AB Old A CARRIER COMMERCIAL REFRIGERATION I 1,039, ,495 (339,652) Decreased per comparable reductions in past appeals Annex A CARRIER CORPORATION 1,535,347-1,033,509 (501,838) Decreased per comparable reductions in past appeals (7) AB Old B GAP INC & SUBS 75,860 47,450 51,065 (24,795) Decreased per comparable reductions in past appeals AB Old B GAP INC & SUBS 1,200,456 43, ,079 (392,377) Decreased per comparable reductions in past appeals AB Old B GAP INC & SUBS 847, , ,548 (206,278) Decreased per comparable reductions in past appeals AB Consol GAP INC & SUBS 618,499 41, ,339 (202,160) Decreased per comparable reductions in past appeals AB Old B GAP INC ,146,011 39, ,430 (374,581) Decreased per comparable reductions in past appeals (5) AB Consol GAP INC ,416 40, ,416 - Assumed withdrawn as in 2008 (1) AB Old B MACY'S DEPARTMENT STORES, INC. 3,852, ,113 3,852,300 - Assumed withdrawn as in AB Old B MACY'S DEPARTMENT STORES, INC. 4,559, ,890 4,559,567 - Assumed withdrawn as in 2006 Source: Orange County Assessor and Orange County Assessment Appeals Board Prepared by: Keyser Marston Associates, Inc. Filename: Brea AB Appeals :Open:NYM: Page 1 of 5

97 Table 4 Open Assessment Appeal Estimated Impacts Project AB Redevelopment Project Area Brea Redevelopment Agency Appeal Number APN Bill Number Roll Year RP Applicant Name Total Contested Value Applicant Opinion of Value Estimated Resolved Value Variance KMA Comments Unique Records AB Old B MACY'S DEPARTMENT STORES, INC. 4,427, ,163 4,427,534 - Assumed withdrawn as in AB Old B MACY'S DEPARTMENT STORES, INC. 4,316, ,440 2,905,585 (1,410,856) Decreased per comparable reductions in past appeals AB Old B MACY'S DEPARTMENT STORES, INC. 4,159,191 1,164,000 2,799,733 (1,359,458) Decreased per comparable reductions in past appeals AB Old B MACY'S DEPARTMENT STORES, INC. 6,034,238 2,445,000 4,061,909 (1,972,329) Decreased per comparable reductions in past appeals AB Old B MACY'S WEST STORES, INC 3,977,530 2,100,000 2,677,449 (1,300,081) Decreased per comparable reductions in past appeals (5) SECURED APPEALS AB Consol RAAJVINEE, LLC 4,090,956 1,637,000 3,600,000 (490,956) Resolved: Board Reduction AB Consol RAAJVINEE, LLC 3,140,000 1,884,000 3,000,000 (140,000) Resolved: Board Reduction (2) AB Consol FIERROS, MANUEL 765, , ,894 (85,751) Decreased per comparable reductions in past appeals (2) AB Consol VIMAL, INC. 940, , ,000 (190,926) Decreased per comparable reductions in past appeals (2) AB Consol GANESH SAI, LLC 2,448,000 1,600,000 1,870,000 (578,000) Resolved: Board Reduction AB Consol GANESH SAI LLC 2,442,198 1,500,000 1,870,000 (572,198) Assumed 2009 stipulated AV. (2) AB Consol JERVIS, JERRY D 748, , ,423 (83,799) Decreased per comparable reductions in past appeals (2) AB Consol L&S INVESTMENT CO. DBA 99 CENTS ONLY 5,342,293 4,000,000 4,540,000 (802,293) Resolved: Board Reduction AB Consol L&S INVESTMENT CO DBA 99 CENTS ONLY 5,329,631-3,900,000 (1,429,631) Resolved: Board Reduction (2) AB Consol WELTMER, ROBERT 288, , ,314 - No change; duplicate appeal AB Consol WELTMER, ROBERT 288, , ,000 (18,314) Decreased per comparable reductions in past appeals (2) AB Consol NCL SECURITY LLC 606, , ,129 (67,871) Decreased per comparable reductions in past appeals (2) AB Consol NCL SECURITY LLC 614, , ,233 (68,767) Decreased per comparable reductions in past appeals (2) AB Consol MITCHELL PROPERTIES LLC 545, , ,736 - Assumed withdrawn as in (2) AB Consol OLINGER, MICHAEL JOHN 507, , ,003 (41,997) Decreased per comparable reductions in past appeals (2) AB Consol NORCUTT, BRAD 931, , ,213 (104,331) Decreased per comparable reductions in past appeals (2) AB Consol NORCUTT, BRADLEY KRIS 581, , ,625 - No change; duplicate appeal AB Consol NORCUTT, BRADLEY KRIS 581, , ,008 (5,617) Decreased per comparable reductions in past appeals (2) AB Old A PARK LAMBERT LLC 2,509,244 1,506,000 2,509,244 - Assumed withdrawn as in (4) AB Old A PARK LAMBERT LLC 2,555,023 1,533,000 2,555,023 - Assumed withdrawn as in (4) AB Old A CLAUDIO J SALTARELLI & CECILIA M CARR 1,580,000 1,053,590 1,235,684 (344,316) Decreased per comparable reductions in past appeals (4) AB Old A BREA IMPERIAL 11,895,810 5,000,000 9,303,460 (2,592,350) Decreased per comparable reductions in past appeals (4) AB Old A PUENTE STREET LLC 5,589,898 4,071,773 4,750,000 (839,898) Resolved: Board Reduction (4) AB Old A NEW ALBERTSONS INC 11,275,078 8,350,000 11,275,078 - Assumed withdrawn as in 2008 and (4) AB Old A NEW ALBERTSONS INC 5,653,419 3,700,000 5,653,419 - Assumed withdrawn as in 2008 and (4) AB Old A NEW ALBERTSONS INC 15,363,502 11,500,000 15,363,502 - No change assumed; 2009 stipulated AV >2010 AV. (4) AB Old A NEW ALBERTSONS INC 19,448,187 14,600,000 19,448,187 - Assumed withdrawn as in 2008 and (4) AB Old A NEW ALBERTSONS INC 23,545,329 18,600,000 23,545,329 - Assumed withdrawn as in 2008 and (4) AB Old A NEW ALBERTSONS INC 25,621,327 19,300,000 25,621,327 - Assumed withdrawn as in 2008 and (4) AB Old A PUENTE STREET LLC 17,066,128 13,340,000 14,500,000 (2,566,128) Resolved: Board Reduction (4) AB Old A PUCCIO, LOUIS & ROSALIE 6,533,803 3,266,901 6,533,803 - Assumed withdrawn as in 2008 and (4) AB Old A BROCO LLC, BROCO LEASING LLC 1,808,458 1,200,000 1,650,000 (158,458) Resolved: Board Reduction AB Old A DAVENPORT, STEVE 1,804,171 1,200,000 1,411,004 (393,167) Decreased per comparable reductions in past appeals (4) AB Old A MERRILL, MICHAEL L 1,509,529 1,000,000 1,180,571 (328,958) Decreased per comparable reductions in past appeals (4) AB Consol MM BREA, LLC 6,461,138 3,000,000 5,053,119 (1,408,019) Decreased per comparable reductions in past appeals (2) AB Consol BIRCH STREET FOOD COURT, LLC 2,321,712 1,100,000 1,815,762 (505,950) Decreased per comparable reductions in past appeals (2) AB Consol BIRCH STREET FOOD COURT, LLC 2,321,712 1,100,000 1,815,762 (505,950) Decreased per comparable reductions in past appeals (2) AB Consol BREA LLC 6,927,565 3,000,000 6,300,000 (627,565) Resolved: Assessor Prop 8 Reduction Source: Orange County Assessor and Orange County Assessment Appeals Board Prepared by: Keyser Marston Associates, Inc. Filename: Brea AB Appeals :Open:NYM: Page 2 of 5

98 Table 4 Open Assessment Appeal Estimated Impacts Project AB Redevelopment Project Area Brea Redevelopment Agency Appeal Number APN Bill Number Roll Year RP Applicant Name Total Contested Value Applicant Opinion of Value Estimated Resolved Value Variance KMA Comments Unique Records AB Consol BREA LLC 5,850,000 3,000,000 5,850,000 - No change assumed; 2009 stipulated AV >2010 AV. (2) AB Consol MM BREA LLC 3,120,940 1,400,000 2,440,821 (680,119) Decreased per comparable reductions in past appeals (2) AB Consol DU COING, BRENT W 4,234, ,000 4,234,531 - Assumed withdrawn as in (2) AB Consol GATEWAY CLEANERS 5,208,242-4,073,255 (1,134,987) Decreased per comparable reductions in past appeals (2) AB Consol 110 W. BIRCH STREET, LLC 3,344,043 1,600,000 2,615,305 (728,738) Decreased per comparable reductions in past appeals (2) AB Consol 215 S. BREA BLVD., LLC 8,692,926 3,500,000 6,798,552 (1,894,374) Decreased per comparable reductions in past appeals (2) AB Consol BIRCH STREET PROMENADE, LLC/ 260/330 2,804,325 1,300,000 2,193,203 (611,122) Decreased per comparable reductions in past appeals (2) AB Consol BIRCH STREET PROMENADE, LLC/ 260/330 7,784,841 3,000,000 6,088,359 (1,696,482) Decreased per comparable reductions in past appeals (2) AB Old B SEARS HOLDINGS CORPORATION (SEARS 13,805,239 11,000,000 13,805,239 - Assumed withdrawn as in (6) AB Old B NORDSTROM INCORPORATED 13,671,017 11,920,635 11,920,635 (1,750,382) Decreased per comparable reductions in past appeals (6) AB Old B NORDSTROM INCORPORATED 389, , ,014 (43,641) Decreased per comparable reductions in past appeals (6) AB Old B MACY'S DEPARTMENT STORES, INC. 17,392,568 17,361,768 17,361,768 (30,800) Decreased per comparable reductions in past appeals AB Old B MACY'S CALIFORNIA, INC. 19,890,941 16,293,288 16,293,288 (3,597,653) Decreased per comparable reductions in past appeals AB Old B MACY'S CALIFORNIA, INC. 19,714,025 17,139,504 17,139,504 (2,574,521) Decreased per comparable reductions in past appeals (6) AB Old B WELLS FARGO BANK 2,148,959 1,600,000 1,680,655 (468,304) Decreased per comparable reductions in past appeals (6) AB Consol MANLEY FANTICOLA HOLDINGS, LLC 5,840,000 2,700,000 4,567,340 (1,272,660) Decreased per comparable reductions in past appeals AB Consol 240/260 S. BREA BLVD., LLC 5,826,158 2,750,000 4,556,514 (1,269,644) Decreased per comparable reductions in past appeals (2) AB Consol MCDONALD'S CORPORATION 2,049,730 1,230,000 2,049,730 - Assumed withdrawn as in (2) Annex A LA FLORESTA, LLC 29,535,540 16,319,087 16,320,000 (13,215,540) Resolved: Assessor Prop 8 Reduction (8) Annex A LA FLORESTA, LLC 18,142,411 10,024,113 10,020,000 (8,122,411) Resolved: Assessor Prop 8 Reduction (8) Annex A LA FLORESTA, LLC 14,638,302 8,088,009 8,090,000 (6,548,302) Resolved: Assessor Prop 8 Reduction (8) Annex A LA FLORESTA, LLC 3,852,185 2,128,424 2,130,000 (1,722,185) Resolved: Assessor Prop 8 Reduction (8) Annex A NNN SATURN BUSINESS PARK LLC 24,046,973 20,000,000 21,500,000 (2,546,973) Resolved: Assessor Prop 8 Reduction Annex A NNN SATURN BUSINESS PARK LLC 19,085,000 10,199,000 19,085,000 - No change assumed; 2009 P8 reduced AV >2010 AV. (8) Annex A AEW LT BREA IMPERIAL 19,537,900 9,000,000 18,500,000 (1,037,900) Resolved: Assessor Prop 8 Reduction Annex A AEW LT BREA IMPERIAL CENTRE LLC 16,320,000 8,500,000 16,320,000 - No change assumed; 2009 P8 reduced AV >2010 AV. (8) Annex A AEW LT BREA IMPERIAL 17,466,672 9,000,000 16,000,000 (1,466,672) Resolved: Assessor Prop 8 Reduction Annex A AEW LT BREA IMPERIAL CENTRE, LLC 14,990,000 8,000,000 14,990,000 - No change assumed; duplicate appeal filing Annex A AEW LT BREA IMPERIAL CENTRE LLC 14,990,000 8,000,000 14,990,000 - No change assumed; 2009 P8 reduced AV >2010 AV. (8) Annex A WATT LEED LEASE LLC 9,887,363 5,000,000 7,732,696 (2,154,667) Decreased per comparable reductions in past appeals (8) Annex A BECKMAN COULTER INC. 84,388,604 28,063,000 84,388,604 - Assumed withdrawn as in 2008 and 2010 prior appeal Annex A BECKMAN INSTRUMENTS INC 134,854,536 89,097, ,854,536 - Assumed withdrawn as in 2008 and 2010 prior appeal. (8) Annex A BECKMAN COULTER INC. 10,758,592 (7,384,000) 10,758,592 - Assumed withdrawn as in 2008 prior appeal Annex A BECKMAN COULTER INC. 16,807,057 5,031,000 16,807,057 - Assumed withdrawn as in 2008 prior appeal Annex A BECKMAN INSTRUMENTS INC 20,690,720 2,000,000 20,690,720 - Assumed withdrawn as in 2008 prior appeal. (8) Annex A NEVELL, MICHAEL 3,265,680 2,975,000 2,975,000 (290,680) Decreased per comparable reductions in past appeals (8) Annex A PROLOGIS CALIFORNIA I LLC 5,169,799 3,120,000 5,169,799 - Assumed withdrawn as in (8) Annex A DIGITAL REALTY TRUST-AFFECTED PARTY 11,014,640 5,507,319 8,614,316 (2,400,324) Decreased per comparable reductions in past appeals (8) Annex A AQUIPORT BREA LP 111,167,965 60,000,000 86,942,100 (24,225,865) Decreased per comparable reductions in past appeals (8) Annex A AQUIPORT BREA LP 11,133,425 8,500,000 8,707,215 (2,426,210) Decreased per comparable reductions in past appeals (8) Annex A AMERICAN SUZUKI MOTOR CORP. 16,765,153 8,542,512 13,111,669 (3,653,484) Decreased per comparable reductions in past appeals (8) Annex A AMERICAN SUZUKI MOTOR CORP. 4,220,078 2,532,047 3,300,433 (919,645) Decreased per comparable reductions in past appeals (8) Annex A AMERICAN SUZUKI MOTOR CORP. 721, , ,582 (235,782) Decreased per comparable reductions in past appeals (8) Annex A AMERICAN SUZUKI MOTOR CORP. 1,086, , ,332 (355,110) Decreased per comparable reductions in past appeals (8) Annex A AMERICAN SUZUKI MOTOR CORP. 1,620, ,520 1,267,645 (353,221) Decreased per comparable reductions in past appeals (8) Source: Orange County Assessor and Orange County Assessment Appeals Board Prepared by: Keyser Marston Associates, Inc. Filename: Brea AB Appeals :Open:NYM: Page 3 of 5

99 Table 4 Open Assessment Appeal Estimated Impacts Project AB Redevelopment Project Area Brea Redevelopment Agency Appeal Number APN Bill Number Roll Year RP Applicant Name Total Contested Value Applicant Opinion of Value Estimated Resolved Value Variance KMA Comments Unique Records Annex A AMERICAN SUZUKI MOTOR CORP. 7,494,938 4,496,962 5,861,632 (1,633,306) Decreased per comparable reductions in past appeals (8) Annex A BREA UNION PLAZA 1 6,876,321 5,000,000 6,876,321 - Assumed withdrawn as in (8) Annex A MCDONALD'S CORP./ORGAN BROWNSTEIN 1,759,442 1,056,000 1,759,442 - Assumed withdrawn as in (8) Annex A LA FLORESTA, LLC 4,575,928 2,528,309 2,530,000 (2,045,928) Resolved: Assessor Prop 8 Reduction (8) Annex A LA FLORESTA, LLC 1,278, , ,000 (568,755) Resolved: Assessor Prop 8 Reduction (8) Annex A LA FLORESTA, LLC 2,432,287 1,343,896 1,340,000 (1,092,287) Resolved: Assessor Prop 8 Reduction (8) Annex A LA FLORESTA, LLC 15,747,264 8,700,737 8,700,000 (7,047,264) Resolved: Assessor Prop 8 Reduction (8) Annex A ABBEY III-BREA LLC 1,103, , ,000 (263,656) Resolved: Board Reduction Annex A ABBEY III-BREA LLC 835, , ,000 - No change assumed; 2009 stipulated AV >2010 AV. (8) Annex A ABBEY III-BREA LLC 25,702,457 12,851,229 20,080,000 (5,622,457) Resolved: Board Reduction Annex A ABBEY III-BREA LLC 18,945,000 9,472,501 18,945,000 - No change assumed; 2009 stipulated AV >2010 AV. (8) Annex A KILROY REALTY LP 7,855,101 4,000,000 7,855,101 - Assumed withdrawn as in (8) Annex A KILROY REALTY LP 6,789,120 4,000,000 5,309,626 (1,479,494) Decreased per comparable reductions in past appeals (8) Annex A TAING, KENG T 3,146,894 1,888,000 2,461,119 (685,775) Decreased per comparable reductions in past appeals (8) Annex A WELLS REIT CA LP 27,033,417 19,800,000 23,918,952 (3,114,465) Resolved: Assessor Prop 8 Reduction Annex A WELLS REIT CA LP 24,470,000 19,233,000 23,918,952 (551,048) Assumed 2009 prop 8 reduced AV. (8) Annex A WELLS REIT 1,228, ,000 1,228,129 - Assumed withdrawn as in (8) Annex A CH REALTY III/FAIRWAY LP 33,158,514 19,894,000 28,000,000 (5,158,514) Assumed 2009 stipulated AV. (8) Annex A KILROY REALTY LP 1,093, , ,354 (357,549) Decreased per comparable reductions in past appeals (8) Annex A ABBEY III-BREA LLC 30,530,954 15,265,478 24,680,000 (5,850,954) Resolved: Board Reduction Annex A ABBEY III-BREA LLC 20,570,000 10,285,001 20,570,000 - No change assumed; 2009 stipulated AV >2010 AV. (8) Annex A ABBEY III-BREA LLC 6,292,963 3,146,482 5,060,000 (1,232,963) Resolved: Board Reduction Annex A ABBEY III-BREA LLC 4,240,000 2,120,001 4,240,000 - No change assumed; 2009 stipulated AV >2010 AV. (8) Annex A VILLA GROVE, LLC 7,548,000 5,265,625 4,700,000 (2,848,000) Resolved: Assessor Prop 8 Reduction (8) Annex A PUCCIO, LOUIS & ROSALIE 3,308,971 1,654,485 2,587,876 (721,095) Decreased per comparable reductions in past appeals (8) Annex A HARDAGE HOTELS X, LLC 10,122,653 4,900,000 5,974,407 (4,148,246) Resolved: Assessor Prop 8 Reduction Annex A HARDAGE HOTELS X LLC 9,823,574 5,250,000 5,974,407 (3,849,167) Assumed 2009 prop 8 reduced AV. (8) Annex A ESH/HV PROPERTIES L.L.C. 12,745,940 7,000,000 9,100,000 (3,645,940) Resolved: Assessor Prop 8 Reduction (8) Annex A OLAZABAL, JOSHUA A 800, , ,000 (55,000) Decreased per comparable reductions in past appeals (8) Annex A SCARSI, JOHN L 869, , ,000 (133,000) Decreased per comparable reductions in past appeals (8) Annex A MAYER, MATT 802, , ,000 (152,000) Decreased per comparable reductions in past appeals (8) Annex A PATEL, KAUSHAL 590, , ,000 (175,000) Decreased per comparable reductions in past appeals (8) AB Consol CHOW, JEFF 408, , ,305 (45,695) Decreased per comparable reductions in past appeals (2) AB Old A GWARTNEY, PHILIP 981, , ,354 (109,898) Decreased per comparable reductions in past appeals (4) AB Old A DE PUE, KENT A 2,298,867 1,540,700 1,797,895 (500,972) Decreased per comparable reductions in past appeals AB Old A DE PUE, KENT A 1,750,000 1,540,000 1,540,000 (210,000) Decreased per comparable reductions in past appeals (4) AB Old A CHEN, PETER H 1,104, , ,687 (123,688) Decreased per comparable reductions in past appeals (4) AB Old A SANGUEDOLCE, JOHN 770, , ,762 (86,238) Decreased per comparable reductions in past appeals (4) AB Old A OC OFFICE HOLDINGS LLC 844, , ,000 (144,549) Resolved: Board Reduction AB Old A FREDAS, ROSIE 770, , ,762 (86,238) Decreased per comparable reductions in past appeals (4) AB Old A ONE IRON LLC 695, , ,161 (77,839) Decreased per comparable reductions in past appeals (4) AB Old A TECHNICAL PROPERTY HOLDINGS, LLC 795, , ,962 (89,038) Decreased per comparable reductions in past appeals (4) AB Old A AMLA LLC 780, , ,999 (87,404) Decreased per comparable reductions in past appeals (4) AB Old A TOMLINSON TRUST, FRANK N 1,060, , ,282 (118,718) Decreased per comparable reductions in past appeals (4) AB Old A JAC N TML, LLC. 1,074, , ,946 (120,315) Decreased per comparable reductions in past appeals (4) Source: Orange County Assessor and Orange County Assessment Appeals Board Prepared by: Keyser Marston Associates, Inc. Filename: Brea AB Appeals :Open:NYM: Page 4 of 5

100 Table 4 Open Assessment Appeal Estimated Impacts Project AB Redevelopment Project Area Brea Redevelopment Agency Appeal Number APN Bill Number Roll Year RP Applicant Name Total Contested Value Applicant Opinion of Value Estimated Resolved Value Variance KMA Comments Unique Records AB Old A HAKANSON, MARGARET A 1,458, ,000 1,140,670 (317,840) Decreased per comparable reductions in past appeals (4) AB Old A BERRY HOLDINGS LLC 1,204, , ,384 (262,589) Decreased per comparable reductions in past appeals (4) AB Old A SCHUBER, CHARLES L 898, , ,000 (73,620) Resolved: Assessor Prop 8 Reduction AB Old A SCHUBER, CHARLES L 896, , ,489 - No change assumed; 2009 stipulated AV >2010 AV. (4) TOTAL Total Reductions for Tax Refund (177,012,000) Projected Tax Refund at 1% (1,771,000) Unsecured Value Reduction (unique filings) (3,355,000) Secured Value Reduction (unique filings) (125,705,000) Old A Total Reductions for Tax Refund (14,276,604) Projected Tax Refund at 1% (143,000) (3) Unsecured Value Reduction (unique filings) - (4) Secured Value Reduction (unique filings) (8,755,000) Old B Total Reductions for Tax Refund (17,560,953) Projected Tax Refund at 1% (176,000) (5) Unsecured Value Reduction (unique filings) (2,373,000) (6) Secured Value Reduction (unique filings) (4,837,000) AB Annex Total Reductions for Tax Refund (126,374,988) Projected Tax Refund at 1% (1,264,000) (7) Unsecured Value Reduction (unique filings) (502,000) (8) Secured Value Reduction (unique filings) (98,823,000) AB Supplement Total Reductions for Tax Refund (18,799,853) Projected Tax Refund at 1% (188,000) (1) Unsecured Value Reduction (unique filings) (480,000) (2) Secured Value Reduction (unique filings) (13,290,000) Source: Orange County Assessor and Orange County Assessment Appeals Board Prepared by: Keyser Marston Associates, Inc. Filename: Brea AB Appeals :Open:NYM: Page 5 of 5

101 Table 5 Receipts to Levy Analysis Project Area AB Brea Redevelopment Agency Preliminary (4) I. Reported Assessed Value (1): Secured 2,415,298,935 2,805,265,151 2,860,600,321 2,976,728,159 3,006,771,764 3,002,912,011 State Assessed 2,456,811 2,392,531 2,095, , , ,785 Unsecured 282,361, ,094, ,167, ,556, ,657, ,830,452 II. Total Project Value 2,700,117,568 3,100,751,813 3,169,862,932 3,287,699,769 3,327,844,426 3,323,157,248 Less Base Value (2) 322,906, ,829, ,963, ,357, ,183, ,183,421 Incremental Value 2,377,210,674 2,777,922,767 2,847,899,006 2,967,342,606 3,007,661,005 3,002,973,827 III. Gross Tax Increment (3): Secured Tax Increment 22,185,345 25,399,469 26,838,111 27,965,678 28,360,435 28,140,000 Unsecured Tax Increment 3,108,180 3,066,264 3,263,626 3,249,174 3,527,287 3,239,000 Total TI (Before Annual Cap) 25,293,526 28,465,734 30,101,737 31,214,852 31,887,722 31,379,000 IV. Reported Delinquent 262, , , , , ,117 % Delinquent 1.04% 1.47% 1.86% 1.95% 1.06% 2.23% V. Annual Cap Forfeiture (3) (6,293,526) (9,465,734) (11,101,737) (12,214,852) (12,887,722) (12,379,000) Allocated Levy Under TI Cap 19,000,000 19,000,000 19,000,000 19,000,000 19,000,000 19,000,000 (1) Amounts shown are as reported by the Orange County Auditor-Controller in August of each fiscal year. (2) Annual changes in the Base Year value are the result of acquisitions of privately held properties by public entities. Increases in the Base Year value are the result of dispositions of publicly held properties to private ownership. The County's practice stems from the case of Redevelopment Agency of the City of Sacramento vs. Malaki, 216 Cal. Appl. 2d 480 and subsequent related cases. (3) Source: County Auditor-Controller year-end tax ledger detail. Amounts represent the annual tax increment revenues allocable to the Agency and do not include administrative fees, supplemental taxes, prior year redemption payments, tax refunds, and pass through payments. (4) FY allocations do not reflect pending year-end reconciliation payments that may be received by the end of August. Gross tax increment amount for FY derived from a tax rate of 1.045% as used in the tax increment projection of this Report (i.e. only assumes the Brea City 1978 Paramedics override). Source Data: Orange County Auditor Controller Prepared by Keyser Marston Associates, Inc. Filename: Brea Hist : Levy: 6/6/2011: GSH

102 Table 6 Completed Projects - Value Added Project Area AB Brea Redevelopment Agency Bldg Permit Location Scope SubArea Value I. PERSONAL PROPERTY VALUE Beckman Coulter S Kraemer Bldg 2 Tenant Imp Annex 1,750,000 1,750, Beckman Coulter S Kraemer S Campus Tenant Imp Annex 750, , Brea Gateway Center W Imperial Remodeling Suppl 500, , Ross Stores E Imperial Tenant Imp Annex 800, , Piedmont Office S Placentia Tenant Imp Annex 500, , Brea Union Plaza E Imperial Tenant Imp Annex 500, , Beckman Coulter S Kraemer N Campus Tenant Imp Annex 750, , TOTAL NEW PERSONAL PROPERTY VALUE ADDED 5,550,000 4,800, , II. Personal Property Subtotal Old A Personal Property Subtotal Old B Personal Property Subtotal Annex 5,050,000 4,300, , Personal Property Subtotal Suppl 500, , Total Personal Property Value Added 5,550,000 4,800, , Source: City of Brea Building Safety Prepared by Keyser Marston Associates, Inc. Filename: Brea_AB_TI_ :New Dev: 6/6/2011: GSH: 1 of 1

103 Table 7 Tax Increment Projection Project Area AB - Summary Brea Redevelopment Agency (000's Omitted) Reported I. Real Property Appeal Value Reduction (Table 4) Real Property Growth Total Real Property II. Personal Property/ SBE Appeal Value Reduction (Table 4) New Value Added for ABT (Table 6) Total Personal Property III. Total Project Value Less Base Value Incremental Value Over Base IV. Gross Tax Increment Unitary Tax Total Gross Tax Increment Tax Refunds Due to Appeals Subtotal Amount Exceeding $19M TI Cap V. Total Allocation to Agency at $19M TI Cap SB 2557 County Admin Charge County Tax Sharing (AB Supplement) Statutory Pass Through (Merger) Brea Mall Rebate Net Tax Increment Revenue VI. Redevelopment Fund Deposit to Housing Fund 2,902,447 2,902,447 2,797,567 2,825,543 2,882,054 2,939,695 2,998,489 3,058,458 3,119,628 3,182,020 3,245,661 0 (125,705) ,826 27,976 56,511 57,641 58,794 59,970 61,169 62,393 63,640 64,913 2,902,447 2,797,567 2,825,543 2,882,054 2,939,695 2,998,489 3,058,458 3,119,628 3,182,020 3,245,661 3,310, , , , , , , , , , , ,906 0 (3,355) , , , , , , , , , , , ,906 3,323,157 3,219,723 3,248,448 3,304,959 3,362,600 3,421,394 3,481,364 3,542,533 3,604,926 3,668,566 3,733,479 (320,183) (320,183) (320,183) (320,183) (320,183) (320,183) (320,183) (320,183) (320,183) (320,183) (320,183) 3,002,974 2,899,539 2,928,265 2,984,776 3,042,417 3,101,211 3,161,181 3,222,350 3,284,742 3,348,383 3,413,296 31,379 30,298 30,598 31,188 31,791 32,405 33,032 33,671 34,323 34,988 35, ,620 30,539 30,839 31,429 32,032 32,646 33,273 33,912 34,564 35,229 35,908 (1,771) ,849 30,539 30,839 31,429 32,032 32,646 33,273 33,912 34,564 35,229 35,908 (10,849) (11,539) (11,839) (12,429) (13,032) (13,646) (14,273) (14,912) (15,564) (16,229) (16,908) 19,000 19,000 19,000 19,000 19,000 19,000 19,000 19,000 19,000 19,000 19,000 (302) (293) (296) (301) (307) (313) (319) (325) (331) (338) (344) (508) (508) (508) (508) (508) (508) (508) (508) (508) (508) (508) (93) (93) (93) (93) (93) (93) (93) (93) (93) (93) (93) (1,107) (1,107) (1,107) (1,107) (1,107) (1,107) (1,107) (1,107) (1,107) (1,107) (1,107) 16,990 16,999 16,996 16,990 16,985 16,979 16,973 16,967 16,960 16,954 16,948 13,190 13,199 13,196 13,190 13,185 13,179 13,173 13,167 13,160 13,154 13,148 3,800 3,800 3,800 3,800 3,800 3,800 3,800 3,800 3,800 3,800 3,800 Prepared by Keyser Marston Associates, Inc. Filename: Brea_AB_TI_ : SUM_AB: 6/6/2011: GSH: Page 1 of 3

104 Table 7 Tax Increment Projection Project Area AB - Summary Brea Redevelopment Agency (000's Omitted) I. Real Property Appeal Value Reduction (Table 4) Real Property Growth Total Real Property II. Personal Property/ SBE Appeal Value Reduction (Table 4) New Value Added for ABT (Table 6) Total Personal Property III. Total Project Value Less Base Value Incremental Value Over Base IV. Gross Tax Increment Unitary Tax Total Gross Tax Increment Tax Refunds Due to Appeals Subtotal Amount Exceeding $19M TI Cap V. Total Allocation to Agency at $19M TI Cap SB 2557 County Admin Charge County Tax Sharing (AB Supplement) Statutory Pass Through (Merger) Brea Mall Rebate Net Tax Increment Revenue VI. Redevelopment Fund Deposit to Housing Fund Old A & Old B TI Receipt Limit July 24, ,310,574 3,376,785 3,444,321 3,513,207 3,583,471 2,613,701 2,665,975 2,719,294 2,773,680 2,829,154 2,885, ,211 67,536 68,886 70,264 71,669 52,274 53,319 54,386 55,474 56,583 57,715 3,376,785 3,444,321 3,513,207 3,583,471 3,655,141 2,665,975 2,719,294 2,773,680 2,829,154 2,885,737 2,943, , , , , , , , , , , , , , , , , , , , , , ,046 3,799,691 3,867,227 3,936,113 4,006,377 4,078,047 2,883,020 2,936,340 2,990,726 3,046,199 3,102,783 3,160,497 (320,183) (320,183) (320,183) (320,183) (320,183) (298,741) (298,741) (298,741) (298,741) (298,741) (298,741) 3,479,507 3,547,043 3,615,930 3,686,194 3,757,863 2,584,280 2,637,599 2,691,985 2,747,459 2,804,042 2,861,757 36,360 37,064 37,784 38,519 26,459 27,005 27,562 28,130 28,710 29,301 29, ,601 37,305 38,025 38,760 26,633 27,179 27,736 28,304 28,884 29,475 30, ,601 37,305 38,025 38,760 26,633 27,179 27,736 28,304 28,884 29,475 30,078 (17,601) (18,305) (19,025) (19,760) (7,633) (8,179) (8,736) (9,304) (9,884) (10,475) (11,078) 19,000 19,000 19,000 19,000 19,000 19,000 19,000 19,000 19,000 19,000 19,000 (351) (358) (365) (372) (255) (260) (265) (271) (276) (282) (288) (508) (508) (508) (508) (508) (508) (508) (508) (508) (508) (508) (93) (93) (93) (93) (93) (93) (93) (93) (93) (93) (93) (1,107) ,941 18,041 18,035 18,028 18,144 18,139 18,134 18,128 18,123 18,117 18,111 13,141 14,241 14,235 14,228 14,344 14,339 14,334 14,328 14,323 14,317 14,311 3,800 3,800 3,800 3,800 3,800 3,800 3,800 3,800 3,800 3,800 3,800 Prepared by Keyser Marston Associates, Inc. Filename: Brea_AB_TI_ : SUM_AB: 6/6/2011: GSH: Page 2 of 3

105 Table 7 Tax Increment Projection Project Area AB - Summary Brea Redevelopment Agency (000's Omitted) Annex TI Receipt Limit May 18, 2034 AB Suppl TI Receipt Limit Dec 20, I. Real Property Appeal Value Reduction (Table 4) Real Property Growth Total Real Property II. Personal Property/ SBE Appeal Value Reduction (Table 4) New Value Added for ABT (Table 6) Total Personal Property III. Total Project Value Less Base Value Incremental Value Over Base IV. Gross Tax Increment Unitary Tax Total Gross Tax Increment Tax Refunds Due to Appeals Subtotal Amount Exceeding $19M TI Cap V. Total Allocation to Agency at $19M TI Cap SB 2557 County Admin Charge County Tax Sharing (AB Supplement) Statutory Pass Through (Merger) Brea Mall Rebate Net Tax Increment Revenue VI. Redevelopment Fund Deposit to Housing Fund 2,943,451 3,002,320 1,485,468 1,515,178 1,545, ,869 60,046 29,709 30,304 30,910 3,002,320 3,062,367 1,515,178 1,545,481 1,576, , ,046 39,739 39,739 39, , ,046 39,739 39,739 39,739 3,219,366 3,279,413 1,554,917 1,585,221 1,616,130 (298,741) (298,741) (167,281) (167,281) (167,281) 2,920,626 2,980,672 1,387,636 1,417,939 1,448,849 30,519 31,147 14,500 14, ,693 31,321 14,606 14, ,693 31,321 14,606 14,923 0 (11,693) (12,321) (9,606) (9,923) 0 19,000 19,000 5,000 5,000 0 (294) (300) (139) (142) 0 (508) (508) (508) (508) 0 (93) (93) ,106 18,100 4,353 4, ,306 14,300 3,353 3, ,800 3,800 1,000 1,000 0 Prepared by Keyser Marston Associates, Inc. Filename: Brea_AB_TI_ : SUM_AB: 6/6/2011: GSH: Page 3 of 3

106 Table 8 Tax Increment Projection Project Area AB - Summary Brea Redevelopment Agency (000's Omitted) N O G R O W T H Reported I. Real Property Appeal Value Reduction (Table 4) Real Property Growth Total Real Property II. Personal Property/ SBE Appeal Value Reduction (Table 4) New Value Added for ABT (Table 6) Total Personal Property III. Total Project Value Less Base Value Incremental Value Over Base IV. Gross Tax Increment Unitary Tax Total Gross Tax Increment Tax Refunds Due to Appeals Subtotal Amount Exceeding $19M TI Cap V. Total Allocation to Agency at $19M TI Cap SB 2557 County Admin Charge County Tax Sharing (AB Supplement) Statutory Pass Through (Merger) Brea Mall Rebate Net Tax Increment Revenue VI. Redevelopment Fund Deposit to Housing Fund 2,902,447 2,902,447 2,776,742 2,776,742 2,776,742 2,776,742 2,776,742 2,776,742 2,776,742 2,776,742 2,776,742 0 (125,705) ,902,447 2,776,742 2,776,742 2,776,742 2,776,742 2,776,742 2,776,742 2,776,742 2,776,742 2,776,742 2,776, , , , , , , , , , , ,906 0 (3,355) , , , , , , , , , , , ,906 3,323,157 3,198,897 3,199,647 3,199,647 3,199,647 3,199,647 3,199,647 3,199,647 3,199,647 3,199,647 3,199,647 (320,183) (320,183) (320,183) (320,183) (320,183) (320,183) (320,183) (320,183) (320,183) (320,183) (320,183) 3,002,974 2,878,714 2,879,464 2,879,464 2,879,464 2,879,464 2,879,464 2,879,464 2,879,464 2,879,464 2,879,464 31,379 30,080 30,088 30,088 30,088 30,088 30,088 30,088 30,088 30,088 30, ,620 30,321 30,329 30,329 30,329 30,329 30,329 30,329 30,329 30,329 30,329 (1,771) ,849 30,321 30,329 30,329 30,329 30,329 30,329 30,329 30,329 30,329 30,329 (10,849) (11,321) (11,329) (11,329) (11,329) (11,329) (11,329) (11,329) (11,329) (11,329) (11,329) 19,000 19,000 19,000 19,000 19,000 19,000 19,000 19,000 19,000 19,000 19,000 (302) (291) (291) (291) (291) (291) (291) (291) (291) (291) (291) (508) (508) (508) (508) (508) (508) (508) (508) (508) (508) (508) (93) (93) (93) (93) (93) (93) (93) (93) (93) (93) (93) (1,107) (1,107) (1,107) (1,107) (1,107) (1,107) (1,107) (1,107) (1,107) (1,107) (1,107) 16,990 17,001 17,001 17,001 17,001 17,001 17,001 17,001 17,001 17,001 17,001 13,190 13,201 13,201 13,201 13,201 13,201 13,201 13,201 13,201 13,201 13,201 3,800 3,800 3,800 3,800 3,800 3,800 3,800 3,800 3,800 3,800 3,800 Prepared by Keyser Marston Associates, Inc. Filename: Brea_AB_TI_ _NoGrowth: SUM_AB: 6/6/2011: GSH: Page 1 of 3

107 Table 8 Tax Increment Projection Project Area AB - Summary Brea Redevelopment Agency (000's Omitted) I. Real Property Appeal Value Reduction (Table 4) Real Property Growth Total Real Property II. Personal Property/ SBE Appeal Value Reduction (Table 4) New Value Added for ABT (Table 6) Total Personal Property III. Total Project Value Less Base Value Incremental Value Over Base IV. Gross Tax Increment Unitary Tax Total Gross Tax Increment Tax Refunds Due to Appeals Subtotal Amount Exceeding $19M TI Cap V. Total Allocation to Agency at $19M TI Cap SB 2557 County Admin Charge County Tax Sharing (AB Supplement) Statutory Pass Through (Merger) Brea Mall Rebate Net Tax Increment Revenue VI. Redevelopment Fund Deposit to Housing Fund N O G R O W T H Old A & Old B TI Receipt Limit July 24, ,776,742 2,776,742 2,776,742 2,776,742 2,776,742 1,985,579 1,985,579 1,985,579 1,985,579 1,985,579 1,985, ,776,742 2,776,742 2,776,742 2,776,742 2,776,742 1,985,579 1,985,579 1,985,579 1,985,579 1,985,579 1,985, , , , , , , , , , , , , , , , , , , , , , ,046 3,199,647 3,199,647 3,199,647 3,199,647 3,199,647 2,202,625 2,202,625 2,202,625 2,202,625 2,202,625 2,202,625 (320,183) (320,183) (320,183) (320,183) (320,183) (298,741) (298,741) (298,741) (298,741) (298,741) (298,741) 2,879,464 2,879,464 2,879,464 2,879,464 2,879,464 1,903,884 1,903,884 1,903,884 1,903,884 1,903,884 1,903,884 30,088 30,088 30,088 30,088 19,895 19,895 19,895 19,895 19,895 19,895 19, ,329 30,329 30,329 30,329 20,069 20,069 20,069 20,069 20,069 20,069 20, ,329 30,329 30,329 30,329 20,069 20,069 20,069 20,069 20,069 20,069 20,069 (11,329) (11,329) (11,329) (11,329) (3,838) (3,838) (3,838) (3,838) (3,838) (3,838) (3,838) 19,000 19,000 19,000 19,000 16,231 16,231 16,231 16,231 16,231 16,231 16,231 (291) (291) (291) (291) (192) (192) (192) (192) (192) (192) (192) (508) (508) (508) (508) (508) (508) (508) (508) (508) (508) (508) (93) (93) (93) (93) (93) (93) (93) (93) (93) (93) (93) (1,107) ,001 18,108 18,108 18,108 15,438 15,438 15,438 15,438 15,438 15,438 15,438 13,201 14,308 14,308 14,308 12,192 12,192 12,192 12,192 12,192 12,192 12,192 3,800 3,800 3,800 3,800 3,246 3,246 3,246 3,246 3,246 3,246 3,246 Prepared by Keyser Marston Associates, Inc. Filename: Brea_AB_TI_ _NoGrowth: SUM_AB: 6/6/2011: GSH: Page 2 of 3

108 Table 8 Tax Increment Projection Project Area AB - Summary Brea Redevelopment Agency (000's Omitted) N O G R O W T H Annex TI Receipt Limit May 18, 2034 AB Suppl TI Receipt Limit Dec 20, I. Real Property Appeal Value Reduction (Table 4) Real Property Growth Total Real Property II. Personal Property/ SBE Appeal Value Reduction (Table 4) New Value Added for ABT (Table 6) Total Personal Property III. Total Project Value Less Base Value Incremental Value Over Base IV. Gross Tax Increment Unitary Tax Total Gross Tax Increment Tax Refunds Due to Appeals Subtotal Amount Exceeding $19M TI Cap V. Total Allocation to Agency at $19M TI Cap SB 2557 County Admin Charge County Tax Sharing (AB Supplement) Statutory Pass Through (Merger) Brea Mall Rebate Net Tax Increment Revenue VI. Redevelopment Fund Deposit to Housing Fund 1,985,579 1,985, , , , ,985,579 1,985, , , , , ,046 39,739 39,739 39, , ,046 39,739 39,739 39,739 2,202,625 2,202,625 1,002,888 1,002,888 1,002,888 (298,741) (298,741) (167,281) (167,281) (167,281) 1,903,884 1,903, , , ,607 19,895 19,895 8,732 8, ,069 20,069 8,838 8, ,069 20,069 8,838 8,838 0 (3,838) (3,838) (3,838) (3,838) 0 16,231 16,231 5,000 5,000 0 (192) (192) (84) (84) 0 (508) (508) (508) (508) 0 (93) (93) ,438 15,438 4,408 4, ,192 12,192 3,408 3, ,246 3,246 1,000 1,000 0 Prepared by Keyser Marston Associates, Inc. Filename: Brea_AB_TI_ _NoGrowth: SUM_AB: 6/6/2011: GSH: Page 3 of 3

109 Brea Redevelopment Project Area AB Historic Values by Component Area Table 1-A Old A Table 1-B Old B Table 1-C AB Annex Table 1-D AB Supplement

110 Table 1-A Historic Project Area Assessed Values Old A Brea Redevelopment Agency % % % % % Avg % Chg Chg Chg Chg Chg Chg I. Secured: Land 117,421, ,622, % 196,032, % 221,064, % 230,966, % 225,692, % 13.96% Improvements 227,540, ,815, % 219,592, % 243,598, % 258,558, % 258,041, % 2.55% Personal Property 12,743,432 12,680, % 19,596, % 10,059, % 10,110, % 8,838, % -7.06% Exemptions 3,205,922 3,270, % 3,335, % 3,402, % 3,470, % 8,148, % 20.51% Total Secured 354,498, ,848, % 431,885, % 471,320, % 496,165, % 484,424, % 6.44% II. State Assessed: Land 73,023 60, % % % % % -100% Improvements 54,822 45, % % % % % -100% Personal Property 31,384 25, % % % % % -100% Exemptions % % % % % 0.00% Total State 159, , % % % % % -100% III. Unsecured: Land/Mineral Rts 1,937, , % 214, % 1,661, % 212, % 200, % % Improvements 31,166,190 30,483, % 30,734, % 29,286, % 40,436, % 40,876, % 5.57% Personal Property 52,668,670 56,417, % 56,801, % 59,922, % 65,940, % 69,251, % 5.63% Exemptions % 21, % 11, % % 1,599, % 0.00% Total Unsecured 85,772,588 87,108, % 87,729, % 90,858, % 106,589, % 108,728, % 4.86% IV. Project Value: Land 119,431, ,891, % 196,247, % 222,726, % 231,179, % 225,893, % 13.59% Improvements 258,761, ,343, % 250,326, % 272,885, % 298,994, % 298,918, % 2.93% Personal Property 65,443,486 69,123, % 76,397, % 69,981, % 76,051, % 78,090, % 3.60% Exemptions 3,205,922 3,270, % 3,356, % 3,413, % 3,470, % 9,747, % 24.91% Total Project 440,430, ,088, % 519,614, % 562,179, % 602,755, % 593,153, % 6.13% V. Reported Base Value 20,250,977 20,250, % 19,717, % 19,717, % 19,717, % 19,717, % Incremental Value 420,179, ,837, % 499,896, % 542,462, % 583,037, % 573,436, % 6.42% Source: Orange County Auditor-Controller Prepared by Keyser Marston Associates, Inc. Filename: Brea Hist : HIST: GSH

111 Table 1-B Historic Project Area Assessed Values Old B Brea Redevelopment Agency % % % % % Avg % Chg Chg Chg Chg Chg Chg I. Secured: Land 61,843,634 91,821, % 82,959, % 78,601, % 80,173, % 79,983, % 5.28% Improvements 254,755, ,482, % 248,170, % 242,473, % 249,606, % 249,184, % -0.44% Personal Property 5,062,643 5,849, % 13,079, % 10,575, % 10,340, % 9,702, % 13.89% Exemptions % % % % % 0.00% Total Secured 321,662, ,152, % 344,209, % 331,650, % 340,121, % 338,870, % 1.05% II. State Assessed: Land % % % % % 0% Improvements % % % % % 0% Personal Property % % % % % 0% Exemptions % % % % % 0% Total State % % % % % 0% III. Unsecured: Land 253, , % 451, % 268, % 256, % 170, % -7.57% Improvements 36,352,310 35,905, % 33,888, % 41,111, % 39,782, % 50,153, % 6.65% Personal Property 21,925,669 21,839, % 29,003, % 27,313, % 35,771, % 30,673, % 6.95% Exemptions % % % % 35, % 0.00% Total Unsecured 58,531,184 58,016, % 63,343, % 68,694, % 75,810, % 80,962, % 6.70% IV. Project Value: Land 62,096,839 92,092, % 83,411, % 78,869, % 80,429, % 80,154, % 5.24% Improvements 291,108, ,387, % 282,059, % 283,585, % 289,388, % 299,338, % 0.56% Personal Property 26,988,312 27,688, % 42,082, % 37,888, % 46,112, % 40,375, % 8.39% Exemptions % % % % 35, % 0.00% Total Project 380,193, ,169, % 407,553, % 400,344, % 415,931, % 419,833, % 2.00% V. Reported Base Value 1,725,489 1,725, % 1,725, % 1,725, % 1,725, % 1,725, % Incremental Value 378,467, ,443, % 405,827, % 398,618, % 414,205, % 418,107, % 2.01% Source: Orange County Auditor-Controller Prepared by Keyser Marston Associates, Inc. Filename: Brea Hist : HIST: GSH

112 Table 1-C Historic Project Area Assessed Values AB Annexation Brea Redevelopment Agency % % % % % Avg % Chg Chg Chg Chg Chg Chg I. Secured: Land 332,018, ,533, % 517,537, % 533,007, % 537,688, % 530,256, % 9.82% Improvements 564,678, ,989, % 585,695, % 606,369, % 624,835, % 604,843, % 1.38% Personal Property 32,901,452 35,167, % 36,118, % 37,848, % 35,727, % 81,129, % 19.78% Exemptions % % 4,860, % 5,508, % 13,845, % 0.00% Total Secured 929,598,264 1,186,690, % 1,139,351, % 1,172,365, % 1,192,744, % 1,202,383, % 5.28% II. State Assessed: Land 34,940 28, % % % % % -100% Improvements 26,232 21, % % % % % -100% Personal Property 15,017 12, % % % % % -100% Exemptions % % % % % 0% Total State 76,189 62, % % % % % -100% III. Unsecured: Land 586, , % 580, % 2,272, % 575, % 468, % -4.39% Improvements 19,081,550 21,669, % 24,811, % 25,285, % 25,846, % 25,881, % 6.29% Personal Property 77,488,521 85,378, % 89,418, % 80,182, % 69,611, % 65,295, % -3.37% Exemptions 7,174 6, % 5, % 4, % 3, % 17, % 19.06% Total Unsecured 97,149, ,628, % 114,805, % 107,736, % 96,029, % 91,628, % -1.16% IV. Project Value: Land 332,640, ,148, % 518,118, % 535,280, % 538,263, % 530,725, % 9.79% Improvements 583,786, ,680, % 610,506, % 631,654, % 650,682, % 630,724, % 1.56% Personal Property 110,404, ,557, % 125,537, % 118,030, % 105,338, % 146,425, % 5.81% Exemptions 7,174 6, % 5, % 4,864, % 5,511, % 13,863, % % Total Project 1,026,824,343 1,294,380, % 1,254,157, % 1,280,101, % 1,288,773, % 1,294,011, % 4.73% V. Reported Base Value 131,480, ,480, % 131,459, % 131,459, % 131,459, % 131,459, % Incremental Value 895,343,619 1,162,900, % 1,122,697, % 1,148,642, % 1,157,314, % 1,162,552, % 5.36% Source: Orange County Auditor-Controller Prepared by Keyser Marston Associates, Inc. Filename: Brea Hist : HIST: GSH

113 Table 1-D Historic Project Area Assessed Values AB Supplement (Consolidated) Brea Redevelopment Agency % % % % % Avg % Chg Chg Chg Chg Chg Chg I. Secured: Land 471,141, ,153, % 576,870, % 605,880, % 586,642, % 583,639, % 4.38% Improvements 357,707, ,550, % 389,227, % 418,434, % 427,668, % 428,523, % 3.68% Personal Property 758, , % 750, % 682, % 755, % 794, % 0.92% Exemptions 20,068,132 20,872, % 21,693, % 23,605, % 37,325, % 35,724, % 12.23% Total Secured 809,539, ,573, % 945,154, % 1,001,392, % 977,740, % 977,233, % 3.84% II. State Assessed: Land 2,153,143 2,142, % 2,095, % 414, % 414, % 414, % % Improvements 43,403 35, % % % % % -100% Personal Property 24,847 20, % % % % % -100% Exemptions % % % % % 0% Total State 2,221,393 2,198, % 2,095, % 414, % 414, % 414, % % III. Unsecured: Land 1,092, , % 1,438, % 3,544, % 5,156, % 3,180, % 23.83% Improvements 15,467,542 18,721, % 14,303, % 18,115, % 17,472, % 14,593, % -1.16% Personal Property 24,458,784 20,895, % 25,737, % 21,788, % 19,822, % 21,031, % -2.97% Exemptions 110, , % 190, % 180, % 222, % 294, % 21.73% Total Unsecured 40,908,160 40,341, % 41,288, % 43,267, % 42,228, % 38,509, % -1.20% IV. Project Value: Land 474,387, ,154, % 580,403, % 609,839, % 592,213, % 587,234, % 4.36% Improvements 373,218, ,307, % 403,530, % 436,549, % 445,140, % 443,116, % 3.49% Personal Property 25,242,623 21,657, % 26,488, % 22,470, % 20,577, % 21,825, % -2.87% Exemptions 20,178,512 21,006, % 21,884, % 23,785, % 37,547, % 36,019, % 12.29% Total Project 852,669, ,113, % 988,538, % 1,045,074, % 1,020,384, % 1,016,158, % 3.57% V. Reported Base Value 169,449, ,371, % 169,062, % 167,455, % 167,281, % 167,281, % Incremental Value 683,219, ,741, % 819,476, % 877,619, % 853,103, % 848,876, % 4.44% Source: Orange County Auditor-Controller Prepared by Keyser Marston Associates, Inc. Filename: Brea Hist : HIST: GSH

114 Brea Redevelopment Project Area AB Values by Land Use Table 2-A Old A Table 2-B Old B Table 2-C AB Annex Table 2-D AB Supplement

115 Table 2-A FY Assessed Values by Land Use Old A Brea Redevelopment Agency Record Land Use Assessed Value % of Total Count 1 Commercial 77,157, % 21 2 Industrial 407,246, % Miscellaneous, Rural or Vacant 21, % 4 4 Unsecured 108,728, % 1,991 5 Total Old A 593,153, % 2,201 Industrial 69% Miscellaneous, Rural or Vacant 0% Unsecured 18% Commercial 13% Source: Orange County Assessor Prepared by Keyser Marston Associates, Inc. Filename: Brea Uses Old A: Sec Uses: 6/6/2011: GSH

116 Table 2-B FY Assessed Values by Land Use Old B Brea Redevelopment Agency Record Land Use Assessed Value % of Total Count 1 Commercial 338,870, % 26 2 Public & Government-Owned - 0.0% 4 3 Unsecured 80,962, % 1,991 4 Total Old B 419,833, % 2,021 Commercial 81% Public & Government-Owned 0% Unsecured 19% Source: Orange County Assessor Prepared by Keyser Marston Associates, Inc. Filename: Brea Uses Old B: Sec Uses: 6/6/2011: GSH

117 Table 2-C FY Assessed Values by Land Use AB Annexation Brea Redevelopment Agency Record Land Use Assessed Value % of Total Count 1 Commercial 554,565, % 86 2 Industrial 431,386, % Residential Single Family 192,365, % Miscellaneous, Rural or Vacant 24,066, % 25 5 Unsecured 91,628, % 1,991 6 Total AB Annex 1,294,011, % 2,588 Industrial 33% Residential Single Family 15% Commercial 43% Unsecured 7% Miscellaneous, Rural or Vacant 2% Source: Orange County Assessor Prepared by Keyser Marston Associates, Inc. Filename: Brea Uses Annex A: Sec Uses: 6/6/2011: GSH

118 Table 2-D FY Assessed Values by Land Use AB Supplement (Consolidated) Brea Redevelopment Agency Record Land Use Assessed Value % of Total Count 1 Commercial 221,638, % Industrial 7,179, % 13 3 Residential Single Family 630,157, % 2,484 4 Residential Multi-Family/Other 118,216, % Miscellaneous, Rural or Vacant 455, % 3 6 Unsecured 38,509, % 1,991 7 Total AB Supplement 1,016,158, % 4,866 Residential Single Family 62% Residential Multi- Family/Other 11% Industrial 1% Commercial 22% Miscellaneous, Rural Unsecured or Vacant 4% 0% Source: Orange County Assessor Prepared by Keyser Marston Associates, Inc. Filename: Brea Uses Consol: Sec Uses: 6/6/2011: GSH

119 Brea Redevelopment Project Area AB Top 10 Taxpayers Table 3-A Old A Table 3-B Old B Table 3-C AB Annex Table 3-D AB Supplement

120 Table 3-A Ten Largest Taxpayers FY Old A Brea Redevelopment Agency Estimated % of % of Appeal Total Project Reduction No. of Parcels Assessed Project Incremental Exposure Assessee Name Description Sec Uns Value Value (1) Value (2) (Table 4) 1 New Albertsons Inc Industrial 6 3 $147,908, % 25.79% 2 Evangelical Christian Commercial ,015, % 7.15% 3 Mercury Casualty Co Commercial & Industrial 4 30,303, % 5.28% 4 Puente Street LLC Industrial 2 22,656, % 3.95% (3,406,026) 5 Sekisui Ta Industries LLC Industrial ,021, % 3.84% 6 AMB Institutional Commercial & Industrial 4 20,892, % 3.64% 7 Simpson Manufacturing Co Industrial 6 20,857, % 3.64% 8 Bonita Puente LLC Commercial 1 13,988, % 2.44% 9 Brea Imperial INC Commercial 1 11,895, % 2.07% (2,592,350) 10 WCP Puente LLC Commercial 20 9,100, % 1.59% TOTAL OLD A 47 9 $340,640, % 59.40% ($5,998,376) Source: Orange County Assessor and Orange County Auditor-Controller. (1) Based upon Fiscal Year project value of $593,153,964. (2) Based upon Fiscal Year incremental value of $573,436,684. Prepared by Keyser Marston Associates, Inc. Filename: Brea Top Old A: 1011 Sum: 6/6/2011: NYM

121 Table 3-B Ten Largest Taxpayers FY Old B Brea Redevelopment Agency Estimated % of % of Appeal Total Project Reduction No. of Parcels Assessed Project Incremental Exposure Assessee Name Description Sec Uns Value Value (1) Value (2) (Table 4) 1 Retail Property Trust Regional Shopping Center 6 $206,140, % 49.30% 2 Nesbitt Partners Brea Commercial 3 31,326, % 7.49% 3 Nordstrom INC Commercial 3 28,314, % 6.77% (1,794,023) 4 Macy's California INC Commercial ,691, % 5.67% (3,874,602) 5 Sears Roebuck & CO Commercial ,538, % 4.43% 6 Ansue LLC Commercial 1 18,475, % 4.42% 7 Apple Computer INC Commercial 3 8,584, % 2.05% 8 JC Penny Corporation Commercial 4 5,790, % 1.38% 9 Windsor Capital Group 40 Commercial 1 4,611, % 1.10% 10 Target Corporation Commercial 1 3,309, % 0.79% TOTAL OLD B $348,781, % 83.42% ($5,668,625) Source: Orange County Assessor and Orange County Auditor-Controller. (1) Based upon Fiscal Year project value of $419,833,408. (2) Based upon Fiscal Year incremental value of $418,107,919. Prepared by Keyser Marston Associates, Inc. Filename: Brea Top Old B: 1011 Sum: 6/6/2011: NYM

122 Table 3-C Ten Largest Taxpayers FY AB Annexation Brea Redevelopment Agency 2010 Est Est. % of % of Appeal Appeal Total Project Reduction Reduction No. of Parcels Assessed Project Incremental Exposure Exposure Assessee Name Description Sec Uns Value Value (1) Value (2) (Table 4) (Table 4) 1 Beckman Instruments INC Commercial & Vacant 2 1 $155,575, % 13.38% 2 Acquiport Brea LP Industrial 2 122,301, % 10.52% (26,652,075) 3 La Floresta LLC Industrial & Agricultural 8 89,988, % 7.74% (40,362,672) 4 Brea Union Plaza Commercial 13 78,865, % 6.78% 5 ICE Holdings LLC Commercial 3 49,180, % 4.23% 6 Abbey III Brea LLC Commercial ,604, % 3.84% (12,970,030) 7 American Suzuki Motor Commercial ,680, % 3.24% (7,150,548) 8 AEW LT Brea Imperial Commercial 2 31,310, % 2.69% (2,504,572) 9 FE Colyear Properties Commercial & Industrial 4 30,703, % 2.64% 10 Wells REIT CA LP Commercial 2 25,698, % 2.21% (551,048) (3,114,465) TOTAL AB ANNEX 48 7 $665,907, % 57.28% ($34,353,671) ($58,951,739) Source: Orange County Assessor and Orange County Auditor-Controller. (1) Based upon Fiscal Year project value of $1,294,011,799. (2) Based upon Fiscal Year incremental value of $1,162,552,645. Prepared by Keyser Marston Associates, Inc. Filename: Brea Top Annex: 1011 Sum: 6/6/2011: NYM

123 Table 3-D Ten Largest Taxpayers FY AB Supplement (Consolidated) Brea Redevelopment Agency Estimated % of % of Appeal Total Project Reduction No. of Parcels Assessed Project Incremental Exposure Assessee Name Description Sec Uns Value Value (1) Value (2) (Table 4) 1 Brea Gateway Center Commercial 13 $23,460, % 2.76% ($1,134,987) 2 Edwards Theaters Circuit Commercial ,434, % 2.17% 3 Pall Mall House Multi-Family Residential 2 9,906, % 1.17% 4 MM Brea LLC Commercial 3 9,583, % 1.13% (2,088,138) S Brea Blvd LLC Commercial 1 8,692, % 1.02% (1,894,374) 6 WRG Group LLC Multi-Family Residential 2 8,632, % 1.02% 7 Mariposa Investment CORP Commercial 3 7,926, % 0.93% 8 260/330 W Birch St LLC Commercial 1 7,784, % 0.92% (1,269,644) 9 MP Apartments LLC Multi-Family Residential 1 6,619, % 0.78% 10 Brea Village Shopping Commercial 2 6,383, % 0.75% TOTAL AB SUPPLEMENT 30 2 $107,424, % 12.65% ($6,387,143) Source: Orange County Assessor and Orange County Auditor-Controller. (1) Based upon Fiscal Year project value of $1,016,158,077. (2) Based upon Fiscal Year incremental value of $848,876,579. Prepared by Keyser Marston Associates, Inc. Filename: Brea Top Consol: 1011 Sum: 6/6/2011: NYM

124 Brea Redevelopment Project Area AB Tax Increment Revenue Projection Table 7-A Merger (Old A, Old B, Annex) Table 7-B Old A Table 7-C Old B Table 7-D AB Annex Table 7-E AB Supplement

125 Table 7-A Tax Increment Projection Old A/ Old B/ Annex Merger Brea Redevelopment Agency (000's Omitted) Reported I. Real Property Appeal Value Reduction (Table 4) Real Property Growth Total Real Property II. Personal Property/ SBE Appeal Value Reduction (Table 4) New Value Added for ABT (Table 6) Total Personal Property III. Total Project Value Less Base Value Incremental Value Over Base IV. Gross Tax Increment Unitary Tax Total Gross Tax Increment Tax Refunds Due to Appeals Total Allocation Before $14M TI Cap Amount Exceeding $14M TI Cap V. Tax Increment to Agency SB 2557 Fee at 0.96% Statutory Pass Through Trigger Brea Mall Rebate Net After Pass Throughs VI. Redevelopment Fund Deposit to Housing Fund 1,926,008 1,926,008 1,827,195 1,845,467 1,882,376 1,920,024 1,958,424 1,997,593 2,037,544 2,078,295 2,119,861 2,162,258 0 (112,415) ,602 18,272 36,909 37,648 38,400 39,168 39,952 40,751 41,566 42,397 43,245 1,926,008 1,827,195 1,845,467 1,882,376 1,920,024 1,958,424 1,997,593 2,037,544 2,078,295 2,119,861 2,162,258 2,205, , , , , , , , , , , , ,166 0 (2,875) , , , , , , , , , , , , ,166 2,306,999 2,209,611 2,228,633 2,265,542 2,303,190 2,341,590 2,380,759 2,420,711 2,461,462 2,503,028 2,545,425 2,588,670 (152,902) (152,902) (152,902) (152,902) (152,902) (152,902) (152,902) (152,902) (152,902) (152,902) (152,902) (152,902) 2,154,097 2,056,709 2,075,731 2,112,640 2,150,288 2,188,688 2,227,857 2,267,809 2,308,560 2,350,126 2,392,523 2,435,768 22,509 21,491 21,690 22,075 22,469 22,870 23,279 23,697 24,122 24,557 25,000 25, ,642 21,624 21,823 22,208 22,602 23,003 23,412 23,830 24,255 24,690 25,133 25,586 (1,583) ,059 21,624 21,823 22,208 22,602 23,003 23,412 23,830 24,255 24,690 25,133 25,586 (7,059) (7,624) (7,823) (8,208) (8,602) (9,003) (9,412) (9,830) (10,255) (10,690) (11,133) (11,586) 14,000 14,000 14,000 14,000 14,000 14,000 14,000 14,000 14,000 14,000 14,000 14,000 (218) (208) (210) (214) (218) (222) (226) (230) (234) (238) (242) (246) (93) (93) (93) (93) (93) (93) (93) (93) (93) (93) (93) (93) (1,107) (1,107) (1,107) (1,107) (1,107) (1,107) (1,107) (1,107) (1,107) (1,107) (1,107) (1,107) 13,690 13,699 13,697 13,693 13,690 13,686 13,682 13,678 13,674 13,670 13,665 13,661 10,890 10,899 10,897 10,893 10,890 10,886 10,882 10,878 10,874 10,870 10,865 10,861 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 Prepared by Keyser Marston Associates, Inc. Filename: Brea_AB_TI_ : A&B&Annex: 6/6/2011: GSH: 1 of 2

126 Table 7-A Tax Increment Projection Old A/ Old B/ Annex Merger Brea Redevelopment Agency (000's Omitted) Old A & Old B TI Receipt Limit July 24, 2025 Annex TI Receipt Limit May 18, I. Real Property Appeal Value Reduction (Table 4) Real Property Growth Total Real Property II. Personal Property/ SBE Appeal Value Reduction (Table 4) New Value Added for ABT (Table 6) Total Personal Property III. Total Project Value Less Base Value Incremental Value Over Base IV. Gross Tax Increment Unitary Tax Total Gross Tax Increment Tax Refunds Due to Appeals Total Allocation Before $14M TI Cap Amount Exceeding $14M TI Cap V. Tax Increment to Agency SB 2557 Fee at 0.96% Statutory Pass Through Trigger Brea Mall Rebate Net After Pass Throughs VI. Redevelopment Fund Deposit to Housing Fund 2,205,504 2,249,614 2,294,606 2,340,498 1,345,868 1,372,785 1,400,241 1,428,246 1,456,811 1,485,947 1,515,666 1,545, ,110 44,992 45,892 46,810 26,917 27,456 28,005 28,565 29,136 29,719 30,313 30,920 2,249,614 2,294,606 2,340,498 2,387,308 1,372,785 1,400,241 1,428,246 1,456,811 1,485,947 1,515,666 1,545,979 1,576, , , , , , , , , , , , , , , , , , , , , , , , ,306 2,632,780 2,677,772 2,723,664 2,770,474 1,550,092 1,577,547 1,605,552 1,634,117 1,663,253 1,692,972 1,723,285 1,754,205 (152,902) (152,902) (152,902) (152,902) (131,459) (131,459) (131,459) (131,459) (131,459) (131,459) (131,459) (131,459) 2,479,878 2,524,870 2,570,762 2,617,572 1,418,632 1,446,088 1,474,093 1,502,658 1,531,794 1,561,513 1,591,826 1,622,746 25,913 26,383 26,863 14,543 14,824 15,111 15,404 15,702 16,007 16,317 16,634 16, ,046 26,516 26,996 14,610 14,891 15,178 15,471 15,769 16,074 16,384 16,701 17, ,046 26,516 26,996 14,610 14,891 15,178 15,471 15,769 16,074 16,384 16,701 17,024 (12,046) (12,516) (12,996) (610) (891) (1,178) (1,471) (1,769) (2,074) (2,384) (2,701) (3,024) 14,000 14,000 14,000 14,000 14,000 14,000 14,000 14,000 14,000 14,000 14,000 14,000 (251) (255) (260) (141) (143) (146) (149) (152) (155) (158) (161) (164) (93) (93) (93) (93) (93) (93) (93) (93) (93) (93) (93) (93) ,657 13,652 13,647 13,767 13,764 13,761 13,758 13,756 13,753 13,750 13,747 13,743 10,857 10,852 10,847 10,967 10,964 10,961 10,958 10,956 10,953 10,950 10,947 10,943 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 Prepared by Keyser Marston Associates, Inc. Filename: Brea_AB_TI_ : A&B&Annex: 6/6/2011: GSH: 2 of 2

127 Table 7-B Tax Increment Projection Old A Only Brea Redevelopment Agency (000's Omitted) Reported I. Real Property Appeal Value Reduction (Table 4) Real Property Growth Total Real Property II. Personal Property/ SBE Appeal Value Reduction (Table 4) Total Personal Property III. Total Project Value Less Base Value Incremental Value Over Base Tax Rate IV. Gross Tax Increment Unitary Tax Total Gross Tax Increment Tax Refunds Due to Appeals Total Allocation Before $14M TI Cap 475, , , , , , , , , , ,667 0 (8,755) ,501 4,703 9,501 9,691 9,885 10,082 10,284 10,490 10,699 10, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,148 (19,717) (19,717) (19,717) (19,717) (19,717) (19,717) (19,717) (19,717) (19,717) (19,717) (19,717) 573, , , , , , , , , , , % 1.045% 1.045% 1.045% 1.045% 1.045% 1.045% 1.045% 1.045% 1.045% 1.045% 5,992 5,937 5,986 6,085 6,187 6,290 6,395 6,503 6,612 6,724 6, ,032 5,977 6,026 6,125 6,227 6,330 6,435 6,543 6,652 6,764 6,878 (143) ,889 5,977 6,026 6,125 6,227 6,330 6,435 6,543 6,652 6,764 6,878 Prepared by Keyser Marston Associates, Inc. Filename: Brea_AB_TI_ : Old A: 6/6/2011: GSH: 1 of 2

128 Table 7-B Tax Increment Projection Old A Only Brea Redevelopment Agency (000's Omitted) Old A TI Receipt Limit July 24, I. Real Property Appeal Value Reduction (Table 4) Real Property Growth Total Real Property II. Personal Property/ SBE Appeal Value Reduction (Table 4) Total Personal Property III. Total Project Value Less Base Value Incremental Value Over Base Tax Rate IV. Gross Tax Increment Unitary Tax Total Gross Tax Increment Tax Refunds Due to Appeals Total Allocation Before $14M TI Cap 556, , , , , ,132 11,354 11,581 11,813 12, , , , , , , , , , , , , , , , , , , , ,077 (19,717) (19,717) (19,717) (19,717) (19,717) 665, , , , , % 1.045% 1.045% 1.045% 1.045% 6,955 7,073 7,194 7, ,995 7,113 7,234 7, ,995 7,113 7,234 7,358 0 Prepared by Keyser Marston Associates, Inc. Filename: Brea_AB_TI_ : Old A: 6/6/2011: GSH: 2 of 2

129 Table 7-C Tax Increment Projection Old B Only Brea Redevelopment Agency (000's Omitted) Reported I. Real Property Appeal Value Reduction (Table 4) Real Property Growth Total Real Property II. Personal Property/ SBE Appeal Value Reduction (Table 4) Total Personal Property III. Total Project Value Less Base Value Incremental Value Over Base Tax Rate IV. Gross Tax Increment Unitary Tax Total Gross Tax Increment Tax Refunds Due to Appeals Total Allocation Before $14M TI Cap 329, , , , , , , , , , ,103 0 (4,837) ,432 3,268 6,601 6,733 6,867 7,005 7,145 7,288 7,433 7, , , , , , , , , , , ,685 90,665 90,665 88,292 88,292 88,292 88,292 88,292 88,292 88,292 88,292 88,292 0 (2,373) ,665 88,292 88,292 88,292 88,292 88,292 88,292 88,292 88,292 88,292 88, , , , , , , , , , , ,977 (1,725) (1,725) (1,725) (1,725) (1,725) (1,725) (1,725) (1,725) (1,725) (1,725) (1,725) 418, , , , , , , , , , , % 1.045% 1.045% 1.045% 1.045% 1.045% 1.045% 1.045% 1.045% 1.045% 1.045% 4,369 4,319 4,353 4,422 4,492 4,564 4,637 4,712 4,788 4,866 4, ,395 4,345 4,379 4,448 4,518 4,590 4,663 4,738 4,814 4,892 4,971 (176) ,219 4,345 4,379 4,448 4,518 4,590 4,663 4,738 4,814 4,892 4,971 Prepared by Keyser Marston Associates, Inc. Filename: Brea_AB_TI_ : Old B: 6/6/2011: GSH: 1 of 2

130 Table 7-C Tax Increment Projection Old B Only Brea Redevelopment Agency (000's Omitted) Old B TI Receipt Limit July 24, I. Real Property Appeal Value Reduction (Table 4) Real Property Growth Total Real Property II. Personal Property/ SBE Appeal Value Reduction (Table 4) Total Personal Property III. Total Project Value Less Base Value Incremental Value Over Base Tax Rate IV. Gross Tax Increment Unitary Tax Total Gross Tax Increment Tax Refunds Due to Appeals Total Allocation Before $14M TI Cap 386, , , , , ,734 7,888 8,046 8,207 8, , , , , ,931 88,292 88,292 88,292 88,292 88, ,292 88,292 88,292 88,292 88, , , , , ,223 (1,725) (1,725) (1,725) (1,725) (1,725) 480, , , , , % 1.045% 1.045% 1.045% 1.045% 5,026 5,108 5,192 5, ,052 5,134 5,218 5, ,052 5,134 5,218 5,304 0 Prepared by Keyser Marston Associates, Inc. Filename: Brea_AB_TI_ : Old B: 6/6/2011: GSH: 2 of 2

131 Table 7-D Tax Increment Projection AB Annex Only Brea Redevelopment Agency (000's Omitted) Reported I. Real Property Appeal Value Reduction (Table 4) Real Property Growth Total Real Property II. Personal Property/ SBE Appeal Value Reduction (Table 4) New Value Added for ABT (Table 6) Total Personal Property III. Total Project Value Less Base Value Incremental Value Over Base Tax Rate IV. Gross Tax Increment Unitary Tax Total Gross Tax Increment Tax Refunds Due to Appeals Total Allocation Before $14M TI Cap 1,121,253 1,121,253 1,030,099 1,040,400 1,061,208 1,082,432 1,104,080 1,126,162 1,148,685 1,171,659 1,195,092 1,218,994 0 (98,823) ,668 10,301 20,808 21,224 21,649 22,082 22,523 22,974 23,433 23,902 24,380 1,121,253 1,030,099 1,040,400 1,061,208 1,082,432 1,104,080 1,126,162 1,148,685 1,171,659 1,195,092 1,218,994 1,243, , , , , , , , , , , , ,306 0 (502) , , , , , , , , , , , , ,306 1,294,012 1,206,655 1,217,706 1,238,514 1,259,738 1,281,387 1,303,468 1,325,992 1,348,965 1,372,399 1,396,300 1,420,680 (131,459) (131,459) (131,459) (131,459) (131,459) (131,459) (131,459) (131,459) (131,459) (131,459) (131,459) (131,459) 1,162,553 1,075,196 1,086,247 1,107,055 1,128,279 1,149,928 1,172,009 1,194,532 1,217,506 1,240,939 1,264,841 1,289, % 1.045% 1.045% 1.045% 1.045% 1.045% 1.045% 1.045% 1.045% 1.045% 1.045% 1.045% 12,148 11,235 11,351 11,568 11,790 12,016 12,247 12,482 12,722 12,967 13,217 13, ,215 11,302 11,418 11,635 11,857 12,083 12,314 12,549 12,789 13,034 13,284 13,539 (1,264) ,951 11,302 11,418 11,635 11,857 12,083 12,314 12,549 12,789 13,034 13,284 13,539 Prepared by Keyser Marston Associates, Inc. Filename: Brea_AB_TI_ : Annex: 6/6/2011: GSH: 1 of 2

132 Table 7-D Tax Increment Projection AB Annex Only Brea Redevelopment Agency (000's Omitted) Annex TI Receipt Limit May 18, I. Real Property Appeal Value Reduction (Table 4) Real Property Growth Total Real Property II. Personal Property/ SBE Appeal Value Reduction (Table 4) New Value Added for ABT (Table 6) Total Personal Property III. Total Project Value Less Base Value Incremental Value Over Base Tax Rate IV. Gross Tax Increment Unitary Tax Total Gross Tax Increment Tax Refunds Due to Appeals Total Allocation Before $14M TI Cap 1,243,374 1,268,241 1,293,606 1,319,478 1,345,868 1,372,785 1,400,241 1,428,246 1,456,811 1,485,947 1,515,666 1,545, ,867 25,365 25,872 26,390 26,917 27,456 28,005 28,565 29,136 29,719 30,313 30,920 1,268,241 1,293,606 1,319,478 1,345,868 1,372,785 1,400,241 1,428,246 1,456,811 1,485,947 1,515,666 1,545,979 1,576, , , , , , , , , , , , , , , , , , , , , , , , ,306 1,445,548 1,470,913 1,496,785 1,523,174 1,550,092 1,577,547 1,605,552 1,634,117 1,663,253 1,692,972 1,723,285 1,754,205 (131,459) (131,459) (131,459) (131,459) (131,459) (131,459) (131,459) (131,459) (131,459) (131,459) (131,459) (131,459) 1,314,089 1,339,453 1,365,325 1,391,715 1,418,632 1,446,088 1,474,093 1,502,658 1,531,794 1,561,513 1,591,826 1,622, % 1.045% 1.045% 1.045% 1.045% 1.045% 1.045% 1.045% 1.045% 1.045% 1.045% 1.045% 13,732 13,997 14,267 14,543 14,824 15,111 15,404 15,702 16,007 16,317 16,634 16, ,799 14,064 14,334 14,610 14,891 15,178 15,471 15,769 16,074 16,384 16,701 17, ,799 14,064 14,334 14,610 14,891 15,178 15,471 15,769 16,074 16,384 16,701 17,024 Prepared by Keyser Marston Associates, Inc. Filename: Brea_AB_TI_ : Annex: 6/6/2011: GSH: 2 of 2

133 Table 7-E Tax Increment Projection AB Supplement Only Brea Redevelopment Agency (000's Omitted) Reported I. Real Property Appeal Value Reduction (Table 4) Real Property Growth Total Real Property II. Personal Property/ SBE Appeal Value Reduction (Table 4) New Value Added for ABT (Table 6) Total Personal Property III. Total Project Value Less Base Value Incremental Value Over Base Tax Rate IV. Gross Tax Increment Unitary Tax Total Gross Tax Increment Tax Refunds Due to Appeals Total Allocation Before $5M TI Cap Amount Exceeding $5M TI Cap V. Tax Increment to Agency SB 2557 Fee at 0.95% County Tax Sharing Statutory Pass Through Trigger Net After Pass Throughs 976, , , , ,678 1,019,671 1,040,065 1,060,866 1,082,083 1,103,725 1,125,799 0 (13,290) ,224 9,704 19,602 19,994 20,393 20,801 21,217 21,642 22,074 22, , , , ,678 1,019,671 1,040,065 1,060,866 1,082,083 1,103,725 1,125,799 1,148,315 39,719 39,719 39,739 39,739 39,739 39,739 39,739 39,739 39,739 39,739 39,739 0 (480) ,719 39,739 39,739 39,739 39,739 39,739 39,739 39,739 39,739 39,739 39,739 1,016,158 1,010,112 1,019,815 1,039,417 1,059,410 1,079,804 1,100,605 1,121,823 1,143,464 1,165,539 1,188,055 (167,281) (167,281) (167,281) (167,281) (167,281) (167,281) (167,281) (167,281) (167,281) (167,281) (167,281) 848, , , , , , , , , ,257 1,020, % 1.045% 1.045% 1.045% 1.045% 1.045% 1.045% 1.045% 1.045% 1.045% 1.045% 8,870 8,807 8,908 9,113 9,322 9,535 9,753 9,974 10,201 10,431 10, ,976 8,913 9,014 9,219 9,428 9,641 9,859 10,080 10,307 10,537 10,773 (188) ,788 8,913 9,014 9,219 9,428 9,641 9,859 10,080 10,307 10,537 10,773 (3,788) (3,913) (4,014) (4,219) (4,428) (4,641) (4,859) (5,080) (5,307) (5,537) (5,773) 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 (84) (85) (86) (87) (89) (91) (94) (96) (98) (100) (102) (508) (508) (508) (508) (508) (508) (508) (508) (508) (508) (508) ,407 4,407 4,406 4,404 4,402 4,400 4,398 4,396 4,394 4,392 4,390 VI. Redevelopment Fund Deposit to Housing Fund 3,407 3,407 3,406 3,404 3,402 3,400 3,398 3,396 3,394 3,392 3,390 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 Prepared by Keyser Marston Associates, Inc. Filename: Brea_AB_TI_ :SUPPL: 6/6/2011: GSH: 1 of 3

134 Table 7-E Tax Increment Projection AB Supplement Only Brea Redevelopment Agency (000's Omitted) I. Real Property Appeal Value Reduction (Table 4) Real Property Growth Total Real Property II. Personal Property/ SBE Appeal Value Reduction (Table 4) New Value Added for ABT (Table 6) Total Personal Property III. Total Project Value Less Base Value Incremental Value Over Base Tax Rate IV. Gross Tax Increment Unitary Tax Total Gross Tax Increment Tax Refunds Due to Appeals Total Allocation Before $5M TI Cap Amount Exceeding $5M TI Cap V. Tax Increment to Agency SB 2557 Fee at 0.95% County Tax Sharing Statutory Pass Through Trigger Net After Pass Throughs 1,148,315 1,171,282 1,194,707 1,218,601 1,242,973 1,267,833 1,293,190 1,319,053 1,345,434 1,372,343 1,399, ,966 23,426 23,894 24,372 24,859 25,357 25,864 26,381 26,909 27,447 27,996 1,171,282 1,194,707 1,218,601 1,242,973 1,267,833 1,293,190 1,319,053 1,345,434 1,372,343 1,399,790 1,427,786 39,739 39,739 39,739 39,739 39,739 39,739 39,739 39,739 39,739 39,739 39, ,739 39,739 39,739 39,739 39,739 39,739 39,739 39,739 39,739 39,739 39,739 1,211,021 1,234,447 1,258,341 1,282,713 1,307,572 1,332,929 1,358,793 1,385,174 1,412,082 1,439,529 1,467,525 (167,281) (167,281) (167,281) (167,281) (167,281) (167,281) (167,281) (167,281) (167,281) (167,281) (167,281) 1,043,739 1,067,165 1,091,059 1,115,431 1,140,291 1,165,647 1,191,511 1,217,892 1,244,801 1,272,248 1,300, % 1.045% 1.045% 1.045% 1.045% 1.045% 1.045% 1.045% 1.045% 1.045% 1.045% 10,907 11,151 11,401 11,656 11,916 12,181 12,451 12,726 13,008 13,294 13, ,013 11,257 11,507 11,762 12,022 12,287 12,557 12,832 13,114 13,400 13, ,013 11,257 11,507 11,762 12,022 12,287 12,557 12,832 13,114 13,400 13,693 (6,013) (6,257) (6,507) (6,762) (7,022) (7,287) (7,557) (7,832) (8,114) (8,400) (8,693) 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 (104) (107) (109) (112) (114) (117) (119) (122) (124) (127) (130) (508) (508) (508) (508) (508) (508) (508) (508) (508) (508) (508) ,387 4,385 4,383 4,380 4,378 4,375 4,373 4,370 4,367 4,365 4,362 VI. Redevelopment Fund Deposit to Housing Fund 3,387 3,385 3,383 3,380 3,378 3,375 3,373 3,370 3,367 3,365 3,362 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 Prepared by Keyser Marston Associates, Inc. Filename: Brea_AB_TI_ :SUPPL: 6/6/2011: GSH: 2 of 3

135 Table 7-E Tax Increment Projection AB Supplement Only Brea Redevelopment Agency (000's Omitted) AB Suppl TI Receipt Limit Dec 20, I. Real Property Appeal Value Reduction (Table 4) Real Property Growth Total Real Property II. Personal Property/ SBE Appeal Value Reduction (Table 4) New Value Added for ABT (Table 6) Total Personal Property III. Total Project Value Less Base Value Incremental Value Over Base Tax Rate IV. Gross Tax Increment Unitary Tax Total Gross Tax Increment Tax Refunds Due to Appeals Total Allocation Before $5M TI Cap Amount Exceeding $5M TI Cap V. Tax Increment to Agency SB 2557 Fee at 0.95% County Tax Sharing Statutory Pass Through Trigger Net After Pass Throughs 1,427,786 1,456,341 1,485,468 1,515,178 1,545, ,556 29,127 29,709 30,304 30,910 1,456,341 1,485,468 1,515,178 1,545,481 1,576,391 39,739 39,739 39,739 39,739 39, ,739 39,739 39,739 39,739 39,739 1,496,081 1,525,208 1,554,917 1,585,221 1,616,130 (167,281) (167,281) (167,281) (167,281) (167,281) 1,328,799 1,357,926 1,387,636 1,417,939 1,448, % 1.045% 1.045% 1.045% 1.045% 13,885 14,190 14,500 14, ,991 14,296 14,606 14, ,991 14,296 14,606 14,923 0 (8,991) (9,296) (9,606) (9,923) 0 5,000 5,000 5,000 5,000 0 (133) (136) (139) (142) 0 (508) (508) (508) (508) ,359 4,356 4,353 4,350 0 VI. Redevelopment Fund Deposit to Housing Fund 3,359 3,356 3,353 3, ,000 1,000 1,000 1,000 0 Prepared by Keyser Marston Associates, Inc. Filename: Brea_AB_TI_ :SUPPL: 6/6/2011: GSH: 3 of 3

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137 APPENDIX C AUDITED FINANCIAL STATEMENTS OF THE AGENCY FOR FISCAL YEAR ENDED JUNE 30, 2010

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