$12,020,000 CITY OF FAIRFIELD COMMUNITY FACILITIES DISTRICT NO. 3 (NORTH CORDELIA GENERAL IMPROVEMENTS) SPECIAL TAX REFUNDING BONDS, SERIES 2018

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1 NEW ISSUE BOOK ENTRY ONLY INSURED RATING: S&P: AA UNDERLYING RATING: S&P: A+ See 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 2018 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, although, in the case of tax years beginning prior to January 1, 2018, for the purpose of computing the alternative minimum tax imposed on certain corporations, such interest earned by a corporation prior to the end of its tax year in 2018 is taken into account in determining certain income and earnings. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. See "LEGAL MATTERS - Tax Exemption." $12,020,000 CITY OF FAIRFIELD COMMUNITY FACILITIES DISTRICT NO. 3 (NORTH CORDELIA GENERAL IMPROVEMENTS) SPECIAL TAX REFUNDING BONDS, SERIES 2018 Dated: Date of Delivery Due: September 1, as shown on inside cover Authority for Issuance. The bonds captioned above (the 2018 Bonds ) are being issued under the Mello-Roos Community Facilities Act of 1982, as amended (the Act ); a resolution adopted on October 16, 2018, by the City Council of the City of Fairfield (the City ) acting as the legislative body of the City of Fairfield Community Facilities District No. 3 (North Cordelia General Improvements) (the District ); and a Fiscal Agent Agreement dated as of December 1, 2018 (the Fiscal Agent Agreement ), by and between the City, for and on behalf of the District, and The Bank of New York Mellon Trust Company, N.A., as fiscal agent (the Fiscal Agent ). See THE 2018 BONDS Authority for Issuance. Security and Sources of Payment. The 2018 Bonds are payable from Special Tax Revenues (as defined in this Official Statement), which consist of special taxes levied on property within the District according to the rate and method of apportionment of special tax approved by the City Council of the City and the eligible landowner voters in the District. The 2018 Bonds are secured by a first pledge of the Special Tax Revenues and the moneys on deposit in certain funds and accounts held by the Fiscal Agent under the Fiscal Agent Agreement. See SECURITY FOR THE 2018 BONDS. Use of Proceeds. The 2018 Bonds are being issued to (i) defease and refund in full a series of bonds issued previously by the City, for and on behalf of the District, captioned 15,510,000 City of Fairfield Community Facilities District No. 3 (North Cordelia General Improvements) Special Tax Bonds, Series 2008, which are currently outstanding in the aggregate principal amount of $14,295,000, (ii) purchase a debt service reserve policy for the 2018 Bonds concurrently with the delivery of the 2018 Bonds, and (iii) pay costs of issuing the 2018 Bonds. See FINANCING PLAN. Additional Debt. Following the issuance of the 2018 Bonds, the District will not have any other outstanding debt payable from Special Tax Revenues. The City may issue or incur additional obligations in the future that are secured by and payable from the Special Tax Revenues on parity with the 2018 Bonds ( Parity Bonds ) if conditions set forth in the Fiscal Agent Agreement are met. The City has no current plans to issue Parity Bonds. See SECURITY FOR THE 2018 BONDS Issuance of Parity Bonds. Municipal Bond Insurance Policy. The scheduled payment of principal of and interest on certain maturities of the 2018 Bonds (as indicated on the inside cover of this Official Statement) when due will be guaranteed under an insurance policy to be issued concurrently with the delivery of the insured 2018 Bonds by Assured Guaranty Municipal Corp. See BOND INSURANCE. Bond Terms. Interest on the 2018 Bonds is payable semiannually on each March 1 and September 1, commencing March 1, Interest will be calculated on the basis of a 360-day year composed of twelve 30-day months. The 2018 Bonds will be issued in integral multiples of $5,000. The 2018 Bonds, when delivered, will be initially 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 2018 Bonds. See THE 2018 BONDS General Bond Terms and APPENDIX F DTC and the Book-Entry Only System. Redemption. The 2018 Bonds are subject to optional redemption and mandatory sinking fund redemption. Pursuant to the Rate and Method, the Special Taxes are not subject to prepayment. See THE 2018 BONDS - Redemption. The 2018 Bonds, the interest thereon, and any premiums payable on the redemption of any of the 2018 Bonds, are not indebtedness of the City, the District (except to the limited extent described in this Official Statement), or the State of California (the State ) or any of its political subdivisions, and none of the City, the District (except to the limited extent described in this Official Statement) or the State or any of its political subdivisions is liable on the 2018 Bonds. Neither the faith and credit nor the taxing power of the City, the District (except to the limited extent described in this Official Statement) or the State or any of its political subdivisions is pledged to the payment of the 2018 Bonds. Except for the Special Tax Revenues (other than the Special Tax Revenues to be deposited into the Administrative Expense Fund pursuant to the Fiscal Agent Agreement), no taxes are pledged to the payment of the 2018 Bonds. The 2018 Bonds are not a general obligation of the City or the District but are limited obligations of the City and the District payable solely from the Special Tax Revenues (other than the Special Tax Revenues to be deposited into the Administrative Expense Fund pursuant to the Fiscal Agent Agreement), as more fully described in this Official Statement. MATURITY SCHEDULE (see inside cover) This cover page contains certain information for quick reference only. It is not a summary of the issue. Potential investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. Investment in the 2018 Bonds involves risks that may not be appropriate for some investors. See SPECIAL RISK FACTORS for a discussion of special risk factors that should be considered in evaluating the investment quality of the 2018 Bonds. The 2018 Bonds are offered when, as and if issued, subject to approval as to their legality by Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, and certain other conditions. Certain legal matters with respect to the 2018 Bonds will be passed upon for the City by the City Attorney and by Jones Hall, A Professional Law Corporation, San Francisco, California, acting as Disclosure Counsel, and for the Underwriter by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California. It is anticipated that the 2018 Bonds, in book-entry form, will be available for delivery through the facilities of DTC in New York, New York, on or about December 5, The date of this Official Statement is: November 8, 2018.

2 MATURITY SCHEDULE $8,350,000 Serial Bonds Base CUSIP : Maturity Date (September 1) Principal Amount Interest Rate Yield Price CUSIP 2019 $440, % 1.890% % CM , CN , CP , CQ , CR I 435, CS I 475, CT I 510, CU I 550, CV I 595, CW I 640, C CX I 685, C CY I 735, C CZ I 895, DC I 940, DD2 $1,625, % Term Bond due September 1, 2033 I, Yield 3.350%, Price % C CUSIP No DB6 $2,045, % Term Bond due September 1, 2037 I, Yield 3.540%, Price % C CUSIP No DF7 C Priced to the first optional redemption date at par of September 1, I Insured pursuant to insurance policy issued by Assured Guaranty Municipal Corp. See BOND INSURANCE. Copyright 2018, American Bankers Association. CUSIP data is provided by Standard & Poor s CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. Neither the City nor the Underwriter assumes any responsibility for the accuracy of the CUSIP data.

3 GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT No Offering May Be Made Except by this Official Statement. No dealer, broker, salesperson or other person has been authorized to give any information or to make any representations with respect to the 2018 Bonds other than as contained in this Official Statement, and if given or made, such other information or representation must not be relied upon as having been authorized. No Unlawful Offers or Solicitations. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation. Effective Date. This Official Statement speaks only as of its date, and the information and expressions of opinion contained in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement nor any sale of the 2018 Bonds will, under any circumstances, create any implication that there has been no change in the affairs of the City, the District, any other parties described in this Official Statement, or in the condition of property within the District since the date of this Official Statement. Use of this Official Statement. This Official Statement is submitted in connection with the sale of the 2018 Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not a contract with the purchasers of the 2018 Bonds. Preparation of this Official Statement. The information contained in this Official Statement has been obtained from sources that are believed to be reliable, but this information is not guaranteed as to accuracy or completeness. The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. Document References and Summaries. All references to and summaries of the Fiscal Agent Agreement or other documents contained in this Official Statement are subject to the provisions of those documents and do not purport to be complete statements of those documents. Stabilization of and Changes to Offering Prices. The Underwriter may overallot or take other steps that stabilize or maintain the market prices of the 2018 Bonds at levels above those that might otherwise prevail in the open market. If commenced, the Underwriter may discontinue such market stabilization at any time. The Underwriter may offer and sell the 2018 Bonds to certain securities dealers, dealer banks and banks acting as agent at prices lower than the public offering prices stated on the inside cover page of this Official Statement, and those public offering prices may be changed from time to time by the Underwriter. Exemption from Securities Laws Registration. The issuance and sale of the 2018 Bonds have not been registered under the Securities Act of 1933, as amended (the Securities Act ), or the Securities Exchange Act of 1934, as amended (the Exchange Act ), in reliance upon exemptions for the issuance and sale of municipal securities provided under Section 3(a)(2) of the Securities Act and Section 3(a)(12) of the Exchange Act. Estimates and Projections. Certain statements included or incorporated by reference in this Official Statement constitute forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the Exchange Act and Section 27A of the Securities Act. Such statements are generally identifiable by the terminology used such as plan, expect, estimate, budget or other similar words. The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The City does not plan to issue any updates or revisions to those forward-looking statements if or when its expectations, or events, conditions or circumstances on which such statements are based occur. City Internet Website. The City maintains an Internet website, but the information on the website is not incorporated in this Official Statement. Bond Insurance Policy. Assured Guaranty Municipal Corp. ( AGM ) makes no representation regarding the 2018 Bonds or the advisability of investing in the 2018 Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading BOND INSURANCE and APPENDIX G Specimen Municipal Bond Insurance Policy.

4 CITY OF FAIRFIELD CITY COUNCIL Harry T. Price, Mayor Chuck Timm, Vice Mayor Pam Bertani, Councilmember Catherine Moy, Councilmember Rick Vaccaro, Councilmember CITY EXECUTIVE STAFF David A. White, City Manager Laura Snideman, Assistant City Manager Julie Lucido, Public Works Director Emily Combs, Finance Director Allison Picard, Human Resources Director Ann Mottola, Park & Recreation Director Randy Fenn, Police Chief Anthony Velasquez, Fire Chief Kevin Snyder, Community Development Director CITY TREASURER Arvinda Krishnan CITY CLERK Karen L. Rees CITY ATTORNEY Richards, Watson & Gershon San Francisco, California PROFESSIONAL SERVICES BOND AND DISCLOSURE COUNSEL Jones Hall, A Professional Law Corporation San Francisco, California MUNICIPAL ADVISOR PFM Financial Advisors LLC San Francisco, California SPECIAL TAX CONSULTANT Willdan Financial Services Temecula, California VERIFICATION AGENT Samuel Klein and Company, Certified Public Accountants Morristown, New Jersey FISCAL AGENT The Bank of New York Mellon Trust Company, N.A. San Francisco, California

5 TABLE OF CONTENTS INTRODUCTION... 1 Authority for Issuance... 1 Purpose of Issuance... 1 The District... 2 Security for the 2018 Bonds... 2 Bond Insurance... 3 Redemption... 3 Risk Factors... 3 FINANCING PLAN... 4 Refunding Plan... 4 Estimated Sources and Uses of Funds... 5 THE 2018 BONDS... 6 Authority for Issuance... 6 General Bond Terms... 7 Redemption... 8 Registration, Transfer or Exchange... 9 Scheduled Debt Service SECURITY FOR THE 2018 BONDS General Limited Obligation Special Taxes Rate and Method Covenant to Foreclose Teeter Plan; Teeter-Like Plan Applicable to the Special Taxes Special Tax Fund Bond Fund Reserve Fund Investment of Moneys in Funds Issuance of Parity Bonds Subordinate Bonds Limits on Special Tax Waivers and Bond Tenders THE DISTRICT Background Summary of Property Classes Assessed Property Values Direct and Overlapping Public Debt Major Land Owners Value-to-Debt Burden Ratio Distribution Delinquencies Sample Property Tax Bill Projected Debt Service Coverage BOND INSURANCE Bond Insurance Policy Assured Guaranty Municipal Corp SPECIAL RISK FACTORS Limited Obligation Levy and Collection of the Special Tax Potential Consequences of Future Special Tax Delinquencies Payment of Special Tax is Not a Personal Obligation of the Property Owners Assessed Valuations Property Values Future Development of Class II Parcels Other Possible Claims Upon the Value of Taxable Property Exempt Properties Depletion of 2018 Reserve Fund Bankruptcy and Foreclosure Delays Disclosure to Future Purchasers Risks Associated with the Reserve Surety Provider No Acceleration Provisions Loss of Tax Exemption IRS Audit of Tax-Exempt Bond Issues Impact of Legislative Proposals, Clarifications of the Tax Code and Court Decisions on Tax Exemption Voter Initiatives and State Constitutional Provisions Risks Associated with AGM Secondary Market for Bonds LEGAL MATTERS Tax Exemption Legal Opinions VERIFICATION OF MATHEMATICAL ACCURACY RATING LITIGATION UNDERWRITING PROFESSIONAL FEES CONTINUING DISCLOSURE EXECUTION APPENDIX A APPENDIX B APPENDIX C APPENDIX D APPENDIX E APPENDIX F APPENDIX G GENERAL INFORMATION ABOUT THE CITY OF FAIRFIELD AND SOLANO COUNTY RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX SUMMARY OF THE FISCAL AGENT AGREEMENT FORM OF OPINION OF BOND COUNSEL FORM OF CONTINUING DISCLOSURE CERTIFICATE DTC AND THE BOOK-ENTRY ONLY SYSTEM SPECIMEN MUNICIPAL BOND INSURANCE POLICY i

6 REGIONAL LOCATION MAP City of Fairfield Solano County, California

7 N680 CITY OF FAIRFIELD COMMUNITY FACILITIES DISTRICT NO. 3 (NORTH CORDELIA GENERAL IMPROVEMENTS) / Green Valley Rd Suisun Valley Rd Rockville Rd Mangels Bl E80 Mangels Bl Central Wy W80 Pittman Rd Lopes Rd Legend CITY OF FAIRFIELD BOUNDARY CFD3 Parcels S680 Cordelia Rd

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9 OFFICIAL STATEMENT $12,020,000 CITY OF FAIRFIELD COMMUNITY FACILITIES DISTRICT NO. 3 (NORTH CORDELIA GENERAL IMPROVEMENTS) SPECIAL TAX REFUNDING BONDS, SERIES 2018 INTRODUCTION This Official Statement, including the cover page, inside cover and attached appendices, is provided to furnish information regarding the bonds captioned above (the 2018 Bonds ) to be issued by the City of Fairfield, California (the City ), County of Solano (the County ), for and on behalf of the City of Fairfield Community Facilities District No. 3 (North Cordelia General Improvements) (the District ). This introduction is not a summary of this Official Statement and is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement and the documents summarized or described in this Official Statement. A full review should be made of the entire Official Statement by those interested in purchasing the 2018 Bonds. The sale and delivery of Bonds to potential investors is made only by means of the entire Official Statement. Capitalized terms used but not defined in this Official Statement have the meanings set forth in APPENDIX C Summary of the Fiscal Agent Agreement Definitions and in APPENDIX B Rate and Method of Apportionment of Special Tax. Authority for Issuance The 2018 Bonds are authorized to be issued under the Mello-Roos Community Facilities Act of 1982, as amended, commencing at Section 53311, et seq., of the California Government Code (the Act ), a resolution adopted on October 16, 2018, by the City Council of the City (the City Council ) acting as the legislative body of the District, and a Fiscal Agent Agreement dated as of December 1, 2018 (the Fiscal Agent Agreement ), between the City, for and on behalf of the District, and The Bank of New York Mellon Trust Company, N.A., as fiscal agent (the Fiscal Agent ). See THE 2018 BONDS Authority for Issuance. Purpose of Issuance The 2018 Bonds are being issued to defease and refund in full a series of bonds issued previously by the City, for and on behalf of the District, captioned 15,510,000 City of Fairfield Community Facilities District No. 3 (North Cordelia General Improvements) Special Tax Bonds, Series 2008 (the Prior Bonds ). The Prior Bonds are currently outstanding in the aggregate principal amount of $14,295,000. Proceeds of the 2018 Bonds will also be used to purchase a debt service reserve policy for the 2018 Bonds (a Reserve Surety ) from Assured Guaranty Municipal Corp. ( AGM ) concurrently with the delivery of the 2018 Bonds. See FINANCING PLAN. 1

10 The District The District was formed and established by the City on July 18, 1989, under the Act, following a public hearing by the City Council. On July 18, 1989, a landowner election was held within the District that authorized the City to incur bonded indebtedness on behalf of the District and approved the levy of special taxes pursuant to the Rate and Method of Apportionment of Special Tax (the Rate and Method ). See THE 2018 BONDS Authority for Issuance. The District is located in the Cordelia Specific Plan Area of the City and contains approximately 1,108 gross acres. See THE DISTRICT Background. Security for the 2018 Bonds Security and Sources of Payment for the 2018 Bonds. The 2018 Bonds are payable from Special Tax Revenues, consisting of certain proceeds of an annual Special Tax to be levied on property located within the District, and from certain other funds pledged under the Fiscal Agent Agreement. The Fiscal Agent Agreement authorizes the City to issue additional obligations secured by a pledge of Special Tax Revenues on a parity with the pledge of Special Tax Revenues to the 2018 Bonds. See THE 2018 BONDS and SECURITY FOR THE 2018 BONDS. The Rate and Method establishes three categories of taxable property: Class I properties: lots on which improvements have been constructed and that are completed for occupancy as of March 1 of each calendar year. Class I properties are subject to 100% of the special tax per unit (i.e., a single-family dwelling unit and each distinct residential unit within a multifamily dwelling structure). Class II properties: lands on which a final subdivision map for single-family or multifamily residential uses has been recorded and individual lots or parcels created, but which contain no improvements completed for occupancy as of March 1. The annual special tax for Class II properties is 66.7% of the amount collected for a Class I property per unit in any year multiplied by the number of units permitted within the subdivided acreage. Class III properties: unsubdivided lands on which no improvements are constructed or under construction as of March 1. The annual special tax is 33.3% of the amount collected for a Class I property in any year multiplied by the total number of units permitted within the unsubdivided acreage. The District is substantially built out. As of March 1, 2018, there were 2,338 Class I properties, 229 Class II properties and one Class III property (which consists of 2.72 acres of open space that will not be developed). For additional information regarding the District and current property ownership, see THE DISTRICT. Covenant to Foreclose. The City has covenanted in the Fiscal Agent Agreement to cause foreclosure proceedings to be commenced and prosecuted against parcels with delinquent installments of the Special Tax under certain circumstances. For a more detailed description of the foreclosure covenant see SECURITY FOR THE 2018 BONDS Covenant to Foreclose Reserve Fund. The Fiscal Agent Agreement establishes a debt service reserve fund (the 2018 Reserve Fund ) to be held by the Fiscal Agent as a reserve for the payment of 2

11 principal of and interest on the 2018 Bonds. See SECURITY FOR THE 2018 BONDS 2018 Reserve Fund. Additional Debt of the District. Following the issuance of the 2018 Bonds, the City will not have any other outstanding debt payable from Special Tax Revenues. The City may issue or incur additional obligations in the future on parity with the 2018 Bonds ( Parity Bonds ) if the conditions set forth in the Fiscal Agent Agreement are met. The City has no current plans to issue Parity Bonds. See SECURITY FOR THE 2018 BONDS Issuance of Parity Bonds. As used in this Official Statement, the 2018 Bonds and any Parity Bonds are referred to collectively as the Bonds. Bond Insurance Concurrently with the execution and delivery of the 2018 Bonds, AGM will issue its municipal bond insurance policy (the Policy ) for certain maturities of the 2018 Bonds, as indicated on the inside cover of this Official Statement (the Insured 2018 Bonds ). The Policy guarantees the scheduled payment of principal of and interest on the Insured 2018 Bonds when due as set forth in the form of the Policy included as APPENDIX G to this Official Statement. See BOND INSURANCE. Redemption The 2018 Bonds are subject to optional redemption and mandatory sinking payment redemption. Pursuant to the Rate and Method, the Special Taxes are not subject to prepayment. See THE 2018 BONDS Redemption. Risk Factors Investment in the 2018 Bonds involves risks that may not be appropriate for some investors. See SPECIAL RISK FACTORS for a discussion of certain risk factors that should be considered, in addition to the other matters set forth in this Official Statement, in considering the investment quality of the 2018 Bonds. 3

12 FINANCING PLAN Refunding Plan The Prior Bonds were issued by the City, for and on behalf of the District, on March 20, 2008, and are currently outstanding in the aggregate principal amount of $14,295,000. All the outstanding Prior Bonds will be redeemed in full on March 1, 2019 (the Redemption Date ), at a redemption price equal to their outstanding principal amount, together with accrued interest to the redemption date, without premium. In order to accomplish the refunding plan, a portion of the net proceeds of the 2018 Bonds will be deposited with The Bank of New York Mellon Trust Company, N.A., as escrow agent (the Escrow Agent ) pursuant to an Escrow Deposit and Trust Agreement dated as of December 1, 2018 (the Escrow Agreement ), between the City and the Escrow Agent. The Fiscal Agent will invest $14,627, of such deposit in Federal Securities (as defined below) and hold the remaining $1.63 uninvested in cash. These funds will be sufficient to pay and redeem the Prior Bonds in full on the Redemption Date. See VERIFICATION OF MATHEMATICAL ACCURACY. Federal Securities is defined in the Fiscal Agent Agreement relating to the Prior Bonds, dated as of March 1, 2008, between the City and The Bank of New York Mellon Trust Company, N.A., as fiscal agent, to mean (a) any direct general obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America), the payment of principal of and interest on which are unconditionally and fully guaranteed by the United States of America; and (b) any obligations the principal of and interest on which are unconditionally guaranteed by the United States of America. Upon such irrevocable deposit with the Escrow Agent and in accordance with the Escrow Agreement, the Prior Bonds will be legally defeased and no longer be entitled to the benefits of, or be secured by, any pledge of or lien on the Special Taxes. Amounts on deposit under the Escrow Agreement are not available to pay debt service on the 2018 Bonds, except that any monies remaining in the Escrow Fund after the payments required by the Escrow Agreement are made will be transferred to the Fiscal Agent for deposit into the Bond Fund for the 2018 Bonds. 4

13 Estimated Sources and Uses of Funds The estimated proceeds from the sale of the 2018 Bonds will be deposited into the following funds established under the Fiscal Agent Agreement: SOURCES Principal Amount of Bonds $12,020, Plus: Net Original Issue Premium 1,252, Amounts Related to Prior Bonds 1,761, Total Sources $15,033, USES Deposit into Costs of Issuance Fund (1) $322, Transfer to Escrow Agent (2) 14,627, Underwriter s Discount 83, Total Uses $15,033, (1) Includes, among other things, the fees and expenses of the Municipal Advisor, Bond Counsel, Disclosure Counsel, Fiscal Agent and Escrow Agent; fees of the Verification Agent, rating agency and Special Tax Consultant; the premium for such Reserve Surety; the premium for the Policy; and the cost of printing the preliminary and final Official Statements. (2) Will be used to defease and refund the Prior Bonds. See Refunding Plan above. 5

14 THE 2018 BONDS This section generally describes the terms of the 2018 Bonds contained in the Fiscal Agent Agreement, which is summarized in more detail in APPENDIX C. Capitalized terms used but not defined in this section are defined in APPENDIX C. Authority for Issuance The 2018 Bonds are issued pursuant to the Act and the Fiscal Agent Agreement. In addition, as required by the Act, the City Council has taken the following actions with respect to establishing the District and authorizing issuance of the 2018 Bonds: Resolutions of Intention: On June 6, 1989, the City Council adopted Resolution No stating its intention to establish the District and to authorize the levy of a special tax therein. On the same day the City Council adopted Resolution No stating its intention to incur a bonded indebtedness for the purpose of financing the public facilities within the District. Resolution of Formation: Immediately following a noticed public hearing on July 18, 1989, the City Council adopted Resolution No , which established the District. Resolution of Necessity: On July 18, 1989, the City Council adopted Resolution No declaring the necessity to incur bonded indebtedness in an aggregate amount not to exceed $30,000,000 within the District. Resolution Calling Special Election: On July 18, 1989, the City Council adopted Resolution No , which called a special election to authorize the levy of a special tax, the incurring of bonded indebtedness and the establishment of the appropriations limit within the District. Landowner Election: On October 17, 1989, the eligible landowner voters of the District, by more than a two-thirds majority, authorized the issuance of not to exceed $30,000,000 principal amount of bonds to finance the acquisition and construction of the authorized facilities, and approved the Rate and Method and the Special Tax to pay debt service on bonds issued to finance the authorized facilities. Special Tax Lien and Levy: A Notice of Special Tax Lien was recorded in the real property records of Solano County on December 17, Ordinance Levying Special Taxes: On October 23, 1989, the City Council introduced Ordinance No levying the Special Tax within the District. The City Council passed and adopted the Ordinance on November 21, Resolution Authorizing Issuance of the 2018 Bonds: On October 16, 2018, the City Council adopted a resolution approving issuance of the 2018 Bonds in an amount not to exceed $15,000,000. City s Goals and Policies. As required by the Act, the City adopted goals and policies for community facilities districts by Resolution adopted on February 3,

15 General Bond Terms Dated Date, Maturity and Authorized Denominations. The 2018 Bonds will be dated their date of delivery (the Closing Date ), and will mature in the amounts and on the dates set forth on the inside cover page of this Official Statement. The 2018 Bonds will be issued in fully registered form in integral multiples of $5,000 each. Interest. The 2018 Bonds will bear interest at the annual rates set forth on the inside cover page of this Official Statement, payable semiannually on each March 1 and September 1, commencing March 1, 2019 (each, an Interest Payment Date ) until the principal sum of the 2018 Bonds has been paid. Interest will be calculated on the basis of a 360-day year composed of twelve 30-day months. Each Bond will bear interest from the Interest Payment Date next preceding the date of authentication thereof unless (i) it is authenticated on an Interest Payment Date, in which event it will bear interest from such date of authentication; (ii) it is authenticated prior to an Interest Payment Date and after the close of business on the Record Date (as defined below) preceding such Interest Payment Date, in which event it will bear interest from such Interest Payment Date; or (iii) it is authenticated on or before the Record Date preceding the first Interest Payment Date, in which event it will bear interest from the Closing Date; provided, however, that if at the time of authentication of a Bond, interest is in default thereon, such Bond will bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon. Record Date means the 15th day of the calendar month next preceding an Interest Payment Date whether or not such day is a business day. DTC and Book-Entry Only System. DTC will act as securities depository for the 2018 Bonds. The 2018 Bonds will be issued as fully-registered securities registered initially in the name of Cede & Co. (DTC s partnership nominee). See APPENDIX F DTC AND THE BOOK-ENTRY ONLY SYSTEM. Payments of Interest and Principal. For so long as DTC is used as depository for the 2018 Bonds, principal of, premium, if any, and interest payments on the 2018 Bonds will be made solely to DTC or its nominee, Cede & Co., as registered owner of the 2018 Bonds, for distribution to the beneficial owners of the 2018 Bonds in accordance with the procedures adopted by DTC. Interest on the 2018 Bonds (including the final interest payment upon maturity or earlier redemption) is payable on the applicable Interest Payment Date by check of the Fiscal Agent mailed by first class mail to the registered owner thereof at such registered owner s address as it appears on the registration books maintained by the Fiscal Agent at the close of business on the Record Date preceding the Interest Payment Date, or by wire transfer to an account in the United States of America made on such Interest Payment Date upon written instructions of any owner of $1,000,000 or more in aggregate principal amount of Bonds delivered to the Fiscal Agent prior to the applicable Record Date, which instructions will continue in effect until revoked in writing, or 7

16 until such Bonds are transferred to a new owner. The principal of the 2018 Bonds and any interest or premium on the 2018 Bonds are payable in lawful money of the United States of America upon surrender of the 2018 Bonds at the Principal Office of the Fiscal Agent. Redemption Optional Redemption. The 2018 Bonds maturing on September 1, 2029, and thereafter are subject to redemption from any source of funds prior to their stated maturities, on September 1, 2028, and any date thereafter, in whole or in part, at a redemption price equal to the principal amount of the 2018 Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium. Mandatory Sinking Payment Redemption. The 2018 Bond maturing on September 1, 2033, and September 1, 2037 (the Term Bonds ), are subject to mandatory redemption in part by lot, from sinking fund payments made by the City from the Bond Fund at a redemption price equal to the principal amount thereof to be redeemed, without premium, in the aggregate respective principal amounts all as set forth in the following table: Term Bonds Maturing September 1, 2033 Redemption Date (September 1) Sinking Payment 2032 $785, (maturity) 840,000 Term Bonds Maturing September 1, 2037 Redemption Date (September 1) Sinking Payment 2036 $990, (maturity) 1,055,000 Provided, however, if some but not all of the Term Bonds of a given maturity have been redeemed through optional redemption as described above, the total amount of all future Sinking Fund Payments relating to such maturity will be reduced by the aggregate principal amount of Term Bonds of such maturity so redeemed, to be allocated among such Sinking Fund Payments on a pro rata basis in integral multiples of $5,000 as determined by the City. No Redemption From Special Tax Prepayments. Pursuant to the Rate and Method, the Special Taxes are not subject to prepayment. Purchase of Bonds In Lieu of Redemption. In lieu of redemption as described above, moneys in the Bond Fund or other funds provided by the City may be used and withdrawn by the Fiscal Agent for purchase of outstanding Bonds, upon the filing with the Fiscal Agent of an Officer s Certificate requesting such purchase, at public or private sale as and when, and at such prices (including brokerage and other charges) as such Officer s Certificate may provide, but in no event may Bonds be purchased at a price in excess of the principal amount thereof, plus interest accrued to the date of purchase and any premium which would otherwise be due if such Bonds were to be redeemed in accordance with the Fiscal Agent Agreement. Any Bonds 8

17 purchased under this provision of the Fiscal Agent Agreement will be treated as outstanding Bonds, except to the extent otherwise directed by the Finance Director of the City. Notice of Redemption. The Fiscal Agent will cause notice of any redemption to be mailed by first class mail, postage prepaid, at least 20 days but not more than 60 days prior to the date fixed for redemption, to the Securities Depositories, to one or more Information Services, and to the respective registered owners of any Bonds designated for redemption, at their addresses appearing on the Bond registration books in the Principal Office of the Fiscal Agent; but such mailing will not be a condition precedent to such redemption and failure to mail or to receive any such notice, or any defect therein, will not affect the validity of the proceedings for the redemption of such Bonds. The sole remedy for failure to file such notices through the Municipal Securities Rulemaking Board s Electronic Municipal Market Access (EMMA) website will be an action by the holders of the Bonds in mandamus for specific performance or a similar remedy to compel performance. Any notice of an optional redemption may provide that the proposed redemption is conditioned upon receipt of sufficient funds to accomplish the redemption. The City has the right to rescind any notice of the optional redemption of Bonds by written notice to the Fiscal Agent 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 a default under the Fiscal Agent Agreement. The City and the Fiscal Agent have no liability to the owners or any other party related to or arising from such rescission of redemption. The Fiscal Agent will mail notice of such rescission of redemption in the same manner as the original notice of redemption was sent under the Fiscal Agent Agreement. Selection of Bonds for Redemption. Whenever provision is made in the Fiscal Agent Agreement for the redemption of less than all of the Bonds of any maturity or any given portion thereof, the Fiscal Agent will select the Bonds to be redeemed from all Bonds or such given portion thereof not previously called for redemption as directed by the City or in the absence of direction by the City, on a pro rata basis among series and maturities, so as to maintain substantially the same debt service profile for the Bonds as in effect prior to the redemption, and by lot in any manner the Fiscal Agent in its sole discretion deems appropriate. Effect of Redemption. From and after the date fixed for redemption, if funds available for the payment of the principal of, and interest and any premium on, the Bonds so called for redemption have been deposited in the Bond Fund, such Bonds so called will cease to be entitled to any benefit under the Fiscal Agent Agreement other than the right to receive payment of the redemption price, and no interest will accrue thereon on or after the redemption date specified in the notice of redemption. Registration, Transfer or Exchange The following provisions regarding the exchange and transfer of the Bonds apply only during any period in which the Bonds are not subject to DTC s book-entry system. While the Bonds are subject to DTC s book-entry system, their exchange and transfer will be effected through DTC and the Participants and will be subject to the procedures, rules and requirements established by DTC. See APPENDIX F DTC and the Book-Entry Only System. 9

18 Registration. The Fiscal Agent will keep, or cause to be kept, at its Principal Office sufficient books for the registration and transfer of the Bonds, which will show the series number, date, amount, rate of interest and last known owner of each Bond, and will at all times be open to inspection by the City during regular business hours upon reasonable notice; and, upon presentation for such purpose, the Fiscal Agent will, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on said books, the ownership of the Bonds as described below. The City and the Fiscal Agent will treat the owner of any Bond whose name appears on the Bond register as the absolute owner of such Bond for any and all purposes, and the City and the Fiscal Agent will not be affected by any notice to the contrary. The City and the Fiscal Agent may rely on the address of the owner as it appears in the Bond register for any and all purposes. Transfer and Exchange. Any Bond may, in accordance with its terms, be transferred, upon the Bond register, by the person in whose name it is registered, in person or by such person s duly authorized attorney, upon surrender of such Bond for cancellation, accompanied by delivery of a duly written instrument of transfer in a form acceptable to the Fiscal Agent. Bonds may be exchanged at the Principal Office of the Fiscal Agent solely for a like aggregate principal amount of Bonds of authorized denominations and of the same maturity. The cost for any services rendered or any expenses incurred by the Fiscal Agent in connection with any such transfer or exchange will be paid by the City from the Administrative Expense Fund. The Fiscal Agent will collect from the owner requesting such transfer or exchange any tax or other governmental charge required to be paid with respect to such transfer or exchange. Whenever any Bond or Bonds are surrendered for transfer or exchange, the City will execute and the Fiscal Agent will authenticate and deliver a new Bond or Bonds, for a like aggregate principal amount. No transfers or exchanges of Bonds will be required to be made (i) 15 days prior to the date established by the Fiscal Agent for selection of Bonds for redemption, or (ii) with respect to a Bond after such Bond has been selected for redemption, or (iii) between a Record Date and the succeeding Interest Payment Date. 10

19 Scheduled Debt Service The following is the debt service schedule for the 2018 Bonds, assuming no optional redemption. Period Ending September 1 Principal Interest Total Debt Service 2019 $440,000 $409, $849, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,008, , , ,024, , , ,037, , , ,053, , , ,066, , , ,077, , , ,092, ,055,000 52, ,107, Total $12,020,000 $6,572, $18,592,

20 SECURITY FOR THE 2018 BONDS This section generally describes the security for the 2018 Bonds set forth in the Fiscal Agent Agreement, which is summarized in more detail in APPENDIX C. Capitalized terms used but not defined in the section are defined in APPENDIX C. General The payment of the principal of, and interest and any premium on, the Bonds is secured by a first pledge of the following: all of the Special Tax Revenues (other than the Special Tax Revenues to be deposited in the Administrative Expense Fund pursuant to the Fiscal Agent Agreement), and all moneys deposited in the Bond Fund and, until disbursed as provided in the Fiscal Agent Agreement, in the Special Tax Fund. In addition, the 2018 Bonds and all 2018 Related Parity Bonds are secured by a first pledge (which pledge is effected in the manner and to the extent provided in the Fiscal Agent Agreement) of all moneys deposited in the 2018 Reserve Fund. The moneys in the 2018 Reserve Fund (except as otherwise provided in the Fiscal Agent Agreement) are dedicated to the payment of the principal of, and interest and any premium on, the 2018 Bonds and all 2018 Related Parity Bonds as provided in the Fiscal Agent Agreement and in the Act until all of the 2018 Bonds and all 2018 Related Parity Bonds have been paid and retired or until moneys or Federal Securities have been set aside irrevocably for that purpose under the Fiscal Agent Agreement. Special Tax Revenues is defined in the Fiscal Agent Agreement to mean the proceeds of the Special Taxes received by the City, interest thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes to the amount of said lien and interest thereon, but does not include any interest in excess of the interest due on the Bonds or any penalties collected in connection with any such foreclosure Related Parity Bonds is defined in the Fiscal Agent Agreement to mean any series of Parity Bonds for which (i) the Proceeds are deposited into the 2018 Reserve Fund so that the balance therein is equal to the 2018 Reserve Requirement following issuance of such Parity Bonds and (ii) the related Supplemental Agreement specifies that the 2018 Reserve Fund shall act as a reserve for the payment of the principal of, and interest and any premium on, such series of Parity Bonds. See 2018 Reserve Fund. In addition, the City covenants and agrees in the Fiscal Agent Agreement that the Insurer Reimbursement Amounts are secured by a lien on and pledge of the Special Tax Revenues and payable from such Special Tax Revenues on a parity with debt service due on the Bonds. Amounts in the Costs of Issuance Fund and the Administrative Expense Fund are not pledged to the repayment of the Bonds. The amounts transferred to the Escrow Agent are not in any way pledged to pay the debt service on the Bonds, except to the extent described under the heading FINANCING PLAN Refunding Plan. 12

21 Limited Obligation The 2018 Bonds, the interest thereon, and any premiums payable on the redemption of any of the 2018 Bonds, are not indebtedness of the City, the District (except to the limited extent described in this Official Statement), or the State of California (the State ) or any of its political subdivisions, and none of the City, the District (except to the limited extent described in this Official Statement) or the State or any of its political subdivisions is liable on the 2018 Bonds. Neither the faith and credit nor the taxing power of the City, the District (except to the limited extent described in this Official Statement) or the State or any of its political subdivisions is pledged to the payment of the 2018 Bonds. Except for the Special Tax Revenues (other than the Special Tax Revenues to be deposited into the Administrative Expense Fund pursuant to the Fiscal Agent Agreement), no taxes are pledged to the payment of the 2018 Bonds. The 2018 Bonds are not a general obligation of the City or the District but are limited obligations of the City and the District payable solely from the Special Tax Revenues (other than the Special Tax Revenues to be deposited into the Administrative Expense Fund pursuant to the Fiscal Agent Agreement), as more fully described in this Official Statement. Special Taxes Levy of Special Taxes. The City will agree in the Fiscal Agent Agreement to comply with all requirements of the Act to assure the timely collection of Special Taxes, including the enforcement of delinquent Special Taxes. Under the Act and the Fiscal Agent Agreement, the City is required to levy the Special Taxes each year in an amount required for the following (in each case taking into account the balances on hand in the funds held under the Fiscal Agent Agreement): the timely payment of principal of and interest on any outstanding Bonds becoming due and payable during the ensuing calendar year; and any necessary replenishment or expenditure of the 2018 Reserve Fund; an amount estimated to be sufficient to pay the Administrative Expenses (including amounts necessary to discharge any rebate obligation) during the ensuing year. See Special Tax Fund below. The Fiscal Agent Agreement provides that, in general, the Special Taxes are payable and will be collected in the same manner and at the same time and in the same installment as the general taxes on real property, and will have the same priority, become delinquent at the same times and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the general taxes on real property. Rate and Method General. The Special Tax is levied and collected according to the Rate and Method, which provides the means for determining the amount of the Special Tax that will need to be collected each Fiscal Year from the property in the District subject to the Special Tax (the Taxable Property ). 13

22 The following is a synopsis of the provisions of the Rate and Method, which should be read in conjunction with the complete text of the Rate and Method, including its attachments, which is attached as APPENDIX B. The meaning of the defined terms used in this section are as set forth in APPENDIX B. This section provides only a summary of the Rate and Method, and is qualified by more complete and detailed information contained in the entire Rate and Method attached as APPENDIX B. Annual Calculation of Special Tax. The calculation of the Special Tax payable by each Taxable Parcel in each year involves the following steps: First, on or before July 10 of each calendar year, the City will cause each assessor s parcel within the District to be classified as follows: CLASS I properties are defined as lots on which improvements have been constructed and that are completed for occupancy as of March 1 of each calendar year (the Lien Date ). The annual tax for a Class I property will be 100% of the special tax rate per unit (i.e., a single-family dwelling unit and each distinct residential unit within a multifamily dwelling structure). CLASS II properties are defined as lands on which a final subdivision map for single-family or multifamily residential uses has been recorded and individual lots or parcels created, but which contain no improvement completed for occupancy as of the Lien Date. The Specific Plan will be used to determine the number of dwelling units permitted on any Class II property unless a more precise plan has been prepared and adopted by the City of Fairfield through the prezoning, rezoning or P.U.D. Permit process by the Lien Date. The annual special tax for a Class II property will be 66.7% of the amount collected for a Class I property per unit in any year multiplied by the total number of units permitted within the subdivided acreage. CLASS III properties are defined as unsubdivided lands on which no improvements are constructed, or under construction, as of the Lien Date. The Specific Plan will be used to determine the number of dwelling units permitted on any Class III property, unless a more precise plan has been prepared and adopted by the City of Fairfield through the prezoning, rezoning or P.U.D. Permit process by the Lien Date. The annual special tax will be 33.3% of the amount collected per unit for a Class I property in any year multiplied by the total number of units permitted within the unsubdivided acreage. Second, after classifying the Parcels, the City assigns the annual Special Tax using the annual Special Tax Rates for each Class of property described above. The Class I annual Special Tax Rate for fiscal year is $698 for all Class I parcels in the District. The preceding special tax rates for each Class I property are increased by $12.00 annually, every July 1. The fiscal year Class II rate is $ Since the only remaining Class III Property in the District is deed restricted from any development whatsoever, the property is exempt from an annual Special Tax under the terms of the Rate and Method. Third, the City collects the Special Tax in the same manner as ordinary ad valorem property taxes are collected. 14

23 The City will cause the above steps required under the Rate and Method to be accomplished for each tax year in a timely manner to assure that the schedule of the Special Taxes to be collected are received by the Auditor of the County for inclusion with billings for ad valorem taxes for the applicable tax year. Covenant to Foreclose Sale of Property for Nonpayment of Taxes. The Fiscal Agent Agreement provides that, in general, the Special Tax is to be collected in the same manner as ordinary ad valorem property taxes are collected and, except as provided in the special covenant for foreclosure described below and in the Act, is to be subject to the same penalties and the same procedure, sale and lien priority in case of delinquency as is provided for ad valorem property taxes. Under these procedures, if taxes are unpaid for a period of five years or more, the property is subject to sale by the County. Foreclosure Under Mello-Roos Act. Under Section of the Act, if any delinquency occurs in the payment of the Special Tax, the City may order the institution of a Superior Court action to foreclose the lien therefor within specified time limits. In such an action, the real property subject to the unpaid amount may be sold at a judicial foreclosure sale. While judicial foreclosure is not mandatory under the Act, the City will agree in the Fiscal Agent Agreement that, on or about June 15 of each fiscal year, the Finance Director will compare the amount of Special Taxes previously levied in the District to the amount of Special Tax Revenues received by the City, and if delinquencies have occurred, proceed as follows: Individual Delinquencies. If the Finance Director determines that any single parcel subject to the Special Tax in the District is delinquent in the payment of Special Taxes in the aggregate amount of $1,300 in fiscal year (which amount will increase, in future fiscal years, by $12 from the previous year s amount) or more, then the Finance Director will send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to the property owner within 45 days of such determination, and (if the delinquency remains uncured) foreclosure proceedings will be commenced by the City within 90 days of such determination. The Finance Director may defer any such actions with respect to a delinquent parcel if (1) the Special Taxes are covered by the County s Teeter Plan, or an equivalent procedure, but only to the extent that the City cannot be required to repay the County for amounts apportioned by the County to the City that represent delinquent Special Taxes, (2) the amount in the 2018 Reserve Fund is at least equal to the 2018 Reserve Requirement, (3) the amount in the reserve account for any Parity Bonds that are not 2018 Related Parity Bonds is at least equal to the required amount and (4) the subject parcel is not delinquent with respect to more than the amount of Special Taxes specified in the first sentence of this paragraph. Aggregate Delinquencies. If the Finance Director determines that the total amount of delinquent Special Tax for the prior fiscal year for the entire District (including the total individual delinquencies described above) exceeds 5% of the total Special Tax due and payable for the prior fiscal year, the Finance Director will notify or cause to be notified all property owners who are then delinquent in the payment of Special Taxes (and demand immediate payment of the delinquency) within 45 days of such determination, and will commence foreclosure proceedings within 90 days of such determination against each parcel of land in the District with a Special Tax delinquency. 15

24 Sufficiency of Foreclosure Sale Proceeds; Foreclosure Limitations and Delays. No assurances can be given that the real property subject to a judicial foreclosure sale will be sold or, if sold, that the proceeds of sale will be sufficient to pay any delinquent Special Tax installment. The Act does not require the City to purchase or otherwise acquire any lot or parcel of property foreclosed upon if there is no other purchaser at such sale. Section of the Act requires that property sold by foreclosure be sold for not less than the amount of judgment in the foreclosure action, plus post-judgment interest and authorized costs, unless the consent of the owners of 75% of the outstanding Bonds is obtained. However, under Section of the Act, the City, as judgment creditor, is entitled to purchase any property sold at foreclosure using a credit bid, where the City could submit a bid crediting all or part of the amount required to satisfy the judgment for the delinquent amount of the Special Tax. If the City becomes the purchaser under a credit bid, the City must pay the amount of its credit bid into the Bond Fund, but this payment may be made up to 24 months after the date of the foreclosure sale. Foreclosure by court action is subject to normal litigation delays, the nature and extent of which are largely dependent on the nature of any defense by the debtor and the Superior Court calendar. Also, the ability of the City to foreclose the lien of delinquent unpaid Special Taxes may be limited in certain instances and may require prior consent of the property owner if the property is owned by or in receivership of the Federal Deposit Insurance Corporation (the FDIC ). See SPECIAL RISK FACTORS Exempt Properties. Teeter Plan; Teeter-Like Plan Applicable to the Special Taxes In June 1993, the Board of Supervisors of the County approved the implementation of 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 Revenue and Taxation Code. Under the Teeter Plan, the County apportions secured property taxes on an accrual basis (irrespective of actual collections) to local political subdivisions for which the County acts as the tax-levying or tax-collecting agency. The Teeter Plan was effective for the Fiscal Year commencing July 1, 1993, and pursuant to the Teeter Plan the County purchased all delinquent receivables (comprising delinquent taxes, penalties, and interest) that had accrued as of June 30, 1993, from local taxing entities and selected special assessment districts and community facilities districts. Under the Teeter Plan, the County distributes tax collections on a cash basis to taxing entities during the fiscal year and at year-end distributes 100% of any taxes delinquent as of June 30th to the respective taxing entities and those special assessment districts and community facilities districts (and individual parcels within each district) that the County determines are eligible to participate in the Teeter Plan. The County may make such eligibility determinations on an annual basis and may exclude a district or individual parcel that had previously been included in the plan. The County has the discretion to determine which delinquent assessments will be paid through the Teeter Plan on a case-by-case basis. The County has adopted written guidelines for its Teeter Plan (see - Teeter Plan above), as set forth in the County of Solano Guideline - Solano County Teeter Program dated March 25, 2004 (the Guidelines ). Under the Guidelines, (i) Special Taxes are not covered by the County s Teeter Plan, (ii) the County will apportion Special Taxes to the City as if the Special Taxes were covered by the Teeter Plan and (iii) the County may demand the repayment by the City of 16

25 apportionments that represent delinquent Special Taxes when the County determines that the collection of the delinquent Special Taxes is unlikely. As a result, and notwithstanding any other provision of the Fiscal Agent Agreement, the City may use Special Taxes at any time to repay the County for amounts apportioned by the County to the City that represent delinquent Special Taxes if failure to do so will cause the County to withhold property tax revenues (other than Special Taxes) that would otherwise be apportioned to the City; provided, however, that in the event the County asks the City to repay it for the apportionment of amounts that represent delinquent Special Taxes, the City will make a good faith effort to negotiate a payment plan with the County that will not require the City to repay the County with Special Taxes if doing so will result in there being insufficient Special Tax Revenues to pay debt service on the Bonds when due. There can be no assurances that the County will continue the practice described above in the future. Special Tax Fund Deposits. Under the Fiscal Agent Agreement, the City must remit, immediately upon receipt, all Special Tax Revenues received by it to the Fiscal Agent for deposit into the Special Tax Fund. Notwithstanding the foregoing, (i) any Special Tax Revenues constituting payment of the portion of the Special Tax levy for Administrative Expenses will be separately identified by the Finance Director and will be deposited by the Fiscal Agent in the Administrative Expense Fund; (ii) any Special Tax Revenues constituting the collection of delinquencies in payment of Special Taxes will be separately identified by the Finance Director and will be disposed of by the Fiscal Agent first, for transfer to the Bond Fund to pay any past due debt service on the Bonds; second, for transfer to the 2018 Reserve Fund to the extent needed to increase the amount then on deposit in the 2018 Reserve Fund up to the then-applicable 2018 Reserve Requirement and for transfer to the reserve account for any Parity Bonds that are not 2018 Related Parity Bonds to the extent needed to increase the amount then on deposit in such reserve account up to the amount then required to be deposited therein (and in the event the collection of delinquencies in payment of Special Taxes are not sufficient for the purposes of this clause, such amounts will be applied to the 2018 Reserve Fund and any other reserve accounts ratably based on the then Outstanding principal amount of the Bonds); and (iii) moneys in the Special Tax Fund will be held by the Fiscal Agent for the benefit of the City and owners of the Bonds, will be disbursed as provided below and, pending disbursement, will be subject to a lien in favor of the owners of the Bonds. Disbursements. On the fifth Business Day prior to each Interest Payment Date, the Fiscal Agent will withdraw from the Special Tax Fund and transfer the following amounts in the following order of priority: 17

26 (i) to the Bond Fund an amount, taking into account any amounts then on deposit in the Bond Fund and any expected transfers to the Bond Fund from the 2018 Reserve Fund and any reserve account for Parity Bonds that are not 2018 Related Parity Bonds, such that the amount in the Bond Fund equals the principal (including any sinking payment), premium, if any, and interest due on the Bonds on such Interest Payment Date and any past due principal or interest on the Bonds not previously paid from the collection of Special Tax delinquencies described in subparagraph (ii) under Deposits above; and (ii) without preference or priority (a) to the 2018 Reserve Fund an amount, taking into account amounts then on deposit in the 2018 Reserve Fund, such that the amount in the 2018 Reserve Fund is equal to the 2018 Reserve Requirement and (b) to the reserve account for any Parity Bonds that are not 2018 Related Parity Bonds, taking into account amounts then on deposit in such reserve account, such that the amount in such reserve account is equal to the amount required to be on deposit therein (and in the event that amounts in the Special Tax Fund are not sufficient for the purposes of this paragraph, such amounts will be applied to the 2018 Reserve Fund and any other reserve accounts ratably based on the then Outstanding principal amount of the Bonds). On each September 2, any amounts remaining in the Special Tax Fund will be transferred to the Administrative Expense Fund. Bond Fund Deposits. The Fiscal Agent will hold the moneys in the Bond Fund for the benefit of the City and the owners of the Bonds and will disburse those funds for the payment of the principal of, and interest and any premium on, the Bonds as described below. Disbursements. On each Interest Payment Date, the Fiscal Agent will withdraw from the Bond Fund and pay to the owners of the Bonds the principal of, and interest and any premium, due and payable on such Interest Payment Date on the Bonds. Notwithstanding the foregoing, amounts in the Bond Fund as a result of a transfer pursuant to clause (ii) under "- Special Tax Payments - Deposits above will be immediately disbursed by the Fiscal Agent to pay past due amounts owing on the Bonds. At least five Business Days prior to each Interest Payment Date, the Fiscal Agent will determine if the amounts then on deposit in the Bond Fund are sufficient to pay the debt service due on the Bonds on the next Interest Payment Date. In the event that amounts in the Bond Fund are insufficient for the purpose set forth in the preceding paragraph with respect to any Interest Payment Date, the Fiscal Agent will do the following: (i) Withdraw from the 2018 Reserve Fund, in accordance with the provisions of the Fiscal Agent Agreement, to the extent of any funds or Permitted Investments therein, amounts to cover the amount of such Bond Fund insufficiency related to the 2018 Bonds and any 2018 Related Parity Bonds. Amounts so withdrawn from the 2018 Reserve Fund will be deposited in the Bond Fund. 18

27 (ii) Withdraw from the debt service reserve fund, if any, established under a Supplemental Agreement related to Parity Bonds that are not 2018 Related Parity Bonds, to the extent of any funds or Permitted Investments therein, amounts to cover the amount of such Bond Fund insufficiency related to such Parity Bonds. Amounts so withdrawn from any such debt service reserve fund will be deposited in the Bond Fund. If, after the foregoing transfers and application of such funds for their intended purposes, there are insufficient funds in the Bond Fund to make the payments of principal of, and interest and any premium due and payable on, the Bonds on an Interest Payment Date, the Fiscal Agent will apply the available funds first to the payment of interest on the Bonds, then to the payment of principal due on the Bonds other than by reason of sinking payments, if any, and then to payment of principal due on the Bonds by reason of sinking payments. If there are insufficient funds to make the corresponding payment for all of the then Outstanding Bonds, then each such payment will be made ratably to the Owners of the Bonds based on the then Outstanding principal amount of the Bonds, without regard to the existence of a funded debt service reserve. Any sinking payment not made as scheduled will be added to the sinking payment to be made on the next sinking payment date Reserve Fund Establishment of Fund. The 2018 Reserve Fund is established under the Fiscal Agent Agreement as a separate fund to be held by the Fiscal Agent to the credit of the Fiscal Agent will deposit the Reserve Surety, which deposit, as of the Closing Date, is equal to the initial 2018 Reserve Requirement (defined below). of: 2018 Reserve Requirement is defined in the Fiscal Agent Agreement to mean the sum (i) $1,107,750, which is the least of (a) Maximum Annual Debt Service on the 2018 Bonds as of the Closing Date, (b) 125% of average Annual Debt Service on the 2018 Bonds as of the Closing Date and (c) 10% of the original principal amount of the 2018 Bonds (or, if the 2018 Bonds have more than a de minimis amount of original issue discount or premium, 10% of the issue price of the 2018 Bonds) plus (ii) with respect to any series of 2018 Related Parity Bonds the principal of and interest on which is payable from amounts in the 2018 Reserve Fund, an amount equal to the least of (x) Maximum Annual Debt Service on such 2018 Related Parity Bonds as of the date of their issuance, (y) 125% of average Annual Debt Service on such 2018 Related Parity Bonds as of the date of their issuance and (z) 10% of the original principal amount of such 2018 Related Parity Bonds (or, if the 2018 Related Parity Bonds have more than a de minimis amount of original issue discount or premium, 10% of the issue price of the 2018 Related Parity Bonds); provided that, with respect to the issuance of any 2018 Related Parity Bonds, if the 2018 Reserve Fund would have to be increased by an amount greater than 10% of the stated principal amount of the 2018 Related Parity Bonds (or, if the 2018 Related Parity Bonds have more than a de minimis amount of original issue discount or premium, of the issue price of such 2018 Related Parity Bonds), then the 2018 Reserve Requirement will be such lesser amount as is determined 19

28 by a deposit of such 10%; and provided that accrued interest on any 2018 Related Parity Bonds deposited with the Fiscal Agent upon delivery of such 2018 Related Parity Bonds will be excluded for purposes of the calculation of the 2018 Reserve Requirement. Disbursements. All amounts drawn on the Reserve Surety will be used by the Fiscal Agent solely for the purpose of making transfers to the Bond Fund to pay debt service on the 2018 Bonds as described under - Bond Fund. Notwithstanding the foregoing sentence, the City may amend the Fiscal Agent Agreement in connection with the delivery of an amendment of the Reserve Surety to provide for draws on the Reserve Surety to pay debt service on the 2018 Bonds and one or more series of 2018 Related Parity Bonds Reserve Fund Insurance Policy. The City will have no obligation to replace the Reserve Surety or to fund the 2018 Reserve Fund with cash if, at any time that the 2018 Bonds (or any 2018 Related Parity Bonds secured by the 2018 Reserve Fund) are Outstanding, AGM is downgraded or becomes insolvent, or if for any reason insufficient amounts are available to be drawn upon under the Reserve Surety; provided, however, that the City will reimburse AGM, in accordance with the terms of the Reserve Surety, for any draws made on the Reserve Surety. See APPENDIX C for a description of the timing, purpose and manner of disbursements from the 2018 Reserve Fund. Investment of Moneys in Funds Moneys in any fund or account created or established by the Fiscal Agent Agreement and held by the Fiscal Agent or the Finance Director will be invested by the Fiscal Agent or the Finance Director, as applicable, in Permitted Investments. See APPENDIX C for a definition of Permitted Investments. Issuance of Parity Bonds Under the Fiscal Agent Agreement, the City may issue Parity Bonds in such principal amount as will be determined by the City, under a Supplemental Agreement entered into by the City and the Fiscal Agent. Any such Parity Bonds will constitute Bonds under the Fiscal Agent Agreement and will be secured by a lien on the Special Tax Revenues (other than the Special Tax Revenues to be deposited into the Administrative Expense Fund pursuant to the Fiscal Agent Agreement) and funds pledged for the payment of the Bonds under the Fiscal Agent Agreement on a parity with all other Bonds outstanding. The City may issue such Parity Bonds subject to the following conditions: (i) The City must be in compliance with all covenants set forth in the Fiscal Agent Agreement and all Supplemental Agreements, and issuance of the Parity Bonds will not cause the City to exceed the bonded indebtedness limit of the District. (ii) The Supplemental Agreement providing for the issuance of such Parity Bonds will provide that interest thereon will be payable on the Interest Payment Dates, and principal thereof will be payable on the same date in any year in which principal is payable. There is no requirement that any Parity Bonds pay interest on a current basis. 20

29 (iii) The Supplemental Agreement providing for the issuance of such Parity Bonds may provide for the establishment of separate funds and accounts. The Supplemental Agreement providing for issuance of the Parity Bonds will provide for one of the following: (i) a deposit to the 2018 Reserve Fund in an amount necessary such that the amount deposited therein will equal the 2018 Reserve Requirement following issuance of the Parity Bonds, (ii) a deposit to a reserve account for the Parity Bonds (and such other series of Parity Bonds identified by the City) in an amount defined in such Supplemental Agreement, as long as such Supplemental Agreement expressly declares that the Owners of such Parity Bonds will have no interest in or claim to the 2018 Reserve Fund and that the Owners of the Bonds covered by the 2018 Reserve Fund will have no interest in or claim to such other reserve account or (iii) no deposit to either the 2018 Reserve Fund or another reserve account as long as such Supplemental Agreement expressly declares that the Owners of such Parity Bonds will have no interest in or claim to the 2018 Reserve Fund or any other reserve account. (iv) The CFD Value (as defined below) will be at least four times the sum of: (i) the aggregate principal amount of all Bonds then Outstanding, plus (ii) the aggregate principal amount of the series of Parity Bonds proposed to be issued, plus (iii) the aggregate principal amount of any fixed assessment liens on the parcels in the District subject to the levy of Special Taxes, plus (iv) a portion of the aggregate principal amount of any and all other community facilities district bonds then outstanding and payable at least partially from special taxes to be levied on parcels of land within the District (the Other District Bonds ) equal to the aggregate principal amount of the Other District Bonds multiplied by a fraction, the numerator of which is the amount of special taxes levied for the Other District Bonds on parcels of land within the District, and the denominator of which is the total amount of special taxes levied for the Other District Bonds on all parcels of land against which the special taxes are levied to pay the Other District Bonds (such fraction to be determined based upon the maximum special taxes which could be levied in the year in which maximum annual debt service on the Other District Bonds occurs), based upon information from the most recent available Fiscal Year. (v) The amount of the Special Taxes levied under the Ordinance, the Agreement and any Supplemental Agreement will be at least (i) 110% of the total Annual Debt Service of the then Outstanding Bonds and the proposed Parity Bonds and (ii) 100% of the total Annual Debt Service of the then Outstanding Bonds and the proposed Parity Bonds and the amount of the levy for Administrative Expenses in the current fiscal year. (vi) The City will deliver to the Fiscal Agent an Officer's Certificate certifying that the conditions precedent to the issuance of such Parity Bonds set forth in clauses (i), (ii), (iii), (iv), and (v) above have been satisfied. CFD Value is defined in the Fiscal Agent Agreement to mean the market value, as of the date of the appraisal described below and/or the date of the most recent County real property tax roll, as applicable, of all parcels of real property in the District subject to the levy of the Special Taxes and not delinquent in the payment of any Special Taxes then due and owing, including with respect to such nondelinquent parcels the value of the then existing improvements and any 21

30 facilities to be constructed or acquired with any amounts then on deposit in an improvement fund established under the Fiscal Agent Agreement and with the proceeds of any proposed series of Parity Bonds, as determined with respect to any parcel or group of parcels by reference to (i) an appraisal performed within six months of the date of issuance of any proposed Parity Bonds by an MAI appraiser (the Appraiser ) selected by the City, or (ii) in the alternative, the assessed value of all such nondelinquent parcels and improvements thereon as shown on the then current County real property tax roll available to the Finance Director. It is expressly acknowledged that, in determining the CFD Value, the City may rely on an appraisal to determine the value of some or all of the parcels in the District and/or the most recent County real property tax roll as to the value of some or all of the parcels in the District. Neither the City nor the Finance Director will be liable to the Owners, the Original Purchaser or any other person or entity in respect of any appraisal provided for purposes of this definition or by reason of any exercise of discretion made by any Appraiser pursuant to this definition. Notwithstanding the foregoing, the City may issue Refunding Bonds as Parity Bonds without the need to satisfy the requirements of clauses (iv) or (v) above, and, in connection therewith, the Officer s Certificate in clause (vi) above need not make reference to clauses (iv) and (v). The City has no current plans to issue Parity Bonds. The District has remaining authorization to issue bonded indebtedness in an amount not to exceed $14,490,000. See THE 2018 BONDS Authority for Issuance. Subordinate Bonds Under the Fiscal Agent Agreement, the City may issue bonds or other debt secured by a pledge of Special Tax Revenues, including bonds issued to refund all or a portion of any thenoutstanding Bonds, subordinate to the pledge of such Special Tax Revenues securing the Bonds. Limits on Special Tax Waivers and Bond Tenders The City will covenant in the Fiscal Agent Agreement not to exercise its rights under the Act to waive delinquency and redemption penalties related to the Special Taxes or to declare a Special Tax penalties amnesty program if to do so would materially and adversely affect the interests of the owners of the Bonds. The City will further covenant not to permit the tender of Bonds in payment of any Special Taxes except upon receipt of a certificate of an Independent Financial Consultant that to accept such tender will not result in the City having insufficient Special Tax Revenues to pay the principal of and interest on the Bonds and any Parity Bonds remaining outstanding following such tender. 22

31 THE DISTRICT Background The District is located in the Cordelia Specific Plan Area of the City and contains approximately 1,108 gross acres. Development in the District has been substantially completed. As of March 1, 2018, there were 2,338 Class I properties, 229 Class II properties and one Class III property (which consists of 2.72 acres of open space that will not be developed and thus is no longer subject to an annual Special Tax levy) in the District. A boundary map of the District is provided in the front of this Official Statement. Summary of Property Classes The following table shows a summary of information about the property in Class I and Class II. The single Class III property is no longer subject to the Special Tax levy. Table 1 Summary of Information About Property Classes Fiscal Year Assessed Value (2) % of Total Assessed Value 23 Fiscal Year Special Tax Rate Fiscal Year Special Tax Levy % of Total Fiscal Year Special Tax Levy No. of Parcels (1) Class I 2,338 $1,222,085, % $ $1,631, % Class II 229 (3) 24,736, , Total 2,567 $1,246,822, % $1,738, % (1) As of March 1, (2) As of January 1, (3) Includes 147 parcels in the Bloom at Green Valley and Harvest subdivisions that are owned by TRI Pointe Homes, Inc.; 33 parcels owned by Velleity Property LLC; 15 parcels owned by Hoffmann Land Development Co.; and six parcels owned by Civic Solano County Communities, LLC. See Table 4 (Top Owners by Percent of Special Tax Levy). The remaining owners of Class II parcels own three parcels or less and consist primarily of individual homeowners. Source: City of Fairfield, as compiled by Willdan. Assessed Property Values General Information Regarding Assessed Values. Article XIIIA of the California Constitution ( Proposition 13 ) defines full cash value to mean the county assessor s valuation of real property as shown on the bill under full cash value, or, thereafter, the appraised value of real property when purchased or newly constructed or when a change in ownership has occurred after the 1975 assessment, subject to exemptions in certain circumstances of property transfer or reconstruction. The full cash value is subject to annual adjustment to reflect increases, not to exceed 2% for any year, or decreases in the consumer price index or comparable local data, or to reflect reductions in property value caused by damage, destruction or other factors. Because of the general limitation to 2% per year in increases in full cash value of properties that remain in the same ownership, the County tax roll does not reflect values uniformly proportional to actual market values. In addition, assessed values can be reduced as a result of two basic types of property tax assessment appeals under State law: (a) a base-year assessment appeal, which involves a dispute on the valuation assigned by the assessor immediately subsequent to an instance of a

32 change in ownership or completion of new construction, and (b) a Proposition 8 appeal, which can result (as a result of a property owner s application) if factors occur causing a decline in the market value of the property to a level below the property s then-current assessed value. Accordingly, the gross assessed valuation presented in this Official Statement may not necessarily be representative of the actual market value of certain property in the District. No assurance can be given that should a parcel with delinquent Special Taxes be foreclosed and sold for the amount of the delinquency, that any bid will be received for such property, or if a bid is received that such bid will be sufficient to pay such delinquent Special Taxes. Assessed Valuation History. The table below shows assessed valuations for fiscal years through with respect to the Taxable Property. Table 2 Assessed Value History Fiscal Year No. of Parcels Levied Assessed Land Assessed Structure Assessed Values % Change ,235 $244,849,821 $630,478,705 $875,328, , ,357, ,513, ,871,015 (6.11)% , ,124, ,047, ,172,151 (1.06) , ,645, ,779, ,425,400 (7.47) , ,500, ,247, ,747, ,169 (1) 238,377, ,229, ,606, , ,820, ,295, ,116, , ,849, ,717,969 1,066,567, , ,406, ,899,881 1,129,306, ,567 (1) 323,197, ,625,553 1,246,822, (1) The decrease in the number of parcels levied from Fiscal Year to Fiscal Year was due to an administrative error that caused the Special Tax not to be levied on 67 Class II parcels. The Special Tax was levied again on these parcels beginning in Fiscal Year and will be levied thereafter in accordance with the Rate and Method. Source: City of Fairfield, as compiled by Willdan. No Appraisal. The City has not commissioned an appraisal of the property in the District. Accordingly, all property value information for the Taxable Property contained in this Official Statement is based on the Fiscal Year County Assessor s values. 24

33 Direct and Overlapping Public Debt Contained within the boundaries of the District are certain overlapping local agencies providing public services and assessing property taxes, assessments, special taxes and other charges. Many of these local agencies have outstanding debt. The current and estimated direct and overlapping obligations affecting the property in the District are shown in the following table. The table was prepared by California Municipal Statistics, Inc., and is included for general information purposes only. The City has not reviewed this report for completeness or accuracy and makes no representation in connection therewith. Table 3 Direct and Overlapping Debt As of October 1, 2018 Fiscal Year Local Secured Assessed Valuation: $1,246,822,802 OVERLAPPING GENERAL OBLIGATION BOND DEBT: % Applicable Solano Community College District General Obligation Bonds 2.339% $6,465, City of Fairfield General Obligation Bonds , Fairfield-Suisun Unified School District General Obligation Bonds ,550, TOTAL OVERLAPPING GENERAL OBLIGATION BOND DEBT $22,691, DIRECT AND OVERLAPPING SPECIAL TAX DEBT: % Applicable Fairfield-Suisun Unified School District Community Facilities District No % $4,985, City of Fairfield Community Facilities District No. 3 (1) ,020, $17,005, COMBINED DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: $39,697, Ratios to Assessed Values Outstanding District s Bonded Debt: :1 Outstanding Land Secured Bonded Debt: 73.32:1 Outstanding Direct and Overlapping Debt: 31.41:1 (1) Consists of the 2018 Bonds. Source: California Municipal Statistics, Inc. 25

34 Major Land Owners The following table lists the top owners of Taxable Property based on the fiscal year Special Tax levy and assessed values. Owner Name Table 4 Top Owners by Percent of Special Tax Levy No. of Parcels Fiscal Year Assessed Value (1) Fiscal Year Special Tax Levy % of Fiscal Year Special Tax Levy Share of Principal Amount of 2018 Bonds (2) Direct Value-to- Debt Burden Ratio TRI Pointe Homes Inc. (3) 147 $12,875,903 $68, % $473, :1 Velleity Property LLC (4) 33 2,597,564 15, , :1 Hofman Land Development Co. 15 2,536,858 6, , :1 Individual Homeowner 9 3,114,766 6, , :1 Civic Solano County Communities, LLC 9 1,545,809 4, , :1 NCL LLC 7 2,235,822 4, , :1 Individual Homeowner 5 1,542,883 3, , :1 Individual Homeowner 3 1,050,643 2, , :1 Individual Homeowner 3 1,830,450 2, , :1 Individual Homeowner 3 1,054,915 2, , :1 Subtotal 234 $30,385,613 $116, % $806, :1 All Other Property Owners 2,333 1,216,437,189 1,621, ,213, :1 Total 2,567 $1,246,822,802 $1,738, % $12,020, :1 (1) As of January 1, (2) Amounts allocated based on percentage of Fiscal Year Special Tax levy. (3) Consists of parcels in Bloom at Green Valley and Harvest subdivisions. (4) Consists of parcels in Village Oaks subdivision. Source: City of Fairfield, as compiled by Willdan. 26

35 Value-to-Debt Burden Ratio Distribution The following table sets forth the distribution of assessed value-to-debt burden ratios among parcels of Taxable Property based on fiscal year assessed values. Aggregate Value-to-Debt Burden Ratio Table 5 Assessed Direct and Overlapping Value-to-Debt Burden Ratios Fiscal Year Assessed Value (1) Fiscal Year Special Tax Levy % of Fiscal Year Special Tax Levy Share of 2018 Bonds and Overlapping Debt (3) Direct and Overlapping Value-to- Debt Burden Ratio (4) No. of Parcels Share of 2018 Bonds (2) More than 20:1 2,130 1,168,410,499 $1,483, % $10,000,840 $32,823, :1 15:1 to 19.99: ,913, , ,230,607 3,949, :1 10:1 to 14.99:1 43 7,977,151 26, , , :1 5:1 to 9.99:1 (5) ,174,920 87, ,919 2,254, :1 3:1 to 4.99:1 (5) 6 346,650 2, ,313 72, :1 Less than 3: N/A Totals 2,567 $1,246,822,802 $1,738, % $12,020,000 $39,697, :1 (1) As of January 1, (2) Amounts allocated based on percentage of Fiscal Year Special Tax levy. (3) Represents the pro rata share of the 2018 Bonds plus an estimate of overlapping debt as of October 1, See Direct and Overlapping Public Debt. (4) Value-to-debt burden ratio is calculated based on Share of 2018 Bonds and Overlapping Debt. (5) Consists only of parcels with no improvement value. Source: City of Fairfield, California Municipal Statistics, Inc., and Solano County Assessor, as compiled by Willdan. General Information Regarding Value-to-Debt Burden Ratios. The value-to-debt burden ratio on bonds secured by special taxes will generally vary over the life of those bonds as a result of changes in the value of the property that is security for the special taxes and the principal amount of the outstanding bonds payable from the special taxes. In comparing the aggregate assessed value of the real property within the District and the principal amount of the 2018 Bonds, it should be noted that an individual parcel may only be foreclosed upon to pay delinquent installments of the Special Taxes attributable to that parcel. The principal amount of the outstanding Bonds is not allocated pro-rata among the parcels within the District; rather, the total Special Taxes have been allocated among the parcels within the District according to the Rate and Method. Economic and other factors beyond the property owners control, such as economic recession, deflation of land values, financial difficulty or bankruptcy by one or more property owners, or the complete or partial destruction of taxable property caused by, among other possibilities, earthquake, flood, wildfire, tsunamis, sea level rise or other natural disaster, could cause a reduction in the assessed value within the District. See SPECIAL RISK FACTORS Property Values and Bankruptcy and Foreclosure Delays. 27

36 Delinquencies Special Taxes were first levied in the District in fiscal year The following table is a summary of Special Tax levies, collections and delinquency rates on Class I and Class II properties in the District for fiscal years through based on amounts levied and outstanding delinquencies as of June 30 of each fiscal year and as of August 28, 2018; however, see SECURITY FOR THE 2018 BONDS Teeter Plan; Teeter-Like Plan Applicable to the Special Taxes regarding the County s current practice relating to the Special Taxes and the Teeter Plan. Table 6 Special Tax Levies, Collections and Delinquency Rates Fiscal Years Through As of Fiscal Year Ended June 30 As of September 28, 2018 Remaining Fiscal Year Total Special Tax Levied No. of Parcels Delinquent Dollars Delinquent Percent Delinquent No. of Parcels Delinquent Dollars Delinquent Percent Delinquent $1,215, $89, % 0 $0 0.00% ,269, , ,296, , ,323, , ,350, , ,377, , (1) 1,361, , ,422, , , ,529, , , ,566, , , (1) In Fiscal Year through and including Fiscal Year , the Special Tax was not levied on 67 Class II parcels due to an administrative error; accordingly, this table does not reflect such parcels during that time period. The Special Tax was levied again on these parcels beginning in Fiscal Year and will be levied thereafter in accordance with the Rate and Method. Source: City of Fairfield and Solano County Tax Collector, as compiled by Willdan. 28

37 Sample Property Tax Bill The following table reflects the estimated property tax bill of a representative property in the District for fiscal year Table 7 Sample Property Tax Bill Fiscal Year Assessed Valuation and Property Taxes: Land Value $141, Improvement Value 311, Homeowners Exemption (7,000.00) Total Assessed Value $446, Percent of Ad Valorem Property Taxes: Total AV Amount 1% Tax Rate % $4, Assessment, Special Taxes & Parcel Charges: Fairfield City % Solano County Water Agency State Water Project % Solano County Community College 2015 GO Refunding Bonds % 3.64 Fairfield-Suisun USD GO 2011 Refunding Bonds % Fairfield-Suisun USD GO 2012 Refunding Bonds % Solano County Community College GO 2012 Series A Bonds % Solano County Community College GO 2012 Series B Bonds % Solano County Community College GO 2014 Refunding Series A Bonds % 7.88 Solano County Community College GO 2014 Refunding Series B Bonds % Fairfield-Suisun USD GO 2016 Series A Bonds % Fairfield-Suisun Sewer District Drainage Maintenance City of Fairfield North Cordelia Maintenance District City of Fairfield CFD # City of Fairfield CFD # San Francisco Bay Restoration Authority-Measure AA Total Assessments, Special Taxes and Parcel Charges $2, Total Property Taxes 6, Total Effective Tax Rate 1.47% Source: Solano County Tax Collector, as compiled by Willdan. 29

38 Projected Debt Service Coverage The table below shows the projected debt service coverage from the annual Special Tax levy in the District for all outstanding 2018 Bonds, assuming no Special Tax delinquencies. Projected Class I Special Tax Revenues (1) Table 8 Projected Debt Service Coverage on 2018 Bonds Projected Class II Special Tax Revenues (2) Total Projected Special Tax Revenues Estimated Administrative Expenses Estimated Available Projected Special Tax Revenues Debt Service on the 2018 Bonds Debt Service Coverage on the 2018 Bonds Bond Year 2019 $1,631,924 $106,616 $1,738,540 $45,000 $1,693,540 $849, % ,659, ,448 1,768,428 45,900 1,722, , ,688, ,280 1,798,316 46,818 1,751, , ,716, ,112 1,828,204 47,754 1,780, , ,744, ,946 1,858,094 48,709 1,809, , ,772, ,778 1,887,982 49,684 1,838, , ,800, ,612 1,917,872 50,677 1,867, , ,828, ,444 1,947,760 51,691 1,896, , ,856, ,276 1,977,648 52,725 1,924, , ,884, ,110 2,007,538 53,779 1,953, , ,912, ,942 2,037,426 54,855 1,982, , ,940, ,777 2,067,317 55,952 2,011,365 1,008, ,968, ,609 2,097,205 57,071 2,040,134 1,024, ,996, ,441 2,127,093 58,212 2,068,880 1,037, ,024, ,275 2,156,983 59,377 2,097,606 1,053, ,052, ,107 2,186,871 60,564 2,126,307 1,066, ,080, ,941 2,216,761 61,775 2,154,986 1,077, ,108, ,773 2,246,649 63,011 2,183,638 1,092, ,136, ,605 2,276,537 64,271 2,212,266 1,107, (1) Projected Class I revenue is based on fiscal year Special Tax rate and parcel count of 2,338. (2) Projected Class II revenue is based on fiscal year Special Tax rate and parcel count of 229. Source: City of Fairfield as to the Projected Special Tax Revenue and Stifel, Nicolaus & Company, Incorporated, as to the Debt Service on Bonds, as compiled by Willdan. 30

39 BOND INSURANCE Bond Insurance Policy Concurrently with the issuance of the 2018 Bonds, AGM will issue its Municipal Bond Insurance Policy (the Policy ) for the Insured 2018 Bonds. The Policy guarantees the scheduled payment of principal of and interest on the Insured 2018 Bonds when due as set forth in the form of the Policy included as APPENDIX G to the Official Statement. The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law. Assured Guaranty Municipal Corp. AGM is a New York domiciled financial guaranty insurance company and an indirect subsidiary of Assured Guaranty Ltd. ( AGL ), a Bermuda-based holding company whose shares are publicly traded and are listed on the New York Stock Exchange under the symbol AGO. AGL, through its operating subsidiaries, provides credit enhancement products to the U.S. and global public finance, infrastructure and structured finance markets. Neither AGL nor any of its shareholders or affiliates, other than AGM, is obligated to pay any debts of AGM or any claims under any insurance policy issued by AGM. AGM s financial strength is rated AA (stable outlook) by S&P Global Ratings, a business unit of Standard & Poor s Financial Services LLC ( S&P ), AA+ (stable outlook) by Kroll Bond Rating Agency, Inc. ( KBRA ) and A2 (stable outlook) by Moody s Investors Service, Inc. ( Moody s ). Each rating of AGM should be evaluated independently. An explanation of the significance of the above ratings may be obtained from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold any security, and such ratings are subject to revision or withdrawal at any time by the rating agencies, including withdrawal initiated at the request of AGM in its sole discretion. In addition, the rating agencies may at any time change AGM s long-term rating outlooks or place such ratings on a watch list for possible downgrade in the near term. Any downward revision or withdrawal of any of the above ratings, the assignment of a negative outlook to such ratings or the placement of such ratings on a negative watch list may have an adverse effect on the market price of any security guaranteed by AGM. AGM only guarantees scheduled principal and scheduled interest payments payable by the issuer of bonds insured by AGM on the date(s) when such amounts were initially scheduled to become due and payable (subject to and in accordance with the terms of the relevant insurance policy), and does not guarantee the market price or liquidity of the securities it insures, nor does it guarantee that the ratings on such securities will not be revised or withdrawn. Current Financial Strength Ratings. On June 26, 2018, S&P announced it had affirmed AGM s financial strength rating of AA (stable outlook). AGM can give no assurance as to any further ratings action that S&P may take. 31

40 On May 7, 2018, Moody s announced it had affirmed AGM s insurance financial strength rating of A2 (stable outlook). AGM can give no assurance as to any further ratings action that Moody s may take. On January 23, 2018, KBRA announced it had affirmed AGM s insurance financial strength rating of AA+ (stable outlook). AGM can give no assurance as to any further ratings action that KBRA may take. For more information regarding AGM s financial strength ratings and the risks relating thereto, see AGL s Annual Report on Form 10-K for the fiscal year ended December 31, Capitalization of AGM. At September 30, 2018: The policyholders surplus of AGM was approximately $2,203 million. The contingency reserves of AGM and its indirect subsidiary Municipal Assurance Corp. ( MAC ) (as described below) were approximately $1,187 million. Such amount includes 100% of AGM s contingency reserve and 60.7% of MAC s contingency reserve. The net unearned premium reserves and net deferred ceding commission income of AGM and its subsidiaries (as described below) were approximately $1,863 million. Such amount includes (i) 100% of the net unearned premium reserve and deferred ceding commission income of AGM, (ii) the consolidated net unearned premium reserves and net deferred ceding commissions of AGM s wholly owned subsidiary Assured Guaranty (Europe) plc ( AGE ), and (iii) 60.7% of the net unearned premium reserve of MAC. The policyholders surplus of AGM and the contingency reserves, net unearned premium reserves and deferred ceding commission income of AGM and MAC were determined in accordance with statutory accounting principles. The net unearned premium reserves and net deferred ceding commissions of AGE were determined in accordance with accounting principles generally accepted in the United States of America. Incorporation of Certain Documents by Reference. Portions of the following documents filed by AGL with the Securities and Exchange Commission (the SEC ) that relate to AGM are incorporated by reference into this Official Statement and shall be deemed to be a part hereof: (i) (ii) (iii) the Annual Report on Form 10-K for the fiscal year ended December 31, 2017 (filed by AGL with the SEC on February 23, 2018); the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2018 (filed by AGL with the SEC on May 4, 2018); the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2018 (filed by AGL with the SEC on August 2, 2018); and (iv) the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2018 (filed by AGL with the SEC on November 9, 2018). 32

41 All consolidated financial statements of AGM and all other information relating to AGM included in, or as exhibits to, documents filed by AGL with the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, excluding Current Reports or portions thereof furnished under Item 2.02 or Item 7.01 of Form 8-K, after the filing of the last document referred to above and before the termination of the offering of the 2018 Bonds shall be deemed incorporated by reference into this Official Statement and to be a part hereof from the respective dates of filing such documents. Copies of materials incorporated by reference are available over the internet at the SEC s website at at AGL s website at or will be provided upon request to Assured Guaranty Municipal Corp.: 1633 Broadway, New York, New York 10019, Attention: Communications Department (telephone (212) ). Except for the information referred to above, no information available on or through AGL s website shall be deemed to be part of or incorporated in this Official Statement. Any information regarding AGM included herein under the caption BOND INSURANCE Assured Guaranty Municipal Corp. or included in a document incorporated by reference herein (collectively, the AGM Information ) shall be modified or superseded to the extent that any subsequently included AGM Information (either directly or through incorporation by reference) modifies or supersedes such previously included AGM Information. Any AGM Information so modified or superseded shall not constitute a part of this Official Statement, except as so modified or superseded. Miscellaneous Matters. AGM makes no representation regarding the 2018 Bonds or the advisability of investing in the 2018 Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading BOND INSURANCE. 33

42 SPECIAL RISK FACTORS The purchase of the 2018 Bonds described in this Official Statement involves a degree of risk that may not be appropriate for some investors. The following includes a discussion of some of the risks which should be considered before making an investment decision. This discussion does not purport to be comprehensive or definitive and does not purport to be a complete statement of all factors which may be considered as risks in evaluating the credit quality of the 2018 Bonds. There can be no assurance that other risk factors will not become material in the future. Limited Obligation The City has no obligation to pay principal of and interest on the 2018 Bonds if Special Tax collections are delinquent or insufficient, other than from amounts, if any, on deposit in the 2018 Reserve Fund or funds derived from the tax sale or foreclosure and sale of parcels for Special Tax delinquencies. Neither the City nor the District is obligated to advance funds to pay debt service on the 2018 Bonds. Levy and Collection of the Special Tax The principal source of payment of principal of and interest on the 2018 Bonds is the proceeds of the annual levy and collection of the Special Tax against property within the District. The annual levy of the Special Tax is subject to the annual Special Tax rate authorized in the Rate and Method. The levy cannot be made at a higher rate even if the failure to do so means that the estimated proceeds of the levy and collection of the Special Tax, together with other available funds, will not be sufficient to pay debt service on the 2018 Bonds. Because the Special Tax formula set forth in the Rate and Method is not based on property value, the levy of the Special Tax will rarely, if ever, result in a uniform relationship between the value of particular parcels of Taxable Property and the amount of the levy of the Special Tax against those parcels. Thus, there will rarely, if ever, be a uniform relationship between the value of the parcels of Taxable Property and their proportionate share of debt service on the 2018 Bonds, and certainly not a direct relationship. The following are factors that might cause the levy of the Special Tax on any particular parcel of Taxable Property to vary from the Special Tax that might otherwise be expected: Reduction in the number of parcels of Taxable Property for such reasons as acquisition of Taxable Property by a governmental entity and failure of the government to pay the Special Tax based upon a claim of exemption or, in the case of the federal government or an agency thereof, immunity from taxation, thereby resulting in an increased tax burden on the remaining taxed parcels. Failure of the owners of Taxable Property to pay the Special Tax and delays in the collection of or inability to collect the Special Tax by tax sale or foreclosure and sale of the delinquent parcels, thereby resulting in an increased tax burden on the remaining parcels. Except as set forth above under SECURITY FOR THE 2018 BONDS Special Taxes and Rate and Method, the Fiscal Agent Agreement provides that the Special Tax is to be collected in the same manner as ordinary ad valorem property taxes are collected and, except as provided in the special covenant for foreclosure described in SECURITY FOR THE 2018 BONDS 34

43 Covenant to Foreclose and in the Act, is subject to the same penalties and the same procedure, sale and lien priority in case of delinquency as is provided for ordinary ad valorem property taxes. Under these procedures, if taxes are unpaid for a period of five years or more, the property is deeded to the State and then is subject to sale by the County. If sales or foreclosures of property are necessary, there could be a delay in payments to owners of the 2018 Bonds pending such sales or the prosecution of foreclosure proceedings and receipt by the City of the proceeds of sale if the 2018 Reserve Fund is depleted. See SECURITY FOR THE 2018 BONDS Covenant to Foreclose. Potential Consequences of Future Special Tax Delinquencies The County s current practice relating to the Special Taxes and the Teeter Plan is described under the heading entitled SECURITY FOR THE 2018 BONDS Teeter Plan; Teeter- Like Plan Applicable to the Special Taxes. If the County were to discontinue this practice, future delinquencies in the payment of the Special Taxes could cause a draw on the 2018 Reserve Fund and, perhaps ultimately, a default in the payment on the 2018 Bonds. In such an event, the City could receive additional funds for the payment of debt service through foreclosure sales of delinquent property, but no assurance can be given as to the amount of foreclosure sale proceeds or when foreclosure sale proceeds would be received. The City has covenanted in the Fiscal Agent Agreement to commence and pursue foreclosure proceedings against delinquent parcels under the terms and conditions described in this Official Statement. See SECURITY FOR THE 2018 BONDS Covenant to Foreclose. Foreclosure actions would include, among other steps, mailing multiple demand letters to the record owners of the delinquent parcels advising them of the consequences of failing to pay the applicable special taxes and contacting secured lenders to obtain payment, and formal action to authorize commencement of foreclosure proceedings. If these efforts were unsuccessful, they would be followed (as needed) by the filing of an action to foreclose in superior court against each parcel that remained delinquent. If owners are delinquent in the payment of the Special Tax, the City may not increase Special Tax levies to make up for delinquencies for prior fiscal years above the Special Tax rates specified in the Rate and Method. The City currently levies the Special Tax at the maximum rates specified in the Rate and Method. Payment of Special Tax is Not a Personal Obligation of the Property Owners An owner of Taxable Property is not personally obligated to pay the Special Taxes. Rather, the Special Taxes are an obligation running only against the parcels of Taxable Property. If, after a default in the payment of the Special Tax and a foreclosure sale by the City, the resulting proceeds are insufficient, taking into account other obligations also constituting a lien against the affected parcels of Taxable Property, the City has no recourse against the owner. Assessed Valuations The City has not commissioned an appraisal of the parcels in the District in connection with the issuance of the 2018 Bonds. Therefore, the estimated valuations of all Taxable Property in the District set forth in this Official Statement are based on the County Assessor s values. The assessed value is not an indication of what a willing buyer might pay for a property. The assessed 35

44 value is not evidence of future value because future facts and circumstances may differ significantly from the present. No assurance can be given that any of the Taxable Property in the District could be sold for the assessed value if that property should become delinquent and subject to foreclosure proceedings. Property Values The value of Taxable Property within the District is a critical factor in determining the investment quality of the 2018 Bonds. If a property owner defaults in the payment of the Special Tax, the City s only remedy is to foreclose on the delinquent property in an attempt to obtain funds with which to pay the delinquent Special Tax. Although land in the District is substantially developed, land values could be adversely affected by economic and other factors beyond the City s control, such as a general economic downturn, adverse judgments in pending or future litigation that could affect the scope, timing or viability of remaining development, relocation of employers out of the area, stricter land use regulations, shortages of water, electricity, natural gas or other utilities, destruction of property caused by earthquake, wildfire, flood or other natural disasters, environmental pollution or contamination, or unfavorable economic conditions. Natural Disasters. The value of the Taxable Property in the future can be adversely affected by a variety of natural occurrences, particularly those that may affect infrastructure and other public improvements and private improvements on the Taxable Property and the continued habitability and enjoyment of such private improvements. In addition to many other potential natural disasters, the areas in and surrounding the City and the District may be subject to the following risks: Seismic Activity. The City is located along the eastern edge of the seismically active Coast Ranges of California. Active faults near the City include the Green Valley fault (which goes through the District) and Cordelia fault. Most large earthquakes in the Bay Area have occurred along the major faults including the San Andreas, Hayward, Calaveras faults, which are located 20 to 45 miles west and south of the City. Flooding Hazards. The City has required new development greater than an acre to provide storm water detention facilities for more than 10 years to reduce peak runoff and mitigate the effects of urbanization. Streams within the City limits do periodically experience overflow conditions, including but not limited to: American Canyon, Dan Wilson, Green Valley, Jameson Canyon, Laurel, Ledgewood, McCoy, Pennsylvania Avenue, Union Avenue and Union Creek. In the lower reaches of this creek system, flood hazards are intensified by high tides that result in restricted drainage. The major cause of flooding in the southern parts of the City and in the Cordelia area is the lowlying nature of the land and the associated effects of the high tides and wind action. Fire Hazards. Significant portions of the foothill watershed areas surrounding the City are threatened with wildfire risk, and these areas present a dangerous combination of factors. Extreme Wildfire Risk Areas, are those lands where severe burning conditions prevail (chaparral and heavy woodland, steep slopes, poor access, winds). In the City, this includes the hilly areas to the west and northwest, the Cement Hill area, the hills above Green Valley and the hills above Interstate 80 and 680 just south of Cordelia. 36

45 Other natural disasters could include, without limitation, landslides, dam failure, canal failure, droughts or tornadoes. One or more natural disasters could occur and could result in damage to improvements of varying seriousness. The damage may entail significant repair or replacement costs and that repair or replacement may never occur either because of the cost, or because repair or replacement will not facilitate habitability or other use, or because other considerations preclude such repair or replacement. Under any of these circumstances there could be significant delinquencies in the payment of Special Taxes, and the value of the Taxable Property may well depreciate or disappear. Legal Requirements. Other events that may affect the value of Taxable Property include changes in the law or application of the law. Such changes may include, without limitation, local growth control initiatives, local utility connection moratoriums and local application of statewide tax and governmental spending limitation measures. Hazardous Substances. One of the most serious risks in terms of the potential reduction in the value of Taxable Property is a claim with regard to a hazardous substance. In general, the owners and operators of Taxable Property may be required by law to remedy conditions of the parcel relating to releases or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as CERCLA or the Superfund Act, is the most well-known and widely applicable of these laws, but California laws with regard to hazardous substances are also stringent and similar. Under many of these laws, the owner or operator is obligated to remedy a hazardous substance condition of property whether or not the owner or operator has anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the Taxable Property be affected by a hazardous substance, is to reduce the marketability and value of the parcel by the costs of remedying the condition, because the purchaser, upon becoming owner, will become obligated to remedy the condition just as is the seller. The assessed values set forth in this Official Statement do not take into account the possible reduction in marketability and value of any of the Taxable Property by reason of the possible liability of the owner or operator for the remedy of a hazardous substance condition of the parcel. Although the City is not aware that the owner or operator of any of the Taxable Property has such a current liability with respect to any of the Taxable Property, it is possible that such liabilities do currently exist and that the City is not aware of them. Further, it is possible that liabilities may arise in the future with respect to any of the Taxable Property resulting from the existence, currently, on the parcel of a substance presently classified as hazardous but that has not been released or the release of which is not presently threatened, or may arise in the future resulting from the existence, currently on the parcel of a substance not presently classified as hazardous but that may in the future be so classified. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling it. All of these possibilities could significantly affect the value of Taxable Property that is realizable upon a delinquency. Future Development of Class II Parcels No assurance can be given that the property currently classified as Class II parcels will be developed. Such development may be adversely affected by changes in general or local economic conditions, fluctuations in or a deterioration of the real estate market, increased construction costs, development, financing and marketing capabilities of any merchant builder owners, and other similar factors. 37

46 Other Possible Claims Upon the Value of Taxable Property While the Special Taxes are secured by the Taxable Property, the security only extends to the value of such Taxable Property that is not subject to priority and parity liens and similar claims. The table in the section entitled THE DISTRICT Direct and Overlapping Public Debt shows the presently outstanding amount of governmental obligations (with stated exclusions), the tax or assessment for which is or may become an obligation of one or more of the parcels of Taxable Property. In addition, other governmental obligations may be authorized and undertaken or issued in the future, the tax, assessment or charge for which may become an obligation of one or more of the parcels of Taxable Property and may be secured by a lien on a parity with the lien of the Special Tax securing the 2018 Bonds. In general, as long as the Special Tax is collected on the County tax roll, the Special Tax and all other taxes, assessments and charges also collected on the tax roll are of equal priority. In the event of such foreclosure proceedings, the Special Taxes will generally be on a parity with the other taxes, assessments and charges, and will share the proceeds of such foreclosure proceedings on a pro-rata basis. Although the Special Taxes will generally have priority over nongovernmental liens on a parcel of Taxable Property, regardless of whether the non-governmental liens were in existence at the time of the levy of the Special Tax or not, this result may not apply in the case of bankruptcy. See Bankruptcy and Foreclosure Delays below. Exempt Properties Exemptions Under Rate and Method and the Act. Certain properties are exempt from the Special Tax in accordance with the Rate and Method and the Act, which provides that properties or entities of the state, federal or local government are exempt from the Special Tax; provided, however, that property within the District acquired by a public entity through a negotiated transaction or by gift or devise, which is not otherwise exempt from the Special Tax, will continue to be subject to the Special Tax. See SECURITY FOR THE 2018 BONDS Rate and Method. In addition, although the Act provides that if property subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to that property is to be treated as if it were a special assessment, the constitutionality and operation of these provisions of the Act have not been tested, meaning that such property could become exempt from the Special Tax. The Act further provides that no other properties or entities are exempt from the Special Tax unless the properties or entities are expressly exempted in a resolution of consideration to levy a new special tax or to alter the rate or method of apportionment of an existing special tax. Property Owned by FDIC. The ability of the City to collect interest and penalties specified by State law and to foreclose the lien of a delinquent Special Tax installment may be limited in certain respects with regard to property in which the FDIC has or obtains an interest. The FDIC has asserted a sovereign immunity defense to the payment of special taxes and assessments. The City is unable to predict what effect this assertion would have in the event of a delinquency on a parcel within the District in which the FDIC has or obtains an interest. 38

47 In addition, although the FDIC does not claim immunity from ad valorem property taxation, it requires a foreclosing entity to obtain FDIC's consent to foreclosure proceedings. Prohibiting a foreclosure on property owned by the FDIC could reduce the amount available to pay the principal of and interest on the 2018 Bonds. Either outcome would cause a draw on the 2018 Reserve Fund and perhaps, ultimately, a default in the payment on the 2018 Bonds. No investigation has been made as to whether the FDIC or any other governmental entity currently owns or has an interest in any property in the District. Property Owned by Fannie Mae or Freddie Mac. If a parcel of Taxable Property is owned by a federal government entity or federal government-sponsored entity, such as Fannie Mae or Freddie Mac, or a private deed of trust secured by a parcel of Taxable Property is owned by a federal government entity or federal government-sponsored entity, such as Fannie Mae or Freddie Mac, the ability to foreclose on the parcel or to collect delinquent Special Taxes may be limited. Federal courts have held that, based on the supremacy clause of the United States Constitution ( This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the contrary notwithstanding ), in the absence of Congressional intent to the contrary, a state or local agency cannot foreclose to collect delinquent taxes or assessments if foreclosure would impair the federal government interest. This means that, unless Congress has otherwise provided, if a federal government entity owns a parcel of Taxable Property but does not pay taxes and assessments levied on the parcel (including Special Taxes), the applicable state and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments. Moreover, unless Congress has otherwise provided, if the federal government has a mortgage interest in the parcel and the City wishes to foreclose on the parcel as a result of delinquent Special Taxes, the property cannot be sold at a foreclosure sale unless it can be sold for an amount sufficient to pay delinquent taxes and assessments on a parity with the Special Taxes and preserve the federal government s mortgage interest. No investigation has been made as to whether Fannie Mae, Freddie Mac, or any other governmental entity currently owns or has an interest in any property in the District. Depletion of 2018 Reserve Fund The 2018 Reserve Fund is to be maintained at an amount equal to the 2018 Reserve Requirement. See SECURITY FOR THE 2018 BONDS 2018 Reserve Fund. The 2018 Reserve Fund will be used to pay principal of and interest on the 2018 Bonds and any 2018 Related Parity Bonds if insufficient funds are available from the proceeds of the levy and collection of the Special Tax against property within the District. If the 2018 Reserve Fund is depleted, it can be replenished from the proceeds of the levy and collection of the Special Taxes that exceed the amounts to be paid to the 2018 Bond owners under the Fiscal Agent Agreement, but will be replenished on a pro rata basis with the reserve accounts for Parity Bonds that are not 2018 Related Parity Bonds. However, because the Special Tax levy is limited to the maximum annual Special Tax rates, it is possible that no replenishment would be possible if the Special Tax proceeds, together with other available funds, remain insufficient to pay all such amounts. Thus 39

48 it is possible that the 2018 Reserve Fund will be depleted and not be replenished by the levy and collection of the Special Taxes. Bankruptcy and Foreclosure Delays The payment of the Special Tax and the ability of the City to foreclose the lien of a delinquent unpaid Special Tax, as discussed in SECURITY FOR THE 2018 BONDS, may be limited by bankruptcy, insolvency or other laws generally affecting creditors' rights or by the laws of the State of California relating to judicial foreclosure. The various legal opinions to be delivered concurrently with the delivery of the 2018 Bonds (including Bond Counsel's approving legal opinion) will be qualified as to the enforceability of the various legal instruments by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights, by the application of equitable principles and by the exercise of judicial discretion in appropriate cases. Although bankruptcy proceedings would not cause the Special Taxes to become extinguished, bankruptcy of a property owner or any other person claiming an interest in the property could result in a delay in superior court foreclosure proceedings and could result in the possibility of Special Tax installments not being paid in part or in full. Such a delay would increase the likelihood of a delay or default in payment of the principal of and interest on the 2018 Bonds. In addition, the amount of any lien on property securing the payment of delinquent Special Taxes could be reduced if the value of the property were determined by the bankruptcy court to have become less than the amount of the lien, and the amount of the delinquent Special Taxes in excess of the reduced lien could then be treated as an unsecured claim by the court. Any such stay of the enforcement of the lien for the Special Tax, or any such delay or non-payment, would increase the likelihood of a delay or default in payment of the principal of and interest on the 2018 Bonds and the possibility of delinquent Special Taxes not being paid in full. Disclosure to Future Purchasers The City has recorded a notice of the Special Tax lien in the Office of the County Recorder. While title companies normally refer to such notices in title reports, there can be no guarantee that such reference will be made or, if made, that a prospective purchaser or lender will consider such special tax obligation in the purchase of property in the District or the lending of money secured by property in the District. The Act requires the subdivider of a subdivision (or its agent or representative) to notify a prospective purchaser or long-term lessor of any lot, parcel, or unit subject to a Mello-Roos special tax of the existence and maximum amount of such special tax using a statutorily prescribed form. California Civil Code Section b requires that in the case of transfers other than those covered by the above requirement, the seller must at least make a good faith effort to notify the prospective purchaser of the special tax lien in a format prescribed by statute. Failure by an owner of the property to comply with these requirements, or failure by a purchaser or lessor to consider or understand the nature and existence of the Special Tax, could adversely affect the willingness and ability of the purchaser or lessor to pay the Special Tax when due. 40

49 Risks Associated with the Reserve Surety Provider The City may elect to fund the 2018 Reserve Fund with a Reserve Surety. The City can provide no assurances that the provider of the Reserve Surety will be able to meet its obligations under the Reserve Surety, if and when required to do so. In addition, any change in the ratings of the provider could impact the price of the 2018 Bonds in the secondary market. No Acceleration Provisions The 2018 Bonds do not contain a provision allowing for their acceleration in the event of a payment default or other default under the terms of the 2018 Bonds or the Fiscal Agent Agreement. So long as the 2018 Bonds are in book-entry form, DTC will be the sole Bond owner and will be entitled to exercise all rights and remedies of Bond holders. Loss of Tax Exemption As discussed under the caption LEGAL MATTERS Tax Exemption, interest on the 2018 Bonds might become includable in gross income for purposes of federal income taxation retroactive to the date the 2018 Bonds were issued as a result of future acts or omissions of the City in violation of its covenants in the Fiscal Agent Agreement. The Fiscal Agent Agreement does not contain a special redemption feature triggered by the occurrence of an event of taxability. As a result, if interest on the 2018 Bonds were to become includable in gross income for purposes of federal income taxation, the 2018 Bonds would continue to remain outstanding until maturity unless earlier redeemed pursuant to optional or mandatory redemption or redemption upon prepayment of the Special Taxes. See THE 2018 BONDS Redemption. IRS Audit of Tax-Exempt Bond Issues The Internal Revenue Service (the IRS ) has initiated an expanded program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the 2018 Bonds will be selected for audit by the IRS. It is also possible that the market value of such Bonds might be affected as a result of such an audit of such Bonds (or by an audit of similar bonds or securities). Impact of Legislative Proposals, Clarifications of the Tax Code and Court Decisions on Tax Exemption Future legislative proposals, if enacted into law, clarification of the Tax Code (as defined under LEGAL MATTERS ) or court decisions may cause interest on the 2018 Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Bondholders from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such legislative proposals, clarification of the Tax Code or court decisions may also affect the market price for, or marketability of, the 2018 Bonds. Prospective purchasers of the 2018 Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation. 41

50 Voter Initiatives and State Constitutional Provisions Under the California Constitution, the power of initiative is reserved to the voters for the purpose of enacting statutes and constitutional amendments. Since 1978, the voters have exercised this power through the adoption of Proposition 13 and similar measures, including Proposition 218, which was approved in the general election held on November 5, 1996, and Proposition 26, which was approved on November 2, Proposition 218. Proposition 218 Voter Approval for Local Government Taxes Limitation on Fees, Assessments, and Charges Initiative Constitutional Amendment, added Articles XIIIC and XIIID to the California Constitution, imposing certain vote requirements and other limitations on the imposition of new or increased taxes, assessments and property-related fees and charges. Among other things, Section 3 of Article XIIIC states that... the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge. The Act prohibits a legislative body from adopting any resolution to reduce the rate of any special tax or terminate the levy of any special tax pledged to repay any debt incurred pursuant to the Act unless the legislative body determines that the reduction or termination of the special tax would not interfere with the timely retirement of that debt. Proposition 26. On November 2, 2010, California voters approved Proposition 26, entitled the Supermajority Vote to Pass New Taxes and Fees Act. Section 1 of Proposition 26 declares that Proposition 26 is intended to limit the ability of the State Legislature and local government to circumvent existing restrictions on increasing taxes by defining the new or expanded taxes as fees. Proposition 26 amended Articles XIIIA and XIIIC of the State Constitution. The amendments to Article XIIIA limit the ability of the State Legislature to impose higher taxes (as defined in Proposition 26) without a two-thirds vote of the Legislature. Article XIIIC requires that all new local taxes be submitted to the electorate before they become effective. Taxes for general governmental purposes require a majority vote and taxes for specific purposes ( special taxes ) require a two-thirds vote. The Special Taxes and the 2018 Bonds were each authorized by not less than a two-thirds vote of the landowners within the District who constituted the qualified electors at the time of such voted authorization, and the statute of limitations period for any challenges to the formation of the District and the levy of the Special Taxes has expired. The City believes, therefore, that issuance of the 2018 Bonds does not require the conduct of further proceedings under the Act, Proposition 218 or Proposition 26. Like their antecedents, Proposition 218 and Proposition 26 have undergone, are likely to undergo, both judicial and legislative scrutiny. For example, in August 2014, in City of San Diego. v. Melvin Shapiro, an Appellate Court invalidated an election held by the City of San Diego to authorize the levying of special taxes on hotels City-wide pursuant to a City charter ordinance creating a convention center facilities district which specifically defined the electorate to consist solely of (1) the owners of real property in the City on which a hotel is located, and (2) the lessees of real property owned by a governmental entity on which a hotel is located. The court held that such landowners and lessees are neither qualified electors of the City for purposes of Articles XIII A, Section 4 of the California Constitution, nor a proper electorate under Article XIIIC, Section 2(d) of the California Constitution. The court specifically noted that the decision did not require the Court to consider the distinct question of whether landowner voting to impose special taxes under Section 53326(b) 42

51 of the Act (which was the nature of the voter approval through which the District was formed) violates the California Constitution in districts that lack sufficient registered voters to conduct an election among registered voters. Accordingly, this case should have no effect on the levy of the Special Taxes. The City cannot predict the ultimate outcome or effect of any such judicial scrutiny, legislative actions, or future initiatives. These initiatives, and any future initiatives, may affect the collection of fees, taxes and other types of revenue by local agencies such as the City. Subject to overriding federal constitutional principles, such collection may be materially and adversely affected by voter-approved initiatives, possibly to the extent of creating cash-flow problems in the payment of outstanding obligations such as the 2018 Bonds. Risks Associated with AGM Before the delivery of the 2018 Bonds, the City will pay the premiums for the Policy and the Reserve Surety. The City can provide no assurances that AGM will be able to meet its obligations under the Policy or the Reserve Surety, if and when required to do so. In addition, any change in the ratings of AGM could impact the price of the 2018 Bonds in the secondary market. Secondary Market for Bonds There can be no guarantee that there will be a secondary market for the 2018 Bonds or, if a secondary market exists, that any Bonds can be sold for any particular price. Prices of bond issues for which a market is being made will depend upon then-prevailing circumstances. Such prices could be substantially different from the original purchase price. No assurance can be given that the market price for the 2018 Bonds will not be affected by the introduction or enactment of any future legislation (including without limitation amendments to the Code), or changes in interpretation of the Code, or any action of the Internal Revenue Service, including but not limited to the publication of proposed or final regulations, the issuance of rulings, the selection of the 2018 Bonds for audit examination, or the course or result of any Internal Revenue Service audit or examination of the 2018 Bonds or obligations that present similar tax issues as the 2018 Bonds. 43

52 LEGAL MATTERS Tax Exemption Federal Tax Status. In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to the qualifications set forth below, under existing law, the interest on the 2018 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, although, in the case of tax years beginning prior to January 1, 2018, for the purpose of computing the alternative minimum tax imposed on certain corporations, such interest earned by a corporation prior to the end of its tax year in 2018 is taken into account in determining certain income and earnings. The opinions set forth in the preceding paragraph are subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986, as amended (the "Tax Code") relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the 2018 Bonds. The City has made certain representations and covenants in order to comply with each such requirement. Inaccuracy of those representations, or failure to comply with certain of those covenants, may cause the inclusion of such interest in gross income for federal income tax purposes, which may be retroactive to the date of issuance of the 2018 Bonds. Tax Treatment of Original Issue Discount and Premium. If the initial offering price to the public at which a 2018 Bond is sold is less than the amount payable at maturity thereof, then such difference constitutes "original issue discount" for purposes of federal income taxes and State of California personal income taxes. If the initial offering price to the public at which a 2018 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 and original issue premium are 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 2018 Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). The amount of original issue discount accruing during each period is added to the adjusted basis of such 2018 Bonds to determine taxable gain upon disposition (including sale, redemption, or payment on maturity) of such 2018 Bond. The Tax Code contains certain provisions relating to the accrual of original issue discount in the case of purchasers of the 2018 Bonds who purchase the 2018 Bonds after the initial offering of a substantial amount of such maturity. Owners of such 2018 Bonds should consult their own tax advisors with respect to the tax consequences of ownership of 2018 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 2018 Bonds under federal individual alternative minimum taxes. Under the Tax Code, original issue premium is amortized on an annual basis over the term of the 2018 Bond (said term being the shorter of the 2018 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 2018 Bond for purposes of determining taxable gain or loss upon disposition. 44

53 The amount of original issue premium on a 2018 Bond is amortized each year over the term to maturity of the 2018 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 2018 Bond premium is not deductible for federal income tax purposes. Owners of premium 2018 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 2018 Bonds. California Tax Status. In the further opinion of Bond Counsel, interest on the 2018 Bonds is exempt from California personal income taxes. Other Tax Considerations. Current and future legislative proposals, if enacted into law, clarification of the Tax Code or court decisions may cause interest on the 2018 Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent beneficial owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such legislative proposals, clarification of the Tax Code or court decisions may also affect the market price for, or marketability of, the 2018 Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether, if enacted, such legislation would apply to bonds issued prior to enactment. The opinions expressed by Bond Counsel are based upon existing legislation and regulations as interpreted by relevant judicial and regulatory authorities as of the date of such opinion, and Bond Counsel has expressed no opinion with respect to any proposed legislation or as to the tax treatment of interest on the 2018 Bonds, or as to the consequences of owning or receiving interest on the 2018 Bonds, as of any future date. Prospective purchasers of the 2018 Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no opinion. Owners of the 2018 Bonds should also be aware that the ownership or disposition of, or the accrual or receipt of interest on, the 2018 Bonds may have federal or state tax consequences other than as described above. Other than as expressly described above, Bond Counsel expresses no opinion regarding other federal or state tax consequences arising with respect to the 2018 Bonds, the ownership, sale or disposition of the 2018 Bonds, or the amount, accrual or receipt of interest on the 2018 Bonds. Legal Opinions Concurrently with the issuance of the 2018 Bonds, Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, will render its opinion substantially in the form set forth in APPENDIX D to this Official Statement. Certain legal matters with respect to the 2018 Bonds will be passed upon for the City and the District by Jones Hall, A Professional Law Corporation, San Francisco, California, acting as Disclosure Counsel. 45

54 VERIFICATION OF MATHEMATICAL ACCURACY Samuel Klein and Company, Certified Public Accountants, Morristown, New Jersey, upon delivery of the 2018 Bonds, will deliver a report on the mathematical accuracy of certain computations contained in schedules provided to them, which were prepared by the Underwriter, relating to (1) the sufficiency of the anticipated receipts from the moneys deposited pursuant to the Escrow Agreement to pay, when due, the principal, interest and redemption requirements of the Prior Bonds, and (2) the yield on the 2018 Bonds. RATING S&P Global Ratings is expected to assign its municipal bond rating of AA to the Insured 2018 Bonds with the understanding that AGM will issue the Policy concurrently with the delivery of the Insured 2018 Bonds. S&P Global Ratings has assigned an underlying rating of A+ to the 2018 Bonds. Such rating reflects only the views of such rating agency, and an explanation of the significance of the rating may be obtained by contacting the rating agency at: S&P Global Ratings, 55 Water Street, New York, New York Such rating is not a recommendation to buy, sell or hold the 2018 Bonds. There is no assurance that such rating will continue for any given period of time or that such rating will not be revised downward or withdrawn entirely by such organizations, if in the rating agency s judgment circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the 2018 Bonds. LITIGATION The City is not aware of any pending or threatened litigation challenging the validity of the 2018 Bonds, the Special Taxes securing the 2018 Bonds, or any action taken by the City in connection with the formation of the District, the levying of the Special Taxes or the issuance of the 2018 Bonds. MUNICIPAL ADVISOR PFM Financial Advisors LLC, San Francisco, California (the Municipal Advisor ), is a California Limited Liability Company registered as an Independent Registered Municipal Advisor with the Securities Exchange Commission and Municipal Securities Rulemaking Board, serving as financial advisor to the City. The Municipal Advisor does not underwrite, trade or distribute municipal or other public securities. The Municipal Advisor has assisted the City in connection with the planning, structuring, sale and issuance of the 2018 Bonds. The Municipal Advisor is not obligated to undertake, and has not undertaken to make, an independent verification of or to assume responsibilities for the accuracy, completeness or fairness of the information contained in this Official Statement not provided by the Municipal Advisor. 46

55 UNDERWRITING The 2018 Bonds are being purchased by Stifel, Nicolaus & Company, Incorporated (the Underwriter ), at a purchase price of $13,188, (which represents the aggregate principal amount of the 2018 Bonds ($12,020,000.00), plus a net original issue premium of $1,252,069.30, less an Underwriter's discount of $83,610.00). The purchase agreement relating to the 2018 Bonds provides that the Underwriter will purchase all of the 2018 Bonds, if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in such purchase agreement. The Underwriter may offer and sell the 2018 Bonds to certain dealers and others at prices lower than the offering prices stated on the inside cover page hereof. The offering prices may be changed from time to time by the Underwriter. PROFESSIONAL FEES In connection with the issuance of the 2018 Bonds, fees or compensation payable to certain professionals are contingent upon the issuance and delivery of the 2018 Bonds. Those professionals include: the Underwriter; and The Bank of New York Mellon Trust Company, N.A., as Fiscal Agent. CONTINUING DISCLOSURE The City will covenant for the benefit of owners of the 2018 Bonds to provide certain financial information and operating data relating to the District and the 2018 Bonds by not later than nine months after the end of the City s fiscal year (currently March 31 each year based on the City s current fiscal year end of June 30) (the Annual Report ) and to provide notices of the occurrence of certain listed events. These covenants have been made in order to assist the Underwriter in complying with Securities Exchange Commission Rule 15c2-12(b)(5) (the Rule ). The specific nature of the information to be contained in the Annual Report or the notices of listed events is set forth in APPENDIX E. The City previously entered into numerous disclosure undertakings under the Rule in connection with the issuance of long-term obligations. The City has not failed to comply in all material aspects with any previous undertakings with regard to the Rule in the past five years except: (i) for one fiscal year, the City failed to file its audited financial statements for two series of special tax bonds and (ii) for one fiscal year, the City filed its annual report for a series of special tax bonds after its filing deadline. Any failure by the City to comply with the provisions of its undertaking will not constitute a default under the Fiscal Agent Agreement (although owners of the 2018 Bonds will have any remedy available at law or in equity as provided in the undertaking). Nevertheless, a failure to comply must be reported in accordance with the Rule. Such a failure may adversely affect the transferability and liquidity of the 2018 Bonds. 47

56 To ensure compliance with its continuing disclosure undertakings under the Rule in the future, the City has appointed the City s Finance Director to coordinate the preparation and filing of annual disclosure reports in accordance with the City s disclosure undertakings and has adopted policies and procedures related thereto. The City has also engaged Willdan Financial Services to serve as its dissemination agent and assist the City in complying with its continuing disclosure undertakings. 48

57 EXECUTION The execution and delivery of this Official Statement have been duly authorized by the City on behalf of the District. CITY OF FAIRFIELD, CALIFORNIA, for and on behalf of CITY OF FAIRFIELD COMMUNITY FACILITIES DISTRICT NO. 3 (NORTH CORDELIA GENERAL IMPROVEMENTS) By: /s/ David A. White David A. White, City Manager 49

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59 APPENDIX A GENERAL INFORMATION ABOUT THE CITY OF FAIRFIELD AND SOLANO COUNTY The following information concerning the City of Fairfield (the "City") and Solano County (the County ) are included only for the purpose of supplying general information regarding the community. The 2018 Bonds are not a debt of the City, the County, the State of California (the State ) or any of its political subdivisions, and neither the City, the County, the State nor any of its political subdivisions is liable therefor. General The City, which comprises approximately 37 square miles, is located in the County approximately 44 miles northeast of San Francisco and 42 miles west of Sacramento. The City is served by Interstate 80, the major freeway link between San Francisco and Sacramento, as well as Highway 12, a connecting freeway from Interstate 80 to Napa Valley. Historically, the City's economy has been based upon agriculture and related industries; the City has served as a commerce center for agriculture in its region for over 100 years. In recent years, the City has transformed its economic base as a result of significant residential, industrial and commercial building activity occurring over the past several years. The City has been proactive in providing commercial/industrial development opportunities, and has formed several assessment districts to finance public improvements required by new projects. This rapid expansion in manufacturing, logistics, warehousing and distribution has led to substantial growth in population and employment. Another major contributor to the City s economy is Travis Air Force Base, the largest employer of both the City and the County. As of September 30, 2016 (the date of Travis Air Force Base s latest economic impact report), the partnership between Travis Air Force Base and the County generated 4,839 indirect jobs, totaling an estimated annual dollar value of $249,653,812. Travis Air Force Base also awarded more than $111 million worth of contracts to local businesses for work on construction, operations and maintenance of base infrastructure projects. Municipal Government The City was incorporated in 1892 and operates under a council/manager form of government. All municipal departments operate under the supervision of the City Manager. The City Council consists of a Mayor elected at large for a four-year term and four other Council members elected at large for overlapping four-year terms. A-1

60 Population The following table lists population estimates for the City, the County and the State of California for the last five calendar years, as of January 1. CITY OF FAIRFIELD, SOLANO COUNTY AND STATE OF CALIFORNIA Population Estimates Calendar Years 2014 through 2018, as of January 1 Year City of Fairfield Solano County State of California , ,371 38,568, , ,148 38,912, , ,907 39,179, , ,640 39,500, , ,784 39,809,693 Source: California State Department of Finance, as of January 1. A-2

61 Employment and Industry The City is included in the Vallejo-Fairfield Metropolitan Statistical Area ( MSA ). The unemployment rate in the Solano County was 4.1 percent in July 2018, down from a revised 4.2 percent in June 2018, and below the year-ago estimate of 5.1 percent. This compares with an unadjusted unemployment rate of 4.4 percent for California and 4.1 percent for the nation during the same period. The table below provides information about employment rates and employment by industry type for the Vallejo-Fairfield MSA (which includes Solano County) for the calendar years 2013 through VALLEJO-FAIRFIELD METROPOLITAN STATISTICAL AREA (SOLANO COUNTY) Civilian Labor Force, Employment and Unemployment (Annual Averages) (March 2017 Benchmark) Civilian Labor Force (1) 203, , , , ,300 Employment 185, , , , ,300 Unemployment 18,500 15,300 12,600 11,400 10,000 Unemployment Rate 9.1% 7.5% 6.1% 5.5% 4.8% Wage and Salary Employment: (2) Agriculture 1,700 1,800 1,800 1,800 1,800 Natural Resources and Mining Construction 8,600 8,300 8,800 10,200 10,600 Manufacturing 10,200 11,000 11,800 11,800 12,300 Wholesale Trade 4,200 4,400 4,500 4,300 4,200 Retail Trade 17,200 17,500 18,400 18,500 18,600 Trans., Warehousing, Utilities 3,500 4,000 4,300 4,500 4,500 Information 1,100 1,100 1,100 1,100 1,100 Finance and Insurance 3,700 3,500 3,600 3,700 3,600 Professional and Business Services 9,400 9,500 9,600 10,100 10,300 Educational and Health Services 23,400 24,000 25,200 25,600 26,700 Leisure and Hospitality 13,700 14,300 14,600 15,000 15,100 Other Services 4,000 4,000 4,100 4,200 4,300 Federal Government 3,800 3,700 3,700 3,700 3,700 State Government 5,200 5,200 5,100 5,300 5,300 Local Government 15,000 15,600 15,900 16,200 16,100 Total all Industries (3) 126, , , , ,900 (1) Labor force data is by place of residence; includes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike. (2) Industry employment is by place of work; excludes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike. (3) Totals may not add due to rounding. Source: State of California Employment Development Department. A-3

62 Major Employers The following table shows the principal employers in the City, as shown in the City s Comprehensive Annual Financial Report for fiscal year ending June 30, Employer CITY OF FAIRFIELD Major Employers As of June 30, 2017 Type Number of Employees Travis Air Force Base U.S. Military 13,414 Fairfield-Suisun Unified School District Education 2,187 County of Solano Government 2,633 Northbay Medical Center Healthcare 1,969 Solano Community College Education 750 Partnership Health Plan Healthcare 561 City of Fairfield Government 541 Jelly Belly Candy Co. Manufacturing 489 Sutter Fairfield Medical Campus Healthcare 475 Westamerica Bancorporation Banking 418 Source: City of Fairfield Comprehensive Annual Financial Report for fiscal year ended June 30, A-4

63 Effective Buying Income "Effective Buying Income" is defined as personal income less personal tax and nontax payments, a number often referred to as "disposable" or "after-tax" income. Personal income is the aggregate of wages and salaries, other labor-related income (such as employer contributions to private pension funds), proprietor's income, rental income (which includes imputed rental income of owner-occupants of non-farm dwellings), dividends paid by corporations, interest income from all sources, and transfer payments (such as pensions and welfare assistance). Deducted from this total are personal taxes (federal, state and local), nontax payments (fines, fees, penalties, etc.) and personal contributions to social insurance. According to U.S. government definitions, the resultant figure is commonly known as "disposable personal income." The following table summarizes the total effective buying income for the City, the County, the State and the United States for the calendar years 2013 through CITY OF FAIRFIELD, SOLANO COUNTY AND THE STATE OF CALIFORNIA AND THE UNITED STATES EFFECTIVE BUYING INCOME For Calendar Years 2013 Through 2017 Total Effective Median Household Buying Income Effective Year and Area (000s omitted) Buying Income 2013 City of Fairfield $2,363,233 $53,591 Solano County 9,786,833 53,898 California 858,676,636 48,340 United States 6,982,757,379 43, City of Fairfield $2,414,508 $53,906 Solano County 9,934,308 54,340 California 901,189,699 50,072 United States 7,357,153,421 45, City of Fairfield $2,594,525 $56,931 Solano County 10,690,163 57,332 California 981,231,666 53,589 United States 7,757,960,399 46, City of Fairfield $2,814,985 $61,501 Solano County 11,370,811 60,401 California 1,036,142,723 55,681 United States 8,132,748,136 48, City of Fairfield $2,968,591 $63,262 Solano County 11,739,608 61,626 California 1,113,648,181 59,646 United States 8,640,770,229 50,735 Source: The Nielsen Company (US), Inc. A-5

64 Commercial Activity A summary of historic taxable sales within the City and the County during the past five years in which data is available is shown in the following tables. Total taxable sales during calendar year 2016 in the City were reported to be $1,909,699,000 a 0.16% increase over the total taxable sales of $1,912,826,000 reported during calendar year Annual figures are not yet available for calendar year CITY OF FAIRFIELD Taxable Retail Sales Number of Permits and Valuation of Taxable Transactions ($000s) Retail Stores Total All Outlets Number of Permits Taxable Transactions Number of Permits Taxable Transactions ,417 1,122,369 2,045 1,526, ,420 1,220,506 2,043 1,666, ,402 1,293,090 2,047 1,823, ,495 1,352,355 2,306 1,912, ,489 1,374,043 2,322 1,909,699 Source: California State Board of Equalization, Taxable Sales in California (Sales & Use Tax). A summary of historic taxable sales within the City and the County during the past five years in which data is available is shown in the following tables. Total taxable sales during calendar year 2016 in the City were reported to be $7,192,098,000 a 3.27% increase over the total taxable sales of $6,961,047,000 reported during calendar year Annual figures are not yet available for calendar year SOLANO COUNTY Taxable Retail Sales Number of Permits and Valuation of Taxable Transactions ($000s) Retail Stores Total All Outlets Number of Permits Taxable Transactions Number of Permits Taxable Transactions ,607 4,110,380 8,102 6,037, ,693 4,344,846 8,129 6,377, ,741 4,547,857 8,206 6,700, ,233 4,687,466 9,265 6,961, ,042 4,851,514 9,408 7,192,098 Source: California State Board of Equalization, Taxable Sales in California (Sales & Use Tax). A-6

65 Building Activity The tables below summarize building activity in the City and the County for the past five available years. CITY OF FAIRFIELD Total Building Permit Valuations (Valuations in Thousands)* Permit Valuation New Single-family $36,934.8 $85,386.2 $107,025.2 $57,186.4 $67,690.1 New Multi-family , , Res. Alterations/Additions 5, , , , ,124.3 Total Residential 42, , , , ,814.4 New Commercial 12, , , , ,569.4 New Industrial 8, , , ,366.0 New Other 1, , , ,427.2 Com. Alterations/Additions 17, , , , ,955.5 Total Nonresidential 39, , , , ,318.1 New Dwelling Units Single Family Multiple Family TOTAL Source: Construction Industry Research Board, Building Permit Summary. * Subtotals may not foot due to rounding. SOLANO COUNTY Total Building Permit Valuations (Valuations in Thousands)* Permit Valuation New Single-family $109,649.8 $170,575.2 $281,379.9 $251,088.8 $218,841.3 New Multi-family 27, , , ,071.3 Res. Alterations/Additions 27, , , , ,571.1 Total Residential 164, , , , ,483.7 New Commercial 38, , , , ,464.0 New Industrial 9, , , ,795.2 New Other 15, , , , ,815.2 Com. Alterations/Additions 51, , , , ,542.8 Total Nonresidential 115, , , , ,617.2 New Dwelling Units Single Family , Multiple Family TOTAL , Source: Construction Industry Research Board, Building Permit Summary. * Subtotals may be slightly off due to rounding. A-7

66 Home Sales The table below provides home sale information in the City for calendar years 2007 through 2017, and for 2018 year-to-date as of September 4, CITY OF FAIRFIELD Home Sale Information (1) No. of Home Sales Median Price ,226 $430, , , , , , , , , , , , , , , , , , , , , (2) 1, ,250 (1) Incudes attached and detached single-family home sales. (2) Year-to-date as of September 4, Source: CoreLogic; DQNews. A-8

67 APPENDIX B RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX B-1

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71 APPENDIX C SUMMARY OF THE FISCAL AGENT AGREEMENT C-1

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73 APPENDIX C SUMMARY OF THE FISCAL AGENT AGREEMENT The following is a summary of certain provisions of the Fiscal Agent Agreement. A copy of the Fiscal Agent Agreement is available from the Fiscal Agent upon written request. Certain Definitions Act means the Mello-Roos Community Facilities Act of 1982, as amended, being sections et seq. of the California Government Code. Administrative Expenses means costs directly related to the administration of the CFD consisting of: the actual costs of computing the Special Taxes and preparing the annual Special Tax collection schedules (whether by a City employee or consultant or both) and the actual costs of collecting the Special Taxes (whether by the County or otherwise); the actual costs of remitting the Special Taxes to the Fiscal Agent; fees, expenses and actual costs of the Fiscal Agent (including its legal counsel) in the discharge of its duties under the Fiscal Agent Agreement; the actual costs of the City or its designee of complying with the disclosure provisions of the Act and the Fiscal Agent Agreement, including those related to public inquiries regarding the Special Tax and disclosures to Owners of the Bonds and the Original Purchaser; the actual costs of the City or its designee related to an appeal of the Special Tax; any amounts required to be rebated to the federal government; an allocable share of the salaries of the City staff directly related to the foregoing and a proportionate amount of City general administrative overhead related thereto. Administrative Expenses shall also include amounts advanced by the City for any administrative purpose of the CFD, including costs related to prepayments of Special Taxes, recordings related to such prepayments and satisfaction of Special Taxes, amounts advanced to ensure maintenance of tax exemption, and the costs of prosecuting foreclosure of delinquent Special Taxes, which amounts advanced are subject to reimbursement from other sources, including proceeds of foreclosure. Administrative Expense Fund means the fund designated the City of Fairfield Community Facilities District No. 3 (North Cordelia General Improvements) Administrative Expense Fund" established and administered under the Fiscal Agent Agreement. Agreement means the Fiscal Agent Agreement, as it may be amended or supplemented from time to time by any Supplemental Agreement adopted pursuant to the provisions of the Fiscal Agent Agreement. Annual Debt Service means, for each Bond Year, the sum of (i) the interest due on the Outstanding Bonds in such Bond Year, assuming that the Outstanding Bonds are retired as scheduled, and (ii) the principal amount of the Outstanding Bonds due in such Bond Year (including any mandatory sinking payment due in such Bond Year). Assessor s Parcel means a lot or parcel shown in an Assessor s Parcel Map with an assigned Assessor s Parcel number. Assessor s Parcel Map means an official map of the Assessor of the County designating parcels by an Assessor s Parcel number. Exhibit C Page 1

74 Auditor means the auditor/controller of the County, or such other official at the County who is responsible for preparing property tax bills. Authorized Officer means the City Manager, the Finance Director, the City Clerk, or any other officer or employee authorized by the City Council of the City or by an Authorized Officer to undertake the action referenced in the Fiscal Agent Agreement as required to be undertaken by an Authorized Officer. Bond Counsel means Jones Hall, A Professional Law Corporation or any other attorney or firm of attorneys acceptable to the City and nationally recognized for expertise in rendering opinions as to the legality and tax-exempt status of securities issued by public entities. Bond or Bonds means the 2018 Bonds and, if the context requires, any Parity Bonds, at any time Outstanding under the Fiscal Agent Agreement or any Supplemental Agreement. Bond Fund means the fund designated the City of Fairfield, Community Facilities District No. 3 (North Cordelia General Improvements) Special Tax Refunding Bonds Bond Fund established and administered under the Fiscal Agent Agreement. Bond Proceeds Fund means the fund by that name established and held by the Fiscal Agent in accordance with the Fiscal Agent Agreement. Bond Year means the one-year period beginning on September 2nd in each year and ending on September 1 in the following year, except that the first Bond Year shall begin on the Closing Date and shall end on September 1, Business Day means any day other than (i) a Saturday or a Sunday or (ii) a day on which banking institutions in the state in which the Fiscal Agent has its principal corporate trust office are authorized or obligated by law or executive order to be closed. CFD Value means the market value, as of the date of the appraisal described below and/or the date of the most recent County real property tax roll, as applicable, of all parcels of real property in the CFD subject to the levy of the Special Taxes and not delinquent in the payment of any Special Taxes then due and owing, including with respect to such nondelinquent parcels the value of the then existing improvements and any facilities to be constructed or acquired with any amounts then on deposit in an improvement fund established under the Fiscal Agent Agreement and with the proceeds of any proposed series of Parity Bonds, as determined with respect to any parcel or group of parcels by reference to (i) an appraisal performed within six (6) months of the date of issuance of any proposed Parity Bonds by an MAI appraiser (the Appraiser ) selected by the City, or (ii), in the alternative, the assessed value of all such nondelinquent parcels and improvements thereon as shown on the then current County real property tax roll available to the Finance Director. It is expressly acknowledged that, in determining the CFD Value, the City may rely on an appraisal to determine the value of some or all of the parcels in the CFD and/or the most recent County real property tax roll as to the value of some or all of the parcels in the CFD. Neither the City nor the Finance Director shall be liable to the Owners, the Original Purchaser or any other person or entity in respect of any appraisal provided for purposes of this definition or by reason of any exercise of discretion made by any Appraiser pursuant to this definition. Exhibit C Page 2

75 Closing Date means the date upon which there is a physical delivery of the 2018 Bonds in exchange for the amount representing the purchase price of the 2018 Bonds by the Original Purchaser. Dated Date means the dated date of the 2018 Bonds, which is the Closing Date. Debt Service means the scheduled amount of interest and amortization of principal payable on the 2018 Bonds and the scheduled amount of interest and amortization of principal payable on any Parity Bonds during the period of computation, in each case excluding amounts scheduled during such period which relate to principal which has been retired before the beginning of such period. Depository means (a) initially, DTC, and (b) any other Securities Depository acting as Depository for book-entry. DTC means The Depository Trust Company, New York, New York, and its successors and assigns. Escrow Agent means The Bank of New York Mellon Trust Company, N.A., in its capacity as escrow agent pursuant to the Escrow Agreement. Escrow Agreement means that certain Escrow Deposit and Trust Agreement, dated as of December 1, 2018, by and between the City and The Bank of New York Mellon Trust Company, N.A., in its capacity as Escrow Agent and as the Prior Bonds Fiscal Agent. Escrow Fund means that certain escrow fund to be created and maintained by the Escrow Agent as set forth in the Escrow Agreement for the purpose of defeasing, paying and redeeming the outstanding Prior Bonds pursuant to and in accordance with the provisions of Section 9.03 of the Prior Bonds Fiscal Agent Agreement. Exempt Property means all Assessor s Parcels that are exempt from the Special Tax pursuant to the Rate and Method. Facilities means the facilities that are authorized to be financed by the CFD under the Resolution of Formation. Fair Market Value means with respect to the Permitted Investments the price at which a willing buyer would purchase the investment from a willing seller in a bona fide, arm s length transaction (determined as of the date the contract to purchase or sell the investment becomes binding) if the investment is traded on an established securities market (within the meaning of section 1273 of the Tax Code) and, otherwise, the term Fair Market Value means the acquisition price in a bona fide arm s length transaction (as referenced above) if (i) the investment is a certificate of deposit that is acquired in accordance with applicable regulations under the Tax Code, (ii) the investment is an agreement with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate (for example, a guaranteed investment contract, a forward supply contract or other investment agreement) that is acquired in accordance with applicable regulations under the Tax Code, (iii) the investment is a United States Treasury Security State and Local Government Series that is acquired in accordance with applicable regulations of the United States Bureau of Public Debt, or (iv) any commingled investment fund in which the City and related parties do not own more than a ten Exhibit C Page 3

76 percent (10%) beneficial interest if the return paid by such fund is without regard to the source of the investment. Federal Securities means: (a) any direct general obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America), the timely payment of principal of and interest on which are unconditionally and fully guaranteed by the United States of America; and (b) any obligations the timely payment of principal of and interest on which are fully unconditionally guaranteed by the United States of America. Finance Director means the official of the City, or such official s designee, who acts in the capacity as the chief financial officer of the City, including the controller or other financial officer. Fiscal Agent means The New York Mellon Trust Company, N.A., the Fiscal Agent appointed by the City and acting as an independent fiscal agent with the duties and powers provided in the Fiscal Agent Agreement, its successors and assigns, and any other corporation or association which may at any time be substituted in its place, as provided in the Fiscal Agent Agreement. Fiscal Year means the twelve-month period extending from July 1 in a calendar year to June 30 of the succeeding year, both dates inclusive. Independent Financial Consultant means any consultant or firm of such consultants appointed by the City or the Finance Director, and who, or each of whom: (i) is judged by the Finance Director to have experience in matters relating to the issuance and/or administration of bonds under the Act; (ii) is in fact independent and not under the domination of the City; (iii) does not have any substantial interest, direct or indirect, with or in the City, or any owner of real property in the CFD, or any real property in the CFD; and (iv) is not connected with the City as an officer or employee of the City, but who may be regularly retained to make reports to the City. Information Services means (i) the Municipal Securities Rulemaking Board s Electronic Municipal Market Access ( EMMA ) system and (ii) in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such services providing information with respect to called bonds as the City may designate in an Officer s Certificate delivered to the Fiscal Agent. Insured 2018 Bonds means the 2018 Bonds insured by the 2018 Bond Insurance Policy, as such Insured 2018 Bonds are identified in Section 2.02(D). Interest Payment Date means each September 1 and March 1 of every calendar year, commencing with March 1, Maximum Annual Debt Service means the largest Annual Debt Service for any Bond Year after the calculation is made through the final maturity date of any Outstanding Bonds. Officer s Certificate means a written certificate of the City signed by an Authorized Officer of the City. Exhibit C Page 4

77 Ordinance means any ordinance of the City Council of the City levying the Special Taxes, including but not limited to such Ordinance No introduced by the Council on October 23, 1989 and adopted by the City Council on November 21, Outstanding, when used as of any particular time with reference to Bonds, means (subject to the provisions of the Fiscal Agent Agreement) all Bonds except (i) Bonds theretofore canceled by the Fiscal Agent or surrendered to the Fiscal Agent for cancellation; (ii) Bonds paid or deemed to have been paid within the meaning of the provisions of the Fiscal Agent Agreement relating to discharge of the Bonds; and (iii) Bonds in lieu of or in substitution for which other Bonds shall have been authorized, executed, issued and delivered by the City under the Fiscal Agent Agreement or any Supplemental Agreement. Parity Bonds means Bonds issued and payable on a parity basis with the Bonds under the Fiscal Agent Agreement. Permitted Investments means the following, but only to the extent that the same are acquired at Fair Market Value: (a) Federal Securities. (b) any of the following direct or indirect obligations of the following agencies of the United States of America: (i) direct obligations of the Export- Import Bank; (ii) certificates of beneficial ownership issued by the Farmers Home Administration; (iii) participation certificates issued by the General Services Administration; (iv) mortgage-backed bonds or pass-through obligations issued and guaranteed by the Government National Mortgage Association, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation or the Federal Housing Administration; (v) project notes issued by the United States Department of Housing and Urban Development; and (vi) public housing notes and bonds guaranteed by the United States of America; (c) interest-bearing demand or time deposits (including certificates of deposit including those placed by a third party pursuant to a separate agreement between the City and the Fiscal Agent), other deposit products, trust funds, trust accounts, interest bearing deposits, overnight bank deposits, interest bearing money market accounts or deposit accounts in federal or state chartered savings and loan associations or in federal or State of California banks (including the Fiscal Agent, its parent, if any, and affiliates), provided that (i) the unsecured short-term obligations of such commercial bank or savings and loan association shall be rated in the highest short-term rating category by any Rating Agency, or (ii) such demand or time deposits shall be fully insured by the Federal Deposit Insurance Corporation; (d) commercial paper rated in the highest short-term rating category by any Rating Agency, issued by corporations which are organized and operating within the United States of America, and which matures not more than 180 days following the date of investment therein; (e) bankers acceptances (including those of the Fiscal Agent or any of its affiliates), consisting of bills of exchange or time drafts drawn on and Exhibit C Page 5

78 accepted by a commercial bank, including its parent (if any), affiliates and subsidiaries, whose short-term obligations are rated in the highest short-term rating category by any Rating Agency, or whose long-term obligations are rated A or better by any Rating Agency, which mature not more than 270 days following the date of investment therein; (f) obligations the interest on which is excludable from gross income pursuant to Section 103 of the Tax Code and which are either (a) rated A or better by any Rating Agency, or (b) fully secured as to the payment of principal and interest by Federal Securities; (g) obligations issued by any corporation organized and operating within the United States of America having assets in excess of Five Hundred Million ($500,000,000), which obligations are rated A or better by any Rating Agency; (h) money market mutual funds (including money market funds for which the Fiscal Agent, its affiliates or subsidiaries provide investment advisory or other management services) which invest in Federal Securities or which are rated in the highest short-term rating category by any Rating Agency, including those funds for which the Fiscal Agent or an affiliate receives and retains a fee for services provided to the fund, whether as a custodian, transfer agent, investment advisor or otherwise, excluding funds with a floating net asset value; and (i) any investment agreement representing general unsecured obligations of a financial institution rated A or better by any Rating Agency, by the terms of which the Fiscal Agent is permitted to withdraw all amounts invested therein in the event any such rating falls below A. (j) the Local Agency Investment Fund established pursuant to Section of the Government Code of the State of California, provided, however, that the Fiscal Agent shall be permitted to make investments and withdrawals in its own name and the Fiscal Agent may restrict investments in the such fund if necessary to keep moneys available for the purposes of this Fiscal Agent Agreement. (k) the California Asset Management Program. Principal Office means such corporate trust office of the Fiscal Agent as may be designated from time to time by written notice from the Fiscal Agent to the City, or such other office designated by the Fiscal Agent from time to time; except that with respect to presentation of Bonds for payment or for registration of transfer and exchange such term shall mean the office or agency of the Fiscal Agent at which, at any particular time, its corporate trust agency business shall be conducted. Prior Bonds means the City of Fairfield Community Facilities District No. 3 (North Cordelia General Improvements) Special Tax Bonds, Series Prior Bonds Fiscal Agent means The Bank of New York Mellon Trust Company, N.A. Exhibit C Page 6

79 Prior Bonds Fiscal Agent Agreement means the Fiscal Agent Agreement by and between the City of Fairfield, for and on behalf of the CFD, and The Bank of New York Mellon Trust Company, N.A. as fiscal agent dated as of March 1, Proceeds when used with reference to the Bonds, means the face amount of the Bonds, plus any accrued interest and premium, less any original issue and/or underwriter s discount. Qualified Reserve Account Credit Instrument means (i) the 2018 Reserve Fund Insurance Policy and (ii) an irrevocable standby or direct-pay letter of credit, insurance policy, or surety bond issued by a commercial bank or insurance company and deposited with the Fiscal Agent, provided that all of the following requirements are met at the time of acceptance thereof by the Fiscal Agent: (a) in the case of a commercial bank, the long-term credit rating of such bank at the time of delivery of the irrevocable standby or direct-pay letter of credit is at least "A" from S&P or "A" from Moody s and, in the case of an insurance company, the claims paying ability of such insurance company at the time of delivery of the insurance policy or surety bond is at least "A" from S&P, or "A" from Moody s or, if not rated by S&P or Moody s but rated by A.M. Best & Company, is rated at the time of delivery in the highest rating category by A.M. Best & Company; (b) such letter of credit, insurance policy or surety bond has a term of at least 12 months; (c) such letter of credit or surety bond has a stated amount at least equal to the portion of the 2018 Reserve Requirement with respect to which funds are proposed to be released; and (d) the Fiscal Agent is authorized pursuant to the terms of such letter of credit, insurance policy or surety bond to draw thereunder an amount equal to any deficiencies which may exist from time to time in the Bond Fund for the purpose of making payments with respect to the 2018 Bonds and any 2018 Related Parity Bonds. Record Date means the fifteenth day of the calendar month next preceding the applicable Interest Payment Date, whether or not such day is a Business Day. Refunding Bonds means bonds issued by the City for the CFD, the net proceeds of which are used to refund all or a portion of the then-outstanding Bonds; provided that (i) the interest cost to maturity of such bonds to be issued plus the principal amount of such bonds to be issued is equal to or less than the interest cost to maturity of the Bonds being refunded plus the principal amount of the Bonds being refunded and (ii) the final maturity of such bonds to be issued is not later than the final maturity of the Bonds being refunded. Special Tax Fund means the special fund designated City of Fairfield, Community Facilities District No. 3 (North Cordelia General Improvements), Special Tax Fund established and administered under the Fiscal Agent Agreement. Special Tax Revenues means (i) the proceeds of the Special Taxes received by the City, including any scheduled payments thereof, interest thereon and (ii) the proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes to the amount of said lien and interest thereon, but shall not include any interest in excess of the interest due on the Bonds or any penalties collected in connection with any such foreclosure. Special Taxes means the special taxes levied by the City Council within the CFD under the Act, the Ordinance and the Fiscal Agent Agreement Supplemental Agreement means an agreement the execution of which is authorized by a resolution which has been duly adopted by the City under the Act and which agreement is Exhibit C Page 7

80 amendatory of or supplemental to the Fiscal Agent Agreement, but only if and to the extent that such agreement is specifically authorized under the Fiscal Agent Agreement. Tax Code means the Internal Revenue Code of 1986 as in effect on the date of issuance of the Bonds or (except as otherwise referenced in the Fiscal Agent Agreement) as it may be amended to apply to obligations issued on the date of issuance of the Bonds, together with applicable temporary and final regulations promulgated, and applicable official public guidance published, under the Tax Code. Taxable Property means all of the Assessor s Parcels within the boundaries of the CFD that are not exempt from the Special Tax pursuant to law or classified as Exempt Property. "2018 Bond Insurance Policy" means the insurance policy issued by the 2018 Bond Insurer guaranteeing the scheduled payment of principal of and interest on the Insured 2018 Bonds when due. "2018 Bond Insurer" means Assured Guaranty Municipal Corp., a New York stock insurance company, or any successor thereto or assignee thereof, as issuer of the 2018 Bond Insurance Policy and the 2018 Reserve Fund Insurance Policy Bonds means the Bonds so designated and authorized to be issued under the Fiscal Agent Agreement Related Parity Bonds means any series of Parity Bonds for which (i) the Proceeds are deposited into the 2018 Reserve Fund so that the balance therein is equal to the 2018 Reserve Requirement following issuance of such Parity Bonds and (ii) the related Supplemental Agreement specifies that the 2018 Reserve Fund shall act as a reserve for the payment of the principal of, and interest and any premium on, such series of Parity Bonds Reserve Fund means the fund designated the City of Fairfield, Community Facilities District No. 3 (North Cordelia General Improvements), Special Tax Refunding Bonds, Series 2018, 2018 Reserve Fund established and administered under the Fiscal Agent Agreement. "2018 Reserve Fund Insurance Policy" means the municipal bond debt service reserve insurance policy relating to the 2018 Bonds issued by the 2018 Bond Insurer Reserve Requirement means the sum of: (i) $1,107,750.00, which is the least of (a) Maximum Annual Debt Service on the 2018 Bonds as of the Closing Date, (b) 125% of average Annual Debt Service on the 2018 Bonds as of the Closing Date and (c) 10% of the original principal amount of the 2018 Bonds (or, if the 2018 Bonds have more than a de minimis amount of original issue discount or premium, 10% of the issue price of the 2018 Bonds) plus (ii) with respect to any series of 2018 Related Parity Bonds the principal of and interest on which is payable from amounts in the 2018 Reserve Fund, an amount equal to the least of (x) Maximum Annual Debt Service on such 2018 Related Parity Bonds as of the date of their issuance, (y) 125% of average Annual Debt Service on such 2018 Related Parity Bonds as of the date of their issuance and (z) 10% of the original principal amount of such Exhibit C Page 8

81 2018 Related Parity Bonds (or, if the 2018 Related Parity Bonds have more than a de minimis amount of original issue discount or premium, 10% of the issue price of the 2018 Related Parity Bonds); provided that, with respect to the issuance of any 2018 Related Parity Bonds, if the 2018 Reserve Fund would have to be increased by an amount greater than ten percent (10%) of the stated principal amount of the 2018 Related Parity Bonds (or, if the 2018 Related Parity Bonds have more than a de minimis amount of original issue discount or premium, of the issue price of such 2018 Related Parity Bonds), then the 2018 Reserve Requirement shall be such lesser amount as is determined by a deposit of such ten percent (10%); and provided that accrued interest on any 2018 Related Parity Bonds deposited with the Fiscal Agent upon delivery of such 2018 Related Parity Bonds shall be excluded for purposes of the calculation of the 2018 Reserve Requirement Certain Provisions Relating to the Bonds Interest. The 2018 Bonds shall bear interest at the rates set forth above payable on the Interest Payment Dates in each year. Interest on all Bonds shall be calculated on the basis of a 360-day year composed of twelve 30-day months. Each Bond shall bear interest from the Interest Payment Date next preceding the date of authentication thereof unless (i) it is authenticated on an Interest Payment Date, in which event it shall bear interest from such date of authentication, or (ii) it is authenticated prior to an Interest Payment Date and after the close of business on the Record Date preceding such Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or (iii) it is authenticated on or before the Record Date preceding the first Interest Payment Date, in which event it shall bear interest from the Dated Date; provided, however, that if at the time of authentication of a Bond, interest is in default thereon, such Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon. Method of Payment. Interest on the Bonds (including the final interest payment upon maturity or earlier redemption), is payable on the applicable Interest Payment Date by check of the Fiscal Agent mailed by first class mail to the registered Owner thereof at such registered Owner s address as it appears on the registration books maintained by the Fiscal Agent at the close of business on the Record Date preceding the Interest Payment Date, or by wire transfer to an account in the United States of America made on such Interest Payment Date upon written instructions of any Owner of $1,000,000 or more in aggregate principal amount of Bonds delivered to the Fiscal Agent prior to the applicable Record Date, which instructions shall continue in effect until revoked in writing, or until such Bonds are transferred to a new Owner. The principal of the Bonds and any interest or premium on the Bonds are payable in lawful money of the United States of America upon surrender of the Bonds at the Principal Office of the Fiscal Agent. All Bonds paid by the Fiscal Agent and any other Bonds surrendered to the Fiscal Agent for cancellation shall be canceled by the Fiscal Agent. The Fiscal Agent shall destroy the canceled Bonds and, upon request, issue a certificate of destruction of such Bonds to the City. Transfer or Exchange of Bonds Any Bond may, in accordance with its terms, be transferred, upon the books required to be kept under the provisions of the Fiscal Agent Agreement by the person in whose name it is registered, in person or by such person s duly authorized attorney, upon surrender of such Bond for cancellation, accompanied by delivery of a duly written instrument of transfer in a form acceptable to the Fiscal Agent. Bonds may be exchanged at the Principal Office of the Fiscal Agent solely for a like aggregate principal Exhibit C Page 9

82 amount of Bonds of authorized denominations and of the same maturity. The cost for any services rendered or any expenses incurred by the Fiscal Agent in connection with any such transfer or exchange shall be paid by the City from the Administrative Expense Fund. The Fiscal Agent shall collect from the Owner requesting such transfer or exchange any tax or other governmental charge required to be paid with respect to such transfer or exchange. Whenever any Bond or Bonds shall be surrendered for transfer or exchange, the City shall execute and the Fiscal Agent shall authenticate and deliver a new Bond or Bonds, for a like aggregate principal amount. No transfers or exchanges of Bonds shall be required to be made (i) fifteen days prior to the date established by the Fiscal Agent for selection of Bonds for redemption or (ii) with respect to a Bond after such Bond has been selected for redemption; or (iii) between a Record Date and the succeeding Interest Payment Date. Bond Register. The Fiscal Agent will keep, or cause to be kept, at its Principal Office sufficient books for the registration and transfer of the Bonds which books shall show the series number, date, amount, rate of interest and last known owner of each Bond and shall at all times be open to inspection by the City during regular business hours upon reasonable notice; and, upon presentation for such purpose, the Fiscal Agent shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on said books, the ownership of the Bonds as provided in the Fiscal Agent Agreement. The City and the Fiscal Agent will treat the Owner of any Bond whose name appears on the Bond register as the absolute Owner of such Bond for any and all purposes, and the City and the Fiscal Agent shall not be affected by any notice to the contrary. The City and the Fiscal Agent may rely on the address of the Owner as it appears in the Bond register for any and all purposes. Certain Provisions Relating to Security for the Bonds Pledge of Special Tax Revenues. The Bonds shall be secured by a first pledge (which pledge shall be effected in the manner and to the extent in the Fiscal Agent Agreement provided) of all of the Special Tax Revenues (other than the Special Tax Revenues to be deposited into the Administrative Expense Fund pursuant to the Fiscal Agent Agreement) and all moneys deposited in the Bond Fund, and, until disbursed as provided in the Fiscal Agent Agreement, in the Special Tax Fund. The Special Tax Revenues (other than the Special Tax Revenues to be deposited into the Administrative Expense Fund pursuant to the Fiscal Agent Agreement) and all moneys deposited into such funds (except as otherwise provided in the Fiscal Agent Agreement) are by the Fiscal Agent Agreement dedicated to the payment of the principal of, and interest and any premium on, the Bonds as provided in the Fiscal Agent Agreement and in the Act until all of the Bonds have been paid and retired or until moneys or Federal Securities have been set aside irrevocably for that purpose under the provisions of the Fiscal Agent Agreement relating to discharge of the Bonds. The 2018 Bonds and all 2018 Related Parity Bonds shall be secured by a first pledge (which pledge shall be effected in the manner and to the extent therein provided) of all moneys deposited in the 2018 Reserve Fund. The moneys in the 2018 Reserve Fund (except as otherwise provided therein) are hereby dedicated to the payment of the principal of, and interest and any premium on, the 2018 Bonds and all 2018 Related Parity Bonds as provided herein and in the Act until all of the 2018 Bonds and all 2018 Related Parity Bonds have been paid and retired or until moneys or Federal Securities have been set aside irrevocably for that purpose under the Fiscal Agent Agreement. Exhibit C Page 10

83 In addition, the City covenants and agrees that the Insurer Reimbursement Amounts (as defined in Appendix D of the Fiscal Agent Agreement) are secured by a lien on and pledge of the Special Tax Revenues and payable from such Special Tax Revenues on a parity with debt service due on the Bonds. Amounts in the Costs of Issuance Fund and the Administrative Expense Fund are not pledged to the repayment of the Bonds. Limited Obligation. All obligations of the City under the Fiscal Agent Agreement and the Bonds shall not be general obligations of the City, but shall be limited obligations, payable solely from the Special Tax Revenues (other than the Special Tax Revenues to be deposited into the Administrative Expense Fund pursuant to the Fiscal Agent Agreement) and the funds pledged therefore under the Fiscal Agent Agreement. Neither the faith and credit nor the taxing power of the City (except to the limited extent set forth in the Fiscal Agent Agreement) or of the State of California or any political subdivision thereof is pledged to the payment of the Bonds. No Acceleration. The principal of the Bonds is not subject to acceleration. Parity Bonds. In addition to the 2018 Bonds, the City may issue Parity Bonds in such principal amount as shall be determined by the City, under a Supplemental Agreement entered into by the City and the Fiscal Agent. Any such Parity Bonds shall constitute Bonds under the Fiscal Agent Agreement and shall be secured by a lien on the Special Tax Revenues and funds pledged for the payment of the Bonds under the Fiscal Agent Agreement on a parity with all other Bonds Outstanding under the Fiscal Agent Agreement. The City may issue such Parity Bonds subject to the following specific conditions precedent: (A) Compliance. The City shall be in compliance with all covenants set forth in the Fiscal Agent Agreement and all Supplemental Agreements,, and issuance of the Parity Bonds shall not cause the City to exceed the bonded indebtedness limit of the CFD. (B) Same Payment Dates. The Supplemental Agreement providing for the issuance of such Parity Bonds shall provide that interest thereon shall be payable on the Interest Payment Dates, and principal thereof shall be payable on the same date in any year in which principal is payable on the 2018 Bonds (provided that there shall be no requirement that any Parity Bonds pay interest on a current basis). (C) Separate Funds; Reserve Fund Deposit. The Supplemental Agreement providing for the issuance of such Parity Bonds may provide for the establishment of separate funds and accounts. The Supplemental Agreement providing for issuance of the Parity Bonds shall provide for one of the following: (i) a deposit to the 2018 Reserve Fund in an amount necessary such that the amount deposited therein shall equal the 2018 Reserve Requirement following issuance of the Parity Bonds, (ii) a deposit to a reserve account for the Parity Bonds (and such other series of Parity Bonds identified by the City) in an amount defined in such Supplemental Agreement, as long as such Supplemental Agreement expressly declares that the Owners of such Parity Bonds will have no interest in or claim to the 2018 Reserve Fund and that the Owners of the Bonds covered by the 2018 Reserve Fund will have no interest in or claim to such other reserve account or (iii) no deposit to either the 2018 Reserve Fund or another reserve Exhibit C Page 11

84 account as long as such Supplemental Agreement expressly declares that the Owners of such Parity Bonds will have no interest in or claim to the 2018 Reserve Fund or any other reserve account. (D) Value. The CFD Value shall be at least four (4) times the sum of: (i) the aggregate principal amount of all Bonds then Outstanding, plus (ii) the aggregate principal amount of the series of Parity Bonds proposed to be issued, plus (iii) the aggregate principal amount of any fixed assessment liens on the parcels in the CFD subject to the levy of Special Taxes, plus (iv) a portion of the aggregate principal amount of any and all other community facilities district bonds then outstanding and payable at least partially from special taxes to be levied on parcels of land within the CFD (the Other District Bonds ) equal to the aggregate principal amount of the Other District Bonds multiplied by a fraction, the numerator of which is the amount of special taxes levied for the Other District Bonds on parcels of land within the CFD, and the denominator of which is the total amount of special taxes levied for the Other District Bonds on all parcels of land against which the special taxes are levied to pay the Other District Bonds (such fraction to be determined based upon the maximum special taxes which could be levied in the year in which maximum annual debt service on the Other District Bonds occurs), based upon information from the most recent available Fiscal Year. (E) Coverage. The amount of the Special Taxes levied under the Ordinance, the Agreement and any Supplemental Agreement shall be at least (i) 110% of the total Annual Debt Service of the then Outstanding Bonds and the proposed Parity Bonds and (ii) 100% of the total Annual Debt Service of the then Outstanding Bonds and the proposed Parity Bonds and the amount of the levy for Administrative Expenses in the current fiscal year. (F) Certificates. The City shall deliver to the Fiscal Agent an Officer's Certificate certifying that the conditions precedent to the issuance of such Parity Bonds set forth in paragraphs (A), (B), (C), (D), and (E) above have been satisfied. Notwithstanding the foregoing, the City may issue Refunding Bonds as Parity Bonds without the need to satisfy the requirements of paragraphs (D) or (E) above, and, in connection therewith, the Officer s Certificate in paragraph (F) above need not make reference to paragraphs (D) and (E). Nothing in the Fiscal Agent Agreement shall prohibit the City from issuing any other bonds or otherwise incurring debt secured by a pledge of the Special Tax Revenues subordinate to the pledge thereof under the Fiscal Agent Agreement. Exhibit C Page 12

85 Certain Funds and Accounts 2018 Reserve Fund. Establishment of Fund. The 2018 Reserve Fund is established as a separate fund to be held by the Fiscal Agent to the credit of which the Fiscal Agent will deposit the 2018 Reserve Fund Insurance Policy, which deposit, as of the Closing Date, is equal to the initial 2018 Reserve Requirement. Disbursements. All amounts drawn on the 2018 Reserve Fund Insurance Policy shall be used by the Fiscal Agent solely for the purpose of making transfers to the Bond Fund to pay debt service on the 2018 Bonds in accordance with Section 4.04(B). Notwithstanding the foregoing sentence, the City may amend the Fiscal Agent Agreement in connection with the delivery of an amendment of the 2018 Reserve Fund Insurance Policy to provide for draws on the 2018 Reserve Fund Insurance Policy to pay debt service on the 2018 Bonds and one or more series of 2018 Related Parity Bonds Reserve Fund Insurance Policy. The City will have no obligation to replace the 2018 Reserve Fund Insurance Policy or to fund the 2018 Reserve Fund with cash if, at any time that the 2018 Bonds (or any 2018 Related Parity Bonds secured by the 2018 Reserve Fund) are Outstanding, the 2018 Bond Insurer is downgraded or becomes insolvent, or if for any reason insufficient amounts are available to be drawn upon under the 2018 Reserve Fund Insurance Policy; provided, however, that the City will reimburse the 2018 Bond Insurer, in accordance with the terms of the 2018 Reserve Fund Insurance Policy, for any draws made thereon. The Fiscal Agent will comply with the terms of the 2018 Reserve Fund Insurance Policy as is required to receive payments thereunder in the event and to the extent required under the Fiscal Agent Agreement. Bond Fund. Establishment of Bond Fund. Moneys in the Bond Fund shall be held by the Fiscal Agent for the benefit of the City and the Owners of the Bonds, and shall be disbursed for the payment of the principal of, and interest and any premium on, the Bonds as provided below. Disbursements. At least 10 Business Days before each Interest Payment Date, the Fiscal Agent shall notify the Finance Director in writing as to the principal and premium, if any, and interest due on the Bonds on the next Interest Payment Date (whether as a result of scheduled principal of and interest on the Bonds, optional redemption of the Bonds or a mandatory sinking fund redemption). On each Interest Payment Date, the Fiscal Agent shall withdraw from the Bond Fund and pay to the Owners of the Bonds the principal of, and interest and any premium, due and payable on such Interest Payment Date on the Bonds. Notwithstanding the foregoing, amounts in the Bond Fund as a result of a transfer pursuant to the Fiscal Agent Agreement shall be immediately disbursed by the Fiscal Agent to pay past due amounts owing on the Bonds. Exhibit C Page 13

86 At least 5 Business Days prior to each Interest Payment Date, the Fiscal Agent shall determine if the amounts then on deposit in the Bond Fund are sufficient to pay the debt service due on the Bonds on the next Interest Payment Date. In the event that amounts in the Bond Fund are insufficient for such purpose, the Fiscal Agent promptly shall notify the Finance Director by telephone (and confirm in writing) of the amount of the insufficiency. In the event that amounts in the Bond Fund are insufficient for the purpose set forth in the preceding paragraph with respect to any Interest Payment Date, the Fiscal Agent shall do the following: (i) Withdraw from the 2018 Reserve Fund, in accordance with the provisions of the Fiscal Agent Agreement, to the extent of any funds or Permitted Investments therein, amounts to cover the amount of such Bond Fund insufficiency related to the 2018 Bonds and any 2018 Related Parity Bonds. Amounts so withdrawn from the 2018 Reserve Fund shall be deposited in the Bond Fund. (ii) Withdraw from the debt service reserve fund, if any, established under a Supplemental Agreement related to Parity Bonds that are not 2018 Related Parity Bonds, to the extent of any funds or Permitted Investments therein, amounts to cover the amount of such Bond Fund insufficiency related to such Parity Bonds. Amounts so withdrawn from any such debt service reserve fund shall be deposited in the Bond Fund. If, after the foregoing transfers and application of such funds for their intended purposes, there are insufficient funds in the Bond Fund to make the payments provided for in the Fiscal Agent Agreement, the Fiscal Agent shall apply the available funds first to the payment of interest on the Bonds, then to the payment of principal due on the Bonds other than by reason of sinking payments, if any, and then to payment of principal due on the Bonds by reason of sinking payments. If there are insufficient funds to make the corresponding payment for all of the then Outstanding Bonds, then each such payment shall be made ratably to the Owners of the Bonds based on the then Outstanding principal amount of the Bonds, without regard to the existence of a funded debt service reserve. Any sinking payment not made as scheduled shall be added to the sinking payment to be made on the next sinking payment date.. Deficiency. If at any time the Fiscal Agent has actual knowledge that there is a danger of deficiency in the Bond Fund and that the Fiscal Agent may be unable to pay Debt Service on the Bonds in a timely manner, the Fiscal Agent shall report to the Finance Director such fact. The City covenants to increase the levy of the Special Taxes in the next Fiscal Year (subject to the maximum amount authorized by the Resolution of Formation) in accordance with the procedures set forth in the Act for the purpose of curing Bond Fund deficiencies. Excess. Any excess moneys remaining in the Bond Fund, following the payment of Debt Service on the Bonds on any September 1, shall be transferred to the Special Tax Fund. Exhibit C Page 14

87 Special Tax Fund Establishment of Special Tax Fund. The Special Tax Fund is established as a separate fund to be held by the Fiscal Agent, to the credit of which the Fiscal Agent shall deposit amounts received from or on behalf of the City consisting of Special Tax Revenues and amounts transferred from the Administrative Expense Fund and the Bond Fund. The City shall promptly remit any Special Tax Revenues received by it to the Fiscal Agent for deposit by the Fiscal Agent to the Special Tax Fund. Notwithstanding the foregoing, (i) any Special Tax Revenues constituting payment of the portion of the Special Tax levy for Administrative Expenses shall be separately identified by the Finance Director and shall be deposited by the Fiscal Agent in the Administrative Expense Fund; (ii) any Special Tax Revenues constituting the collection of delinquencies in payment of Special Taxes shall be separately identified by the Finance Director and shall be disposed of by the Fiscal Agent first, for transfer to the Bond Fund to pay any past due debt service on the Bonds; second, for transfer to the 2018 Reserve Fund to the extent needed to increase the amount then on deposit in the 2018 Reserve Fund up to the then 2018 Reserve Requirement and for transfer to the reserve account for any Parity Bonds that are not 2018 Related Parity Bonds to the extent needed to increase the amount then on deposit in such reserve account up to the amount then required to be deposited therein (and in the event the collection of delinquencies in payment of Special Taxes are not sufficient for the purposes of this clause, such amounts shall be applied to the 2018 Reserve Fund and any other reserve accounts ratably based on the then Outstanding principal amount of the Bonds); and third, to be held in the Special Tax Fund for use as described in the Fiscal Agent Agreement; and (iii) Moneys in the Special Tax Fund shall be held by the Fiscal Agent for the benefit of the City and Owners of the Bonds, shall be disbursed as provided below and, pending disbursement, shall be subject to a lien in favor of the Owners of the Bonds. Disbursements. On the fifth Business Day prior to each Interest Payment Date, the Fiscal Agent shall withdraw from the Special Tax Fund and transfer the following amounts in the following order of priority (i) to the Bond Fund an amount, taking into account any amounts then on deposit in the Bond Fund and any expected transfers from the 2018 Reserve Fund and any reserve account for Parity Bonds that are not Related Parity Bonds to the Bond Fund such that the amount in the Bond Fund equals the principal (including any sinking payment), premium, if any, and interest due on the Bonds on such Interest Payment Date and any past due principal or interest on the Bonds not theretofore paid from a transfer described in the Fiscal Agent Agreement, and (ii) without preference or priority (a) to the 2018 Reserve Fund an amount, taking into account amounts then on deposit in the 2018 Reserve Fund, such Exhibit C Page 15

88 that the amount in the 2018 Reserve Fund is equal to the 2018 Reserve Requirement and (b) to the reserve account for any Parity Bonds that are not Related Parity Bonds, taking into account amounts then on deposit in the such reserve account, such that the amount in such reserve account is equal to the amount required to be on deposit therein (and in the event that amounts in the Special Tax Fund are not sufficient for the purposes of this paragraph, such amounts shall be applied to the 2018 Reserve Fund and any other reserve accounts ratably based on the then Outstanding principal amount of the Bonds). On each September 2, any amounts remaining in the Special Tax Fund shall be transferred to the Administrative Expense Fund. The County has adopted written guidelines for its Alternative Method of Tax Apportionment ( Teeter Plan ), as set forth in the County of Solano Guideline - Solano County Teeter Program dated March 25, 2004 (the Guidelines ). Under the Guidelines, (i) Special Taxes are not covered by the County s Teeter Plan, (ii) the County will apportion Special Taxes to the City as if the Special Taxes were covered by the Teeter Plan and (iii) the County may demand the repayment by the City of apportionments that represent delinquent Special Taxes when the County determines that the collection of the delinquent Special Taxes is unlikely. As a result, and notwithstanding any other provision of this Agreement, the City may use Special Taxes at any time to repay the County for amounts apportioned by the County to the City that represent delinquent Special Taxes if failure to do so will cause the County to withhold property tax revenues (other than Special Taxes) that would otherwise be apportioned to the City; provided, however, that in the event the County asks the City to repay it for the apportionment of amounts that represent delinquent Special Taxes, the City will make a good faith effort to negotiate a payment plan with the County that will not require the City to repay the County with Special Taxes if doing so will result in there being insufficient Special Tax Revenues to pay debt service on the Bonds when due. Certain Covenants Collection of Special Tax Revenues. The City shall comply with all requirements of the Act so as to assure the timely collection of Special Tax Revenues, including without limitation, the enforcement of delinquent Special Taxes. Processing. On or within 5 Business Days of each June 1, the Fiscal Agent shall provide the Finance Director with a notice stating (i) the amount then on deposit in the Bond Fund and the 2018 Reserve Fund and any reserve account for Parity Bonds that are not 2018 Related Parity Bonds that is held by the Fiscal Agent, and (ii) if the amount in the 2018 Reserve Fund is less than the 2018 Reserve Requirement or the amount in such other reserve account held by the Fiscal Agent is less than its required amount, informing the City that replenishment of the 2018 Reserve Fund or reserve account is necessary, informing the City of the amount (if any) that the City needs to provide for replenishment of the 2018 Reserve Fund or such other reserve account so that the balance therein equals the 2018 Reserve Requirement or applicable reserve, as applicable. The receipt of or failure to receive such notice by the Exhibit C Page 16

89 Finance Director shall in no way affect the obligations of the Finance Director under the following two paragraphs and the Fiscal Agent shall not be liable for failure to provide such notices to the Finance Director. Upon receipt of such notice, the Finance Director shall communicate with the Auditor to ascertain the relevant parcels on which the Special Taxes are to be levied, taking into account any parcel splits or combinations during the preceding and then current year. Levy. The Finance Director shall effect the levy of the Special Taxes each Fiscal Year in accordance with the Ordinance by each August 1 that the Bonds are outstanding, or otherwise such that the computation of the levy is complete before the final date on which Auditor will accept the transmission of the Special Tax amounts for the parcels within the CFD for inclusion on the next real property tax roll. Upon the completion of the computation of the amounts of the levy, the Finance Director shall prepare or cause to be prepared, and shall transmit to the Auditor, such data as the Auditor requires to include the levy of the Special Taxes on the next real property tax roll. Computation. The Finance Director shall fix and levy the amount of Special Taxes within the CFD required for the timely payment of principal of and interest on any outstanding Bonds of the CFD becoming due and payable during the ensuing calendar year, including any necessary replenishment or expenditure of the 2018 Reserve Fund and any reserve account for Parity Bonds that are not 2018 Related Parity Bonds and an amount estimated to be sufficient to pay the Administrative Expenses, including amounts necessary to discharge any rebate obligation, during such year, taking into account the balances in the applicable funds established under the Fiscal Agent Agreement and in the Special Tax Fund. The Special Taxes so levied shall not exceed the authorized amounts as provided in the proceedings under the Resolution of Formation. Collection. Except as set forth in the Ordinance, Special Taxes shall be payable and be collected in the same manner and at the same time and in the same installment as the general taxes on real property are payable, and have the same priority, become delinquent at the same time and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the ad valorem taxes on real property. The Finance Director is hereby authorized to employ consultants to assist in computing the levy of the Special Taxes thereunder and any reconciliation of amounts levied to amounts received. The fees and expenses of such consultants and the costs and expenses of the Finance Director (including a charge for City staff time) in conducting its duties thereunder shall be an Administrative Expense hereunder. Covenant to Foreclose. Under the Act, the City by the Fiscal Agent Agreement covenants with and for the benefit of the Owners of the Bonds that it will order, and cause to be commenced as provided in the Fiscal Agent Agreement, and thereafter diligently prosecute to judgment (unless such delinquency is theretofore brought current), an action in the superior court to foreclose the lien of any delinquent Special Tax or installment thereof. The Finance Director shall notify the City Attorney of any such delinquency of which the Finance Director is aware, and the City Attorney shall commence, or cause to be commenced, such proceedings. Exhibit C Page 17

90 On or about June 15 of each Fiscal Year, the Finance Director shall compare the amount of Special Taxes theretofore levied in the CFD and to the amount of Special Tax Revenues theretofore received by the City, and: Individual Delinquencies. If the Finance Director determines that any single parcel subject to the Special Tax in the CFD is delinquent in the payment of Special Taxes in the aggregate amount of $1,300 in fiscal year (which amount shall increase, in future years, by $12 from the previous year s amount) or more, then the Finance Director shall send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to the property owner within 45 days of such determination, and (if the delinquency remains uncured) foreclosure proceedings shall be commenced by the City within 90 days of such determination. Notwithstanding the foregoing, in its sole discretion, the Finance Director may defer such action if(1) the Special Taxes are covered by the County s Teeter Plan, or an equivalent procedure, but only to the extent that the City cannot be required to repay the County for amounts apportioned by the County to the City that represent delinquent Special Taxes, (2) the amount in the 2018 Reserve Fund is at least equal to the 2018 Reserve Requirement, (3) the amount in the reserve account for any Parity Bonds that are not 2018 Related Parity Bonds is at least equal to the required amount and (4) the subject parcel is not delinquent with respect to more than the amount of Special Taxes specified in the first sentence of this paragraph.. Aggregate Delinquencies. If the Finance Director determines that the total amount of delinquent Special Tax for the prior Fiscal Year for the entire CFD, (including the total of individual delinquencies), exceeds 5% of the total Special Tax due and payable for the prior Fiscal Year, determined by reference to the latest available secured property tax roll of the County, the Finance Director shall notify or cause to be notified property owners who are then delinquent in the payment of Special Taxes (and demand immediate payment of the delinquency) within 45 days of such determination, and shall commence foreclosure proceedings within 90 days of such determination against each parcel of land in the CFD with a Special Tax delinquency. The Finance Director and the City Attorney, as applicable, are by the Fiscal Agent Agreement authorized to employ counsel to conduct any such foreclosure proceedings. The fees and expenses of any such counsel (including a charge for City staff time) in conducting foreclosure proceedings shall be an Administrative Expense under the Fiscal Agent Agreement. Books and Records. City. The City will keep, or cause to be kept, proper books of record and accounts, separate from all other records and accounts of the City, in which complete and correct entries shall be made of all transactions relating to the Special Tax Revenues. Such books of record and accounts shall at all times during business hours be subject to the inspection of the Fiscal Agent and the Owners of not less than ten percent (10%) of the principal amount of the Bonds then Outstanding, or their representatives duly authorized in writing. Exhibit C Page 18

91 Fiscal Agent. The Fiscal Agent will keep, or cause to be kept, proper books of record and accounts, separate from all other records and accounts of the Fiscal Agent, in which complete and correct entries shall be made of all transactions made by it relating to the expenditure of amounts disbursed from the funds, and, if any, accounts in such funds held by the Fiscal Agent under the Fiscal Agent Agreement. Such books of record and accounts shall at all times during the Fiscal Agent s business hours be subject to the inspection of the City and the Owners of not less than ten percent (10%) of the principal amount of the Bonds then Outstanding, or their representatives duly authorized in writing upon reasonable prior notice. Private Activity Bond Limitations. The City shall assure that the proceeds of the 2018 Bonds are not so used as to cause the 2018 Bonds to satisfy the private business tests of section 141(b) of the Tax Code or the private loan financing test of section 141(c) of the Code. Federal Guarantee Prohibition. The City shall not take any action or permit or suffer any action to be taken if the result of the same would be to cause the 2018 Bonds to be federally guaranteed within the meaning of Section 149(b) of the Tax Code. Rebate Requirement. The City shall take any and all actions necessary to assure compliance with section 148(f) of the Tax Code, relating to the rebate of excess investment earnings, if any, to the federal government, to the extent that such section is applicable to the 2018 Bonds. The Finance Director shall take note of any investment of monies under the Fiscal Agent Agreement in excess of the yield on the 2018 Bonds, and shall take such actions as are necessary to ensure compliance with this covenant, such as increasing the portion of the Special Tax levy for Administration Expenses as appropriate to have funds available in the Administrative Expense Fund to satisfy any rebate liability. If necessary to satisfy its obligations under this covenant, the City may use: (A) (B) (C) Earnings on the 2018 Reserve Fund if the amount on deposit in the 2018 Reserve Fund, following the proposed transfer, is equal to the 2018 Reserve Requirement, and earnings on amounts in any other reserve account for Parity Bonds that are not 2018 Related Parity Bonds to the extent permitted by the Supplemental Agreement; Amounts on deposit in the Administrative Expense Fund; and Any other funds available to the CFD, including amounts advanced by the City, in its sole discretion, to be repaid by the CFD as soon as practicable from amounts described in the preceding clauses (A) and (B). No Arbitrage. The City shall not take, or permit or suffer to be taken by the Fiscal Agent or otherwise, any action with respect to the proceeds of the 2018 Bonds which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the date of issuance of the 2018 Bonds would have caused the 2018 Bonds to be arbitrage bonds within the meaning of section 148 of the Tax Code. Yield of the 2018 Bonds. In determining the yield of the 2018 Bonds to comply with its federal tax law-related covenants under the Fiscal Agent Agreement, the City will take into account redemption (including premium, if any) in advance of maturity based on the Exhibit C Page 19

92 reasonable expectations of the City, as of the Closing Date, regarding prepayments of Special Taxes and use of prepayments for redemption of the 2018 Bonds, without regard to whether or not prepayments are received or 2018 Bonds redeemed. Maintenance of Tax-Exemption. The City shall take all actions necessary to assure the exclusion of interest on the 2018 Bonds from the gross income of the Owners of the 2018 Bonds to the same extent as such interest is permitted to be excluded from gross income under the Tax Code as in effect on the date of issuance of the 2018 Bonds. Limits on Special Tax Waivers and Bond Tenders. The City covenants not to exercise its rights under the Act to waive delinquency and redemption penalties related to the Special Taxes or to declare a Special Tax penalties amnesty program if to do so would materially and adversely affect the interests of the owners of the Bonds and further covenants not to permit the tender of Bonds in payment of any Special Taxes except upon receipt of a certificate of an Independent Financial Consultant that to accept such tender will not result in the City having insufficient Special Tax Revenues to pay the principal of and interest on the Bonds, any Subordinate Bonds and any Parity Bonds remaining Outstanding following such tender. City Bid at Foreclosure Sale. The City will not bid at a foreclosure sale of property in respect of delinquent Special Taxes, unless it expressly agrees to take the property subject to the lien for Special Taxes and that the Special Taxes levied on the property are payable while the City owns the property. Amendment of Rate and Method. The City shall not initiate proceedings under the Act to modify the Rate and Method if such modification would adversely affect the security for the Bonds. If an initiative is adopted that purports to modify the Rate and Method in a manner that would adversely affect the security for the Bonds, the City shall, to the extent permitted by law, commence and pursue reasonable legal actions to prevent the modification of the Rate and Method in a manner that would adversely affect the security for the Bonds Bond Insurance Policy. So long as the 2018 Bond Insurance Policy remains in effect, and notwithstanding any other provision in the Fiscal Agent Agreement, the City and the Fiscal Agent will comply with all of the terms and provisions set forth in Exhibit D of the Fiscal Agent Agreement relating to the 2018 Bond Insurer and the 2018 Bond Insurance Policy (see 2018 Bond Insurance Policy below) Reserve Fund Insurance Policy. So long as the 2018 Reserve Fund Insurance Policy remains in effect, and notwithstanding any other provision in the Fiscal Agent Agreement, the City and the Fiscal Agent will comply with all of the terms and provisions set forth in Exhibit E of the Fiscal Agent Agreement relating to the 2018 Bond Insurer and the 2018 Reserve Fund Insurance Policy (see 2018 Reserve Fund Insurance Policy below. Investment of Moneys in Funds General. Moneys in any fund or account created or established by the Fiscal Agreement and held by the Fiscal Agent shall be invested by the Fiscal Agent in Permitted Investments, which in any event by their terms mature prior to the date on which such moneys are required to be paid out under the Fiscal Agent Agreement, as directed pursuant to an Officer s Certificate filed with the Fiscal Agent at least 2 Business Days in advance of the Exhibit C Page 20

93 making of such investments. In the absence of any such Officer s Certificate, the Fiscal Agent shall hold such funds uninvested. Moneys in Funds. Moneys in any fund or account created or established by the Fiscal Agent Agreement and held by the Finance Director shall be invested by the Finance Director in any Permitted Investment or in any other lawful investment for City funds, which in any event by its terms matures prior to the date on which such moneys are required to be paid out under the Fiscal Agent Agreement. Obligations purchased as an investment of moneys in any fund shall be deemed to be part of such fund or account, subject, however, to the requirements of the Fiscal Agent Agreement for transfer of investment earnings and profits resulting from investment of amounts in funds and accounts. Whenever in the Fiscal Agent Agreement any moneys are required to be transferred by the City to the Fiscal Agent, such transfer may be accomplished by transferring a like amount of Permitted Investments. Valuation of Investments. Except as otherwise provided in the next sentence, all investments of amounts deposited in any fund or account created by or pursuant to the Fiscal Agent Agreement, or otherwise containing gross proceeds of the Bonds (within the meaning of section 148 of the Tax Code) shall be acquired, disposed of, and valued (as of the date that valuation is required by the Fiscal Agent Agreement or the Tax Code) at Fair Market Value. Investments in funds or accounts (or portions thereof) that are subject to a yield restriction under the applicable provisions of the Tax Code and (unless valuation is undertaken at least annually) investments in the subaccounts within the 2018 Reserve Fund and any reserve account established for Parity Bonds shall be valued at their present value (within the meaning of section 148 of the Tax Code). The Fiscal Agent shall not be liable for verification of the application of such sections of the Tax Code or for any determination of Fair Market Value or present value and may conclusively rely upon an Officer s Certificate as to such valuations. Commingled Money. Investments in any and all funds and accounts may be commingled in a separate fund or funds for purposes of making, holding and disposing of investments, notwithstanding provisions in the Fiscal Agent Agreement for transfer to or holding in or to the credit of particular funds or accounts of amounts received or held by the Fiscal Agent or the Finance Director under the Fiscal Agent Agreement, provided that the Fiscal Agent or the Finance Director, as applicable, shall at all times account for such investments strictly in accordance with the funds and accounts to which they are credited and otherwise as provided in the Fiscal Agent Agreement. Sale of Investments. The Fiscal Agent or the Finance Director, as applicable, shall sell at Fair Market Value, or present for redemption, any investment security whenever it shall be necessary to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the fund or account to which such investment security is credited and neither the Fiscal Agent nor the Finance Director shall be liable or responsible for any loss resulting from the acquisition or disposition of such investment security in accordance herewith. Liability of City General. The City shall not incur any responsibility in respect of the Bonds or the Fiscal Agent Agreement other than in connection with the duties or obligations explicitly in the Fiscal Agent Agreement or in the Bonds assigned to or imposed upon it. The City shall not be liable in connection with the performance of its duties under the Fiscal Agent Agreement, except for Exhibit C Page 21

94 its own negligence or willful default. The City shall not be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions, covenants or agreements of the Fiscal Agent in the Fiscal Agent Agreement or of any of the documents executed by the Fiscal Agent in connection with the Bonds, or as to the existence of a default or event of default thereunder. No General Liability. No provision of the Fiscal Agent Agreement shall require the City to expend or risk its own general funds or otherwise incur any financial liability (other than with respect to the Special Tax Revenues) in the performance of any of its obligations under the Fiscal Agent Agreement, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Certain Provisions Relating to the Fiscal Agent Merger. Any company into which the Fiscal Agent may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Fiscal Agent may sell or transfer all or substantially all of its corporate trust business, provided such company shall be eligible under the following paragraph shall be the successor to such Fiscal Agent without the execution or filing of any paper or any further act, anything in the Fiscal Agent Agreement to the contrary notwithstanding. The Fiscal Agent shall give the Finance Director and the Finance Director written notice of any such succession under the Fiscal Agent Agreement. Removal. Upon 30 days written notice, the City may remove the Fiscal Agent initially appointed, and any successor thereto, and may appoint a successor or successors thereto, but any such successor shall be a bank, national banking association or trust company having a combined capital (exclusive of borrowed capital) and surplus of at least fifty million dollars ($50,000,000), and subject to supervision or examination by federal or state authority. If such bank, national banking association or trust company publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then combined capital and surplus of such bank, national banking association or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. Resignation. The Fiscal Agent may at any time resign by giving written notice to the City by certified mail return receipt requested, and by giving to the Owners notice by mail of such resignation. Upon receiving notice of such resignation, the City shall promptly appoint a successor Fiscal Agent by an instrument in writing. Any resignation or removal of the Fiscal Agent shall become effective upon acceptance of appointment by the successor Fiscal Agent. No Successor. If no appointment of a successor Fiscal Agent shall be made within forty-five (45) days after the Fiscal Agent shall have given to the City written notice or after a vacancy in the office of the Fiscal Agent shall have occurred by reason of its inability to act, the Fiscal Agent, at the expense of the City, or any Owner may apply to any court of competent jurisdiction to appoint a successor Fiscal Agent. Said court may thereupon, after such notice, if any, as such court may deem proper, appoint a successor Fiscal Agent. Court Order. If, by reason of the judgment of any court, the Fiscal Agent is rendered unable to perform its duties under the Fiscal Agent Agreement, all such duties and all of the Exhibit C Page 22

95 rights and powers of the Fiscal Agent under the Fiscal Agent Agreement shall be assumed by and vest in the Finance Director of the City in trust for the benefit of the Owners. The City covenants for the direct benefit of the Owners that its Finance Director in such case shall be vested with all of the rights and powers of the Fiscal Agent under the Fiscal Agent Agreement, and shall assume all of the responsibilities and perform all of the duties of the Fiscal Agent under the Fiscal Agent Agreement, in trust for the benefit of the Owners of the Bonds. Liability of Fiscal Agent. General. The Fiscal Agent shall not be liable in connection with the performance of its duties under the Fiscal Agent Agreement, except for its own negligence or willful misconduct. No Expenditures. No provision of the Fiscal Agent Agreement shall require the Fiscal Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties under the Fiscal Agent Agreement, or in the exercise of any of its rights or powers. No Action. The Fiscal Agent shall be under no obligation to exercise any of the rights or powers vested in it by the Fiscal Agent Agreement at the request or direction of any of the Owners under the Fiscal Agent Agreement unless such Owners shall have offered to the Fiscal Agent reasonable security or indemnity satisfactory to the Fiscal Agent against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. Amendments Permitted With Consent. The Fiscal Agent Agreement and the rights and obligations of the City and of the Owners of the Bonds may be modified or amended at any time by a Supplemental Agreement pursuant to the affirmative vote at a meeting of Owners, or with the written consent without a meeting, of the Owners of at least sixty percent (60%) in aggregate principal amount of the Bonds then Outstanding, exclusive of Bonds disqualified as provided in the Fiscal Agent Agreement. No such modification or amendment shall (i) extend the maturity of any Bond or reduce the interest rate thereon, or otherwise alter or impair the obligation of the City to pay the principal of, and the interest and any premium on, any Bond, without the express consent of the Owner of such Bond, or (ii) permit the creation by the City of any pledge or lien upon the Special Taxes superior to or on a parity with the pledge and lien created for the benefit of the Bonds (except as otherwise permitted by the Act, the laws of the State of California or the Fiscal Agent Agreement), or reduce the percentage of Bonds required for the amendment of the Fiscal Agent Agreement. Without Consent. The Fiscal Agent Agreement and the rights and obligations of the City and of the Owners may also be modified or amended at any time by a Supplemental Agreement, without the consent of any Owners, only to the extent permitted by law and only for any one or more of the following purposes: (i) to add to the covenants and agreements of the City in the Fiscal Agent Agreement, other covenants and agreements thereafter to be observed, or (b) to limit or surrender any right or power in the Fiscal Agent Agreement reserved to or conferred upon the City; Exhibit C Page 23

96 (ii) to make modifications not adversely affecting any Outstanding Bonds in any material respect (as evidenced by the opinion of counsel delivered pursuant to the Fiscal Agent Agreement) including, but not limited to, amending the Rate and Method, so long as the amendment does not result in coverage less than set forth in clause (E) of the Parity Bonds test; (iii) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained in the Fiscal Agent Agreement, or in regard to questions arising under the Fiscal Agent Agreement, as the City and the Fiscal Agent may deem necessary or desirable and not inconsistent with the Fiscal Agent Agreement, and which shall not adversely affect the rights of the Owners of the Bonds (as evidenced by the opinion of counsel delivered pursuant to the Fiscal Agent Agreement); (iv) to make such additions, deletions or modifications as may be necessary or desirable to assure exclusion from gross income for federal income tax purposes of interest on the Bonds; (v) in connection with the issuance of any Parity Bonds; (vi) to amend Section 4.03 and such other provisions of the Fiscal Agent Agreement in order to provide for draws on the 2018 Reserve Fund Insurance Policy to pay debt service on a series of 2018 Related Parity Bonds, subject to the following conditions precedent: (A) the 2018 Bond Insurer shall have consented in writing to the amendment, which consent may be granted or denied in the 2018 Bond Insurer s sole and absolute discretion, (B) the 2018 Bond Insurer shall have delivered an amendment of the 2018 Reserve Fund Insurance Policy such that the amended 2018 Reserve Fund Insurance Policy will satisfy the 2018 Reserve Requirement taking into account the 2018 Bonds and any 2018 Related Parity Bonds secured by the 2018 Reserve Fund, (C) as of the date of delivery of the amendment described in clause (B), the amendment would constitute a Qualified Reserve Account Credit Instrument without regard to clause (i) of the definition thereof, (D) the City shall have delivered an opinion of Bond Counsel to the effect that such amendment, in and of itself, will not adversely affect the exclusion of interest on the 2018 Bonds from gross income for federal income tax purposes and (E) the 2018 Bond Insurer shall have delivered such other opinions and certificates as are requested by Bond Counsel. Fiscal Agent s Consent. Any amendment of the Fiscal Agent Agreement may not modify any of the rights or obligations of the Fiscal Agent without its written consent. The Fiscal Agent shall be furnished an opinion of counsel that any such Supplemental Agreement entered into by the City and the Fiscal Agent complies with the provisions of the Fiscal Agent Agreement and the Fiscal Agent may conclusively rely on such opinion and shall be absolutely protected in so relying. Procedure for Amendment with Written Consent of Owners. The City and the Fiscal Agent may at any time adopt a Supplemental Agreement amending the provisions of the Bonds or of the Fiscal Agent Agreement or any Supplemental Agreement, to the extent that such amendment is permitted by the Fiscal Agent Agreement, to take effect when and as provided in the Fiscal Agent Agreement. A copy of such Supplemental Agreement, together with a request to Owners for their consent thereto, shall be mailed by first class mail, by the Exhibit C Page 24

97 Fiscal Agent, at the expense of the City), to each Owner of Bonds Outstanding, but failure to mail copies of such Supplemental Agreement and request shall not affect the validity of the Supplemental Agreement when assented to as provided in the Fiscal Agent Agreement. Such Supplemental Agreement shall not become effective unless there shall be filed with the Fiscal Agent the written consents of the Owners of at least sixty percent (60%) in aggregate principal amount of the Bonds then Outstanding (exclusive of Bonds disqualified as provided in the Fiscal Agent Agreement) and a notice shall have been mailed as provided in the Fiscal Agent Agreement. Each such consent shall be effective only if accompanied by proof of ownership of the Bonds for which such consent is given, which proof shall be such as is permitted by the Fiscal Agent Agreement. Any such consent shall be binding upon the Owner of the Bonds giving such consent and on any subsequent Owner (whether or not such subsequent Owner has notice thereof) unless such consent is revoked in writing by the Owner giving such consent or a subsequent Owner by filing such revocation with the Fiscal Agent prior to the date when the notice provided for in the Fiscal Agent Agreement has been mailed. After the Owners of the required percentage of Bonds shall have filed their consents to the Supplemental Agreement, the City shall mail a notice to the Owners in the manner provided in the Fiscal Agent Agreement for the mailing of the Supplemental Agreement, stating in substance that the Supplemental Agreement has been consented to by the Owners of the required percentage of Bonds and will be effective as provided in the Fiscal Agent Agreement (but failure to mail copies of said notice shall not affect the validity of the Supplemental Agreement or consents thereto). Proof of the mailing of such notice shall be filed with the Fiscal Agent. A record, consisting of the papers required by the Fiscal Agent Agreement to be filed with the Fiscal Agent, shall be proof of the matters therein stated until the contrary is proved. The Supplemental Agreement shall become effective upon the filing with the Fiscal Agent of the proof of mailing of such notice, and the Supplemental Agreement shall be deemed conclusively binding (except as otherwise provided in the Fiscal Agent Agreement) upon the City and the Owners of all Bonds at the expiration of sixty (60) days after such filing, except in the event of a final decree of a court of competent jurisdiction setting aside such consent in a legal action or equitable proceeding for such purpose commenced within such sixty-day period. Discharge of Agreement. The City may pay and discharge the entire indebtedness on all Bonds Outstanding in any one or more of the following ways: (A) by paying or causing to be paid the principal of, and interest and any premium on, all Bonds Outstanding, as and when the same become due and payable; (B) by depositing with the Fiscal Agent, in trust, at or before maturity, money which, together with the amounts then on deposit in the funds and accounts provided for in the Bond Fund and the 2018 Reserve Fund of the Fiscal Agent Agreement, is fully sufficient to pay all Bonds Outstanding, including all principal, interest and redemption premiums; or (C) by irrevocably depositing with the Fiscal Agent, in trust, cash and/or Federal Securities in such amount as the City shall determine, as confirmed by an independent certified public accountant in writing, as will, together with the interest to accrue thereon and moneys then on deposit in the fund and accounts provided for in the Bond Fund and the 2018 Reserve Fund Exhibit C Page 25

98 (to the extent invested in Federal Securities), be fully sufficient to pay and discharge the indebtedness on all Bonds (including all principal, interest and redemption premiums) at or before their respective maturity dates. If the City shall have taken any of the actions specified in (A), (B) or (C) above, and if such Bonds are to be redeemed prior to the maturity thereof notice of such redemption shall have been given as in the Fiscal Agent Agreement provided or provision satisfactory to the Fiscal Agent shall have been made for the giving of such notice, and, at the election of the City, and notwithstanding that any Bonds shall not have been surrendered for payment, the pledge of the Special Taxes and other funds provided for in the Fiscal Agent Agreement and all other obligations of the City under the Fiscal Agent Agreement with respect to such Bonds Outstanding shall cease and terminate. Notice of such election shall be filed with the Fiscal Agent. Notwithstanding the foregoing, the following obligations and pledges of the City shall continue in any event: (i) the obligation of the City to pay or cause to be paid to the Owners of the Bonds not so surrendered and paid all sums due thereon, (ii) the obligation of the City to pay amounts owing to the Fiscal Agent pursuant to the Fiscal Agent Agreement, and (iii) the obligation of the City to assure that no action is taken or failed to be taken if such action or failure adversely affects the exclusion of interest on the Bonds from gross income for federal income tax purposes. Upon compliance by the City with the foregoing with respect to all Bonds Outstanding, any funds held by the Fiscal Agent after payment of all fees and expenses of the Fiscal Agent, which are not required for the purposes of the preceding paragraph, shall be paid over to the City and any Special Taxes thereafter received by the City shall not be remitted to the Fiscal Agent but shall be retained by the City to be used for any purpose permitted under the Act Bond Insurance Policy (a) The prior written consent of the 2018 Bond Insurer shall be a condition precedent to the deposit of any credit instrument in lieu of a cash deposit into the 2018 Reserve Fund. Except as set forth in the Fiscal Agent Agreement, amounts on deposit in 2018 Reserve Fund shall be applied solely to the payment of debt service due on the Insured 2018 Bonds. (b) The 2018 Bond Insurer shall be deemed to be the sole holder of the Insured 2018 Bonds for the purpose of exercising any voting right or privilege or giving any consent or direction or taking any other action that the holders of the Insured 2018 Bonds insured by it are entitled to take pursuant to the Fiscal Agent Agreement pertaining to (i) defaults and remedies and (ii) the duties and obligations of the Fiscal Agent. In furtherance thereof and as a term of the Fiscal Agent Agreement and each Insured 2018 Bond, each Owner of a Insured 2018 Bond appoints the 2018 Bond Insurer as its agent and attorney-in-fact and agree that the 2018 Bond Insurer may at any time during the continuation of any proceeding by or against the City under the United States Bankruptcy Code or any other applicable bankruptcy, insolvency, receivership, rehabilitation or similar law (an "Insolvency Proceeding") direct all matters relating to such Insolvency Proceeding, including without limitation, (A) all matters relating to any claim or enforcement proceeding in connection with an Insolvency Proceeding (a "Claim"), (B) the direction of any appeal of any order relating to any Claim, (C) the posting of any surety, supersedes or performance bond pending any such appeal, and (D) the right to vote to accept or reject any plan of adjustment. In addition, each Owner of a Insured 2018 Bond delegates Exhibit C Page 26

99 and assigns to the 2018 Bond Insurer, to the fullest extent permitted by law, the rights of each Owner of a Insured 2018 Bond in the conduct of any Insolvency Proceeding, including, without limitation, all rights of any party to an adversary proceeding or action with respect to any court order issued in connection with any such Insolvency Proceeding. The Fiscal Agent acknowledges such appointment, delegation and assignment by each Owner of a Insured 2018 Bond for the 2018 Bond Insurer s benefit, and agrees to cooperate with the 2018 Bond Insurer in taking any action reasonably necessary or appropriate in connection with such appointment, delegation and assignment. Remedies granted to the Owners of the Insured 2018 Bond shall expressly include mandamus. (c) The 2018 Bond Insurer is a third party beneficiary to the Fiscal Agent Agreement as it relates to the Insured 2018 Bonds. (d) Any amendment, supplement, modification to, or waiver of, the Fiscal Agent Agreement or any other transaction document, including any underlying security agreement (each a "Related Document"), that requires the consent of the Owners of the 2018 Bonds or adversely affects the rights and interests of the 2018 Bond Insurer shall be subject to the prior written consent of the 2018 Bond Insurer. (e) The rights granted to the Insured 2018 Bond Insurer under the Fiscal Agent Agreement or any other Related Document to request, consent to or direct any action are rights granted to the 2018 Bond Insurer in consideration of its issuance of the 2018 Bond Insurance Policy. Any exercise by the 2018 Bond Insurer of such rights is merely an exercise of the 2018 Bond Insurer's contractual rights and shall not be construed or deemed to be taken for the benefit, or on behalf, of the Owners of the Insured 2018 Bonds and such action does not evidence any position of the 2018 Bond Insurer, affirmative or negative, as to whether the consent of the Owners of the Insured 2018 Bonds or any other person is required in addition to the consent of the 2018 Bond Insurer. (f) Only (1) cash, (2) non-callable direct obligations of the United States of America ("Treasuries"), (3) evidences of ownership of proportionate interests in future interest and principal payments on Treasuries held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying Treasuries are not available to any person claiming through the custodian or to whom the custodian may be obligated, (4) subject to the prior written consent of the 2018 Bond Insurer, pre-refunded municipal obligations rated "AAA" and "Aaa" by S&P and Moody's, respectively, or (5) subject to the prior written consent of the 2018 Bond Insurer, securities eligible for "AAA" defeasance under then existing criteria of S & P or any combination thereof, shall be used to effect defeasance of the Insured 2018 Bonds unless the 2018 Bond Insurer otherwise approves. To accomplish defeasance of the Insured 2018 Bonds, the City shall cause to be delivered (i) a report of an independent firm of nationally recognized certified public accountants or such other accountant as shall be acceptable to the 2018 Bond Insurer ("Accountant") verifying the sufficiency of the escrow established to pay the Insured 2018 Bonds in full on the maturity or redemption date ("Verification"), (ii) an escrow deposit and trust agreement (which shall be acceptable in form and substance to the 2018 Bond Insurer), (iii) an opinion of nationally recognized bond counsel to the effect that the Insured 2018 Bonds are no longer "Outstanding" under the Fiscal Agent Agreement and (iv) a certificate of discharge of the Fiscal Agent with respect to the Insured 2018 Bonds; each Verification and defeasance opinion shall be acceptable in form and substance, and addressed, to the City, Fiscal Agent Exhibit C Page 27

100 and 2018 Bond Insurer. The 2018 Bond Insurer shall be provided with final drafts of the above-referenced documentation not less than five business days prior to the funding of the escrow. The Insured 2018 Bonds shall be deemed "Outstanding" under the Fiscal Agent Agreement unless and until they are in fact paid and retired or the above criteria are met. (g) Amounts paid by the Insured 2018 Bond Insurer under the 2018 Bond Insurance Policy shall not be deemed paid for purposes of the Fiscal Agent Agreement and the Insured 2018 Bonds relating to such payments shall remain Outstanding and continue to be due and owing until paid by the City in accordance with the Fiscal Agent Agreement. The Fiscal Agent Agreement shall not be discharged unless all amounts due or to become due to the 2018 Bond Insurer have been paid in full or duly provided for. (h) If, on the third Business Day prior to the related scheduled interest payment date or principal payment date ("Payment Date") there is not on deposit with the Fiscal Agent, after making all transfers and deposits required under the Fiscal Agent Agreement, moneys sufficient to pay the principal of and interest on the Insured 2018 Bonds due on such Payment Date, the Fiscal Agent shall give notice to the 2018 Bond Insurer and to its designated agent (if any) (the "Insurer's Fiscal Agent") by telephone or telecopy of the amount of such deficiency by 12:00 noon, New York City time, on such Business Day. If, on the second Business Day prior to the related Payment Date, there continues to be a deficiency in the amount available to pay the principal of and interest on the Insured 2018 Bonds due on such Payment Date, the Fiscal Agent shall make a claim under the 2018 Bond Insurance Policy and give notice to the 2018 Bond Insurer and the 2018 Bond Insurer's Fiscal Agent (if any) by telephone of the amount of such deficiency, and the allocation of such deficiency between the amount required to pay interest on the Insured 2018 Bonds and the amount required to pay principal of the Insured 2018 Bond, confirmed in writing to the 2018 Bond Insurer and the 2018 Bond Insurer's Fiscal Agent by 12:00 noon, New York City time, on such second Business Day by filling in the form of Notice of Claim and Certificate delivered with the 2018 Bond Insurance Policy. The Fiscal Agent shall designate any portion of payment of principal on the Insured 2018 Bonds paid by the 2018 Bond Insurer, whether by virtue of maturity or other advancement of maturity, on its books as a reduction in the principal amount of Bonds registered to the then current Owners of the Insured 2018 Bonds, whether DTC or its nominee or otherwise, and shall issue a replacement Insured 2018 Bond to the 2018 Bond Insurer, registered in the name of Assured Guaranty Municipal Corp., in a principal amount equal to the amount of principal so paid (without regard to authorized denominations); provided that the Fiscal Agent's failure to so designate any payment or issue any replacement Insured 2018 Bond shall have no effect on the amount of principal or interest payable by the City on any Bond or the subrogation rights of the 2018 Bond Insurer. The Fiscal Agent shall keep a complete and accurate record of all funds deposited by the 2018 Bond Insurer into the Policy Payments Account (defined below) and the allocation of such funds to payment of interest on and principal of any Insured 2018 Bond. The 2018 Bond Insurer shall have the right to inspect such records at reasonable times upon reasonable notice to the Fiscal Agent. Upon payment of a claim under the 2018 Bond Insurance Policy, the Fiscal Agent shall establish a separate special purpose trust account for the benefit of the Owners of the Insured 2018 Bonds referred to herein as the "Policy Payments Account" and over which the Fiscal Exhibit C Page 28

101 Agent shall have exclusive control and sole right of withdrawal. The Fiscal Agent shall receive any amount paid under the 2018 Bond Insurance Policy in trust on behalf of the Owners of the Insured 2018 Bonds and shall deposit any such amount in the Policy Payments Account and distribute such amount only for purposes of making the payments for which a claim was made. Such amounts shall be disbursed by the Fiscal Agent to the Owners of the Insured 2018 Bonds in the same manner as principal and interest payments are to be made with respect to the Insured 2018 Bonds under the sections hereof regarding payment of the Insured 2018 Bonds. It shall not be necessary for such payments to be made by checks or wire transfers separate from the check or wire transfer used to pay debt service with other funds available to make such payments. Notwithstanding anything herein to the contrary, the City agrees to pay to the 2018 Bond Insurer (i) a sum equal to the total of all amounts paid by the 2018 Bond Insurer under the 2018 Bond Insurance Policy (the "Insurer Advances"); and (ii) interest on such Insurer Advances from the date paid by the 2018 Bond Insurer until payment thereof in full, payable to the 2018 Bond Insurer at the Late Payment Rate per annum (collectively, the "Insurer Reimbursement Amounts"). "Late Payment Rate" means the lesser of (a) the greater of (i) the per annum rate of interest, publicly announced from time to time by JPMorgan Chase Bank at its principal office in The City of New York, as its prime or base lending rate (any change in such rate of interest to be effective on the date such change is announced by JPMorgan Chase Bank) plus 3%, and (ii) the then applicable highest rate of interest on the Insured 2018 Bonds and (b) the maximum rate permissible under applicable usury or similar laws limiting interest rates. The Late Payment Rate shall be computed on the basis of the actual number of days elapsed over a year of 360 days. Funds held in the Policy Payments Account shall not be invested by the Fiscal Agent and may not be applied to satisfy any costs, expenses or liabilities of the Fiscal Agent. Any funds remaining in the Policy Payments Account following a Insured 2018 Bond payment date shall promptly be remitted to the 2018 Bond Insurer. (i) The 2018 Bond Insurer shall, to the extent it makes any payment of principal of or interest on the Insured 2018 Bonds, become subrogated to the rights of the recipients of such payments in accordance with the terms of the 2018 Bond Insurance Policy (which subrogation rights shall also include the rights of any such recipients in connection with any Insolvency Proceeding). Each obligation of the City to the 2018 Bond Insurer under the Related Documents shall survive discharge or termination of such Related Documents. (j) The City shall pay or reimburse the 2018 Bond Insurer any and all charges, fees, costs and expenses that the 2018 Bond Insurer may reasonably pay or incur in connection with (i) the administration, enforcement, defense or preservation of any rights or security in any Related Document; (ii) the pursuit of any remedies under the Fiscal Agent Agreement or any other Related Document or otherwise afforded by law or equity, (iii) any amendment, waiver or other action with respect to, or related to, the Fiscal Agent Agreement or any other Related Document whether or not executed or completed, or (iv) any litigation or other dispute in connection with the Fiscal Agent Agreement or any other Related Document or the transactions contemplated thereby, other than costs resulting from the failure of the 2018 Bond Insurer to honor its obligations under the 2018 Bond Insurance Policy. The 2018 Bond Insurer reserves the right to charge a reasonable fee as a condition to executing any amendment, waiver or consent proposed in respect of the Fiscal Agent Agreement or any other Related Document. (k) After payment of reasonable expenses of the Fiscal Agent, the application of funds realized upon default shall be applied to the payment of expenses of the City or rebate Exhibit C Page 29

102 only after the payment of past due and current debt service on the Insured 2018 Bonds and amounts required to restore the 2018 Reserve Fund to the 2018 Reserve Requirement. (l) Notwithstanding satisfaction of the other conditions to the issuance of Parity Debt set forth in the Fiscal Agent Agreement, no such issuance may occur if an event of default (or any event which, once all notice or grace periods have passed, would constitute an event of default) exists unless such default shall be cured upon such issuance. (m) In determining whether any amendment, consent, waiver or other action to be taken, or any failure to take action, under the Fiscal Agent Agreement would adversely affect the security for the Insured 2018 Bonds or the rights of the Owners of the Insured 2018 Bonds, the effect of any such amendment, consent, waiver, action or inaction shall be considered as if there were no 2018 Bond Insurance Policy. (n) No contract shall be entered into or any action taken by which the rights of the 2018 Bond Insurer or security for or sources of payment of the Insured 2018 Bonds may be impaired or prejudiced in any material respect except upon obtaining the prior written consent of the 2018 Bond Insurer Reserve Fund Insurance Policy (a) The City shall repay from Special Tax Revenues any draws under the 2018 Reserve Fund Insurance Policy and pay all related reasonable expenses incurred by the 2018 Bond Insurer and shall pay from Special Tax Revenues interest thereon from the date of payment by 2018 Bond Insurer at the Late Payment Rate. Repayments from Special Tax Revenues for draws and payments of expenses and the interest accrued thereon at the Late Payment Rate (collectively, Policy Costs ) shall commence in the first month following each draw, and each such monthly payment shall be in an amount equal to at least 1/12 of the aggregate of Policy Costs related to such draw. Amounts in respect of Policy Costs paid to 2018 Bond Insurer shall be credited first to interest due, then to the expenses due and then to principal due. As and to the extent that payments are made to 2018 Bond Insurer on account of principal due, the coverage under the 2018 Reserve Fund Insurance Policy will be increased by a like amount, subject to the terms of the 2018 Reserve Fund Insurance Policy. The obligation to pay Policy Costs shall be secured by a valid lien on all revenues and other collateral pledged as security for the 2018 Bonds (subject only to the priority of payment provisions set forth under the Fiscal Agent Agreement). All cash and investments in the 2018 Reserve Fund shall be transferred to the Bond Fund for payment of debt service on the 2018 Bonds before any drawing may be made on the 2018 Reserve Fund Insurance Policy or any other Qualified Reserve Account Credit Instrument credited to the 2018 Reserve Fund in lieu of cash. Payment of any Policy Costs shall be made prior to replenishment of any such cash amounts. Draws on all Qualified Reserve Account Credit Instruments (including the 2018 Reserve Fund Insurance Policy) on which there is available coverage shall be made on a pro-rata basis (calculated by reference to the coverage then available thereunder) after applying all available cash and investments in the 2018 Reserve Fund. Payment of Policy Costs and reimbursement of amounts with respect to other Credit Facilities shall be made on a pro-rata basis prior to replenishment of any cash drawn from the 2018 Reserve Fund. For the avoidance of doubt, "available coverage" means Exhibit C Page 30

103 the coverage then available for disbursement pursuant to the terms of the applicable alternative credit instrument without regard to the legal or financial ability or willingness of the provider of such instrument to honor a claim or draw thereon or the failure of such provider to honor any such claim or draw. (b) If the City shall fail to pay from Special Tax Revenues any Policy Costs in accordance with the requirements of subparagraph (a) hereof, the 2018 Bond Insurer shall be entitled to exercise any and all legal and equitable remedies available to it, including those provided under the Fiscal Agent Agreement other than remedies which would adversely affect owners of the Bonds. (c) The Fiscal Agent Agreement shall not be discharged until all Policy Costs owing to the 2018 Bond Insurer shall have been paid in full. The City's obligation to pay such amounts from Special Tax Revenues shall expressly survive payment in full of the 2018 Bonds. (d) The City shall include any Policy Costs then due and owing the 2018 Bond Insurer in the calculation of the Parity Debt test in the Fiscal Agent Agreement. (e) The Fiscal Agent shall ascertain the necessity for a claim upon the 2018 Reserve Fund Insurance Policy in accordance with the provisions of subparagraph (a) above and provide notice to the 2018 Bond Insurer in accordance with the terms of the 2018 Reserve Fund Insurance Policy at least five business days prior to each date upon which interest or principal is due on the 2018 Bonds. Where deposits are required to be made by the City with the Fiscal Agent to the 2018 Reserve Fund for the 2018 Bonds more often than semi-annually, the Fiscal Agent shall give notice to the 2018 Bond Insurer of any failure of the City to make timely payment in full of such deposits within two business days of the date due. Exhibit C Page 31

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105 APPENDIX D FORM OF OPINION OF BOND COUNSEL D-1

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107 APPENDIX D FORM OF OPINION OF BOND COUNSEL, 2018 City Council City of Fairfield 1000 Webster Street Fairfield, CA OPINION: $12,020,000 City of Fairfield Community Facilities District No. 3 (North Cordelia General Improvements) 6pecial Tax Refunding Bonds, Series 2018 Members of the Council: We have acted as bond counsel to the City of Fairfield (the City ) in connection with the issuance by the City of the captioned bonds (the "Bonds"). In such capacity, we have examined such law and such certified proceedings, certifications and other documents as we have deemed necessary to render this opinion. The Bonds are issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (the "Bond Law"), a Fiscal Agent Agreement, dated as of December 1, 2018 (the Fiscal Agent Agreement ), by and between the City and The Bank of New York Mellon Trust Company, N.A., as fiscal agent, and a resolution (the "Resolution") of the City Council of the City adopted on October 16, Under the Fiscal Agent Agreement, the City has pledged certain revenues (the Special Tax Revenues ) for the payment of principal, premium (if any), and interest on the Bonds when due. Regarding questions of fact material to our opinion, we have relied on representations of the City contained in the Resolution and in the Fiscal Agent Agreement, and in the certified proceedings and other certifications of public officials furnished to us, without undertaking to verify the same by independent investigation. Based on the foregoing, we are of the opinion that, under existing law: 1. The City is a duly created and validly existing municipal corporation and general law city with the power to adopt the Resolution, enter into the Fiscal Agent Agreement and perform the agreements on its part contained therein, and issue the Bonds. 2. The Fiscal Agent Agreement has been duly authorized, executed and delivered by the City, and constitutes a valid and binding obligation of the City, enforceable against the City. Appendix D Page 1

108 City of Fairfield, 2018 Page 2 3. The Fiscal Agent Agreement creates a valid lien on the Special Tax Revenues and other funds pledged by the Fiscal Agent Agreement for the security of the Bonds, on a parity with other bonds (if any) issued or to be issued under the Fiscal Agent Agreement. 4. The Bonds have been duly authorized and executed by the City, and are valid and binding limited obligations of the City, payable solely from the Special Tax Revenues and other funds provided therefor in the Fiscal Agent Agreement. 5. The interest on the 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, although, in the case of tax years beginning prior to January 1, 2018, for the purpose of computing the alternative minimum tax imposed on certain corporations, such interest earned by a corporation prior to the end of its tax year in 2018 is taken into account in determining certain income and earnings. The opinions set forth in the preceding sentence are subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986, as amended, relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Bonds. The City has made certain representations and covenants in order to comply with each such requirement. Inaccuracy of those representations, or failure to comply with certain of those covenants, may cause the inclusion of such interest in gross income for federal income tax purposes, which may be retroactive to the date of issuance of the Bonds. 6. Interest on the Bonds is exempt from personal income taxation imposed by the State of California. We express no opinion regarding any other tax consequences arising with respect to the ownership, sale or disposition of, or the amount, accrual or receipt of interest on, the Bonds. The rights of the owners of the Bonds and the enforceability of the Bonds and the Indenture are limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights generally, and by equitable principles, whether considered at law or in equity. This opinion is given as of the date hereof, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention, or any changes in law that may hereafter occur. Our engagement with respect to this matter has terminated as of the date hereof. Respectfully submitted, A Professional Law Corporation Appendix D Page 2

109 APPENDIX E FORM OF CONTINUING DISCLOSURE CERTIFICATE $12,020,000 CITY OF FAIRFIELD COMMUNITY FACILITIES DISTRICT NO. 3 (NORTH CORDELIA GENERAL IMPROVEMENTS) SPECIAL TAX REFUNDING BONDS, SERIES 2018 This CONTINUING DISCLOSURE CERTIFICATE (this Disclosure Certificate ) is executed and delivered by the City of Fairfield, California (the City ), on behalf of itself and the City of Fairfield Community Facilities District No. 3 (North Cordelia General Improvements) (the District ), in connection with the execution and delivery of the bonds captioned above (the Bonds ). The Bonds are being executed and delivered pursuant to a Fiscal Agent Agreement, dated as of December 1, 2018 (the Fiscal Agent Agreement ), by and between the City, for and on behalf of the District, and The Bank of New York Mellon Trust Company, N.A., as fiscal agent. The City covenants and agrees as follows: Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the City, on behalf of itself and the District, for the benefit of the holders and beneficial owners of the Bonds and in order to assist the Participating Underwriter in complying with Rule 15c2-12(b)(5) promulgated under the Securities Exchange Act of 1934, as amended. Section 2. Definitions. In addition to the definitions of capitalized terms set forth above and in Section 1.03 of the Fiscal Agent Agreement, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section 2, the following capitalized terms shall have the meanings ascribed to them below when used in this Disclosure Certificate: Annual Report means any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. Annual Report Date means the date that is nine months days after the end of the City s fiscal year (currently March 31 based on the City s fiscal year end of June 30). Business Day means any day on which the City is not required or authorized to be closed. Dissemination Agent means Willdan Financial Services or any successor Dissemination Agent designated in writing by the City and which has filed with the City a written acceptance of such designation. Listed Events means any of the events listed in Section 5(a) of this Disclosure Certificate. MSRB means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for E-1

110 purposes of the Rule, or any other repository of disclosure information that may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future. Official Statement means the final official statement dated November 8, 2018, executed by the City in connection with the issuance of the Bonds. Participating Underwriter means Stifel, Nicolaus & Company, Incorporated, the original underwriter of the Bonds required to comply with the Rule in connection with offering of the Bonds. Rule means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. Section 3. Provision of Annual Reports. (a) The City shall, or shall cause the Dissemination Agent to, not later than the Annual Report Date, commencing March 31, 2019, with the report for the fiscal year, provide to the MSRB, in an electronic format as prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Certificate; provided, however, that the Annual Report due on March 31, 2019, may consist solely of the Official Statement and the financial statements of the City required pursuant to Section 4(a). Not later than 15 Business Days prior to the Annual Report Date, the City shall provide the Annual Report to the Dissemination Agent (if other than the City). If by 15 Business Days prior to the Annual Report Date the Dissemination Agent (if other than the City) has not received a copy of the Annual Report, the Dissemination Agent shall contact the City to determine if the City is in compliance with the previous sentence. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the City may be submitted separately from the balance of the Annual Report, and later than the Annual Report Date, if not available by that date. If the City s fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(b). The City shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by the City hereunder. (b) If the City does not provide (or cause the Dissemination Agent to provide) an Annual Report by the Annual Report Date, the City in a timely manner shall provide (or cause the Dissemination Agent to provide) to the MSRB, in an electronic format as prescribed by the MSRB, a notice in substantially the form attached as Exhibit A. (c) With respect to each Annual Report, the Dissemination Agent shall: (i) determine each year prior to the Annual Report Date the then-applicable rules and electronic format prescribed by the MSRB for the filing of annual continuing disclosure reports; and (ii) if the Dissemination Agent is other than the City, file a report with the City certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, and stating the date it was provided. E-2

111 Section 4. Content of Annual Reports. The City s Annual Report shall contain or incorporate by reference the following: (a) The City s audited financial statements prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board, together with the following statement: THE CITY S ANNUAL FINANCIAL STATEMENT IS PROVIDED SOLELY TO COMPLY WITH THE SECURITIES EXCHANGE COMMISSION STAFF S INTERPRETATION OF RULE 15C2-12 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. NO FUNDS OR ASSETS OF THE CITY ARE REQUIRED TO BE USED TO PAY DEBT SERVICE ON THE BONDS, AND NEITHER THE CITY NOR THE DISTRICT IS OBLIGATED TO ADVANCE AVAILABLE FUNDS TO COVER ANY DELINQUENCIES. INVESTORS SHOULD NOT RELY ON THE FINANCIAL CONDITION OF THE CITY IN EVALUATING WHETHER TO BUY, HOLD OR SELL THE BONDS. If the City s audited financial statements are not available by the Annual Report Date, the Annual Report shall contain unaudited financial statements, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) Unless otherwise provided in the audited financial statements filed on or before the Annual Report Date, the following financial information and operating data with respect to the latest fiscal year of the District, substantially similar to that provided in the Official Statement: (i) Principal amount of Bonds outstanding as of September 30 prior to the applicable Annual Report Date; (ii) Balance in Reserve Fund and statement of 2018 Reserve Requirement as of September 30 prior to the applicable Annual Report Date; (iii) (iv) (v) (vi) (vii) Table 1 (Summary of Information About Property Classes); Table 4 (Top Owners by Percent of Special Tax Levy); Table 5 (Assessed Value-to-Debt Burden Ratios), but excluding overlapping debt information; Table 6 (Special Tax Levies, Collections and Delinquency Rates) (10-year history); and Table 8 (Projected Debt Service Coverage on 2018 Bonds), but only with respect to the subject year of the Annual Report. (c) In addition to any of the information expressly required to be provided under this Disclosure Certificate, the City shall provide such further material information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. (d) Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the City or related public entities, which are available to the public on the MSRB s Internet web site or filed with the Securities and E-3

112 Exchange Commission. The City shall clearly identify each such other document so included by reference. Section 5. Reporting of Significant Events. (a) The City shall give, or cause to be given, notice of the occurrence of any of the following Listed Events with respect to the Bonds: (1) Principal and interest payment delinquencies. (2) Non-payment related defaults, if material. (3) Unscheduled draws on debt service reserves reflecting financial difficulties. (4) Unscheduled draws on credit enhancements reflecting financial difficulties. (5) Substitution of credit or liquidity providers, or their failure to perform. (6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax-exempt status of the security. (7) Modifications to rights of security holders, if material. (8) Bond calls, if material, and tender offers. (9) Defeasances. (10) Release, substitution, or sale of property securing repayment of the securities, if material. (11) Rating changes. (12) Bankruptcy, insolvency, receivership or similar event of the City. (13) The consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material. (14) Appointment of a successor or additional fiscal agent or the change of name of a fiscal agent, if material. (b) Whenever the City obtains knowledge of the occurrence of a Listed Event, the City shall, or shall cause the Dissemination Agent (if not the City) to, file a notice of such occurrence with the MSRB, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 business days after the occurrence of the Listed Event. Notwithstanding the foregoing, notice of Listed Events described in subsection (a)(8) above need not be given under E-4

113 this subsection any earlier than the notice (if any) of the underlying event is given to holders of affected Bonds under the Fiscal Agent Agreement. (c) The City acknowledges that the events described in subparagraphs (a)(2), (a)(7), (a)(8) (if the event is a bond call), (a)(10), (a)(13), and (a)(14) of this Section 5 contain the qualifier if material. The City shall cause a notice to be filed as set forth in paragraph (b) above with respect to any such event only to the extent that the City determines the event s occurrence is material for purposes of U.S. federal securities law. (d) For purposes of this Disclosure Certificate, any event described in paragraph (a)(12) above is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the City in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the City, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City. Section 6. Identifying Information for Filings with the MSRB. All documents provided to the MSRB under the Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB. Section 7. Termination of Reporting Obligation. The City s obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the City shall give notice of such termination in the same manner as for a Listed Event under Section 5(b). Section 8. Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any Dissemination Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be Willdan Financial Services. Any Dissemination Agent may resign by providing 30 days written notice to the City. Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied: (a) if the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted; (b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Fiscal Agent Agreement for amendments to the Fiscal Agent E-5

114 Agreement with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Bonds. If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first Annual Report filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. If an amendment is made to this Disclosure Certificate modifying the accounting principles to be followed in preparing financial statements, the Annual Report for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the City to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of any amendment made pursuant to this Section 9 shall be filed in the same manner as for a Listed Event under Section 5(b). Section 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the City shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 11. Default. If the City fails to comply with any provision of this Disclosure Certificate, the Participating Underwriter or any holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Fiscal Agent Agreement, and the sole remedy under this Disclosure Certificate in the event of any failure of the City to comply with this Disclosure Certificate shall be an action to compel performance. Section 12. Duties, Immunities and Liabilities of Dissemination Agent. (a) The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the City agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which they may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent s negligence or willful misconduct. The Dissemination Agent shall have no duty or obligation to review any information provided to it by the City hereunder, and shall not be deemed to be acting in any fiduciary capacity for the City, E-6

115 the Bond holders or any other party. The obligations of the City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. (b) The Dissemination Agent shall be paid compensation by the City for its services provided hereunder in accordance with its schedule of fees as amended from time to time, and shall be reimbursed for all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Dissemination Agent, the Participating Underwriter and the holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity. Date: December 5, 2018 CITY OF FAIRFIELD, CALIFORNIA, on behalf of CITY OF FAIRFIELD COMMUNITY FACILITIES DISTRICT NO. 3 (North Cordelia General Improvements) By: David A. White, City Manager AGREED AND ACCEPTED: WILLDAN FINANCIAL SERVICES, as Dissemination Agent By: Name: Title: E-7

116 EXHIBIT A NOTICE OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Name of Issue: City of Fairfield, California City of Fairfield Community Facilities District No. 3 (North Cordelia General Improvements) Special Tax Refunding Bonds, Series 2018 Date of Issuance: December 5, 2018 NOTICE IS HEREBY GIVEN that the City has not provided an Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Certificate dated as of December 5, 2018, executed by the City and countersigned by Willdan Financial Services, as dissemination agent. The City anticipates that the Annual Report will be filed by. Dated: DISSEMINATION AGENT: BY: ITS: E-8

117 APPENDIX F DTC AND THE BOOK-ENTRY ONLY SYSTEM The information in this Appendix F has been provided by The Depository Trust Company ( DTC ), New York, NY, for use in securities offering documents, and the City does not take responsibility for the accuracy or completeness thereof. The City cannot and does not give any assurances that DTC, DTC Participants or Indirect Participants will distribute the Beneficial Owners either (a) payments of interest, principal or premium, if any, with respect to the Bonds or (b) certificates representing ownership interest in or other confirmation of ownership interest in the Bonds, or that they will so do on a timely basis or that DTC, DTC Direct Participants or DTC Indirect Participants mill act in the manner described in this Official Statement. The following description of DTC, the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment of principal, interest and other payments on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interest in the Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. Accordingly, no representations can be made concerning these matters and neither the DTC Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be. Neither the issuer of the Bonds (the Issuer ) nor the trustee, fiscal agent or paying agent appointed with respect to the Bonds (the Agent ) take any responsibility for the information contained in this Appendix. No assurances can be given that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the Bonds, (b) certificates representing ownership interest in or other confirmation or ownership interest in the Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Bonds, or that they will so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Appendix. The current Rules applicable to DTC are on file with the Securities and Exchange Commission and the current Procedures of DTC to be followed in dealing with DTC Participants are on file with DTC. 1. The Depository Trust Company ( DTC ), New York, NY, will act as securities depository for the Bonds (the Securities ). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for each issue of the Securities, each in the aggregate principal amount of such issue, and will be deposited with DTC. If, however, the aggregate principal amount of any issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amount of such issue. 2. DTC, the world s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the F-1

118 New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). On August 8, 2011, Standard & Poor s downgraded its rating of DTC from AAA to AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at The information contained on this Internet site is not incorporated herein by reference. 3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC s records. The ownership interest of each actual purchaser of each Security ( Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued. 4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC s records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. 5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments F-2

119 to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. 6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. 7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). 8. Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from Issuer or Agent, on payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. 9. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered. 10. Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC. 11. The information in this section concerning DTC and DTC s book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof. F-3

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121 APPENDIX G SPECIMEN MUNICIPAL BOND INSURANCE POLICY G-1

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123 MUNICIPAL BOND INSURANCE POLICY ISSUER: BONDS: $ in aggregate principal amount of Policy No: -N Effective Date: Premium: $ ASSURED GUARANTY MUNICIPAL CORP. ("AGM"), for consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY agrees to pay to the trustee (the "Trustee") or paying agent (the "Paying Agent") (as set forth in the documentation providing for the issuance of and securing the Bonds) for the Bonds, for the benefit of the Owners or, at the election of AGM, directly to each Owner, subject only to the terms of this Policy (which includes each endorsement hereto), that portion of the principal of and interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer. On the later of the day on which such principal and interest becomes Due for Payment or the Business Day next following the Business Day on which AGM shall have received Notice of Nonpayment, AGM will disburse to or for the benefit of each Owner of a Bond the face amount of principal of and interest on the Bond that is then Due for Payment but is then unpaid by reason of Nonpayment by the Issuer, but only upon receipt by AGM, in a form reasonably satisfactory to it, of (a) evidence of the Owner's right to receive payment of the principal or interest then Due for Payment and (b) evidence, including any appropriate instruments of assignment, that all of the Owner's rights with respect to payment of such principal or interest that is Due for Payment shall thereupon vest in AGM. A Notice of Nonpayment will be deemed received on a given Business Day if it is received prior to 1:00 p.m. (New York time) on such Business Day; otherwise, it will be deemed received on the next Business Day. If any Notice of Nonpayment received by AGM is incomplete, it shall be deemed not to have been received by AGM for purposes of the preceding sentence and AGM shall promptly so advise the Trustee, Paying Agent or Owner, as appropriate, who may submit an amended Notice of Nonpayment. Upon disbursement in respect of a Bond, AGM shall become the owner of the Bond, any appurtenant coupon to the Bond or right to receipt of payment of principal of or interest on the Bond and shall be fully subrogated to the rights of the Owner, including the Owner's right to receive payments under the Bond, to the extent of any payment by AGM hereunder. Payment by AGM to the Trustee or Paying Agent for the benefit of the Owners shall, to the extent thereof, discharge the obligation of AGM under this Policy. Except to the extent expressly modified by an endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. "Business Day" means any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions in the State of New York or the Insurer's Fiscal Agent are authorized or required by law or executive order to remain closed. "Due for Payment" means (a) when referring to the principal of a Bond, payable on the stated maturity date thereof or the date on which the same shall have been duly called for mandatory sinking fund redemption and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity unless AGM shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration and (b) when referring to interest on a Bond, payable on the stated date for payment of interest. "Nonpayment" means, in respect of a Bond, the failure of the Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principal and interest that is Due for Payment on such Bond. "Nonpayment" shall also include, in respect of a Bond, any payment of principal or interest that is Due for Payment made to an Owner by or on behalf of the Issuer which has been recovered from such Owner pursuant to the