$31,260,000 CITY OF FONTANA COMMUNITY FACILITIES DISTRICT NO. 22 (SIERRA HILLS SOUTH) SPECIAL TAX REFUNDING BONDS, SERIES 2014

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1 NEW ISSUE - BOOK-ENTRY-ONLY NO RATING In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the District, based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of California personal income taxes. In the further opinion of Bond Counsel, interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Bonds. See TAX MATTERS herein. $31,260,000 CITY OF FONTANA COMMUNITY FACILITIES DISTRICT NO. 22 (SIERRA HILLS SOUTH) SPECIAL TAX REFUNDING BONDS, SERIES 2014 Dated: Date of Issuance Due: September 1, as shown on the inside cover page The City of Fontana Community Facilities District No. 22 (Sierra Hills South) (the District ) Special Tax Refunding Bonds, Series 2014 (the Bonds ) are being issued for the principal purpose of refunding the District s outstanding Special Tax Bonds, Series 2004 (the 2004 Bonds ). The 2004 Bonds were issued for the purpose of refunding certain indebtedness of the City of Fontana Community Facilities District No (Empire Center). The Bonds are authorized to be issued pursuant to the Mello Roos Community Facilities Act of 1982, as amended (Sections et seq. of the Government Code of the State of California), and pursuant to an Indenture, dated as of June 1, 2014, by and between the District and U.S. Bank National Association, as Trustee. The Bonds are special obligations of the District and are payable solely from Net Special Tax Revenues (as defined herein), and the other assets pledged therefor under the Indenture, all as further described herein. Special Taxes (as defined herein) are to be levied according to the rate and method of apportionment approved by the City Council of the City of Fontana and the qualified electors within the District. The City Council is the legislative body of the District. The Bonds are issuable in fully registered form and when issued will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York. Individual purchases of Bonds may be made in principal amounts of $5,000 and integral multiples thereof. Purchasers of Bonds will not receive certificates representing their beneficial ownership of the Bonds but will receive credit balances on the books of their respective nominees. Interest on the Bonds will be payable on each September 1 and March 1, commencing March 1, Principal of and interest on the Bonds will be paid by the Trustee to DTC for subsequent disbursement to DTC Participants who are expected to remit such payments to the beneficial owners of the Bonds. See THE BONDS General Provisions and Book-Entry System herein. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE DISTRICT (EXCEPT TO THE LIMITED EXTENT SET FORTH IN THE INDENTURE), THE CITY OF FONTANA OR THE STATE OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR THE SPECIAL TAXES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY BUT ARE SPECIAL OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET SPECIAL TAX REVENUES AND THE OTHER ASSETS PLEDGED UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN. The purchase of the Bonds involves certain risks. See the section of this Official Statement entitled SPECIAL RISK FACTORS for a discussion of certain risk factors that should be considered, in addition to the other matters set forth herein, in evaluating the investment quality of the Bonds. This cover page contains certain information for general reference only. It is not a summary of this issue. Investors are advised to read the entire Official Statement to obtain information essential to the making of an informed investment decision. The Bonds are offered when, as and if issued and accepted by the Underwriter, subject to approval as to their legality by Orrick Herrington & Sutcliffe, LLP, Los Angeles, California, as Bond Counsel, and subject to certain other conditions. Certain legal matters will be passed on for the City and the District by Best Best & Krieger LLP, Riverside, California, in its capacity as City Attorney, and by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, as Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by its counsel, Jones Hall, A Professional Law Corporation, San Francisco, California. It is anticipated that the Bonds will be available for delivery to DTC or its agent in book-entry form on or about June 12, Dated: May 29, 2014

2 Maturity Date (September 1) Principal Amount MATURITY SCHEDULE $31,260,000 Serial Bonds Interest Rate Yield CUSIP 2015 $ 720, % 0.650% QG ,100, % 0.950% QH ,145, % 1.250% QJ ,190, % 1.650% QK ,235, % 2.000% QL ,285, % 2.350% QM ,350, % 2.650% QN ,420, % 2.900% QP ,490, % 3.100% QQ ,565, % 3.250% QR ,640, % 3.420% C QS ,725, % 3.590% C QT ,810, % 3.670% C QU ,900, % 3.760% C QV ,995, % 3.850% C QW ,095, % 3.930% C QX ,760, % 4.000% C QY7 $5,835, % Term Bonds due September 1, 2034 Yield 4.150% C CUSIP RB6 C Yield to optional redemption date of September 1, 2024, at par. CUSIP is a registered trademark of the American Bankers Association. CUSIP Global Services is managed on behalf of the American Bankers Association by S&P Capital IQ. Copyright 2014 CUSIP Global Services. All rights reserved. CUSIP data herein is provided by CUSIP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Service Bureau. CUSIP numbers are provided for convenience of reference only. Neither the District nor the Underwriter takes any responsibility for the accuracy of such numbers.

3 CITY OF FONTANA CITY COUNCIL Acquanetta Warren, Mayor John Roberts, Mayor Pro Tem Michael Tahan, Council Member Lydia S. Wibert, Council Member Jesus Jesse Sandoval, Council Member STAFF Kenneth R. Hunt, City Manager David R. Edgar, Deputy City Manager Lisa Strong, Management Services Director Janet Koehler-Brooks, City Treasurer Toni Lewis, City Clerk Best Best & Krieger LLP, City Attorney BOND COUNSEL Orrick Herrington & Sutcliffe LLP Los Angeles, California FINANCIAL ADVISOR TO THE CITY CSG Advisors Incorporated San Francisco, California TRUSTEE/ESCROW BANK U.S. Bank National Association Los Angeles, California DISCLOSURE COUNSEL Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California SPECIAL TAX CONSULTANT David Taussig & Associates, Inc. Newport Beach, California VERIFICATION AGENT Grant Thornton Minneapolis, Minnesota

4 All the information which the City of Fontana Community Facilities District No. 22 (Sierra Hills South) and the City of Fontana intend to present investors regarding the District, the City and the Bonds is contained in this Official Statement. While the City maintains an internet website for various purposes, none of the information on that website is intended to assist investors in making any investment decision, or to provide any continuing information, with respect to the Bonds or any other obligations of the City. Moreover, none of the information on the website is incorporated herein by reference. No dealer, broker, salesperson or other person has been authorized by the District, the City, or the Underwriter to give any information or to make any representations other than those contained in this Official Statement in connection with the offering made hereby and, if given or made, such other information or representations must not be relied upon as having been authorized by the District, the City, or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as a representation of facts. The information set forth herein has been obtained from sources which are believed to be reliable, but it is not guaranteed as to accuracy or completeness. The information and expression of opinions herein are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or the District since the date hereof. All summaries of documents contained herein are made subject to the provisions of such documents and do not purport to be complete statements of any or all such provisions. The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. CAUTIONARY INFORMATION REGARDING FORWARD-LOOKING STATEMENTS IN THIS OFFICIAL STATEMENT 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 United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used, such as plan, expect, estimate, budget and other similar words and include, but are not limited to, statements that describe possible future revenues and expenses of the City. The achievement of certain results or other expectations contained in such forward-looking statements involves known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. While the District has agreed to provide certain on-going financial and operating data (see CONTINUING DISCLOSURE and Appendix E hereto), it 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 statements are based change. THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF SUCH BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

5 TABLE OF CONTENTS Page INTRODUCTION... 1 The District... 1 Security and Sources of Payment for the Bonds... 4 Description of the Bonds... 4 Tax Matters... 5 Professionals Involved in the Offering... 5 Continuing Disclosure... 5 Bond Owners Risks... 6 Other Information... 6 PLAN OF REFUNDING... 6 Subordinate Promissory Note... 7 ESTIMATED SOURCES AND USES OF FUNDS... 7 THE BONDS... 7 General Provisions... 7 Redemption... 8 Debt Service Schedule Book-Entry System SECURITY AND SOURCES OF PAYMENT FOR THE BONDS General Special Taxes Covenant for Superior Court Foreclosure Special Tax Fund Reserve Fund Investment of Moneys Additional Bonds Estimated Debt Service Coverage THE COMMUNITY FACILITIES DISTRICT General Description of the District Description by Tax Rate Zone Description of Authorized Purposes Property Values Taxpayers Delinquency History Residential Properties Direct and Overlapping Bonded Indebtedness Overlapping Maintenance Assessment Districts SPECIAL RISK FACTORS Risks of Real Estate Secured Investments Generally Declines in Value Risks Related to Current Market Conditions State Budget Levy of the Special Tax Collection of the Special Tax i

6 TABLE OF CONTENTS Page Concentration of Property Ownership Successor Agency Parcel Exempt Properties Proceedings to Reduce or Terminate the Special Tax Maximum Special Tax Payment of the Special Tax is Not a Personal Obligation of the Owners Disclosures to Future Purchasers Parity Taxes and Special Assessments Depletion of Reserve Fund Bankruptcy and Legal Delays FDIC/Federal Government Interests In Properties Geologic, Topographic and Climatic Conditions Hazardous Substances No Acceleration Provision Bonds Are Limited Obligations Loss of Tax Exemption CONTINUING DISCLOSURE TAX MATTERS ABSENCE OF LITIGATION ABSENCE OF RATINGS FINANCIAL ADVISOR CERTAIN LEGAL MATTERS UNDERWRITING FINANCIAL INTERESTS ADDITIONAL INFORMATION APPENDIX A - RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX... A-1 APPENDIX B - PROPOSED FORM OF OPINION OF BOND COUNSEL... B-1 APPENDIX C - GENERAL INFORMATION CONCERNING THE CITY OF FONTANA... C-1 APPENDIX D - SUMMARY OF THE INDENTURE... D-1 APPENDIX E - FORM OF CONTINUING DISCLOSURE AGREEMENT... E-1 APPENDIX F - INFORMATION CONCERNING THE DEPOSITORY TRUST COMPANY AND ITS BOOK-ENTRY SYSTEM... F-1 ii

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9 $31,260,000 CITY OF FONTANA COMMUNITY FACILITIES DISTRICT NO. 22 (SIERRA HILLS SOUTH) SPECIAL TAX REFUNDING BONDS, SERIES 2014 INTRODUCTION This introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement, including the cover page and appendices hereto, and the documents summarized or described herein. A full review should be made of the entire Official Statement. The offering of the Bonds to potential investors is made only by means of the entire Official Statement. The purpose of this Official Statement, which includes the cover page, the table of contents and the attached appendices, is to provide certain information concerning the issuance of the City of Fontana Community Facilities District No. 22 (Sierra Hills South) Special Tax Refunding Bonds Series 2014, in the aggregate principal amount set forth on the front cover page (the Bonds ). The proceeds of the Bonds will be used, along with certain other funds, to refund the City of Fontana Community Facilities District No. 22 (Sierra Hills South) Special Tax Bonds, Series 2004 (the 2004 Bonds ), to fund a reserve fund for the Bonds (the Reserve Fund ) and to pay costs of issuance of the Bonds. See PLAN OF REFUNDING. The Bonds are being issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Sections et seq. of the Government Code of the State of California) (the Act ), and pursuant to the Indenture, dated as of June 1, 2014 (the Indenture ), by and between City of Fontana Community Facilities District No. 22 (Sierra Hills South) (the District ) and U.S. Bank National Association, as trustee (the Trustee ). The Bonds are secured under the Indenture by a pledge of, constituting a lien on and security interest in, the Net Special Tax Revenues (as defined herein) and any other amounts held in the Special Tax Fund, the Bond Fund and the Reserve Fund established pursuant to the Indenture. This introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement and the documents summarized or described herein. A full review should be made of the entire Official Statement. The sale and delivery of the Bonds to potential investors is made only by means of the entire Official Statement. All capitalized terms used in this Official Statement and not defined shall have the meaning set forth in Appendix D SUMMARY OF THE INDENTURE Definitions herein. The District The District was formed, and the District s 2004 Bonds were issued pursuant to the Act, for the purpose of refunding the outstanding City of Fontana Community Facilities District No (Empire Center) Special Tax Bonds, Series A originally issued in 1991 (the 1991 Bonds ), plus past due principal and interest. At that time, the 1991 Bonds were in default due to the nonpayment of special taxes of this district by multiple prior property owners. The 1991 Bonds proceeds were applied to construct and acquire various public improvements needed with respect to proposed development within City of Fontana Community Facilities District No (Empire Center) (the 1

10 Prior District ). Such proposed development did not occur as expected. The boundaries of the District and the Prior District substantially overlap. Formation Proceedings. The District has been formed by the City pursuant to the Mello- Roos Community Facilities Act of 1982, as amended (Sections et seq. of the Government Code of the State of California) (the Act ), and the City of Fontana Community Facilities District Ordinance to finance the refunding of the indebtedness of the Prior District. The Act was enacted by the California legislature to provide an alternative method of financing certain public capital facilities and services, especially in developing areas of the State of California (the State ). Any local agency (as defined in the Act) may establish a community facilities district to provide for and finance the cost of eligible public facilities and services. Generally, the legislative body of the local agency which forms a community facilities district acts on behalf of such district as its legislative body. Subject to approval by two thirds of the votes cast at an election and compliance with the other provisions of the Act, a legislative body of a local agency may issue bonds for a community facilities district and may levy and collect a special tax within such district to repay such indebtedness. The City Council of the City acts as the legislative body of the District. Pursuant to the Act, the City Council adopted the necessary resolutions stating its intent to establish the District, to authorize the levy of Special Taxes on taxable property within the boundaries of the District, and to have the District incur bonded indebtedness for the purpose of financing an authorized list of facilities. Following public hearings conducted pursuant to the provisions of the Act, the City Council adopted resolutions establishing the District, and calling special elections to submit the levy of the Special Taxes and the incurring of bonded indebtedness to the qualified voters of the District. On July 15, 2003, at an election held pursuant to the Act, the residents who comprised the qualified voters of the District authorized the District to incur bonded indebtedness in the aggregate principal amount not to exceed $39,000,000 to be secured by the levy of Special Taxes (defined below) on taxable property within the District for the purpose of refinancing the 1991 Bonds. On that same date, the voters within the District approved the rate and method of apportionment ( Rate and Method ) of the Special Taxes on land within the District (the Special Taxes ) to pay the principal of and interest on the bonds of the District which is set forth in Appendix A hereto. Almost all of the property in the District was within the boundaries of the Prior District and all such property has been released from all Prior District obligations. The Prior District has been dissolved by ordinance of the City Council. District Description and Development. The District encompasses approximately 489 gross acres. The District is generally located south of Interstate 10, west of Tamarind Avenue, north of Jurupa Avenue and east of Sierra Avenue. The District is located in the southern portion of the City and is bounded to the south by developed residential uses and to the southwest by industrial and commercial uses. A mix of developed and undeveloped land comprises the area east and west of the District. The Rate and Method of Apportionment for the District identifies five Tax Rate Zones corresponding to distinct land use activities occurring with respect to the land in each zone. The zones consist of two residential zones and three commercial/industrial zones. Tax Rate Zone 1 consists of a commercial shopping area known as Palm Court (Tax Rate Zone 1). Tax Rate Zone 2 consists of approximately 210 gross acres developed or planned for industrial and commercial uses, including six parcels that remain to be developed into a commercial or industrial use. Tax Rate Zone 2

11 3 consists of approximately 114 gross acres and has been developed with 383 single family homes and Tax Rate Zone 4 consists of approximately 80.5 gross acres and has been developed with 396 single family homes. Tax Rate Zone 5 is the smallest zone (17.5 acres) and has been developed as a neighborhood shopping center. The property in each Tax Rate Zone is substantially developed though undeveloped parcels in Tax Rate Zones 1, 2 and 5 represent approximately 5.6% of the estimated Special Tax levy for the Bonds. In addition, properties utilized for parking lot and loading dock purposes represent approximately 7.2% of the estimated Special Tax levy to pay the Bonds. Properties in Tax Rate Zone 1 are currently owned by multiple property owners which represent in the aggregate approximately 23.8% of the estimated Special Tax levy to pay the Bonds. Properties in Tax Rate Zone 2 are currently owned by multiple property owners which represent in the aggregate approximately 35.8% of the estimated Special Tax levy to pay the Bonds. Property in Tax Rate Zone 3 is comprised of 383 homes owned by individual homeowners. This property is responsible for approximately 16.2% of the estimated Special Tax levy to pay the Bonds. Property in Tax Rate Zone 3 is not subject to the levy of Special Taxes after fiscal year , prior to the final maturity date of the Bonds (September 1, 2034). Thereafter, the percentage distribution, among Tax Rate Zones and ownerships, of annual maximum Special Taxes available to pay the Bonds will change. See SPECIAL RISK FACTORS Concentration of Property Ownership. Property in Tax Rate Zone 4 is comprised of 396 homes owned by individual homeowners. This property is responsible for approximately 17.4% of the estimated Special Tax levy to pay the Bonds. Properties in Tax Rate Zone 5 are currently owned by a single owner and represent in the aggregate approximately 6.7% of the estimated Special Tax levy to pay the Bonds. Following the defaults related to the Prior District, the City undertook the rezoning and replanning of the then undeveloped land in the District comprising Tax Rate Zones 2, 4 and 5. Associated with the rezoning and replanning, significant environmental and other development constraints were addressed. The City has covenanted not to issue additional indebtedness secured by the Special Taxes on a parity with the Bonds except to refund the Bonds in whole or in part, and only in circumstances where the issuance of such Additional Bonds results in a reduction in the amount of Annual Debt Service on the outstanding Bonds (including such Additional Bonds) in each Bond Year. Other taxes and/or special assessments with liens equal in priority to the continuing lien of the Special Taxes may be levied on the property within the District. See SPECIAL RISK FACTORS Parity Taxes and Special Assessments. 3

12 Security and Sources of Payment for the Bonds Under the Indenture, the City has pledged to repay the Bonds from Net Special Tax Revenues and any other amounts held in the Special Tax Fund, the Bond Fund and the Reserve Fund. The Indenture defines Net Special Tax Revenues to mean Special Tax Revenues less amounts required to pay Administrative Expenses. The term Special Tax Revenues is defined in the Indenture to mean the proceeds of the Special Taxes received by or on behalf of the District, including any prepayments thereof, interest and penalties thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes (which will be limited to the amount of said lien and interest and penalties thereon). Net Special Tax Revenues are the primary security for the repayment of the Bonds. In the event that Net Special Tax Revenues are not paid when due, the only sources of funds available to pay the debt service on the Bonds are the amounts held by the Trustee for such purpose in the Special Tax Fund, the Bond Fund and the Reserve Fund. See SECURITY AND SOURCES OF PAYMENT FOR THE BONDS herein. Property in the District is substantially developed and the District has conducted no appraisal of any of the properties in the District. The District has engaged David Taussig & Associates (the Special Tax Consultant ) to conduct a limited inquiry into the assessed value of the individual nonresidential parcels in the District and the aggregate assessed value of the residential parcels in the District based on the San Bernardino County Assessor Roll dated January 1, 2013 on which the County s tax levy for Fiscal Year is based. Based on such values (without regard to pending appeals) and the estimated Special Tax Levy, parcels having an assessed value-to-lien ratio of less than 3:1 (exclusive of the Agency Parcel) comprise approximately 7.9% of the estimated Special Tax levy for Fiscal Year [and includes properties identified by the Special Tax Consultant as parking property or loading zone property in Tax Rate Zone 1 and a single developed parcel in Tax Rate Zone 1]; in the aggregate, Taxable Property in the District has an assessed valueto-lien ratio of 17.1:1. See THE COMMUNITY FACILITIES DISTRICT and SPECIAL RISK FACTORS herein. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE DISTRICT (EXCEPT TO THE LIMITED EXTENT SET FORTH IN THE INDENTURE), THE CITY OR THE STATE, OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE SPECIAL OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET SPECIAL TAX REVENUES AND THE OTHER ASSETS PLEDGED THEREFOR UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN. Description of the Bonds The Bonds will initially be issued and delivered as fully registered Bonds, registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York ( DTC ). They will be available to actual purchasers of the Bonds (the Beneficial Owners ) in integral multiples of $5,000 under the book-entry system maintained by DTC only through brokers and dealers who are or who act through DTC Participants as described herein. Beneficial Owners will not be entitled to receive physical delivery of the Bonds. 4

13 So long as the Bonds are held in book-entry form, principal of, premium, if any, and interest on the Bonds are payable by the Trustee to DTC. Disbursement of such payments to DTC Participants is the responsibility of DTC, and disbursement of such payments to the Beneficial Owners is the responsibility of DTC Participants. In the event that the book-entry system is no longer used with respect to the Bonds, the Beneficial Owners will become the registered owners of the Bonds and will be paid principal and interest by the Trustee, all as described herein. See THE BONDS Book-Entry System herein. The Bonds are subject to redemption as described herein. For more complete descriptions of the Bonds and the basic documentation pursuant to which they are being sold and delivered, see THE BONDS and Appendix D SUMMARY OF THE INDENTURE. Tax Matters In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the District, based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of California (the State ) personal income taxes. In the further opinion of Bond Counsel, interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Bonds. See TAX MATTERS herein. Professionals Involved in the Offering U.S. Bank National Association, Los Angeles, California, will act as Trustee under the Indenture, as the Escrow Bank under the Escrow Agreement and as the initial Dissemination Agent under the Continuing Disclosure Agreement. Stifel, Nicolaus & Company, Incorporated, is the Underwriter of the Bonds. All proceedings in connection with the issuance and delivery of the Bonds are subject to the approval of Orrick Herrington & Sutcliffe LLP, Bond Counsel to the District. CSG Advisors Incorporated, San Francisco, California, is acting as Financial Advisor for the City in connection with the Bonds. Certain legal matters will be passed on for the City and the District by Best Best & Krieger LLP, Riverside, California, in its capacity as City Attorney, and Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, as Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by its counsel, Jones Hall, A Professional Law Corporation, San Francisco, California. For information concerning respects in which certain of the above-mentioned professionals, advisors, counsel and agents may have a financial or other interest in the offering of the Bonds, see FINANCIAL INTERESTS herein. Continuing Disclosure The District has agreed to provide, or cause to be provided, to the Municipal Securities Rulemaking Board through its Electronic Municipal Market Access system certain annual financial information and operating data and, in a timely manner, notice of certain listed events. These 5

14 covenants have been made in order to assist the Underwriter in complying with Rule 15c2-12(b)(5) of the Securities and Exchange Commission. See CONTINUING DISCLOSURE and Appendix E FORM OF CONTINUING DISCLOSURE AGREEMENT herein for a description of the specific nature of the annual report and notices of listed events and a summary description of the terms of the continuing disclosure agreement pursuant to which such reports are to be made. Bond Owners Risks Certain events could affect the ability of the District to pay the principal of and interest on the Bonds when due. See the section of this Official Statement entitled SPECIAL RISK FACTORS for a discussion of certain factors which should be considered, in addition to other matters set forth herein, in evaluating an investment in the Bonds. Other Information This Official Statement speaks only as of its date, and the information contained herein is subject to change. Brief descriptions of the Bonds and the Indenture are included in this Official Statement. Such descriptions and information do not purport to be comprehensive or definitive. All references herein to the Indenture, the Bonds and the constitution and laws of the State as well as the proceedings of the City Council, acting as the legislative body of the District, are qualified in their entirety by references to such documents, laws and proceedings, and with respect to the Bonds, by reference to the Indenture. Copies of the Indenture, the Escrow Agreement, the Continuing Disclosure Agreement and other documents and information referred to herein are available for inspection and (upon request and payment to the City of a charge for copying, mailing and handling) for delivery from the City at 8353 Sierra Avenue, Fontana, California 92335, Attention: Lisa A. Strong. PLAN OF REFUNDING The Bonds are being issued for the principal purpose of refunding the 2004 Bonds. Concurrently with the issuance of the Bonds, the District and U.S. Bank National Association, as Prior Trustee and as Escrow Bank (the Escrow Bank ), will enter into an Escrow Agreement, dated as of June 1, 2014, relating to the 2004 Bonds (the Escrow Agreement ). A portion of the proceeds derived from the sale of the Bonds, together with moneys held in certain funds and accounts relating to the 2004 Bonds, will be deposited in the Refunding Fund established for the 2004 Bonds pursuant to the Escrow Agreement. The aggregate amount of such deposits will be sufficient to redeem the 2004 Bonds on September 1, 2014 at a redemption price equal to 100% of the principal amount thereof and the interest accrued thereon to such redemption date. The cash held in the Refunding Fund will be held uninvested or be invested in non-callable direct obligations of the United States Treasury or other non-callable obligations, the payment of the principal of and interest on which is guaranteed by a pledge of the full faith and credit of the United States of America (the Securities ) and will be pledged solely for the redemption of the 2004 Bonds. An independent certified public accountant licensed to practice in the State, Grant Thornton, Minneapolis, Minnesota (the Verification Agent ), acting as verification agent with respect to the Refunding Fund, will certify in writing that moneys and securities deposited in the Refunding Fund, together with earnings thereon, will be sufficient to pay the redemption price of, and interest on the 2004 Bonds on September 1, 6

15 (1) Equal to the Reserve Requirement. THE BONDS Cash and securities deposited in the Refunding Fund will not be available for the payment of the Bonds, nor will any interest or other earnings thereon be available for such payment. Subordinate Promissory Note In exchange for its contribution of funds to the escrow providing for the defeasance of the 1991 Bonds, the Fontana Redevelopment Agency (to whose interest the Successor Agency to the Fontana Redevelopment Agency (the Successor Agency ) has succeeded) received from the District a subordinate promissory note (the Subordinate Promissory Note ) in the amount of the difference between the principal amount of the Prior Bonds and $39,000,000 (i.e., $1,635,000). The Subordinate Promissory Note was payable with interest at the rate of 8% per annum on September 2 of each year commencing September 2, Pursuant to the Subordinate Promissory Note, the District pledged Net Special Tax Revenues to the repayment of the Subordinate Promissory Note on a basis subordinate to the pledge of, and lien on, the Net Special Tax Revenues pledged under the Indenture to secure the 2004 Bonds. The District has levied Special Taxes to pay the Subordinate Promissory Note since 2005 and it will be paid in full concurrently with the issuance of the Bonds. ESTIMATED SOURCES AND USES OF FUNDS The following table sets forth the expected sources and uses of Bond proceeds and certain other amounts. Sources: Principal Amount of the Bonds $ 31,260, Funds Held For 2004 Bonds 5,021, Plus Net Original Issue Premium 3,274, Less Underwriter s Discount (235,712.50) Total $ 39,321, Uses: Refunding Fund $ 36,447, Reserve Fund (1) 2,581, Administrative Fund 73, Cost of Issuance Fund 218, Total $ 39,321, General Provisions The Bonds will be issued in fully registered form without coupons in denominations of $5,000 and any integral multiple thereof ( Authorized Denominations ). The Bonds will be dated the date of issuance thereof. The Bonds are scheduled to mature on September 1, in the years and in the principal amounts, and will bear interest at the rates per annum, shown on the inside front cover page of this Official Statement. Interest on the Bonds will be computed on the basis of a 360-day year consisting of twelve 30-day months and will be payable on March 1 and September 1 of each 7

16 year, commencing March 1, 2015 (each an Interest Payment Date ). Interest on each Bond will be payable from the Interest Payment Date next preceding the date of authentication thereof unless (i) such Bond is authenticated on or before an Interest Payment Date and after the close of business on the preceding the fifteenth calendar day of the month preceding each Interest Payment Date, whether or not such day is a Business Day (the Record Date ) in which event interest thereon will be payable from such Interest Payment Date, (ii) such Bond is authenticated on or before the first Record Date, in which event interest thereon will be payable from the Closing Date or (iii) interest on such Bond is in default as of the date of authentication thereof, in which event interest thereon will be payable from the date to which interest has been previously paid or duly provided for. The interest on, and principal of and redemption premiums, if any, on the Bonds are payable in lawful money of the United States of America. Interest is payable by check of the Trustee mailed by first class mail, postage prepaid, on each Interest Payment Date to the Owners of the Bonds at their respective addresses shown on the Registration Books as of the close of business on the preceding Record Date (except that interest on any Bond which is not punctually paid or duly provided for on any Interest Payment Date will, if and to the extent that amounts subsequently become available therefor, be payable on a payment date established by the Trustee to the Person in whose name the ownership of such Bond is registered on the Registration Books at the close of business on a special record date to be established by the Trustee pursuant to the Indenture). Payment of principal of any Bond will be made only upon presentation and surrender thereof at maturity or upon earlier redemption at the Office of the Trustee. The Bonds will initially be issued in book-entry form, and The Depository Trust Company of New York, New York ( DTC ) will act as securities depository. So long as the Bonds are held in book-entry form, principal of, premium, if any, and interest on the Bonds will be paid by the Trustee directly to DTC for distribution to the Beneficial Owners of the Bonds in accordance with procedures adopted by DTC. See Book-Entry System and Appendix F INFORMATION CONCERNING THE DEPOSITORY TRUST COMPANY AND ITS BOOK-ENTRY SYSTEM. The Bonds are not general obligations of the District but are special obligations of the District payable solely from Net Special Tax Revenues and the other assets pledged therefor under the Indenture. Neither the faith and credit nor the taxing power of the City, the District (except to the limited extent set forth in the Indenture), the State or any political subdivision thereof is pledged to the payment of the Bonds. See RISK FACTORS Bonds Are Limited Obligations. Redemption Optional Redemption. The Bonds are subject to optional redemption, in whole, or in part in Authorized Denominations, on any Interest Payment Date on or after September , from any source of available funds, at a Redemption Price equal to the principal amount of the Bonds to be redeemed, plus accrued interest thereon to the date of redemption, without premium. Mandatory Redemption from Special Tax Prepayments. The Bonds are subject to mandatory redemption, in whole, or in part in Authorized Denominations, on any Interest Payment Date on or after March 1, 2015, from and to the extent of prepaid Special Taxes required to be applied thereto and any related proportional amounts in the Reserve Fund required to be applied thereto pursuant to the Indenture (see SECURITY AND SOURCES OF PAYMENT FOR THE BONDS Reserve Fund ) at the following respective Redemption Prices (expressed as percentages 8

17 of the principal amount of the Bonds to be redeemed), plus accrued interest thereon to the date of redemption: Redemption Dates Redemption Price March 1, 2015 through March 1, % September 1, 2022 and March 1, September 1, 2023 and March 1, September 1, 2024 and any Interest Payment Date thereafter 100 Mandatory Sinking Fund Redemption. The Bonds maturing on September 1, 2034 (the 2034 Term Bonds ) are subject to mandatory sinking fund redemption, in part, on September 1 in each year, commencing September 1, 2032, at a Redemption Price equal to the principal amount of the 2034 Term Bonds to be redeemed, without premium, plus accrued interest thereon to the date of redemption, in the aggregate respective principal amounts in the respective years as follows: Sinking Fund Redemption Date (September 1) Principal Amount to be Redeemed 2032 $1,850, ,945, (maturity) 2,040,000 If some but not all of the 2034 Term Bonds are optionally redeemed, the principal amount of 2034 Term Bonds to be subsequently redeemed from mandatory sinking fund payments will be reduced by the aggregate principal amount of 2034 Term Bonds so optionally redeemed, such reduction to be allocated among redemption dates in amounts of $5,000 or any integral multiples thereof, as designated by the District in a Written Certificate of the District filed with the Trustee. If some but not all of the 2034 Term Bonds are redeemed from prepayments of Special Taxes, the principal amount of 2034 Term Bonds to be subsequently redeemed from mandatory sinking fund payments will be reduced by the aggregate principal amount of the 2034 Term Bonds so redeemed by prepayments of Special Taxes, such reduction to be allocated among redemption dates as nearly as practicable on a pro rata basis in amounts of $5,000 or any integral multiples thereof as determined by the Trustee, notice of which determination shall be given by the Trustee to the District. Selection of Bonds for Redemption. Whenever provision is made in the Indenture for the redemption of less than all of the Bonds, the Trustee will select the Bonds to be redeemed from all Bonds not previously called for redemption (i) with respect to any optional redemption of Bonds, among maturities of the Bonds as directed in a Written Request of the District, and (ii) with respect to any redemption of Bonds from prepayments of Special Taxes, among maturities of all Series of Bonds on a pro rata basis as nearly as practicable. The Trustee shall select for redemption the Bonds of the same Series with the same maturity by lot in any manner in which the Trustee, in its sole discretion, shall deem appropriate. For purposes of such selection, all Bonds shall be deemed to be comprised of separate $5,000 denominations, and such separate denominations shall be treated as separate Bonds which may be separately redeemed. Notice of Redemption. If the Bonds are held in book-entry form, notice of redemption will be mailed to DTC and not to the Beneficial Owners of the Bonds under the DTC book-entry system. 9

18 Neither the District nor the Trustee is responsible for giving notice of redemption to the Beneficial Owners. See Book-Entry System. The Indenture provides that the Trustee on behalf and at the expense of the District will give notice of any redemption by first class mail to the respective Owners of any Bonds designated for redemption at their respective addresses appearing on the Registration Books at least 30 but not more than 60 days prior to the date fixed for redemption. Such notice of redemption will state the date of the notice, the redemption date, the redemption place and the Redemption Price and shall designate the CUSIP numbers, if any, the Bond numbers and the maturity or maturities of the Bonds to be redeemed (except in the event of redemption of all of the Bonds of such maturity or maturities in whole). The notice of redemption will require that the Bonds to be redeemed be surrendered at the Office of the Trustee for redemption at the Redemption Price, and give notice that further interest on such Bonds will not accrue from and after the date fixed for redemption. Neither the failure to receive any notice so mailed, nor any defect in such notice, will affect the validity of the proceedings for the redemption of the Bonds or the cessation of accrual of interest thereon from and after the date fixed for redemption. If, on said date fixed for redemption, moneys for the Redemption Price of all the Bonds to be redeemed, together with interest to said date, is held by the Trustee so as to be available therefor on such date, and, if notice of redemption thereof will have been mailed as aforesaid and not canceled, then, from and after said date, interest on said Bonds will cease to accrue and become payable. All moneys held by or on behalf of the Trustee for the redemption of Bonds will be held in trust for the account of the Owners of the Bonds so to be redeemed without liability to such Owners for interest thereon. With respect to any notice of any optional redemption of Bonds, unless at the time such notice is given the Bonds to be redeemed shall be deemed to have been paid within the meaning of the Indenture, such notice will state that such redemption is conditional upon receipt by the Trustee, on or prior to the date fixed for such redemption, of moneys that, together with other available amounts held by the Trustee, are sufficient to pay the Redemption Price of, and accrued interest on, the Bonds to be redeemed, and that if such moneys shall not have been so received said notice shall be of no force and effect and the District will not be required to redeem such Bonds. In the event a notice of redemption of Bonds contains such a condition and such moneys are not so received, the redemption of Bonds as described in the conditional notice of redemption will not be made and the Trustee will, within a reasonable time after the date on which such redemption was to occur, give notice to the Persons and in the manner in which the notice of redemption was given, that such moneys were not so received and that there shall be no redemption of Bonds pursuant to such notice of redemption. 10

19 Debt Service Schedule (1) Year Ending September 1 Principal Interest Total 2015 $ 720,000 $ 1,831, (1) $ 2,551, ,100,000 1,480, ,580, ,145,000 1,436, ,581, ,190,000 1,390, ,580, ,235,000 1,342, ,577, ,285,000 1,293, ,578, ,350,000 1,229, ,579, ,420,000 1,161, ,581, ,490,000 1,090, ,580, ,565,000 1,016, ,581, ,640, , ,578, ,725, , ,581, ,810, , ,579, ,900, , ,579, ,995, , ,579, ,095, , ,579, ,760, , ,139, ,850, , ,141, ,945, , ,144, ,040, , ,142, Totals $31,260,000 $18,557, $49,817, Includes interest from the date of issuance of the Bonds. Source: The Underwriter. Book-Entry System DTC will act as the initial securities depository for the Bonds, and the Bonds will be registered in the name of Cede & Co. (DTC s partnership nominee). One fully-registered Bond certificate for each maturity will be issued for the Bonds in the aggregate principal amount of such maturity, and will be deposited with DTC. So long as Cede & Co. is the registered owner of the Bonds, references herein to the Owners of the Bonds shall mean Cede & Co. and shall not mean the actual purchasers of the Bonds (the Beneficial Owners ). The District does not give any assurance that DTC, its Participants or others will distribute payments with respect to the Bonds or notices concerning the Bonds to the Beneficial Owners thereof or that DTC will serve and act in the manner described in this Official Statement. See Appendix F for a description of DTC and its book-entry only system. General SECURITY AND SOURCES OF PAYMENT FOR THE BONDS The Bonds are special obligations of the District, and, except as otherwise provided in the Indenture, they are payable solely from Net Special Tax Revenues. The Indenture defines Net Special Tax Revenues to mean Special Tax Revenues less amounts required to pay Administrative 11

20 Expenses. The term Special Tax Revenues is defined in the Indenture to mean the proceeds of the Special Taxes received by or on behalf of the District, including any prepayments thereof, interest and penalties thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes (which shall be limited to the amount of said lien and interest and penalties thereon). The Indenture defines the term Special Taxes as the special taxes levied within the District pursuant to the Act, the Ordinance Levying Special Taxes, the Rate and Method and the Indenture. Administrative Expenses is defined in the Indenture to mean costs directly related to the administration of the District, consisting of the costs of computing the Special Taxes and preparing the annual Special Tax collection schedules and the costs of collecting the Special Taxes, the costs of remitting the Special Taxes to the Trustee, the fees and costs of the Trustee (including its legal counsel) in the discharge of the duties required of it under the Indenture, the costs incurred by the District in complying with the disclosure provisions of any continuing disclosure undertaking and the Indenture, including those related to public inquiries regarding the Special Tax and disclosures to Owners, the costs of the District related to an appeal of the Special Tax, any amounts required to be rebated to the federal government in order for the District to comply with the tax covenants in the Indenture, an allocable share of the salaries of the City staff providing services on behalf of the District directly related to the foregoing and a proportionate amount of City general administrative overhead related thereto, and the costs of foreclosure of delinquent Special Taxes. The Special Taxes in the District can only be levied on the Taxable Property (as defined in the Rate and Method) which consists of 48 parcels of commercial/industrial property totaling approximately gross acres and 779 parcels of developed single family detached homes owned by individuals within the District. Of the commercial/industrial parcels, 9 parcels represent Taxable Property that remains to be developed into a commercial or industrial use and these parcels represent approximately 5.6% of the District s estimated Special Tax Levy for Fiscal Year In addition, four of the commercial/industrial parcels in Special Tax Zone 1 represent Taxable Property currently utilized for parking, landscaped areas, right-of-way or loading zone uses and these parcels represent approximately 7.2% of the estimated Special Tax levy for the Bonds. Under no circumstances may the amount of Special Taxes levied by the District in any year exceed the maximum rates approved by the qualified electors within the District, as set forth in the Rate and Method of Apportionment. A copy of the Rate and Method of Apportionment is attached to this Official Statement as Appendix A. In addition to the Net Special Tax Revenues, any other amounts held by the Trustee in the Special Tax Fund, the Bond Fund and the Reserve Fund are pledged pursuant to the Indenture to secure the payment of the principal of, premium, if any, and interest on the Bonds and any Additional Bonds in accordance with their respective terms, the Indenture and the Act. However, those amounts are pledged subject to the provisions of the Indenture permitting the application thereof for the purposes set forth in the Indenture. Amounts on deposit in the Costs of Issuance Fund, the Administrative Expense Fund and the Rebate Fund are not pledged to the payment of any of the Bonds or any Additional Bonds. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE DISTRICT (EXCEPT TO THE LIMITED EXTENT SET FORTH IN THE INDENTURE), THE CITY OR THE STATE, OR ANY POLITICAL SUBDIVISION THEREOF, IS 12

21 PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR NET SPECIAL TAX REVENUES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY BUT ARE SPECIAL OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET SPECIAL TAX REVENUES AND OTHER ASSETS PLEDGED UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN. Special Taxes Authorization. In accordance with the provisions of the Act, the City Council established the District on April 15, 2003 for the purpose of refinancing the acquisition, construction and installation of various public improvements to serve the District. At a special election held on July 15, 2003, the resident electors of the District authorized the District to incur indebtedness secured by Special Taxes levied on property in the District in an amount not to exceed $39,000,000, and approved the Rate and Method which authorized the Special Tax to be levied to repay District indebtedness, including the Bonds. Covenant to Levy. The District has covenanted in the Indenture that by August 10 of each year (or such later date as may be authorized by the Act) it will levy Special Taxes within the District up to the maximum rates permitted under the Rate and Method in the amount required for the payment of principal of and interest on any Outstanding Bonds becoming due and payable during the ensuing calendar year, including any necessary replenishment or expenditure of the Reserve Fund and the amount estimated to be sufficient to pay the Administrative Expenses during such calendar year. The Special Taxes levied in any fiscal year may not exceed the maximum rates authorized pursuant to the Rate and Method. See Appendix A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX hereto. There is no assurance that the Special Tax proceeds will, in all circumstances, be adequate to pay the principal of and interest on the Bonds when due. See SPECIAL RISK FACTORS Levy of the Special Tax herein. Capitalized terms in this section are as defined in the Rate and Method. Rate and Method of Apportionment. Under the Rate and Method, all Taxable Property within the District is subject to the levy of annual Special Taxes as described below. For each Fiscal Year, commencing the first Fiscal Year Special Taxes are levied in the District, all Parcels within the District will be assigned to one or more of Tax Rate Zone 1, Tax Rate Zone 2, Tax Rate Zone 3, Tax Rate Zone 4, or Tax Rate Zone 5. Additionally each Parcel will be classified as Hotel Property, Non- Residential Property, Property Owner Association Property, Public Property, Single Family Residential Property, or Exempt Property, and will be subject to the levy of Special Taxes in accordance with the rate and method of apportionment of the Special Tax as set forth in Sections D, F and G of Appendix A hereto. Summary of Maximum Special Tax Rates The Maximum Annual Special Tax for each Assessor s Parcel of Taxable Property is computed, by Zone, as described below. The District has been divided into five Tax Rate Zones for the purposes of assigning the Special Tax Rates to property within the District. A summary of the Maximum Special Tax Rates 13

22 for Tax Rate Zones 1, 2, 3, 4, and 5 are presented in Table 1 below. (See Sections B through K of Appendix A hereto for specifics regarding the application of these Special Tax Rates.) Tax Rate Zone 3 encompasses approximately 114 acres generally located south of Santa Ana Avenue, west of Tamarind Avenue, and north of Jurupa Avenue and, as indicated in Table 1 below, may only be taxed until the earlier of Fiscal Year or when no Bonds are outstanding. See SPECIAL RISK FACTORS Concentration of Property Ownership. Rate and Method Land Use Class Table 1 Summary of Maximum Special Tax Rates Community Facilities District No. 22 Fiscal Year (1) Tax Rate Zone 1 Tax Rate Zone 2 Single Family Residential Property N/A (2) The greater of the Backup Special Tax or $1,237 per Residential Lot Hotel Property N/A (3) $4,974 per Gross Acre Non-Residential Property $11,190 per $4,974 per Gross Acre Gross Acre Property Owner Association Property N/A (3) $4,974 per Gross Acre Public Property N/A (3) $4,974 per Gross Acre Tax Rate Zone 3 $1,237 per Residential Lot Tax Rate Zone 4 The greater of the Backup Special Tax or $1,237 per Residential Lot N/A (3) N/A (3) N/A (3) Tax Rate Zone 5 The greater of the Backup Special Tax or $1,237 per Residential Lot $4,227 per Gross Acre $11,190 per Gross Acre $11,190 per Gross Acre $4,227 per $6,316 per $11,190 per Gross Acre Gross Acre Gross Acre $4,227 per $6,316 per $11,190 per Gross Acre Gross Acre Gross Acre TERM OF SPECIAL TAX (3) (1) Maximum Special Tax rates escalate at two percent (2%) annually each July 1st. (2) N/A means a specific land use description does not exist within that Tax Rate Zone. (3) The Term of Special Tax is the earlier of when no Bonds are outstanding or the fiscal year specified. Source: David Taussig & Associates, Inc. Back-up Special Tax As described above, for Tax Rate Zone 2, Tax Rate Zone 4 and Tax Rate Zone 5, the Maximum Special Tax Rate for Single Family Residential Property is the greater of the Back up Special Tax for such Zone or $1, per residential lot (increasing by 2% per year beginning July 1, 2015). Tax Rate Zones 2 and 5 are not expected to include any residential lots; nevertheless, the method of calculation of such Back-up Special Taxes is described in Appendix A hereto. The Back-up Special Taxes for Zone 4 relate to undeveloped residential lots and are not expected to be used to pay debt service on the Bonds. Multiple Land Use Classes or Multiple Tax Rate Zones If a Parcel contains more than one Land Use Class and/or Tax Rate Zone, the Maximum Special Tax that can be levied on such a Parcel will be the sum of the products of the applicable Maximum Special Tax Rate times the Gross Acreage or number of Residential Lots within each Land Use Class and/or Tax Rate Zone located on such Parcel. No Taxable Parcels currently fall in this category. The methodology for allocating Gross Acreage to other Assessor s Parcels is described in Section D.6 of Appendix A hereto. 14

23 Mandatory Special Tax Prepayment For Land Use Class Changes Any Parcel for which the Land Use Class changes to a Land Use Class with a lower Maximum Special Tax, as specified for Parcels within that same Tax Rate Zone, will be subject to a mandatory special tax prepayment. The mandatory special tax prepayment amount will be determined through the application of Section J.2 of Appendix A hereto (Prepayment in Part), whereby the Maximum Special Tax Reduction is equal to the difference between the Maximum Special Tax for the Land Use Class in effect prior to such change and the Maximum Special Tax for the new Land Use Class. The mandatory special tax prepayment is due and payable upon the finalization of the zone change or City approval that would cause the change in Land Use Class. In the event the mandatory special tax prepayment is not collected prior to finalization of such zone change or City approval, the CFD Administrator may enroll and collect the mandatory special tax prepayment amount on the property tax bills prepared by the County of San Bernardino. Method Of Apportionment Of The Special Tax For each Fiscal Year, the Council will determine the Special Tax Requirement and levy the Special Taxes until the amount of Special Taxes equals the Special Tax Requirement. The Prior District may only be dissolved upon defeasance of the Refunded Bonds. Step 1: The Special Tax will be levied Proportionately on each Parcel of Single Family Residential Property, Hotel Property and Non-Residential Property at up to 100 percent of its applicable Maximum Special Tax to satisfy the Special Tax Requirement. Step 2: If additional monies are needed to satisfy the Special Tax Requirement after Step 1 has been completed, then the Special Tax will be levied Proportionately on each Parcel of Property Owner Association Property at up to 100 percent of its applicable Maximum Special Tax to satisfy the Special Tax Requirement. Step 3: If additional monies are needed to satisfy the Special Tax Requirement after Step 1 and Step 2 have been completed, then the Special Tax will be levied Proportionately on each Parcel of Public Property at up to 100 percent of its applicable Maximum Special Tax to satisfy the Special Tax Requirement. Exemptions The Council will not levy Special Taxes on: Up to 3 acres of property in Tax Rate Zone 4 owned by or dedicated or irrevocably offered for dedication to the City for park purposes. Parcel 1 and Lots A, B, C, D, H, I, J and K as shown on Parcel Map 12195, recorded in Book 158 of Parcel Maps on Pages 28-40, Records of San Bernardino County, California. The Rate and Method identifies these parcels by reference to a map that has been superseded by a more recent map and some identified lots are now part of lots which are to be subject to the Special Taxes. The Special Tax Consultant reports that one of these exempt parcels comprising two acres is also identified in the Rate and Method as a part of 15

24 212.2 acres of Original Assessor's Parcels which, under the Rate and Method, are reallocated to Taxable Property within Tax Rate Zone 2 to establish actual tax rates applied to such Taxable Property; however, the two acre parcel is not included in any final parcel map for property in Tax Rate Zone 2 and is not reallocated to any Taxable Property in Tax Rate Zone 2. See Appendix A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX E. Allocation of Gross Acreage. All calculations of Special Taxes for Tax Rate Zone 2 in this Official Statement reflect this adjustment. Otherwise, the Special Tax Consultant reports that the adjustments to parcels of property within Tax Rate Zone 2 to account for the exempt acreage does not affect the aggregate Special Taxes to be levied within Tax Rate Zone 2, and adverse impact on any specific parcels will be minor. Certain public uses and other property within Tax Rate Zone 3 identified by certain specific Assessor s Parcel Numbers. Any Parcel for which the obligation to pay the Special Taxes authorized in CFD No has been prepaid; the Special Tax Consultant reports special taxes have not been prepaid for any parcel as of May 1, Prepayment In Full The Special Tax Obligation of a Parcel may be prepaid and the obligation of the Parcel to pay the Special Tax permanently satisfied as described herein, provided that a prepayment may be made only if there are no delinquent Special Taxes with respect to such Parcel at the time of prepayment. An owner of a Parcel in the District intending to prepay the Special Tax Obligation will provide the City with written notice of intent to prepay and pay a non-refundable deposit in an amount determined by the City (to be applied against the Prepayment Amount ). Within 30 days of receipt of the deposit, the City will notify such owner of the prepayment amount of such Parcel. Prepayment must be made not less than 90 days prior to any redemption date for Bonds to be redeemed with the proceeds of such prepaid Special Taxes. The formula for calculating the prepayment in full of Special Taxes is provided in Section H of Appendix A hereto. Prepayment in Part The Special Tax Obligation of a Parcel may be partially prepaid. An owner of a Parcel in the District intending to prepay a portion of the Special Tax Obligation will provide the City with written notice of (i) intent to partially prepay the Special Tax and (ii) the percentage of the Special Tax Obligation to be prepaid (the Partial Special Tax Reduction ), and pay a non refundable deposit in an amount determined by the City (to be applied against the Prepayment Amount ). Within 30 days of receipt of the deposit, the City will notify such owner of the partial prepayment amount of such Parcel. Prepayment must be made not less than 90 days prior to any redemption date for Bonds to be redeemed with the proceeds of such partially prepaid Special Tax Obligations. The amount of the prepayment will be calculated in the manner described in Section J.1 of Appendix A hereto, and will be subject to all of the same limitations noted in Section J.1 except that the Partial Special Tax Reduction will be substituted for the Bond Redemption Amount commencing in paragraph c of Section J.1 of Appendix A hereto. 16

25 With respect to any Parcel for which the Special Tax Obligation is partially prepaid, the City will (i) distribute the funds remitted to it according to the Indenture, and (ii) indicate in the records of the District that there has been a partial prepayment of the Special Tax Obligation and that Special Taxes will continue to be levied on such Parcel pursuant to Section G based on the Special Tax Obligation remaining after the partial prepayment. Limitations. In general, the Special Tax is required to be levied and collected until the Bonds have been retired. However, the Special Tax cannot be levied beyond a period of forty years on each Assessor s Parcel. Moreover, notwithstanding the description of the manner in which the Special Tax is to be apportioned to the Assessor s Parcels within the District set forth above, under no circumstances may the Special Tax levied on any Assessor s Parcel of Residential Property be increased as a consequence of delinquency or default by the owner of any other parcel by more than 10% above the amount that would have been levied in that Fiscal Year had there never been any such delinquency or default. Covenant for Superior Court Foreclosure Pursuant to Section of the Act, the District has covenanted in the Indenture that it will determine or cause to be determined, no later than September 15 of each year, whether or not any owners of property within the District are delinquent in the payment of Special Taxes and that, if such delinquencies exist, the District will order and cause to be commenced no later than November 1, and thereafter diligently prosecute, an action in the superior court to foreclose the lien of any Special Taxes or installment thereof not paid when due. Notwithstanding the foregoing, the District is not required under the Indenture to order the commencement of foreclosure proceedings if (a) the total Special Tax delinquency in the District for such Fiscal Year is less than 5% of the total Special Tax levied in such Fiscal Year, and (b) the amount then on deposit in the Reserve Fund is equal to the Reserve Requirement. Notwithstanding the foregoing, if the District determines that any single property owner in the District is delinquent in the payment of Special Taxes in an amount in excess of (i) $5,000 in the case of Single Family Residential Property or (ii) $15,000, in the case of any other property then the District will diligently institute, prosecute and pursue foreclosure proceedings against such property owner. The mere commencement of foreclosure proceedings will not assure a prompt and favorable resolution of Special Tax delinquencies. The ability of the District to foreclose the lien of delinquent unpaid Special Taxes may be limited. See SPECIAL RISK FACTORS Bankruptcy and Legal Delays and FDIC/Federal Government Interests in Properties. Moreover, even if a judgment of foreclosure and order of sale is obtained, the District must cause a notice of levy to be issued. Under current law, the property owner has 120 days from the date of service of the notice of levy in which to redeem the subject property. If the property owner fails to redeem the property and it is sold, the property owner s only remedy is an action to set aside the sale, which action must be brought within 90 days of the date of sale. If such an action results in the setting aside of the foreclosure sale, the judgment is revived, and the District would be entitled to receive interest on the revived judgment as if the sale had not been made. Under former law a property owner had a period of one year within which to redeem property to be sold, and the constitutionality of the legislation that eliminated the one year redemption period has not been tested. Although the Act authorizes the District to cause a foreclosure action to be commenced and diligently pursued to completion, the Act does not impose on the District or the City any obligation to purchase or acquire any lot or parcel of property sold at a foreclosure sale if there is no other 17

26 purchaser at such sale. However, the City does have the ability to use the foreclosure judgment to purchase property by credit bid at a foreclosure sale, in which case the City would have no obligation to pay such credit bid for 24 months. The Act provides that, in the case of a delinquency, the Special Tax will have the same lien priority as is provided for ad valorem taxes. There can be no assurance that, even if the subject property is sold, the proceeds from such sale will be sufficient to pay the delinquent installments of the Special Tax. The Act does not require the District or any other governmental agency to purchase or otherwise acquire any Assessor s Parcel being sold if there is no other purchaser at such sale. The Act does require that property being sold pursuant to foreclosure under the Act must be sold for not less than the judgment amount (which must include reasonable attorneys fees, together with interest, penalties, and other authorized charges and costs) plus post judgment interest and authorized costs, unless a lower bid price is authorized by the Owners of not less than 75% by value of the Bonds Outstanding. Special Tax Fund The Indenture provides that the Trustee will establish and maintain a separate fund designated the Special Tax Fund. The Indenture requires that the District transfer Special Tax Revenues (other than prepaid Special Taxes) to the Trustee for deposit into the Special Tax Fund as soon as practicable after the District s receipt thereof, but in any event no later than ten Business Days prior to the Interest Payment Date after such receipt. On the Business Day immediately preceding each Interest Payment Date, after having made any requested transfers to the Administrative Expense Fund, as requested by the District, to have sufficient amounts available therein to pay Administrative Expenses, the Trustee is required by the Indenture to make transfers from the Special Tax Fund to the Interest Account in the Bond Fund, the Principal Account in the Bond Fund and the Reserve Fund in the amounts and in the priority specified in the Indenture. See Appendix D SUMMARY OF THE INDENTURE. As soon as practicable after the District s receipt of prepaid Special Taxes, but in any event no later than ten Business Days prior to the Interest Payment Date after such receipt, the District is required to transfer any prepaid Special Taxes to the Trustee and, in connection therewith, deliver to the Trustee a Written Certificate identifying such amounts as prepaid Special Taxes, identifying the portion of such prepaid Special Taxes so transferred that is to be applied to the Redemption Price of the Bonds and identifying the portion of such prepaid Special Taxes that is to be applied to the payment of interest on the Bonds to be so redeemed. The portion of such prepaid Special Taxes that is to be applied to the Redemption Price will be deposited by the Trustee in the Redemption Fund and will be applied to the redemption of the Bonds pursuant to the Indenture. The portion of such prepaid Special Taxes that is to be applied to the payment of interest on the Bonds to be so redeemed will be deposited by the Trustee in the Interest Account and will be applied to the payment of such interest. Reserve Fund The Indenture provides that the Trustee will establish and maintain a special fund designated the Reserve Fund. On the Closing Date, the Trustee will deposit in the Reserve Fund the amount specified under the caption ESTIMATED SOURCES AND USES OF FUNDS. The Trustee is also required, on the Business Day immediately preceding each Interest Payment Date, transfer from the Special Tax Fund (after the requisite transfers to the Administrative Expense Fund, the Interest Account and the Principal Account) the amount, if any, necessary to cause the amount on deposit in 18

27 the Reserve Fund to be equal to the Reserve Requirement. The Indenture defines Reserve Requirement to mean, as of the date of any calculation, the least of (i) 10% of the original aggregate principal amount of the Bonds, (ii) Maximum Annual Debt Service and (iii) 125% of Average Annual Debt Service. Except as otherwise provided in the Indenture, all amounts deposited in the Reserve Fund are to be used and withdrawn by the Trustee solely for the purpose of (i) making transfers to the Interest Account in accordance with the Indenture in the event that, on the Business Day prior to an Interest Payment Date, amounts in the Interest Account are insufficient to pay the interest on the Bonds due and payable on such Interest Payment Date, (ii) making transfers to the Principal Account in accordance with the Indenture in the event that, on the Business Day prior to a September 1 on which principal of the Bonds is due and payable (including principal due and payable by reason of mandatory sinking fund redemption of the Bonds), amounts in the Principal Account are insufficient to pay such principal, and (iii) redeeming Bonds in accordance with the Indenture as described in the following paragraph. Whenever Bonds are to be optionally redeemed or redeemed from Special Tax prepayments, a proportionate share (determined as provided below) of the amount on deposit in the Reserve Fund will, on the date on which amounts to redeem such Bonds are deposited in the Redemption Fund or otherwise deposited with the Trustee, be transferred by the Trustee from the Reserve Fund to the Redemption Fund or to such deposit held by the Trustee and will be applied to the redemption of said Bonds; provided that, such amount will be so transferred only if and to the extent that the amount remaining on deposit in the Reserve Fund will be at least equal to the Reserve Requirement (excluding from the calculation thereof said Bonds to be redeemed). Such proportionate share will be equal to the largest integral multiple of the minimum Authorized Denomination for said Bonds that is not larger than the amount equal to the product of (i) the amount on deposit in the Reserve Fund on the date of such transfer, times (ii) a fraction, the numerator of which is the principal amount of Bonds to be so redeemed and the denominator of which is the principal amount of Bonds to be Outstanding on the day prior to the date on which such Bonds are to be so redeemed. Whenever the balance in the Reserve Fund exceeds the amount required to redeem or pay the Outstanding Bonds, including interest accrued to the date of payment or redemption and premium, if any, due upon redemption, the Trustee will, upon receipt of a Written Request of the Community Facilities District, transfer the amount in the Reserve Fund to the Interest Account, Principal Account and/or Redemption Fund, as applicable, to be applied, on the next succeeding Interest Payment Date to the payment and redemption of all of the Outstanding Bonds. If, as a result of the scheduled payment of principal of or interest on the Bonds, the Reserve Requirement is reduced, the Trustee will transfer an amount equal to the amount of such reduction to the Interest Account. Investment of Moneys All moneys held by the Trustee in any of the funds or accounts established pursuant to the Indenture are required to be invested by the Trustee solely in Permitted Investments, as directed in writing by the District. As used in the Indenture, the phrase Permitted Investments includes a variety of investments, some of which may not be rated by a national rating service. See Appendix D SUMMARY OF THE INDENTURE Definitions. 19

28 Additional Bonds So long as any of the Bonds remain Outstanding, the District will not issue any additional bonds or obligations payable from Net Special Tax Revenues senior to the Bonds. The District may issue Additional Bonds or obligations payable on a parity with the Bonds, if, among other things: (i) upon the issuance of such Additional Bonds, no Event of Default will occur or be continuing under the Indenture; (ii) the proceeds of the Additional Bonds will be applied to refund the Bonds or Additional Bonds previously issued under the Indenture in whole or in part, pay Costs of Issuance incurred in connection with the issuance of such Additional Bonds, and/or make any requisite deposit to the Reserve Fund; and (iii) the Annual Debt Service in each Bond Year, calculated for all Bonds that will be Outstanding after the issuance of such Additional Bonds, will be less than or equal to Annual Debt Service in such Bond Year, calculated for all Bonds and Additional Bonds which are Outstanding immediately prior to the issuance of such Additional Bonds. Nothing contained in the Indenture limits the issuance of any special tax bonds payable from Special Taxes if, after the issuance and delivery of such special tax bonds, none of the Bonds and Additional Bonds theretofore issued under the Indenture will be Outstanding. The District may issue obligations payable from Net Special Tax Revenues on a basis subordinate to the Bonds. Estimated Debt Service Coverage Table 2 below illustrates the estimated coverage for the debt service for the Bonds that is available from the projected Net Special Tax Revenues. Estimated coverage is based on receipt by the City of maximum Special Taxes assuming that there are no further prepayments of the Special Tax and no further changes in the amount of the Taxable Property, and assuming estimated Administrative Expenses of $73,140 escalating 2% each Fiscal Year beginning July 1, The Special Tax will not generally be levied at the maximum rate except where prior delinquencies require that the levy be increased to replenish the Reserve Fund or pay the Bonds. Additionally, pursuant to the Act, under no circumstances will the Special Tax levied against any parcel of residential property within the District be increased as a consequence of delinquency or default by the owner of any other parcel by more than 10% above the amount that would have been levied in that Fiscal Year had there never been any such delinquency of default. Even if the Special Taxes were levied at the maximum rate in any year, actual collections will depend upon the willingness and ability of the owners of property to pay the Special Taxes when due. Numerous factors could affect the timely payment of Special Taxes. See SPECIAL RISK FACTORS herein. Table 2 demonstrates estimated debt service coverage in the aggregate for the District. Generally, properties in the District other than unimproved or parking/loading dock properties in the District provide estimated coverage in excess of 1.0 times after fiscal year , but not before. Nevertheless, unimproved properties (exclusive of property identified as parking/loading zone unimproved property) generally have assessed valuations substantially in excess of the tax burden on such parcels. See THE COMMUNITY FACILITIES DISTRICT Property Values below. 20

29 Fiscal Year Ending June 30 Maximum Special Tax Revenues From Properties with Structures (1) TABLE 2 CITY OF FONTANA COMMUNITY FACILITIES DISTRICT NO. 22 (SIERRA HILLS SOUTH) ESTIMATED DEBT SERVICE COVERAGE ON THE BONDS Maximum Special Tax Revenues Generated by Parking & Loading Zone Property (2) Maximum Special Tax Revenues Generated by Property Without Structures (3) All Taxable Property Maximum Special Tax Revenues Administrative Expenses (4) Debt Service on the Bonds Estimated Net Coverage from Property with Structures (5) Estimated Net Coverage from Property with Structures/ Parking and Loading Zone Property (6) Estimated Net Coverage from All Taxable Property (7) 2015 $2,544,699 $210,379 $163,409 $2,918,487 $73,140 $2,551, % % % ,595, , ,677 2,976,857 74,602 $2,580, % % % ,647, , ,011 3,036,394 76,095 $2,581, % % % ,700, , ,411 3,097,122 77,616 $2,580, % % % ,754, , ,879 3,159,065 79,169 $2,577, % % % ,809, , ,417 3,222,246 80,752 $2,578, % % % ,865, , ,025 3,286,691 82,367 $2,579, % % % ,923, , ,706 3,352,425 84,014 $2,581, % % % ,981, , ,460 3,419,473 85,695 $2,580, % % % ,041, , ,289 3,487,863 87,409 $2,581, % % % ,101, , ,195 3,557,620 89,157 $2,578, % % % ,164, , ,179 3,628,772 90,940 $2,581, % % % ,227, , ,242 3,701,348 92,759 $2,579, % % % ,291, , ,387 3,775,375 94,614 $2,579, % % % ,357, , ,615 3,850,882 96,506 $2,579, % % % ,424, , ,927 3,927,900 98,436 $2,579, % % % ,842, , ,326 3,355, ,405 $2,139, % % % ,899, , ,812 3,423, ,413 $2,141, % % % ,957, , ,389 3,491, ,461 $2,144, % % % ,016, , ,056 3,561, ,551 $2,142, % % % (1) Based on the Maximum Special Tax revenues generated from parcels which have been developed into their applicable intended residential, commercial or industrial use, inclusive of three (3) parcels of Taxable Property owned by CRP Oakmont Sierra LLC as of January 1, 2013 which have subsequently been sold, have completed construction of their applicable shell building and are undergoing tenant improvements, exclusive of Taxable Property currently utilized for parking, landscaped areas, right-of-way, and/or a loading zone. Please note, the Maximum Special Taxes within Tax Rate Zone 3 are not levied after fiscal year Therefore, no Bonds are being supported by property within Tax Rate Zone 3 after fiscal year Furthermore, pursuant to Section 53321(d) of the Government Code, the Special Tax levied against any Assessor s parcel for which an occupancy permit for private residential use has been issued shall not be increased as a consequence of delinquency or default by the owner of any other Assessor s parcel within the District by more than ten percent above the amount that would have been levied in that fiscal year had there never been any such delinquencies or defaults. (2) Based on the Maximum Special Tax revenues generated from four (4) parcels, comprised of approximately 18.8 Gross Acres, of Taxable Property currently utilized for parking, landscaped areas, right-of-way, and/or a loading zone. (3) Based on the Maximum Special Tax revenues generated from nine (9) parcels, comprised of approximately 27.9 Gross Acres, of Taxable Property that remain to be developed into their intended commercial or industrial use. (4) Based on the fiscal year levy for Administrative Expenses equal to $60,000, escalating at 2% annually. (5) Maximum Special Tax Revenues Generated by Property with Structures, less Administrative Expenses, divided by Debt Service on the Bonds. (6) Maximum Special Tax Revenues Generated by Property with Structures plus the Maximum Special Tax Revenues Generated by Parking & Loading Zone Property, less Administrative Expenses, divided by Debt Service on the Bonds. (7) Maximum Special Tax Revenues Generated by All Taxable Property, less Administrative Expenses, divided by Debt Service on the Bonds. Source: David Taussig & Associates, Inc., Stifel Nicolaus & Company 21

30 22

31 General Description of the District THE COMMUNITY FACILITIES DISTRICT The District consists of approximately 489 gross acres (exclusive of exempt property) and is located south of Interstate 10, west of Tamarind Avenue, north of Jurupa Avenue and east of Sierra Avenue. The District is divided into five Tax Rate Zones, consisting of developed commercial, industrial or residential property and land that remains to be developed into a commercial and industrial use. The Bonds will be payable from Special Taxes levied on Taxable Property (as defined in the Rate and Method) within the District. Description by Tax Rate Zone Tax Rate Zone 1. Tax Rate Zone 1 consists of approximately 62.1 gross acres located on multiple parcels in the northern portion of the District, north of Slover Avenue. This property is the location of the Palm Court Shopping Center and is currently owned by multiple property owners. Currently located in this Tax Rate Zone are Target, T.J. Maxx, Ross and other retail stores or users. In addition, Kaiser Foundation Health Plan maintains facilities in the Zone. The District believes that Target is owned by Target Corporation, which changed its name to Dayton Hudson Corporation in See Table 3 below. Individual buildings and related acreage within Tax Rate Zone 1 are owned by PCW Properties LLC, Kaiser Foundation Health Plan, Brandon s Diner Inc., Murg Family Trust, Puente Hills Power Center LLC, Dayton Hudson and Cathay Investments, LLC. Three parcels in Tax Rate Zone 1 are currently utilized for parking purposes associated with the Palm Court Shopping Center and Kaiser Foundation Health Plan activities. In addition, a single parcel is identified as loading zone property under common ownership with the primary owner of the shopping center, PCW Properties LLC. Each of these parking and loading zone parcels has an identified assessed value-to-lien ratio less than 3:1. See Table 6. See SPECIAL RISK FACTORS. In addition, a.07 gross acre parcel owned by Puente Hills Power Center LLC in Tax Rate Zone 1 remains to be developed into a commercial use. Moreover, one of the developed parcels owned by PCW Properties, LLC consists of a property currently occupied by KidzRock Daycare N Preschool having an assessed value-to-lien ratio of approximately 2.5:1. This parcel is responsible for approximately.7% of the estimated Fiscal Year Special Tax levy. See SPECIAL RISK FACTORS. See Table 6. Tax Rate Zone 2. Tax Rate Zone 2 is the Sierra Business Park property, which consists of approximately 210 gross taxable acres located east and south of Tax Rate Zone 1 on either side of Slover Avenue, north of Santa Ana Avenue. Parcels in Tax Rate Zone 2 are primarily improved with substantial industrial park uses and a hotel. In addition, five parcels are currently owned by Wal-Mart Real Estate Business Trust and are unimproved. The City reports that Wal-Mart intends to place a substantial retail store on the site; however, the City gives no assurance the property will be improved with such uses or any other uses. The Wal-Mart parcels have an estimated assessed valueto-lien ratio of 8.8:1. See Table 3B and Table 6. Development of each of the unimproved properties will be subject in all respects to the City s existing land use process and the City gives no assurance such development will be authorized or occur. A single parcel in Tax Rate Zone 2 is owned by the Successor Agency, a public agency controlled by the City. The Successor Agency hopes to dispose of this land for development purposes to an identified buyer, but any such disposition is subject to complex regulatory and statutory limitations imposed as a result of the dissolution of redevelopment agencies by the State in 23

32 2011. No assurance can be given that the Successor Agency will be able to so dispose of the parcel. The Successor Agency has caused all Special Taxes levied on this parcel to be paid each fiscal year through Fiscal Year Moreover, enforcement by the District (which is also controlled by the City) of the payment of Special Taxes by the Successor Agency is subject to certain additional limitations. The Successor Agency parcel has a projected Fiscal Year Special Tax of $4,025 which represents 0.15% of the projected Fiscal Year Special Tax Levy. See SPECIAL RISK FACTORS Successor Agency Parcel. Tax Rate Zone 3. This Zone consists of acres located south of Santa Ana Avenue, west of Tamarind Avenue, north of Jurupa Avenue, east of Tax Rate Zone 4. It is fully developed with 383 individually owned single family homes. Seventy lots within Tax Rate Zone 3 were developed pursuant to Tract Map No and consist of parcels with lot sizes ranging from 5,250 square feet to 13,400 square feet, with homes ranging from 1,874 square feet to 2,511 square feet. The balance of the lots within Tax Rate Zone 3 were developed pursuant to Tract Map No and consist of parcels with lot sizes ranging from 7,200 square feet to 16,960 square feet, with home sizes ranging from 1,874 square feet to 2,511 square feet. Building permits for the development of homes with Tax Rate Zone 3 were issued between July 2002 and December See Table 6 and Table 7. Property in Tax Rate Zone 3 is not subject to the levy of Special Taxes after fiscal year , prior to the final maturity of the Bonds. Thereafter, the percentage distribution, among Tax Rate Zones and ownerships, of maximum Special Taxes available to pay the Bonds will change. See SPECIAL RISK FACTORS Concentration of Ownership. Tax Rate Zone 4. Tax Rate Zone 4 consists of 80.5 acres located south of Santa Ana Avenue to the west of Tax Rate Zone 3. The land in this zone is fully developed with 396 single family homes. Homes in Tax Rate Zone 4 were developed just prior to and following the formation of the District pursuant to three separate tract maps. Home sizes in Tax Rate Zone 4 range from 1,807 square feet to 2,898 square feet and lot sizes range from 5,250 square feet to 15,822 square feet. Building permits for the development of homes within Tax Rate Zone 4 were issued between July 2004 and October See Table 6 and Table 7. Tax Rate Zone 5. Tax Rate Zone 5 consists of 11 parcels totaling 17.5 acres located at the northeast corner of Sierra Avenue and Jurupa Avenue which have been developed as a neighborhood shopping center, anchored by a Stater Bros. grocery store and a Walgreen s pharmacy. The parcels are currently owned by Sierra Crossroads LLC. Two of the parcels consist of vacant pads having an assessed value-to-lien ratio of approximately 4:1. See Table 6. The City reports that this property is developed with infrastructure that will accommodate the future development of the two pads, though any development would be subject to the City s normal land use development process. Description of Authorized Purposes The property in the District is substantially developed. Thirteen parcels representing approximately 12.8 percent of the estimated Special Tax to be levied for Fiscal Year are unimproved and/or without structures, based on information shown on the San Bernardino County Assessor roll, although several of these parcels in Tax Rate Zone 1 (responsible for approximately 7.2% of the estimated Special Tax Levy for Fiscal Year ) are improved for parking and loading dock uses. 24

33 Tables 3A, 3B and 3C set forth for each of Tax Rate Zones 1, 2 and 5 with respect to each parcel of Taxable Property the property owner (as shown on the San Bernardino County Assessor s roll as of January 1, 2013), the street address, lot size and improvement square footage if any, date of construction (if applicable) and current tenant, if applicable. No property owners have participated in the preparation of this Official Statement and the information set forth in these tables has been developed by the Special Tax Consultant from records of the County assessor, the City or others, as identified in the footnotes to the table, but such information is not guaranteed and is subject to change from the time such information was obtained, or otherwise. 25

34 TABLE 3A CITY OF FONTANA COMMUNITY FACILITIES DISTRICT NO. 22 (SIERRA HILLS SOUTH) DISTRICT PROPERTY COMPOSITION (TAX RATE ZONE 1) * Assessor Building Year of Parcel Gross Floor Area Building Tax Rate Zone / Property Owner [1] Number Acreage [2] Address (Square Feet) [3] Completion [3] Current Tenant [4] Tax Rate Zone 1 Property with Structures [5] PCW Properties LLC Slover Avenue 18, Options for Youth - Upland, Inc. PCW Properties LLC Slover Avenue 9, Shakey's Pizza Hear USA dba Hearx West, LLC PCW Properties LLC Slover Avenue 6, China Super Buffet PCW Properties LLC Slover Avenue 22, Tasty Goody dba Ddy Restaurant, Inc. City Furniture, Inc. New Look Eyebrow Threading Ohlala Nails PCW Properties LLC Slover Avenue 22, Los Jalapenos Exsalonce Hair Studio Palm Court Dental Group Tutti Frutiti of Fontana Kaiser VEBA Kaiser Retirees RBT/CMT Staffmark Investment, LLC PCW Properties LLC Slover Avenue 79, Hour Fitness PCW Properties LLC [6] Slover Avenue 121, Various Tenants at Palm Court Shopping Center PCW Properties LLC Slover Avenue 7, Kidz Rock Daycare N Pre School Kaiser Foundation Health Plan Inc Slover Avenue 152, Kaiser Foundation Health Plan DCH Roasters, Inc. Kaiser Foundation Health Plan Inc Slover Avenue 30, Kaiser Foundation Health Plan Dayton Hudson Corp [7] Slover Avenue 136, Target Stores #660 Brandon's Diner Inc. [8] Slover Avenue 3, Brandon's Diner #4 Murg Family Trust Slover Avenue 3, J.P. Morgan Chase Bank Puente Hills Power Center LLC Slover Avenue 8, Vacant Cathay Investments LLC Slover Avenue 7, Autozone #4008 Parking Property [9] PCW Properties LLC NA NA NA NA PCW Properties LLC NA NA NA NA Kaiser Foundation Health Plan Inc NA NA NA NA Loading Zone Property [10] PCW Properties LLC NA NA NA NA Property without Structures [11] Puente Hills Power Center LLC NA NA NA NA Subtotal Tax Rate Zone NA NA NA NA Source: City of Fontana, San Bernardino County, as compiled by David Taussig & Associates, Inc. * See Footnotes at end of Table 3C. 26

35 TABLE 3B CITY OF FONTANA COMMUNITY FACILITIES DISTRICT NO. 22 (SIERRA HILLS SOUTH) DISTRICT PROPERTY COMPOSITION (TAX RATE ZONE 2) * Assessor Building Year of Parcel Gross Floor Area Building Tax Rate Zone / Property Owner [1] Number Acreage [2] Address (Square Feet) [3] Completion [3] Current Tenant [4] Tax Rate Zone 2 Property with Structures [5] Production Avenue LLC Production Avenue 1,101, Aluminum Source, Inc. Aluminum Industrial, Inc. Francisco Street LP Production Avenue 1,101, Tireco, Inc. Francisco Street, LP Troon Circle LP SVF Sierra Fontana Corporation Production Avenue 753, Lifetime Brands, Inc. AMB Institutional Alliance Fund III Sierra Avenue 167, A T V Inc. Menlo Logistics, Inc. AMB Institutional Alliance Fund III Sierra Avenue 116, Rolf C. Hagen USA Corp. AMB Institutional Alliance Fund III Production Avenue 320, American Sporting Goods Corp. CRP Oakmont Sierra LLC [12] Tamarind Avenue 106,455 refer to footnote [12] below refer to footnote [12] below CRP Oakmont Sierra LLC [13] , Tamarind Avenue 308,780 refer to footnote [13] below UPS Supply Chain FN1-06 LLC Slover Avenue 337, Sole Technology Inc. Sierra Hotel Group LLC Sierra Avenue 76, Hilton Garden Inn Property without Structures [11] Wal-Mart Real Estate Business Trust NA NA NA NA Wal-Mart Real Estate Business Trust NA NA NA NA Wal-Mart Real Estate Business Trust NA NA NA NA Wal-Mart Real Estate Business Trust NA NA NA NA Wal-Mart Real Estate Business Trust NA NA NA NA Fontana Redevelopment Agency NA NA NA NA Subtotal Tax Rate Zone NA NA NA NA * See footnotes at end of Table 3C. 27

36 TABLE 3C CITY OF FONTANA COMMUNITY FACILITIES DISTRICT NO. 22 (SIERRA HILLS SOUTH) DISTRICT PROPERTY COMPOSITION (TAX RATE ZONE 5) Assessor Building Year of Parcel Gross Floor Area Building Tax Rate Zone / Property Owner [1] Number Acreage [2] Address (Square Feet) [3] Completion [3] Current Tenant [4] Tax Rate Zone 5 Property with Structures [5] Sierra Crossroads LLC Sierra Avenue 10, Palm Cleaners Fantastic Sams Red Persimmon Nails UPS Store MDJ Tobacco Leaf Champion Taekwondo Juice it Up Sierra Crossroads LLC Sierra Avenue 44, Stater Bros. Market #179 Super Rx Inc. #6179 J.P. Morgan Chase Bank Sierra Crossroads LLC Sierra Avenue 8, H & R Block Edible Arrangements Subway Leo's Country Kitchen Phil Jae Ra, DDS Sierra Crossroads LLC Sierra Avenue 4, Jack in the Box Chevron #2010 Sierra Crossroads LLC Sierra Avenue 2, Starbucks Coffee #10132 Lupita's Jewelers Sierra Crossroads LLC Sierra Avenue 4, Wells Fargo Bank Sierra Crossroads LLC Sierra Avenue 5, Bank of America Sierra Crossroads LLC Sierra Avenue 14, Walgreen's #10768 Sierra Crossroads LLC Sierra Avenue 10, Kiddie Academy of Fontana Property without Structures [11] Sierra Crossroads LLC Sierra Avenue NA NA NA Sierra Crossroads LLC Sierra Avenue NA NA NA Subtotal Tax Rate Zone NA NA NA NA 28

37 Source: City of Fontana, San Bernardino County, as compiled by David Taussig & Associates, Inc. [1] Ownership based on the San Bernardino County Assessor Roll dated January 1, [2] Based on development information obtained from the City of Fontana, and the Allocation of Gross Acreage pursuant to the Rate and Method. Acreage contained herein is for the purposes of setting Special Tax rates and may not conform to the acreage as shown on the Assessor s Parcel Maps. [3] Unless otherwise noted, based on information provided by the City's Building and Safety Division. [4] Represents the current tenant(s) as identified on applicable Business Licenses issued by the City. [5] Represents Taxable Property that has been developed into their applicable intended commercial or industrial use, exclusive of Taxable Property currently utilized for parking, landscaped areas, right-of-way, and/or a loading zone. [6] Building Floor Area based on San Bernardino County Assessor's records. [7] Building Floor Area excludes additional area for outside garden center. [8] Building Floor Area excludes additional area for outside dining area. [9] Represents Taxable Property currently utilized for parking, landscaped areas, and/or right-of-way. [10] Represents Taxable Property currently utilized as a loading zone area. [11] Represents Taxable Property that remain to be developed into their applicable commercial or industrial use. [12] Represents Taxable Property acquired by Sharplink Company LLC from CRP Oakmont Sierra LLC on August 30, Shell building construction is complete, building has been deemed occupiable by the City, tenant improvements are currently underway, however a tenant has not yet been issued a Business License from the City. [13] Represents Taxable Property acquired by Menlo Business Park LLC from CRP Oakmont Sierra LLC on February 10, Shell building construction is complete, building has been deemed occupiable by the City, tenant improvements are currently underway. An aerial photo showing the taxable property within the District appears on the page before page 1. General information about the City is set forth in Appendix C. Property Values The District has not engaged an independent appraiser to provide an opinion concerning the values of the parcels within the District that comprise the Taxable Property. However, the aggregate assessed values of those parcels, as shown on the County Assessor s roll (based on a January 1, 2013 lien date) is $535,967,135. However, some of the property owners in the District, including commercial property owners, appeal the County Assessor s assessed value from time to time. Table 4 sets forth the pending appeals for Fiscal Years and , almost all of which are still pending. There are currently pending 28 appeals of assessed value for Fiscal Years and filing date, involving a potential pending net valuation adjustment of approximately $38.2 million and $32.1 million respectively, for such fiscal years. Most of the appeals for Fiscal Year relate to the parcels for which appeals are also pending for Fiscal Year , and may be duplicative in part. See Table 5 for a summary of the aggregate assessed value changes in the District (by Tax Rate Zone) in the past five years. 29

38 TABLE 4 CITY OF FONTANA COMMUNITY FACILITIES DISTRICT NO. 22 (SIERRA HILLS SOUTH) *PENDING* ASSESSMENT APPEALS FOR NON-RESIDENTIAL PARCELS AS OF APRIL 7, 2014 Count Assessor Parcel Number Tax Zone Tax Year 2012 Property Owner 2012 Filing Period Open Assessment Appeals 30 Appeal Filing Date County's Assessed Value Suggested Assessed Value Potential Assessed Value Adj WOODRUFF PROPERTIES LLC 2012 Decline in Value /30/12 $1,325,356 $ 1,070,000 $ 255,356 Complete WOODRUFF PROPERTIES LLC 2012 Decline in Value /30/12 403, , ,775 Complete WOODRUFF PROPERTIES LLC 2012 Decline in Value /30/12 669, , ,942 Complete WOODRUFF PROPERTIES LLC 2012 Decline in Value /30/12 749, , ,507 Complete WOODRUFF PROPERTIES LLC 2012 Decline in Value /30/12 478, , ,531 Complete WOODRUFF PROPERTIES LLC 2012 Decline in Value /30/12 1,773,795 1,505, ,795 Complete WOODRUFF PROPERTIES LLC 2012 Decline in Value /30/12 1,773,795 1,505, ,795 Complete WOODRUFF PROPERTIES LLC 2012 Decline in Value /30/12 3,335,880 2,289,330 1,046,550 Complete INLAND WESTERN MDS PORTFOLIO L L C 2012 Decline in Value /11/12 5,099,000 2,500,000 2,599,000 04/16/ WOODRUFF PROPERTIES LLC 2012 Decline in Value /30/12 615, , ,176 Complete WOODRUFF PROPERTIES LLC 2012 Decline in Value /30/12 5,273,068 4,482, ,068 Complete WOODRUFF PROPERTIES LLC 2012 Decline in Value /30/12 563, , ,284 Complete AMB INSTITUTIONAL ALLIANCE FUND III 2012 Decline in Value /29/12 9,634,000 6,400,000 3,234,000 Complete AMB INSTITUTIONAL ALLIANCE FUND III 2012 Decline in Value /29/12 6,700,000 4,500,000 2,200,000 Complete AMB INSTITUTIONAL ALLIANCE FUND III 2012 Decline in Value /29/12 18,057,000 16,700,000 1,357,000 Complete FRANCISCO STREET L P 2012 Decline in Value /16/12 50,000,000 30,000,000 20,000,000 06/25/ SIERRA CROSSROADS LLC 2012 Decline in Value /30/12 2,510,851 2,134, ,625 Complete SIERRA CROSSROADS LLC 2012 Decline in Value /30/12 3,723,010 3,164, ,453 Complete SIERRA CROSSROADS LLC 2012 Decline in Value /30/12 3,347,604 2,845, ,141 Complete SIERRA CROSSROADS LLC 2012 Decline in Value /30/12 776, , ,545 Complete SIERRA CROSSROADS LLC 2012 Decline in Value /30/12 3,307,381 2,811, ,108 Complete SIERRA CROSSROADS II LLC 2012 Decline in Value /30/12 10,083,285 7,500,000 2,583,285 Complete SIERRA CROSSROADS II LLC 2012 Decline in Value /30/12 416, ,855 62,446 Complete SIERRA CROSSROADS II LLC 2012 Decline in Value /30/12 1,162, , ,532 Complete Subtotal Pending Assessment Appeals $38,155,914 Count Assessor Parcel Number Tax Zone Tax Year 2013 Property Owner 2013 Filing Period Open Assessment Appeals Appeal Date County's Assessed Value Applicant's Suggested Assessed Value Pending Potential Assessed Value Adj PCW PROPERTIES LLC 2013 Decline in Value /02/13 $ 628,064 $ 422,573 $ 205,491 Complete FRANCISCO STREET L P 2013 Decline in Value /12/13 60,500,000 37,000,000 23,500,000 Complete SIERRA CROSSROADS LLC 2013 Decline in Value /25/13 6,200,000 3,100,000 3,100,000 Complete SIERRA CROSSROADS II LLC 2013 Decline in Value /02/13 10,284,950 5,000,000 5,284,950 Incomplete Subtotal Pending Assessment Appeals $32,090,441 Notes: Hearing Date Complete signifies that the County has received a completed appeal package that is ready to be presented to the Board for evaluation, however no hearing date has been established. Hearing Date Incomplete signifies that the County has received an initial appeal request, however the County has determined that such appeal package is missing information and is not yet ready to be presented to the Board for evaluation. Source: David Taussig & Associates, Inc. Hearing Date Hearing Date

39 Assessed values do not necessarily represent market 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 1975/76 roll 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 which remain in the same ownership, the County tax roll does not reflect values uniformly proportional to actual market values. Moreover, as a result of declines in the market value of properties in recent years, assessed valuations of many properties in the County have declined in the recent years. As a result of the foregoing, there can be no assurance that the assessed valuations of the properties within the District accurately reflect their respective market values, and the future fair market values of those properties may be lower than their current assessed valuations. No assurance can be given that, should a delinquent parcel be foreclosed and sold for the amount of the delinquency, any bid will be received for such parcel, or if a bid is received that such bid will be sufficient to pay such delinquent Special Taxes. Assessed values in the District have changed over time as a result of development, changes in ownership, reductions in assessed value resulting from appeals (or unilateral reductions of value through the County Assessor) and other factors. Table 5 shows the 5 year history of assessed values in the District by Tax Rate Zone in the aggregate. Individual parcels may have experienced more dramatic assessed value changes. 31

40 TABLE 5 CITY OF FONTANA COMMUNITY FACILITIES DISTRICT NO. 22 (SIERRA HILLS SOUTH) ANNUAL CHANGE IN ASSESSED VALUE Tables 6, 7, and 8 show aggregated assessed values in certain cases for developed properties under common ownership. Assessed values for individual parcels will vary as will resulting assessed value-to-lien ratios, and such variation may be material. See discussion regarding a single developed parcel in Tax Rate Zone 1 having an assessed value-to-lien ratio below 3:1. Table 6 sets forth with respect to the parcel(s) of Taxable Property under common ownership in Tax Rate Zones 1, 2 and 5, and on an aggregate basis for residential properties in Tax Rate Zones 3 and 4, Fiscal Year assessed value, the share of the principal amount of the Bonds (allocated to each parcel based upon its respective share of the estimated total Special Tax levy for Fiscal Year ) and the ratio of the assessed value to its share of the principal amount of the Bonds. In addition for each parcel of Taxable Property in Tax Rate Zones 1, 2 and 5, Table 6 shows the name of its owner. 32

41 Tax Rate Zone / Property Owner (1) TABLE 6 CITY OF FONTANA COMMUNITY FACILITIES DISTRICT NO. 22 (SIERRA HILLS SOUTH) ASSESSED VALUE-TO-LIEN RATIOS BY TAX CLASS Number of Taxable Parcels (2) Gross Acreage / Residential Lots (2) Maximum Fiscal Year Special Tax (3) Projected Fiscal Year Special Tax (4) Percent of Projected Fiscal Year Special Tax Pro Rata Share of Bonds (5) Assessed Valuation (1) Estimated Assessed Value-to- Lien Ratios (6) Tax Rate Zone 1 Property with Structures (7) PCW Properties LLC $170,094 $152, % $1,821,878 $23,171, Kaiser Foundation Health Plan Inc $160,022 $143, % $1,714,003 $9,090, Dayton Hudson Corp $114,142 $102, % $1,222,576 $9,567, Brandon's Diner Inc $8,952 $8, % $95,888 $2,133, Murg Family Trust $7,833 $7, % $83,902 $1,890, Puente Hills Power Center LLC $7,833 $7, % $83,902 $940, Cathay Investments LLC $7,833 $7, % $83,902 $2,065, Parking Property (8) PCW Properties LLC $162,260 $145, % $1,737,975 $3,890, Kaiser Foundation Health Plan Inc $12,309 $11, % $131,846 $344, Loading Zone Property (9) PCW Properties LLC $35,809 $32, % $383,553 $628, Property without Structures (10) Puente Hills Power Center LLC $7,833 $7, % $83,902 $319, Subtotal Tax Rate Zone $694,922 $624, % $7,443,329 $54,042, Tax Rate Zone 2 Property with Structures (7,11) Production Avenue LLC $239,225 $215, % $2,562,349 $53,418, Francisco Street LP $238,728 $214, % $2,557,022 $60,500, SVF Sierra Fontana Corporation $154,676 $139, % $1,656,737 $49,000, AMB Institutional Alliance Fund III $137,269 $123, % $1,470,288 $34,176, CRP Oakmont Sierra LLC $74,105 $66, % $793,742 $6,282, FN1-06 LLC $63,661 $57, % $681,873 $17,000, Sierra Hotel Group LLC $18,402 $16, % $197,104 $7,187, Property without Structures (10) Wal-Mart Real Estate Business Trust $114,888 $103, % $1,230,567 $10,877, Fontana Redevelopment Agency $4,476 $4, % $47,944 $ Subtotal Tax Rate Zone $1,045,430 $940, % $11,197,627 $238,442, Tax Rate Zone 3 Individual Homeowners $473,832 $426, % $5,075,231 $99,140,

42 Tax Rate Zone / Property Owner (1) Number of Taxable Parcels (2) Gross Acreage / Residential Lots (2) Maximum Fiscal Year Special Tax (3) Projected Fiscal Year Special Tax (4) Percent of Projected Fiscal Year Special Tax Pro Rata Share of Bonds (5) Assessed Valuation (1) Estimated Assessed Value-to- Lien Ratios (6) Tax Rate Zone 4 Individual Homeowners $508,472 $457, % $5,446,257 $107,357, Tax Rate Zone 5 Property with Structures (7) Sierra Crossroads LLC $159,619 $143, % $1,709,688 $35,374, Property without Structures (10) Sierra Crossroads LLC $36,212 $32, % $387,868 $1,610, Subtotal Tax Rate Zone $195,831 $176, % $2,097,556 $36,984, GRAND TOTAL 827 NA $2,918,487 $2,624, % $31,260,000 $535,967, (1) Ownership and Assessed Valuation based on the San Bernardino County Assessor Roll dated January 1, (2) Based on development information obtained from the City of Fontana, and the "Allocation of Gross Acreage" pursuant to the Rate and Method. Acreage contained herein is for the purposes of setting Special Tax rates and may not conform to the acreage as shown on the Assessor's Parcel Maps. (3) Based on the application of the fiscal year Maximum Special Tax rates pursuant to the Rate and Method. (4) Based on the projected levy of the fiscal year Special Tax required to fund administrative expenses and the debt service on the Bonds. (5) There are currently no overlapping assessment districts and/or other community facilities districts encumbering the District that support outstanding debt. The Bonds are allocated based on a proportionate share of the Projected Fiscal Year Special Tax. (6) Calculated by dividing the Assessed Valuation column by the Pro Rata Share of Bonds column. (7) Represents Taxable Property that has been developed into their applicable intended commercial or industrial use, exclusive of Taxable Property currently utilized for parking, landscaped areas, right-of-way, and/or a loading zone. (8) Represents Taxable Property currently utilized for parking, landscaped areas, and/or right-of-way. (9) Represents Taxable Property currently utilized as a loading zone area. (10) Represents parcels of Taxable Property that remain to be developed into their intended commercial or industrial use. (11) For the three (3) parcels of Taxable Property owned by CRP Oakmont Sierra LLC as of January 1, 2013, (i) one (1) parcel, comprised of approximately 6.1 Gross Acres, was acquired by Sharplink Company LLC on August 30, 2013, and San Bernardino County has reported an Assessed Valuation increase of $6,184,134 on their supplemental secured tax roll, and (ii) two (2) parcels, comprised of approximately 8.8 Gross Acres, were acquired by Menlo Business Park LLC on February 10, 2014, and San Bernardino County has reported an Assessed Valuation increase of $18,000,000 on their supplemental secured tax roll. The applicable shell buildings constructed on these parcels are complete and are undergoing tenant improvements. Source: David Taussig & Associates, Inc. 34

43 Additionally, Table 7 below sets forth the stratification of value-to-liens of the residential parcels within the District, based on Fiscal Year assessed value and such parcels respective shares of the principal amount of the Bonds (allocated to each parcel based upon its respective share of the estimated total Special Tax levy for Fiscal Year ) and the ratio of the assessed value to its share of the principal amount of the Bonds. TABLE 7 CITY OF FONTANA COMMUNITY FACILITIES DISTRICT NO. 22 (SIERRA HILLS SOUTH) RESIDENTIAL PROPERTY VALUE-TO-LIEN STRATIFICATION 35

44 Taxpayers Table 8 below lists the property taxpayers within the District (as of the Fiscal Year County Assessor s tax roll) measured by the percentage of the projected Fiscal Year Special Tax levy. Property ownership may have changed since that time and the District is not aware of the current ownership of property in the District, except specifically noted with respect to recently developed parcels referenced in footnote 1 of Table 8. Residential properties are shown in the aggregate. TABLE 8 CITY OF FONTANA COMMUNITY FACILITIES DISTRICT NO. 22 (SIERRA HILLS SOUTH) TAXPAYERS Property Owner (1) Number of Taxable Parcels Maximum Fiscal Year Special Tax (2) Projected Fiscal Year Special Tax (3) Percent of Fiscal Year Special Tax Pro Rata Share of Bonds (4) Assessed Valuation (1) Estimated Assessed Value-to- Lien Ratios (5) PCW Properties LLC 11 $368,163 $331, % $3,943,406 $27,690, Production Avenue LLC 1 $239,225 $215, % $2,562,349 $53,418, Francisco Street LP 1 $238,728 $214, % $2,557,022 $60,500, Sierra Crossroads LLC 11 $195,831 $176, % $2,097,556 $36,984, Kaiser Foundation Health Plan Inc. 3 $172,332 $154, % $1,845,850 $9,435, SVF Sierra Fontana Corporation 1 $154,676 $139, % $1,656,737 $49,000, AMB Institutional Alliance Fund III 3 $137,269 $123, % $1,470,288 $34,176, Wal-Mart Real Estate Business Trust 5 $114,888 $103, % $1,230,567 $10,877, Dayton Hudson Corp 1 $114,142 $102, % $1,222,576 $9,567, CRP Oakmont Sierra LLC 3 $74,105 $66, % $793,742 $6,282, FN1-06 LLC 1 $63,661 $57, % $681,873 $17,000, Sierra Hotel Group LLC 1 $18,402 $16, % $197,104 $7,187, Puente Hills Power Center LLC 2 $15,667 $14, % $167,805 $1,260, Brandon's Diner Inc. 1 $8,952 $8, % $95,888 $2,133, Murg Family Trust $7,833 $7, % $83,902 $1,890, Cathay Investments LLC 1 $7,833 $7, % $83,902 $2,065, Fontana Redevelopment Agency 1 $4,476 $4, % $47,944 $ Individual Homeowners - Tax Zone $508,472 $457, % $5,446,257 $107,357, Individual Homeowners - Tax Zone 3 (6) 383 $473,832 $426, % $5,075,231 $99,140, Totals 827 $2,918,487 $2,624, % $31,260,000 $535,967, Source: David Taussig & Associates, Inc. (1) Based on the San Bernardino County Assessor Roll dated January 1, For the three (3) parcels of Taxable Property owned by CRP Oakmont Sierra LLC as of January 1, 2013, one (1) parcel, comprised of approximately 6.1 Gross Acres, was acquired by Sharplink Company LLC on August 30, 2013, and two (2) parcels, comprised of approximately 8.8 Gross Acres, were acquired by Menlo Business Park LLC on February 10, (2) Based on the application of the fiscal year Maximum Special Tax rates pursuant to the Rate and Method. 36

45 (3) (4) (5) (6) Based on the projected levy of the fiscal year Special Tax required to fund administrative expenses and the debt service on the Bonds. There are currently no overlapping assessment districts and/or other community facilities districts encumbering the District that support outstanding debt. The Bonds are allocated based on a proportionate share of the Projected Fiscal Year Special Tax. Calculated by dividing the Assessed Valuation column by the Pro Rata Share of Bonds column. The Maximum Special Taxes within Tax Rate Zone 3 are not levied after fiscal year Therefore, no Bonds are being supported by property within Tax Rate Zone 3 after fiscal year

46 Delinquency History The following table is a summary of Special Tax levies, collections and delinquency rates in the District for Fiscal Years through The 2004 Bonds and the Special Taxes were generally levied in an amount equal to the maximum Special Tax and included amounts for debt service on the Subordinate Promissory Note. See PLAN OF REFUNDING. (1) (2) Fiscal Year Annual Special Tax Levied TABLE 9 CITY OF FONTANA COMMUNITY FACILITIES DISTRICT NO. 22 (SIERRA HILLS SOUTH) SPECIAL TAXES AND DELINQUENCIES Number of Parcels Subject to Levy Amount Collected As of Fiscal Year End (1) As of May 29, 2014 Amount Delinquent (2) Number of Parcels Delinquent Percent Delinquent Remaining Amount Delinquent (2) Remaining Parcels Delinquent Remaining Percent Delinquent $2,540, $2,365,908 $174, % $ % $2,590, $2,545,469 $45, % $ % $2,642, $2,625,530 $17, % $1, % $2,695, $2,684,455 $11, % $2, % $2,749, $2,738,741 $10, % $2, % $2,804, $2,776,367 $28, % NA NA NA Amount Collected and Amount Delinquent for fiscal year represents first and second installment amounts collected and delinquent as of May 29, Amount Delinquent does not include penalties, interest or fees. Source: San Bernardino County, City of Fontana, as compiled by David Taussig & Associates, Inc. 38

47 Residential Properties The average assessed value of (net of homeowner s exemptions) residential single family homes comprising Tax Rate Zones 3 and 4 is $251,900 and $264,100, respectively. Individual home values and assessed values will vary based on home and lot size, location, amenities and other factors. Tax rates applicable to individual parcels will likewise vary based on the applicable tax rate area of the County, but currently all property in these zones is in a single tax rate area. Set forth below is a sample property tax bill for residential property in the District. 39