NEW ISSUE BOOK ENTRY ONLY RATING: S&P: A-

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1 NEW ISSUE BOOK ENTRY ONLY RATING: S&P: A- See CONCLUDING INFORMATION - Ratings herein In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes, and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California personal income tax. See CONCLUDING INFORMATION-Tax Matters herein. $7,120,000 COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF CALEXICO Merged Central Business District and Residential Redevelopment Project Area Tax Allocation Bonds, Issue of 2011 Dated: Date of Delivery Due: August 1, as shown on the inside front cover The Community Redevelopment Agency of the City of Calexico, California (the Agency ) is issuing its $7,120,000 Merged Central Business District and Residential Redevelopment Project Area Tax Allocation Bonds, Issue of 2011 (the Bonds ) pursuant to an Indenture of Trust, dated as of February 1, 2011 (the Indenture ), by and between the Agency and The Bank of New York Mellon Trust Co., N.A., as trustee (the Trustee ). The Bonds are being issued to (i) finance certain redevelopment activities of the Agency within the Merged Central Business District and Residential Redevelopment Project Area (the Project Area ), (ii) fund a reserve for the Bonds, and (iii) pay certain costs of issuing the Bonds, all as described herein. See THE PROJECT and ESTIMATED SOURCES AND USES OF FUNDS herein. The Bonds are payable from and secured by the Tax Revenues (as defined herein) to be derived from the Project Area and certain funds and accounts held under the Indenture. A portion of the taxes levied on Project Area property relating to the taxable valuation over and above the taxable valuation of the base year property tax roll ( for the Residential Redevelopment Project, for the Central Business District Redevelopment Project, for Amendment No. 1, for Amendment No. 2, and for Amendment No. 3 of the Project Area) comprise Tax Revenues and will be deposited in the special fund of the Agency (the Special Fund ) and transferred to the Trustee for the payment of the principal of and interest on the Bonds. See SECURITY FOR THE BONDS herein. The Bonds are being issued on a parity basis with certain Parity Bonds (as defined herein) of the Agency. See INTRODUCTION Parity Bonds herein. The Bonds will be issued in book-entry form, as fully registered bonds in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ( DTC ). Interest on the Bonds will be payable on February 1 and August 1 of each year, commencing August 1, 2011 (each an Interest Payment Date ). Purchasers will not receive physical certificates representing their interest in the Bonds. For so long as the Bonds are registered in the name of Cede & Co., the Trustee will make all payments of principal and interest on the Bonds to DTC, which, in turn, is obligated to remit such principal and interest to DTC Participants (defined herein) for subsequent disbursement to the Beneficial Owners (defined herein) of the Bonds. See THE BONDS herein. The Bonds are subject to optional and mandatory redemption as described herein. See THE BONDS Redemption. THE BONDS ARE NOT A DEBT OF THE CITY OF CALEXICO, THE STATE OF CALIFORNIA, OR ANY OF ITS POLITICAL SUBDIVISIONS (EXCEPT THE AGENCY), AND NONE OF SAID CITY, SAID STATE, NOR ANY OF ITS POLITICAL SUBDIVISIONS (EXCEPT THE AGENCY) IS LIABLE HEREON, NOR IN ANY EVENT SHALL THIS BOND BE PAYABLE OUT OF ANY FUNDS OR PROPERTIES OTHER THAN THOSE OF THE AGENCY AS SET FORTH IN THE INDENTURE. THE BONDS DO NOT CONSTITUTE AN INDEBTEDNESS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. This cover page of the Official Statement contains information for quick reference only. It is not a summary of the Bonds. Investors must 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, subject to approval as to their legality by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel, and certain other conditions. Certain legal matters will be passed upon for the City by McDougal, Love, Eckis, Boehmer & Foley, a Professional Corporation, La Mesa, California, and by Richards Watson & Gershon, A Professional Corporation, Los Angeles, California, as Disclosure Counsel to the Agency with respect to the issuance of the Bonds. It is anticipated that the Bonds will be available for delivery through the facilities of DTC on or about February 25, Dated: February 22, 2011.

2 MATURITY SCHEDULE $7,120,000 COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF CALEXICO MERGED CENTRAL BUSINESS DISTRICT AND RESIDENTIAL REDEVELOPMENT PROJECT AREA TAX ALLOCATION BONDS, ISSUE OF 2011 $7,120, % Term Bonds due August 1, 2033 Yield: 7.50% CUSIP FF3 CUSIP Copyright 2011, American Bankers Association. CUSIP data herein is provided by Standard & Poor s CUSIP Service Bureau, a division of The McGraw-Hill Companies. Inc. The Agency does not guarantee the accuracy of the CUSIP data.

3 COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF CALEXICO CALEXICO, CALIFORNIA AGENCY GOVERNING BOARD John Moreno, Chairman Luis J. Castro, Vice-Chairman Maritza Hurtado, Member Daniel Romero, Member Bill Hodge, Member CITY COUNCIL John Moreno, Mayor Luis J. Castro, Mayor Pro Tern Maritza Hurtado, Councilmember Daniel Romero, Councilmember Bill Hodge, Councilmember CITY AND AGENCY STAFF Oscar Rodriquez, Interim City Manager/Redevelopment Executive Director Judy Hashem, City Finance Director Lourdes Cordova, City Clerk PROFESSIONAL SERVICES Bond Counsel Stradling Yocca Carlson & Rauth, a Professional Corporation Newport Beach, California Financial Advisor and Dissemination Agent Urban Futures, Inc. Orange, California Underwriter Kinsell, Newcomb & De Dios, Inc. Carlsbad, CA Counsel for the City McDougal, Love, Eckis, Boehmer & Foley, a Professional Corporation La Mesa, California Trustee The Bank of New York Mellon Trust Co., N.A. Los Angeles, California Disclosure Counsel Richards Watson & Gershon, A Professional Corporation Los Angeles, California

4 No dealer, broker, salesperson or other person has been authorized by the Agency to give any information or to make any representations other than those contained herein. If given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy any of the Bonds by any person in any jurisdiction in which such offer of solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful 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 matter of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as a representation of fact. Certain statements included or incorporated by reference in this Official Statement constitute forward-looking statements. Such statements are generally identifiable by the terminology used such as plan, expect, estimate, budget, or other similar words and include, but are not limited to, statements under the caption THE PROJECT AREA. The achievement of certain results or other expectations contained in such forward-looking statements involves known and unknown risks, uncertainties and other factors, which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. While the Agency has agreed to provide certain on-going financial and other data for a limited period of time the Agency does not plan to issue any updates or revisions to those forward-looking statements if or when the expectations or events, conditions or circumstances on which such statements are based change. The information set forth herein has been obtained from the Agency and other sources that the Agency believes are reliable, but it is not guaranteed as to its accuracy or completeness. The information and expressions 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 Agency since the date hereof. All summaries of the resolutions, the Indenture, laws and statutes or other documents are made subject to the provisions of such documents, respectively, and do not purport to be complete statements of any or all of such provisions. The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. This Official Statement is submitted in connection with the sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. The Bonds have not been registered under the Securities Act of 1933, as amended, nor has the Indenture been qualified under the Trust Agreement Act of 1939, as amended, in reliance upon an exception from the registration requirements contained in such acts. 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 THE SECURITIES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL BONDS TO CERTAIN DEALERS AND OTHERS AT A PRICE LOWER THAN THE OFFERING PRICE. THE OFFERING PRICE MAY BE CHANGED FROM TIME TO TIME BY THE ORIGINAL PURCHASERS.

5 TABLE OF CONTENTS Page INTRODUCTION... 1 General The Bonds... 1 Security for the Bonds... 1 Special Obligations... 2 The City The Agency... 2 Redevelopment Plan and the Project Area... 2 Tax Allocation Financing... 3 Parity Bonds... 3 Available Information and Continuing Disclosure 4 Further Information... 4 THE PROJECT... 4 ESTIMATED SOURCES AND USES OF FUNDS... 4 THE BONDS... 5 General Redemption... 6 Redemption Procedures... 6 Transfer and Exchange... 7 Bonds Mutilated, Lost, Destroyed or Stolen... 8 Book-Entry Only System... 8 Bonds Debt Service Schedule... 9 TAX ALLOCATION FINANCING... 9 In General... 9 General Allocation of Taxes Agreements Taxing Agencies SECURITY FOR THE BONDS Tax Revenues Reserve Account Additional Parity Bonds RISK FACTORS Bonds are Limited Obligations and Not General Obligations Reduction of Tax Revenues Limitation on Indebtedness Concentration of Ownership Reduction in Inflationary Rate Santa Ana Unified School District v. Orange County Development Agency Teeter Plan Development Risks Seismic Risk Levy and Collection State Budget Issues Page Redevelopment Plan Limitations on Tax Revenues23 Property Assessment Appeals...23 Hazardous Substances...24 Bankruptcy and Foreclosure...24 Enforceability of Remedies...24 Loss of Tax Exclusion...24 Assumptions and Projections...25 Limited Secondary Market...25 PROPERTY TAXATION IN CALIFORNIA...25 Constitutional Amendments Affecting Tax Revenues...25 Implementing Legislation...26 Constitutional Challenges to Property Tax System26 Property Tax Collection Procedures...27 Supplemental Assessments...27 Tax Collection Fees...27 Unitary Property Tax...28 Business Inventory and Replacement Revenue...28 Proposition Future Initiatives...29 THE PROJECT AREA...29 General Limitations and Requirements of the Redevelopment Plan...30 Recent Development in the Project Area...30 TAX INCREMENT REVENUES...30 Historical Tax Increment Revenues...30 Assessment Appeals...32 Projected Tax Increment Revenues and Debt Service Coverage...32 Section Payments...35 THE AGENCY...35 Agency and Management...35 Agency Powers...36 Financial Information...37 Regulatory Issues...38 CONCLUDING INFORMATION...38 Underwriting...38 Legal Opinion...38 Tax Matters...38 No Litigation...40 Rating Professional Fees...40 Miscellaneous...40

6 APPENDIX A CITY OF CALEXICO SUPPLEMENTAL INFORMATION... A-1 APPENDIX B AGENCY AUDITED FINANCIAL STATEMENTS FOR FISCAL YEAR ENDED JUNE 30, B-1 APPENDIX C SUMMARY OF THE INDENTURE... C-1 APPENDIX D BOOK-ENTRY ONLY SYSTEM... D-1 APPENDIX E FORM OF BOND COUNSEL OPINION...E-1 APPENDIX F FORM OF CONTINUING DISCLOSURE AGREEMENT...F-1

7 OFFICIAL STATEMENT $7,120,000 COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF CALEXICO MERGED CENTRAL BUSINESS DISTRICT AND RESIDENTIAL REDEVELOPMENT PROJECT AREA TAX ALLOCATION BONDS, ISSUE OF 2011 INTRODUCTION General This Official Statement, including the cover page, is provided to furnish information in connection with the sale by the Community Redevelopment Agency of the City of Calexico (the Agency ) of $7,120,000 Merged Central Business District and Residential Redevelopment Project Area Tax Allocation Bonds, Issue of 2011 (the Bonds ). This Introduction is not a summary of this Official Statement, and is qualified by more complete and detailed information contained in the entire Official Statement. A full review should be made of the entire Official Statement, including the cover page and attached appendices. The offering of Bonds to potential investors is made only by means of the entire Official Statement. Definitions of capitalized terms used herein can be found in APPENDIX C SUMMARY OF THE INDENTURE. The Bonds The Bonds will be issued under the provisions of the Community Redevelopment Law (Part I of Division 24 of the Health and Safety Code of the State of California) (the Redevelopment Law ) and other applicable laws and the Constitution of the State of California. The Bonds will also be issued pursuant to an Indenture of Trust, dated as of February 1, 2011 (the Indenture ), by and between the Agency and The Bank of New York Mellon Trust Co., N.A., as trustee thereunder (the Trustee ). The Agency will use the proceeds of the Bonds to: (i) finance certain redevelopment activities of the Agency within the Merged Central Business District and Residential Redevelopment Project Area (the Project Area ), (ii) fund a reserve for the Bonds, and (iii) pay certain costs of issuing the Bonds. See THE PROJECT and ESTIMATED SOURCES AND USES OF FUNDS herein. Security for the Bonds The Agency has pledged Tax Revenues for the repayment of the Bonds. Tax Revenues means Gross Tax Increment and, to the extent permitted by law, all payments, subventions and reimbursements, if any, to the Agency specifically attributable to ad valorem taxes lost by reason of tax exemptions and tax rate limitations, and including that portion of such Gross Tax Increment otherwise required by Sections and of the Law to be deposited in the Low and Moderate Income Housing Fund (but only to the extent necessary to repay that portion of the Bonds (including applicable reserves and financing costs) which were issued or which shall be issued to finance amounts deposited in the Low and Moderate Income Housing Fund for use pursuant to Section of the Law), to increase or improve the supply of low and moderate income housing within or of benefit to the Project Area, but excluding all other amounts of such taxes required to be paid to taxing agencies pursuant to the Pass-Through Agreements or pursuant to statute, unless otherwise subordinated. Gross Tax Increment means all taxes annually allocated within the Plan Limit, following the Delivery Date, and paid to the Agency with respect to the Project Area pursuant to Article 6 of Chapter 6 (commencing with Section 33670) of the Law and Section 16 of Article XVI of the Constitution of the 1

8 State (but excluding therefrom any amounts attributable to a tax rate levied by a taxing agency for the purpose of producing revenues in an amount sufficient to make annual repayments of the principal of, and interest on any bonded indebtedness approved by the voters of the taxing agency on or after January 1, 1989 for the acquisition or improvement of real property, which portion shall be allocated to, and when collected shall be paid into, the fund of that taxing agency), and as provided in the Redevelopment Plan. See SECURITY FOR THE BONDS herein. Special Obligations THE BONDS ARE SPECIAL OBLIGATIONS OF THE AGENCY AND AS SUCH ARE NOT A DEBT OF THE CITY OF CALEXICO (THE CITY ), THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS (OTHER THAN THE AGENCY) AND NEITHER THE CITY, THE STATE, NOR ANY OF ITS POLITICAL SUBDIVISIONS (OTHER THAN THE AGENCY) IS LIABLE FOR THE PAYMENT THEREOF. IN NO EVENT SHALL THE BONDS BE PAYABLE OUT OF ANY FUNDS OR PROPERTIES OTHER THAN THOSE OF THE AGENCY SET FORTH IN THE INDENTURE. The City The City of Calexico (the City ) is located in Imperial County, California, approximately 120 miles east of the City of San Diego and approximately 60 miles west of Yuma, Arizona. The City encompasses an area of approximately four square miles with an average elevation at sea level. As of January 1, 2010, the City had an estimated population of 40,075. The City lies adjacent to the City of Mexicali, with a population of approximately 1 million. Mexicali is the capital of the State of Baja, Mexico. The City s strategic border location makes it a prime link between the interior of Mexico and the major economic markets along the West Coast of the United States. Each year, more than 1 million vehicles and pedestrians cross into the U.S. through the City s two ports-of-entry. The recently constructed East Calexico Port-of-Entry provides an improved link to major trucking routes, and has increased the efficiency with which people and goods move between Mexico and the United States. Mexicali is a major business center, with large manufacturing and agricultural industries, and a busy rail line into California. The economic growth in Mexicali relies on numerous assembly plants, mainly for products to be exported to the United States, including facilities operated by corporations that include: Daewoo, Mitsubishi, Honeywell, Cardinal Health, Bosch, Price Pfister, Gulfstream, Goodrich, Kenworth and Kwikset. For further information relating to the City, see APPENDIX A CITY OF CALEXICO SUPPLEMENTAL INFORMATION. The City is a general law city incorporated in 1908 with a Council/Manager form of government consisting of five Council members elected to four-year overlapping terms. The Agency The Agency was established by Resolution No of the City Council on May 13, 1952, pursuant to the Law as then effective. On March 20, 1979, the City Council adopted Ordinance No. 759, appointing the five members of the City Council as the governing body of the Agency, to exercise all rights, powers, duties and privileges of the Agency. The Mayor serves as Chairman of the Agency. Certain City personnel provide staff support for the Agency. See THE AGENCY herein. Redevelopment Plan and the Project Area The Redevelopment Plan for the Central Business District Redevelopment Project was approved by Ordinance No. 826 adopted by the City Council on July 20, The Redevelopment Plan for the Residential Redevelopment Project was adopted on June 5, 1979 by Ordinance No. 760 and was amended 2

9 on September 6, 1983 with the adoption of Ordinance No The project areas were merged and redesignated the Merged Central Business District and Residential Redevelopment Project Area (the Project Area ) by the adoption of Ordinance No. 864 on November 20, The Redevelopment Plan for the Project Area was subsequently amended by Amendment No. 1 approved and adopted by Ordinance No. 905 on July 18, 1989, by Amendment No. 2 approved and adopted by Ordinance No. 920 on June 30, 1992, and by Amendment No. 3 approved and adopted by Ordinance No. 930 on December 28, 1993, and by Ordinance No adopted on June 8, The Project Area consists of approximately 2,298 acres in twenty-four non-contiguous areas. Existing land uses in the Project Area are residential, commercial, industrial, governmental and institutional. In 2001 the Legislature enacted SB 211 (Chapter 741, Statutes of 2001) allowing redevelopment agencies to eliminate the time limit for incurring indebtedness required by Chapter 942 for redevelopment plans adopted prior to The limit may be eliminated by an ordinance of the Agency s legislative body and without going through a formal redevelopment plan amendment. Redevelopment agencies that eliminate the time limit for incurring indebtedness are subject to the statutory tax sharing of Chapter 942. The Agency has adopted Ordinance No adopted on June 8, 2005 to eliminate the deadline to incur debt under SB 211. Tax Allocation Financing The Redevelopment Law provides a means for financing redevelopment projects based upon an allocation of taxes collected within a project area. The taxable valuation of a project area last equalized prior to adoption of the redevelopment plan, or base roll, is established and, except for any period during which the taxable valuation drops below the base year level, the taxing agencies within the project area thereafter receive the taxes produced by the levy of the then current tax rate upon the base roll (except as noted in the parenthetical below). Taxes collected upon any increase in taxable valuation over the base roll (except such portion generated by rates levied to pay voter-approved bonded indebtedness after December 31, 1988 for the acquisition or improvement of real property) are allocated to a redevelopment agency and may be pledged by a redevelopment agency to the repayment of any indebtedness incurred in financing or refinancing a redevelopment project. Redevelopment agencies themselves have no authority to levy property taxes and must look specifically to the allocation of taxes produced as above indicated. Any future decrease in the assessed valuation of taxable property in the Project Area or in the applicable tax rates relating thereto will reduce the tax revenues otherwise allocable to the Agency from the Project Area and correspondingly may have an adverse impact on the ability of the Agency to pay the principal of and interest on the Bonds. Parity Bonds The Bonds are being issued on a parity basis with the Agency s $10,000,000 Merged Central Business District and Residential Redevelopment Project Area Tax Allocation Bonds Issue of 2000, currently outstanding in the principal amount of $710,000 (the 2000 Bonds ), $16,120,000 Community Redevelopment Agency of the City of Calexico Merged Central Business District and Residential Redevelopment Project Area Tax Allocation Refunding Bonds Issue of 2003A, currently outstanding in the principal amount of $13,800,000 (the 2003A Bonds ), $3,275,000 Community Redevelopment Agency of the City of Calexico Merged Central Business District and Residential Redevelopment Project Area Taxable Tax Allocation Refunding Bonds Issue of 2003B, currently outstanding in the principal amount of $855,000 (the 2003B Taxable Bonds ), $8,600,000 Community Redevelopment Agency of the City of Calexico Merged Central Business District and Residential Redevelopment Project Area Tax Allocation Bonds, Issue of 2003C, currently outstanding in the principal amount of $7,065,000 (the 2003C Bonds ), and $9,995,000 Community Redevelopment Agency of the City of Calexico Merged 3

10 Central Business District and Residential Redevelopment Project Area Tax Allocation Refunding Bonds Issue of 2006, currently outstanding in the principal amount of $9,870,000 (the 2006 Bonds ). See SECURITY FOR THE BONDS Additional Parity Bonds herein. The 2000 Bonds, the 2003A Bonds, the 2003B Taxable Bonds, the 2003C Bonds and the 2006 Bonds, and any other bonds hereafter issued on a parity basis with the Bonds, are referred to herein as the Parity Bonds. The Agency may issue additional Parity Bonds from time to time in accordance with the Indenture. Available Information and Continuing Disclosure Pursuant to Rule 15c2-12(b)(5) promulgated by the U.S. Securities and Exchange Commission (the Rule ) under the Securities Exchange Act of 1934, as amended, the Agency has undertaken for the benefit of holders of the Bonds to provide certain financial information and operating data relating to the Agency by not later than February 15 of each year, commencing February 15, 2012 (the Annual Information ), and to provide notices of the occurrence of certain enumerated events. The Annual Information and notices will be filed by or on behalf of the Agency with the Municipal Securities Rulemaking Board (the MSRB ). The nature of the information to be provided in the Annual Information and the notices of material events is set forth under the caption APPENDIX F FORM OF CONTINUING DISCLOSURE AGREEMENT. The Agency has never failed to comply in all material respects with any previous continuing disclosure undertakings pursuant to the Rule to provide annual reports or notices of material events. Further Information Brief descriptions of the Bonds and the Indenture, the Agency, and the City 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 Redevelopment Law, the Refunding Law, the Constitution and other laws of the State, and the proceedings of the Agency and the City, are qualified in their entirety by reference to each such document, law or to the Constitution. All capitalized terms used in this Official Statement and not otherwise defined herein have the same meanings as in the Indenture. References herein to the Bonds are qualified in their entirety by reference to the form thereof included in the Indenture. Copies of the Indenture are available for inspection at the office of the Agency. This Official Statement speaks only as of its date, and the information contained herein is subject to change without notice. THE PROJECT The Agency anticipates using the proceeds of the Bonds deposited to fund the costs of public improvements benefitting the Project Area and consistent with the Agency s approved five-year implementation plan, such as, but not limited to, the following: Improvement of Second Street, including street work, water and sewer line, and street lighting and right of way acquisition. Improvements to Town Center industrial park. Infrastructure improvements in the central business district, including the rehabilitation of city owned parking lots. Continuation of low and moderate income housing and rehabilitation programs. 4

11 ESTIMATED SOURCES AND USES OF FUNDS The proceeds of the Bonds and other available amounts are expected to be applied approximately as set forth below: Sources: Principal Amount of the Bonds... $7,120, Net Original Issue Discount... (192,382.40) Total Sources... $6,927, Uses: Redevelopment Fund... 6,184, Reserve Account , Costs of Issuance , Underwriter s Discount... 89, Total Uses... $6,927, (1) Costs of Issuance include fees and expenses of the Financial Advisor, Bond Counsel, Agency Counsel and Disclosure Counsel, Trustee, and Rating Agency, printing expenses and other costs related to the issuance of the Bonds. General THE BONDS The Bonds will be issued in the form of fully registered bonds without coupons and in the denomination of $5,000 or any integral multiple thereof. The Bonds will be dated the date of their delivery and will bear interest at the rates per annum and will mature, subject to redemption provisions set forth below, on the dates and in the principal amounts, as set forth on the inside cover page hereof. Interest on the Bonds will be payable on February 1 and August 1 of each year, commencing on August 1, 2011 (each an Interest Payment Date ). Interest on the Bonds shall be payable on each Interest Payment Date to the person whose name appears on the Registration Books as the Owner thereof as of the Regular Record Date immediately preceding each such Interest Payment Date, such interest to be paid by check or draft of the Trustee mailed on the Interest Payment Date by first class mail to such Owner at the address of such Owner as it appears on the Registration Books; provided, however, that upon the written request of any Owner of at least $1,000,000 in principal amount of Bonds received by the Trustee at least fifteen (15) days prior to such Regular Record Date, payment shall be made by wire transfer in immediately available funds to an account designated by such Owner. Principal of and redemption premium (if any) on any Bond shall be paid upon presentation and surrender thereof, at maturity or redemption, at the Trust Office of the Trustee. Each Bond shall be dated as of the Delivery Date, and shall bear interest from the Interest Payment Date next preceding the date of authentication thereof, unless (a) it is authenticated after a Regular Record Date and on or before the following Interest Payment Date, in which event it shall bear interest from such Interest Payment Date; or (b) a Bond is authenticated on or before July 15, 2011, in which event it shall bear interest from the Delivery Date; provided, however, that if, as of the date of authentication of any Bond, interest thereon is in default, such Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon. Interest on the Bonds shall be calculated on the basis of a 360-day year of twelve (12) 30-day months. 5

12 Redemption Optional Redemption. The Bonds are subject to optional redemption prior to maturity at the option of the Agency, on any date on or after August 1, 2021, as a whole or in part, from any source of available funds at a redemption price equal to 100% of the principal amount of Bonds to be redeemed together with accrued interest thereon to the redemption date, without premium. Mandatory Sinking Account Redemption. The Bonds are subject to redemption in part by lot on August 1, 2029, and on August 1 in each year thereafter, from sinking account payments made by the Agency pursuant to the Indenture, at a redemption price equal to the principal amount thereof to be redeemed together with accrued interest thereon to the redemption date, without premium, or in lieu thereof shall be purchased pursuant to the succeeding paragraph hereof entitled Purchase in Lieu of Redemption in the aggregate respective principal amounts and on the respective dates as set forth in the following table; provided, however, that if some but not all of the Bonds have been redeemed the total amount of all future sinking account payments shall be reduced by an amount corresponding to the aggregate principal amount of Bonds so redeemed, to be allocated among such sinking account payments on a pro rata basis in integral multiples of $5,000 as determined by the Agency (notice of which determination shall be given by the Agency to the Trustee). Sinking Account Installments Year (August 1) Principal Amount 2029 $200, , ,080, ,230, ,390,000 Maturity. Purchase in Lieu of Redemption. In lieu of optional or sinking account redemption of Bonds, amounts on deposit in the Special Fund (to the extent not required to be transferred to the Trustee during the current Bond Year) may also be used and withdrawn by the Agency at any time for the purchase of the Bonds at public or private sale as and when and at such prices (including brokerage and other charges and including accrued interest) as the Agency may in its discretion determine. The par amount of any of the Bonds so purchased by the Agency and surrendered to the Trustee for cancellation in any twelvemonth period ending on August 1 in any year shall be credited towards and shall reduce the principal amount of the Bonds otherwise required to be redeemed on the following August 1 under the Indenture. Redemption Procedures Notice of Redemption. The Trustee on behalf of and at the expense of the Agency shall mail (by first class mail, postage prepaid) notice of any redemption at least 30 but not more than 60 days prior to the redemption date, to (i) the Owners of any Bonds designated for redemption at their respective addresses appearing on the Registration Books, and (ii) to the Securities Depositories and to the Information Services designated in a Written Request of the Agency filed with the Trustee; but such mailing shall not be a condition precedent to such redemption and neither failure to receive any such notice nor any defect therein shall affect the validity of the proceedings for the redemption of such Bonds or the cessation of the accrual of interest thereon. Such notice shall state the redemption date and the redemption price, shall designate the CUSIP number of the Bonds to be redeemed, state the individual number of each Bond to be redeemed or state that all Bonds between two stated numbers (both inclusive) or all of the Bonds Outstanding (or all Bonds of a maturity) are to be redeemed, and shall require that 6

13 such Bonds be then surrendered at the Trust Office of the Trustee for redemption at the said redemption price, giving notice also that further interest on such Bonds will not accrue from and after the redemption date. The Agency will have the right to rescind any optional redemption by written notice to the Trustee on or prior to the dated fixed for redemption. Any notice of redemption will be canceled and annulled if for any reason funds will not or are not available on the date fixed for redemption for the payment in full of the Bonds then called for redemption, and such cancellation will not constitute an Event of Default under the Indenture. The Agency and the Trustee will have no liability to the Owners or any other party related to or arising from such rescission of redemption. The Trustee will mail notice of such rescission of redemption in the same manner as the original notice of redemption was sent. Selection of Bonds for Redemption. Whenever any Bonds or portions thereof are to be selected for redemption by lot, the Trustee shall make such selection, in such manner as the Trustee shall deem fair and appropriate, and shall notify the Agency thereof. In the event of redemption by lot of Bonds, the Trustee shall assign to each Bond then Outstanding a distinctive number for each $5,000 of the principal amount of each such Bond. The Bonds to be redeemed shall be the Bonds to which were assigned numbers so selected, but only so much of the principal amount of each such Bond of a denomination of more than $5,000 shall be redeemed as shall equal $5,000 for each number assigned to it and so selected. Effect of Redemption. From and after the date fixed for redemption, if funds available for the payment of the redemption price of and interest on the Bonds so called for redemption shall have been duly deposited with the Trustee, such Bonds so called shall cease to be entitled to any benefit under the Indenture other than the right to receive payment of the redemption price and accrued interest to the redemption date, and no interest shall accrue thereon from and after the redemption date specified in such notice. Transfer and Exchange Any Bond may, in accordance with its terms, be transferred, upon the Registration Books, by the person in whose name it is registered, in person or by a duly authorized attorney of such person, upon surrender of such Bond to the Trustee at its Trust Office for cancellation, accompanied by delivery of a written instrument of transfer in a form approved by the Trustee, duly executed. Whenever any Bond or Bonds shall be surrendered for registration of transfer, the Agency shall execute and the Trustee shall authenticate and deliver a new Bond or Bonds, of like series, interest rate, maturity and principal amount. The Trustee shall collect any tax or other governmental charge on the transfer of any Bonds pursuant to the Indenture. The cost of printing any Bonds and any services rendered or any expenses incurred by the Trustee in connection with any exchange or transfer shall be paid by the Agency. The Trustee may refuse to transfer, under the provisions of the Indenture, either (a) any Bonds during the period established by the Trustee for the selection of Bonds for redemption, or (b) any Bonds selected by the Trustee for redemption pursuant to the provisions of the Indenture. Bonds may be exchanged at the Trust Office of the Trustee for a like aggregate principal amount of Bonds of other authorized denominations of the same series, interest rate and maturity. The Trustee shall collect any tax or other governmental charge on the exchange of any Bonds pursuant to the Indenture. The Trustee may refuse to exchange, under the provisions of the Indenture, either (a) any Bonds during the period established by the Trustee for the selection of Bonds for redemption or (b) any Bonds selected by the Trustee for redemption pursuant to the provisions of the Indenture. 7

14 Bonds Mutilated, Lost, Destroyed or Stolen If any Bond shall become mutilated, the Agency, at the expense of the Owner of such Bond, shall execute, and the Trustee shall thereupon deliver, a new Bond of like amount and maturity in exchange and substitution for the Bond so mutilated, but only upon surrender to the Trustee of the Bond so mutilated. Every mutilated Bond so surrendered to the Trustee shall be canceled by it. If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee and, if such evidence is satisfactory to it and indemnity satisfactory to it shall be given, the Agency, at the expense of the Owner, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like amount and maturity in lieu of and in substitution for the Bond so lost, destroyed or stolen. The Agency may require payment of a sum not exceeding the actual cost of preparing each new Bond issued under the Indenture and of the expenses which may be incurred by the Agency and the Trustee in the premises. Any Bond issued under the provisions of the Indenture in lieu of any Bond alleged to be lost, destroyed or stolen shall constitute an original additional contractual obligation on the part of the Agency whether or not the Bond so alleged to be lost, destroyed or stolen shall be at any time enforceable by anyone, and shall be equally and proportionately entitled to the benefits of the Indenture with all other Bonds issued pursuant to the Indenture. Book-Entry Only System The Depository Trust Company, New York, New York ( DTC ) will act as securities depository for the Bonds. The Bonds will be executed and delivered as fully-registered securities registered in the name of Cede & Co. (DTC s partnership nominee). One fully-registered bond will be issued for the Bonds of each maturity, in the initial aggregate principal amount of such maturity, and will be deposited with DTC or its authorized agent. See APPENDIX D BOOK-ENTRY ONLY SYSTEM for further information regarding DTC. 8

15 Bonds Debt Service Schedule Scheduled annual debt service payments for the Bonds are set forth in the following table. Bond Year Ending August 1 Principal Interest Total $ 223, $ 223, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , $ 200, , , , , , ,080, , ,565, ,230, , ,564, ,390, , ,563, Total $7,120, $11,010, $18,130, In General TAX ALLOCATION FINANCING The Redevelopment Law provides a means for financing redevelopment projects based upon an allocation of taxes collected within a project area. The taxable valuation of a project area last equalized prior to adoption of the redevelopment plan, or base roll, is established and, except for any period during which the taxable valuation drops below the base year level, the taxing agencies within the project area thereafter receive the taxes produced by the levy of the then current tax rate upon the base roll. Taxes collected upon any increase in taxable valuation over the base roll (except such portion generated by rates levied to pay bonded indebtedness approved by the voters on or after January 1, 1989, for the acquisition or improvement of real property) (herein, the Tax Increment Revenues ) are allocated to a redevelopment agency and may be pledged by a redevelopment agency to the repayment of any indebtedness incurred in financing or refinancing a redevelopment project. Redevelopment agencies themselves have no authority to levy property taxes and must look specifically to the allocation of taxes produced as above indicated. 9

16 General Allocation of Taxes As provided in the Redevelopment Plan of the Agency, and pursuant to Article 6 of Chapter 6 of the Redevelopment Law and Section 16 of Article XVI of the Constitution of the State of California, taxes levied upon taxable property in the Project Area each year by or for the benefit of the State of California and any city, county, city and county, district or other public corporation (herein collectively referred to as taxing agencies ) for fiscal years beginning after the effective date of the ordinances approving the Redevelopment Plan are divided as follows: (1) To Taxing Agencies: That portion of the taxes which would be produced by the rate upon which the tax is levied each year by or for each of said taxing agencies upon the total sum of the assessed value of the taxable property in the Project Area as shown upon the assessment roll used in connection with the taxation of such property by such taxing agency last equalized prior to the effective date of the ordinance approving the Project Area (or ordinances approving amendments to the Redevelopment Plan adding to the Project Area), shall be allocated to, and when collected shall be paid into the funds of the respective taxing agencies as taxes by or for said taxing agencies on all other property are paid; and (2) To the Agency: Except for the taxes that are attributable to a tax rate levy by a taxing agency for the purpose of producing revenues to repay bonded indebtedness approved by the voters of the taxing agency on or after January 1, 1989, which shall be allocated to and when collected shall be paid to such taxing agency, that portion of said levied taxes each year in excess of the amounts provided in (1) above, shall be allocated to, and when collected, shall be paid into a special fund of the Agency to pay the principal of and interest on bonds, loans, moneys advanced to, or indebtedness (whether funded, refunded, assumed, or otherwise) incurred by the Agency to finance or refinance, in whole or in part, redevelopment activities within the Project Area. Unless and until the total assessed valuation of the taxable property in the Project Area exceeds the total assessed value of the taxable property in the Project Area as shown by the last equalized assessment roll referred to in paragraph (1) above, all of the taxes levied and collected upon the taxable property in the Project Area shall be paid into the funds of the respective taxing agencies. When said bonds, loans, advances, and indebtedness, if any, and interest thereon, have been paid, all moneys thereafter received from taxes upon the taxable property in the Project Area shall be paid into the funds of the respective taxing agencies as taxes on all other property are paid. The Agency is authorized to make pledges of the portion of taxes mentioned in paragraph (2) above to repay specific advances, loans and indebtedness as appropriate in carrying out the Redevelopment Plan. Revenues generated as set forth above and allocated to the Agency are generally referred to herein as Tax Increment Revenues. Agreements With Taxing Agencies The Agency has not entered into any tax sharing agreements with any taxing entity in connection with the Central Business District Project Area. The Agency has entered into a tax sharing agreement with the County of Imperial (the County ) with regard to the Residential Redevelopment Project Area. This agreement provides for the County to receive 50% of the tax increment revenues which the County would receive but for the Residential Redevelopment Plan. For purposes of the County, the base year for valuation purposes is All other tax increment revenues are based on the base year. 10

17 The Agency has entered into five agreements (each a Pass-Through Agreement and collectively the Pass-Through Agreements ) for allocation and distribution of tax increment funds within the Amendment No. 1 Area which are set forth as follows: (1) The first agreement, with the County, states that the County shall receive 60% of the annual tax increment revenues which the County would receive but for the Amendment; (2) The second agreement is with the Calexico Unified School District ( CUSD ), and states that CUSD shall receive its share of the inflationary revenue (as defined by California Revenue and Taxation Code Section 110.1(f)) and 50% of the annual tax increment revenues which CUSD would receive but for the Amendment after reduction of the inflationary revenue. In return, CUSD will contribute a pro rata portion of the Agency s legally required contribution to the Low and Moderate Income Housing Fund; (3) The third agreement is with the Heffernan Memorial Hospital District (the Hospital District ), and states that the Hospital District shall receive 100% of the annual tax increment revenue which the Hospital District would receive but for the Amendment; (4) The fourth agreement is with the County Superintendent of Schools, and states that the Agency shall deposit annually in a trust fund the Superintendent s share of the Amendment No. 1 Area tax increment revenue generated by a 2% increase in assessed valuation or any tax rate increase on behalf of the Superintendent, and 33% of the Superintendent s share of the Amendment No. 1 Area tax increment revenue generated by assessed valuation growth in excess of 2%; and (5) The fifth agreement is with the Imperial County Community College District ( ICCCD ) and states that the Agency shall deposit annually in a trust fund ICCCD s share of the Amendment No. 1 Area tax increment revenues generated by a 2% increase in assessed valuation or any tax rate increase on behalf of ICCCD, and 33% of ICCCD s share of the Amendment No. 1 Area tax increment revenue generated by assessed valuation growth in excess of 2%. The Agency has entered into five agreements for allocation and distribution of tax increment funds within the Amendment No. 2 Area which are set forth as follows: (1) The first agreement, with the County, states that the County shall receive 60% (90% in certain areas of the Amendment No. 2 Area) of the annual tax increment revenues which the County would receive but for the Amendment, less the County s pro rata share of the amount the Agency is required to set aside in the Low and Moderate Income Housing Fund; (2) The second agreement is with CUSD and states that CUSD shall receive 50% of the annual tax increment revenues, which CUSD would receive but for the Amendment No. 2 Area, less CUSD s pro rata share of the amount the Agency is required to set aside in the Low and Moderate Income Housing Fund; (3) The third agreement is with the Hospital District, and states that the Hospital District shall receive 100% of the annual tax increment revenues which the Hospital District would receive but for the Amendment No. 2 Area; (4) The fourth agreement is with the County Superintendent of Schools District, and states that the District shall receive its share of the Amendment No. 2 Area tax increment generated by a 2% increase in assessed valuation or any tax rate increase on its behalf, and one- 11

18 third of the annual tax increment revenues, which the District would receive but for the Amendment No. 2 Area; and (5) The fifth agreement is with ICCCD, and states that ICCCD shall receive its share of the Amendment No. 2 Area tax increment generated by a 2% increase in assessed valuation or any tax rate increase on his behalf, and one-third of the annual tax increment revenues, which ICCCD would receive but for the Amendment No. 2 Area. The Agency has entered into five agreements for allocation and distribution of tax increment funds within the Amendment No. 3 Area which are set forth as follows: (1) The first agreement, with the County, states that the County shall receive 60% of the annual tax increment revenues, which the County would receive but for the Amendment net of the Low and Moderate Income Housing Fund; (2) The second agreement is with CUSD, and states that CUSD shall receive 50% of the annual tax increment revenues, which CUSD would receive but for the Amendment No. 3 Area, less CUSD s pro rata share of the amount the Agency is required to set aside in the Low and Moderate Income Housing Fund; (3) The third agreement is with the Hospital District, and states that the Hospital District shall receive 100% of the annual tax increment revenues which the Hospital District would receive but for the Amendment No. 3 Area; (4) The fourth agreement is with the County Superintendent of Schools District, and states that the District shall receive 50% of the annual tax increment revenues, which the District would receive but for the Amendment No. 3 Area net of Low and Moderate Income Housing Funds and the County Property Tax Administration fee; and (5) The fifth agreement is with ICCCD, and states that ICCCD shall receive 37.5% of the annual tax increment revenues, which ICCCD would receive but for the Amendment No. 3 Area net of Low and Moderate Income Housing Funds and the County Property Tax Administration fee. The Agency s obligations under the Pass-Through Agreements with CUSD (with respect to the Amendment No. 1 Area, the Amendment No. 2 Area and Amendment No. 3 Area) and the Pass-Through Agreements with the County and the Hospital District (with respect to the Amendment No. 2 Area and Amendment No. 3 Area only), and ICCCD and County Superintendent of Schools District (with respect to Amendment No. 3 Area only) are subordinate to the Agency s obligations to pay debt service on the Bonds and any Parity Bonds, provided that the Agency obtains an opinion of an independent redevelopment or financial consultant that it is not reasonably foreseeable that such indebtedness would impair the Agency s obligations under such Pass-Through Agreements. See TAX INCREMENT REVENUES Project Area Estimated Debt Service Coverage herein. Housing Set-Aside. In accordance with Section of the Redevelopment Law, not less than twenty percent (20%) of all taxes which are allocated to the Agency shall be deposited in a low and moderate income housing fund (unless the Agency makes certain findings) to be used by the Agency for purposes of improving, increasing and preserving the City s supply of housing for persons and families of low or moderate income (including the payment of indebtedness issued or incurred for such purposes) (the Housing Set-Aside ). 12

19 The Housing Set-Aside requirement is applicable to a redevelopment agency unless the agency were to find that: 1. No need for such housing exists in the applicable city; or or 2. Less than twenty percent (20%) is sufficient to meet such housing needs of the applicable city; 3. (with respect to certain obligations of the agency entered into prior to May 1, 1991) a substantial effort is presently being carried out with other funds (either local, State or federal) and that such efforts are equivalent in impact to funds otherwise required to be deposited into the agency s low and moderate income housing fund. Both the no need finding (item 1 above) and the less than 20% finding (item 2 above) must apply to very low income as well as low and moderate income households, must be consistent with the housing element of the community s general plan and the annual report of its planning agency, and do not become effective until after certain filings have been made with the State Department of Housing and Community Development ( HCD ). Neither finding can be made unless the housing element is in proper form and up to date and has been filed with HCD. The equivalent effort finding (item 3 above) must apply to the community s share of regional housing needs as well as its own existing and projected needs. After June 30, 1993, no agency may make this finding unless it can show evidence that it is required in order to meet contractual obligations to bondholders or other private entities incurred prior to May 1, 1991 and made in reliance on the ability to make the finding. Funds available from the twenty percent (20%) requirement may be used outside a redevelopment project area upon a finding by the agency and the corresponding city council that such use will be of benefit to such redevelopment project area. The Redevelopment Law also permits agencies with more than one project area to set aside less than twenty percent (20%) of the taxes allocated to the agency from one project area if the difference is made up from another project area in the same year and if the agency and the legislative body of the community find that such use of funds will benefit such other project area. THE BONDS ARE SPECIAL OBLIGATIONS OF THE AGENCY AND AS SUCH ARE NOT A DEBT OF THE CITY, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS (OTHER THAN THE AGENCY) AND NEITHER THE CITY, THE STATE, NOR ANY OF ITS POLITICAL SUBDIVISIONS (OTHER THAN THE AGENCY) IS LIABLE FOR THE PAYMENT THEREOF. IN NO EVENT SHALL THE BONDS BE PAYABLE OUT OF ANY FUNDS OR PROPERTIES OTHER THAN THOSE OF THE AGENCY SET FORTH IN THE INDENTURE. Any future decrease in the taxable valuation of property in the Project Area or in the applicable tax rates relating thereto will reduce the tax revenues allocated to the Agency from the Project Area and correspondingly will have an adverse impact on the ability of the Agency to pay the principal of and interest on the Bonds. Except for the Tax Revenues and the amounts held in trust under the Indenture, no funds or properties of the Agency shall be pledged to, or otherwise liable for, the Bonds. The Agency has no power to levy and collect property taxes, and any property tax limitation, legislative measure, voter initiative or provisions or additional sources of income to taxing agencies having the effect of reducing the property tax rate could reduce the amount of Tax Revenues that would otherwise be available to pay debt service on the Bonds. Likewise, broadened property tax exemptions could have a similar effect. See RISK FACTORS herein. 13

20 SECURITY FOR THE BONDS Tax Revenues The Bonds are secured by and payable from Tax Revenues, and moneys held from time to time in certain funds and accounts held by the Trustee under the Indenture. Amounts deposited into the Redevelopment Fund of the Agency are not subject to the lien of the Bonds. See TAX ALLOCATION FINANCING. Reserve Account To further secure the payment of principal of and interest on the Bonds, the Trustee is required to set aside from the Special Fund and deposit in the Reserve Account under the Indenture an amount sufficient to maintain the Reserve Requirement on deposit in the Reserve Account thereunder. Reserve Requirement means, as of the date of computation, an amount which when added to the amounts on deposit in the Reserve Accounts for the Parity Bonds will equal in the aggregate the least of (i) Maximum Annual Debt Service on the Bonds, the Parity Bonds and any other parity bonds; or (ii) one hundred twenty-five percent (125%) of the then average annual debt service on the Bonds and the Parity Bonds. Parity Bonds The Bonds are payable on a parity with the Agency s outstanding 2000 Bonds, 2003A Bonds, 2003B Bonds, 2003C Bonds and 2006 Bonds. See INTRODUCTION Parity Bonds above. Additional Parity Bonds In addition to the Bonds, the 2000 Bonds, the 2003A Bonds, the 2003B Taxable Bonds, the 2003C Bonds and the 2006 Bonds, the Agency may issue or incur Parity Bonds in such principal amount as will be determined by the Agency, pursuant to a separate or supplemental indenture adopted or entered into by the Agency and Trustee. The Agency may issue or incur such Parity Bonds subject to the following specific conditions precedent: (a) The Agency certifies that it is in compliance with all covenants set forth in the Indenture, the 2000 Indenture, the 2003A Indenture, the 2003B Indenture, the 2003C Indenture and the 2006 Indenture; (b) The Parity Bonds will be on such terms and conditions as may be set forth in a separate or supplemental indenture, which will provide for (i) bonds substantially in accordance with the Indenture, the 2000 Indenture, the 2003A Indenture, the 2003B Indenture, the 2003C Indenture and the 2006 Indenture, and (ii) the deposit of moneys into the Reserve Account in an amount sufficient, together with the balance of the Reserve Account, to equal the Reserve Requirement on all Bonds expected to be outstanding including the Parity Bonds; (c) Receipt of a certificate of an Independent Financial Consultant stating: (i) For the current and each future Bond Year the debt service for each such Bond Year with respect to all Bonds, the 2003A Bonds, the 2003B Taxable Bonds, the 2003C Bonds, the 2006 Bonds and other Parity Bonds reasonably expected to be outstanding following the issuance of the Parity Bonds; 14

21 (ii) For the then current Fiscal Year, the Tax Revenues to be received by the Agency based upon the most recently certified assessed valuation of taxable property in the Project Area provided by the appropriate officer of the County: and (iii) That for the then current Fiscal Year, the Tax Revenues referred to in item (ii) are at least equal to the sum of 135% of the Maximum Annual Debt Service referred to in item (i) above (excluding debt service with respect to any portion of the Parity Bonds deposited in an escrowed proceeds account to the extent such debt service is paid from earnings on the investment of such funds), and, for the then current Fiscal Year, 100% of annual debt service with respect to any subordinate debt and that the Agency is entitled under the Law and the Redevelopment Plan to receive taxes under Section of the Law in an amount sufficient to meet expected debt service with respect to all Bonds, the 2000 Bonds, the 2003A Bonds, the 2003B Taxable Bonds, the 2003C Bonds, the 2006 Bonds and other Parity Bonds. (d) The Parity Bonds will mature on and interest will be payable on the same dates as the Bonds (except the first interest payment may be from the date of the Parity Bonds until the next succeeding February 1 or August 1) provided, however, nothing therein shall preclude the Agency from issuing and selling Parity Bonds which do not pay current interest. If the Parity Bonds are to be applied under Section of the Law, Tax Revenues for purposes of such Parity Bonds shall include that portion of taxes allocated under Section of the Law for payment of the Parity Bonds which are required to be set aside under Section Notwithstanding the foregoing, if the Agency is in compliance with all covenants set forth in the Indenture, the Agency may issue and sell junior lien obligations pursuant to the Law, having a lien on the Tax Revenues which is junior to the Bonds and payable solely from surplus as then declared or which may thereafter be declared pursuant to the Indenture (as used in the Indenture obligations will include, without limitation, bonds, notes, interim certificates, debentures or other obligations, loans, advances or other forms of indebtedness incurred by the Agency). RISK FACTORS PURCHASE OF THE BONDS WILL CONSTITUTE AN INVESTMENT SUBJECT TO CERTAIN RISKS, INCLUDING THE RISK OF NONPAYMENT OF PRINCIPAL AND INTEREST. BEFORE PURCHASING ANY OF THE BONDS, PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER, AMONG OTHER THINGS, THE RISK FACTORS DESCRIBED BELOW. THE FOLLOWING IS NOT MEANT TO BE AN EXHAUSTIVE LISTING OF ALL RISKS ASSOCIATED WITH THE PURCHASE OF THE BONDS. MOREOVER, THE ORDER OF PRESENTATION OF THE RISK FACTORS DOES NOT NECESSARILY REFLECT THE ORDER OF THEIR IMPORTANCE. Bonds are Limited Obligations and Not General Obligations The Bonds and the interest thereon are limited obligations of the Agency and do not constitute a general obligation of the Agency. See SECURITY FOR THE BONDS herein. No Owner of the Bonds may compel exercise of the taxing power of the State of California or any of its political subdivisions or agencies to pay the principal of, premium, if any, or interest due on the Bonds. 15

22 Audit by State Controller s Office The State Controller s Office is auditing 18 redevelopment agencies (including the Agency) across the State of California in an effort to obtain facts on how redevelopment agency funds are used and the extent to which they comply with laws governing their activities. The audit will look at, among other things, how a redevelopment agency defines a blighted area, whether they are appropriately paying for low- and moderate-income housing as required by law, whether they are accurately passing through payments to schools within their community, and how much redevelopment agency officials, board members and employees are being compensated for their services. The Agency believes it is in compliance with all laws and regulations under the Redevelopment Law. The Agency however, cannot predict the outcome of such audit and the effect, if any, on future Tax Revenues available for the payment of principal of and interest on the Bonds. Reduction of Tax Revenues Tax Increment Revenues allocated to the Agency (which constitute the principal source of repayment of the principal of and interest on the Bonds, as discussed herein) are a portion of the taxes allocated to the Agency each year which are determined by the amount of incremental valuation of taxable property in the Project Area, the current rate or rates at which property in the Project Area is taxed and the percentage of taxes collected in the Project Area. The Agency has no taxing power, nor does the Agency have the power to affect the rate at which property is taxed. At least four types of events that are beyond the control of the Agency could occur and cause a reduction in Tax Increment Revenues arising from the Project Area, thereby impairing the ability of the Agency to make payments of principal of and interest and premium (if any) when due on the Bonds. First, a reduction of taxable values of property or tax rates in the Project Area or a reduction of the rate of increase in taxable values of property in the Project Area caused by economic or other factors beyond the Agency s control (such as a relocation out of the Project Area by one or more major property owners, successful appeals by property owners for a reduction in a property s assessed value, a reduction of the general inflationary rate, a reduction in transfers of property, construction activity or other events that permit reassessment of property at lower values, or the destruction of property caused by natural or other disasters, including earthquake) could occur, thereby causing a reduction in Tax Increment Revenues. Second, the California electorate or legislature could adopt limitations with the effect of reducing Tax Revenues payable to the Agency. Such limitation already exists under Article XIIIA of the California Constitution, which was adopted pursuant to the initiative process. For a further description of Article XIIIA, see PROPERTY TAXATION IN CALIFORNIA Constitutional Amendments Affecting Tax Revenues, herein. Third, a reduction in the tax rate applicable to property in the Project Area by reason of discontinuation of certain override tax levies in excess of the 1% basic levy will reduce Tax Increment Revenues otherwise available to pay debt service. Such override can be expected to decline over time until it reaches the 1% basic levy and may be discontinued at any time, which may cause a reduction in Tax Revenues. No such override exists as of the date of this Official Statement. Fourth, delinquencies in the payment of property taxes by the owners of land in the Project Area could have an adverse effect on the Agency s ability to make timely payments of principal of and interest on the Bonds should the County discontinue the Teeter Plan. 16

23 Tax Increment Revenues allocated to the Agency are distributed throughout the year in installments, with the first major installment in December, a second major installment in April of the succeeding year and a final payment by the end of June in that year. The payments are adjusted to reflect actual collections. Any reduction in tax revenues, whether for any of the foregoing reasons or any other reason, could have an adverse effect on the Agency s ability to make timely payments of principal of and interest on the Bonds. Limitation on Indebtedness The Agency will covenant in the Indenture that it has not and will not incur any loans, obligations or indebtedness repayable from Tax Revenues such that the total aggregate debt service on said loans, obligations or indebtedness incurred from and after the date of adoption of the Redevelopment Plan, when added to the total aggregate debt service on the Bonds and Parity Bonds, will exceed the maximum amount of Tax Revenues to be divided and allocated to the Agency pursuant to the Redevelopment Plan. The Agency will file annually with the Trustee on or prior to October 1 of each year a Written Certificate of the Agency certifying that Tax Revenue received by the Agency through the date of the certificate combined with the amount remaining to be paid on all outstanding obligations of the Agency will not exceed the Plan Limit. To the extent the total Tax Revenues received or to be received by the Agency equal or exceed 95% of the Plan Limit, after payment of debt service, all Tax Revenues will be deposited with the Trustee and invested in defeasance obligations and may only be used to pay debt service or call bonds on such outstanding obligations. Plan Limit means the limitation contained in the Redevelopment Plan on the number of dollars of taxes which may be divided and allocated to the Agency pursuant to the Redevelopment Plan, as such limitation is prescribed by Section of the Law. Concentration of Ownership The ten largest property taxpayers in the Project Area account for $83,818,127, or approximately 13.03% of the total secured and unsecured assessed value of the Project Area for fiscal year Concentration of ownership presents a risk in that if one or more of the largest property owners were to default on their taxes, or were to successfully appeal the tax assessments on property within the Project Area, a substantial decline in Tax Revenues could result if the City is no longer on the Teeter Plan. See RISK FACTORS Teeter Plan and TAX INCREMENT REVENUES. Reduction in Inflationary Rate As described in greater detail below, Article XIIIA of the California Constitution provides that the full cash value basis of real property used in determining taxable value may be adjusted from year to year to reflect the inflationary rate, not to exceed a 2% increase for any given year, or may be reduced to reflect a reduction in the consumer price index or comparable local data. Such measure is computed on a calendar year basis. The Agency has projected Tax Increment Revenues to be received by it based, among other things, upon such 2% inflationary increases. Should the assessed value of real property not increase at the allowed annual rate of 2%, the Agency s receipt of future Tax Increment Revenues may be adversely affected. See PROPERTY TAXATION IN CALIFORNIA Constitutional Amendments Affecting Tax Revenues herein. Santa Ana Unified School District v. Orange County Development Agency In Santa Ana Unified School District v. Orange County Development Agency, 90 Cal. App. 4 th 404 (2001) (the Santa Ana Case ), the California Court of Appeal for the Fourth Appellate District held that section 33676(a) of the Redevelopment Law requires redevelopment agencies to transfer the requisite portion of the 2% inflationary increase in ad valorem property tax revenues to school districts located 17

24 within its redevelopment project area and which have not entered into separate pass-through agreements with the redevelopment agency. Previously, this section of the Redevelopment Law had been interpreted to require school districts to adopt a resolution to receive the 2% inflationary increase amount prior to the formation of the project area in which the school district is located. The result of the Santa Ana Case is that any school district that has not entered into a pass-through agreement with the redevelopment agency may at any time adopt a resolution to receive the 2% inflationary adjustment. The projections contained in the Fiscal Consultant s report assume that all school districts eligible to do so will adopt such a resolution and these amounts are, therefore, excluded from the projections of the tax increment revenues available to the Agency. Assessment Appeals Property taxable values may be reduced as a result of a successful appeal of the taxable value determined by the County Assessor. An appeal may result in a reduction to the County Assessor s original taxable value and a tax refund to the applicant property owner. Appeal and refund activity within the Project Area may result in resolved appeals which reduce the assessed value of parcels within the Project Area. As assessee may contest either (i) the original determination of the base assessment value of a parcel (i.e., the value assigned after a change of ownership or completion of new construction), or (ii) the current assessment value (i.e., the value as determined by the County Assessor, which may be no more than the base assessment value plus the compounded 2% annual inflation factor) when specified factors have cause the market value of the parcel to drop below current assessment value. At the time of reassessment, after a change of ownership or completion of new construction, the assessee may appeal the base assessment value of the property. Under an appeal of a base assessment value, the assessee appeals the actual underlying market value of the sales transaction or the recently completed improvement. A successful appeal of the base assessment value of a parcel has significant future revenue impacts, because a reduced base year assessment will reduce the compounded future value of the property prospectively. Except for the 2% inflation factor, the value of the property cannot be increased until a change in ownership occurs or additional improvements are added. There are currently four assessment appeals pending for properties in the Project Area owned by the top ten taxpayers, with a total current aggregate assessed valuation of $21,460,604, for which the applicants opinions of value totals $11,212,770. Valuation reductions have not been deducted from projected tax increment, as the outcome of the pending appeals cannot be predicted with certainty. The Agency cannot predict whether there will be future appeals. Future reductions in taxable values in the Project Area resulting from successful appeals by property owners will reduce the amount of Tax Revenues available to pay the principal of and interest on the Bonds. Proposition 8 Adjustments Proposition 8, approved in 1978 (California Revenue and Taxation Code Section 51(b)), provides for the assessment of real property at the lesser of its originally determined (base year) full cash value compounded annually by the inflation factor, or its full cash value as of the lien date, taking into account reductions in value due to damage, destruction, obsolescence or other factors causing a decline in market value. Reductions based on Proposition 8 do not establish new base property values, and the property may be reassessed on a following lien date up to the lower of the then-current fair market value or the factored base year value. Properties in the Project Area have not been subject to Proposition 8 adjustments made by the County Assessor in any significant amount. 18

25 Teeter Plan The County has adopted the Teeter Plan, which provides for a tax distribution procedure in which secured roll taxes are distributed to taxing agencies within the County on the basis of the tax levy, rather than on the basis of actual tax collections. The County, in turn, is entitled to collect any tax penalties and foreclosure proceeds. The Agency participates in the Teeter Plan, and therefore will collect 100% of the levied ad valorem property taxes from the County without regard to the actual payments received by the County. The County may discontinue the Teeter Plan at any time, and cities may elect to terminate their participation in the Teeter Plan. If the County were to discontinue the Teeter Plan, or the Agency were to elect not to participate in the Teeter Plan, the Agency would receive payment of reassessments in the amount actually collected by the County. Discontinuance of the Teeter Plan by the County could reduce the amount of Tax Revenues available to the Agency to meet its obligations under the Bonds. Development Risks Generally, the Agency s ability to pay debt service on the Bonds will be dependent upon the economic strength of the Project Area. The general economy of the Project Area will be subject, in part, to the development risks generally associated with real estate development projects. Projected development within the Project Area may be subject to unexpected delays, disruptions and changes. For example, real estate development operations may be adversely affected by changes in general economic conditions, fluctuations in the real estate market, fluctuations in interest rates, unexpected increases in development costs and by other factors. Further, real estate development operations within the Project Area could be adversely affected by future governmental policies, including governmental policies to restrict or control development. If projected development in the Project Area is delayed or halted, the economy of the Project Area could be adversely affected, causing a reduction of the Tax Increment Revenues available to pay debt service on the Bonds. Seismic Risk The Project Area is located in a seismically active region of Southern California and faults are located near the Project Area. In the event of property damage caused by an earthquake, the assessed valuation of affected property could be reduced. Such a reduction of assessed valuations could result in a reduction of the Tax Increment Revenues that secure the Bonds, which in turn could impair the ability of the Agency to make payments of principal of and interest on the Bonds when due. In April, 2010, there was an earthquake in Baja California, Mexico, which is about 30 miles southeast of the City. The earthquake measured 7.2 on the richter scale and caused damage to the property in the Project Area, which led to a number of requests for rehabilitation loans and grants for homes and businesses. It is likely that assessed values in the Project Area will be negatively impacted by damage due to the earthquake. However, as of the date of this Official Statement, the Agency cannot predict what the effect on assessed values will be. Levy and Collection The Agency does not have independent power to levy and collect property taxes. Any reduction in the tax rate or the implementation of any constitutional or legislative property tax decrease could reduce the Tax Increment Revenues, and accordingly, could have an adverse impact on the ability of the Agency to pay debt service on the Bonds. Likewise, delinquencies in the payment of property taxes could have an adverse effect on the Agency s ability to make timely debt service payments. However, there is no assurance that the County will continue to allocate tax revenues in this manner. 19

26 State Budget Issues Transfers to Educational Revenue Augmentation Fund (ERAF) In connection with its approval of the budget for the , , , , , , , and fiscal years, the State Legislature enacted legislation that, among other things, reallocated funds from redevelopment agencies to school districts by shifting a portion of each agency s tax increment to school districts for such fiscal years for deposit in the Educational Revenue Augmentation Fund ( ERAF ) established in each county treasury throughout the State. The aggregate amount for the transfers for all redevelopment agencies in the State in each such fiscal year was respectively, as follows: $205 million ( ), $65 million ( ), $65 million ( ), $75 million ( ), $135 million ( ), $250 million ( ), $250 million ( ), and $350 million ( ). The amount required to be paid by a redevelopment agency under such legislation was apportioned among all of its redevelopment project areas on a collective basis, and was not allocated separately to individual project areas. The legislation adopted by the State Legislature, and signed by the Governor of the State, to implement the ERAF shift for fiscal year was Assembly Bill No. 1389, Chapter 751, Statutes 2008 ( AB 1389 ). On April 30, 2009 (prior to the May 10, 2009 payment deadline for the ERAF transfers), a California superior court in California Redevelopment Association v. Genest (County of Sacramento) (Case No ) held that the required payment by redevelopment agencies into ERAF in fiscal year pursuant to AB 1389 violated the California constitution and invalidated and enjoined the operation of the California Health and Safety Code section requiring such payment. On May 26, 2009, the State filed a notice that it would appeal the decision of the superior court. On or about September 28, 2009, the State withdrew its appeal of the superior court s decision in California Redevelopment Association v. Genest. Transfers to Supplemental Educational Revenue Augmentation Fund (SERAF) In connection with various legislation related to the budget for the State for its fiscal year , in late July 2009 the State Legislature adopted, and the Governor of the State signed, Assembly Bill No. 26, Chapter 21, Statutes of 2009 ( AB 26 ). AB 26 mandates that redevelopment agencies in the State make deposits to the Supplemental Educational Revenue Augmentation Fund ( SERAF ) that is established in each county treasury throughout the State, in the aggregate amount of $1.7 billion for fiscal year , which was due prior to May 10, 2010, and $350 million for fiscal year , which is due prior to May 10, Similar to the ERAF legislation, each transfer required to be paid by a redevelopment agency under AB 26 is apportioned among all of its redevelopment project areas on a collective basis, and is not allocated separately to individual project areas. On October 8, 2010, the State Legislature adopted, and the Governor of the State signed, the budget for the State for its fiscal year The State s budget does not require any additional transfer from redevelopment agencies to the ERAF or SERAF other than the existing transfer required under AB 26 for fiscal year , due prior to May 10, The California Redevelopment Association, the Union City Redevelopment Agency and the Fountain Valley Redevelopment Agency filed a lawsuit in Sacramento Superior Court on October 20, 2009 challenging the constitutionality of the SERAF transfer provisions of AB 26. Subsequently, the Court certified all redevelopment agencies in the State as a class of plaintiffs in the lawsuit. The Court announced its ruling in the case on May 4, 2010, in which it upheld the constitutionality of SERAF transfer provisions of AB 26. On August 30, 2010, the California Redevelopment Association and the other plaintiffs in the lawsuit challenging the SERAF transfer provisions of AB 26 filed an appeal to the Court s May 4, 2010 decision. The Agency cannot predict the ultimate outcome of such appeal. 20

27 The Agency made the required $1,683,755 SERAF payment for fiscal year by May 10, 2010 from cash on hand. The Agency s SERAF payment for fiscal year is estimated by the California Redevelopment Association to be $346,323 and is due by May 10, The Agency believes it will have sufficient funds to pay the full amount of the SERAF payment when due. AB 26 contains provisions that subordinate the obligation of redevelopment agencies to make the SERAF payments specified therein to certain indebtedness. California Health and Safety Code Sections 33690(a)(3) and (a)(3) state: The obligation of any agency to make the payments required pursuant to this subdivision shall be subordinate to the lien of any pledge of collateral securing, directly or indirectly, the payment of the principal, or interest on any bonds of the agency including, without limitation, bonds secured by a pledge of taxes allocated to the agency pursuant to Section of the California Health and Safety Code. Agencies shall factor in the fiscal obligations created by this subdivision when issuing bonded indebtedness. AB 26 imposes various restrictions on redevelopment agencies that fail to timely make the required SERAF payments, including (i) a prohibition on adding or expanding project areas, (ii) a prohibition on the incurrence of additional debt, (iii) limitations on the encumbrance and expenditure of funds, including funds for operation and administration expenses, and (iv) commencing with the July 1 following the due date of a SERAF annual payment that is not timely made, a requirement that the applicable redevelopment agency allocate an additional five percent (5%) of all taxes that are allocated to the redevelopment agency under the Redevelopment Law for low and moderate income housing for the remainder of the time that the applicable redevelopment agency receives allocations of tax revenues under the Redevelopment Law. Proposition 22 On November 2, 2010, the voters of the State approved Proposition 22, which amended the California Constitution to prohibit the State, even during a period of severe fiscal hardship, from delaying the distribution of tax revenues for transportation, redevelopment, or local government projects and services. As amended by Proposition 22, Article XIII of the California Constitution prohibits the State Legislature from enacting a statute that requires a community redevelopment agency (i) to pay, remit, loan, or otherwise transfer, directly or indirectly, tax increment allocated to the agency (see TAX ALLOCATION FINANCING General Allocation of Taxes ) to or for the benefit of the State, any agency of the State, or any jurisdiction, or (ii) to use, restrict, or assign a particular purpose for tax increment allocated to the agency for the benefit of the State, any agency of the State, or any jurisdiction, except for statutory tax sharing, and for the purpose of increasing, improving, and preserving the supply of low and moderate income housing available at affordable housing cost. The effect of Proposition 22 generally is to preclude the State Legislature from enacting legislation to require future ERAF or SERAF shifts or other legislation reducing the tax increment revenues allocated to redevelopment activities. Governor s Proposed Budget: Disestablishment of Redevelopment Agencies On January 10, 2010, the Governor released the proposed fiscal year State budget, which proposes the elimination of redevelopment. The proposed budget calls for prohibiting redevelopment agencies from creating new contracts or obligations on or after the date urgency legislation is adopted. The proposed budget also calls for disestablishing existing agencies by July 1, 2011, and establishing successor local agencies which would be required to use the property tax that the agencies would otherwise have received to retire pre-existing agency debts and contractual obligations in accordance with existing payment schedules. In this regard, the Governor s Budget Summary for the proposed State budget states, No existing obligations will be impaired. This is a reference to provisions in the federal and State Constitutions that, subject to certain exceptions, generally prohibit states from passing a law that impairs the obligations of contracts. 21

28 Under the Governor s proposal, the amount remaining in fiscal year after the payment of pre-existing agency obligations would be distributed on a one-time basis in various ways, including to the affected local taxing entities (including cities) and to the State General Fund to offset the costs for Medi- Cal and trial courts. Beginning in fiscal year , the amount remaining after the payment of preexisting agency obligations generally would be distributed to cities, counties, special districts, and K-14 schools in amounts proportionate to their share of the countywide property tax. Amounts in Low and Moderate Income Housing Funds would be shifted to local housing authorities for low and moderate income housing. The budget also proposes that the Constitution be amended to provide for 55 percent voter approval for limited tax increases and bonding against local revenues for development projects such as those projects currently undertaken by redevelopment agencies. As with any legislative proposal by the Governor, the budget is subject to the legislative process, and at this point it is not clear whether the Governor will have the Legislature s support regarding these proposals. In any case, it is uncertain when any budget legislation may be adopted or what the exact provisions of any such legislation will be. The potential impact of future legislation could be material to the Agency and its ability to finance or repay existing and future obligations and conduct its redevelopment activities. The State Legislative Analyst Office, in its Overview of the Governor s Budget for fiscal year , dated January 12, 2011, observes that if redevelopment agencies undertake new bonded indebtedness and contractual obligations within the projected next several weeks or months that are required for the State Legislature to draft, review, and complete fiscal year budget-related legislation, such agency actions could constrain the State s ability to redirect redevelopment revenues and to realize the State savings and local benefits anticipated in the Governor s proposal. Therefore, the Legislative Analyst Office recommends that the State Legislature pass urgency legislation as soon as possible to prohibit redevelopment agencies from taking actions that increase their debt, or from creating, amending, or extending any redevelopment project areas. The Agency cannot predict whether or when any such urgency legislation may be approved by the State Legislature, or what the provisions of any such urgency legislation actually adopted may be. As of the date of this Official Statement no such urgency legislation has been introduced. Although the Governor s Budget Summary for the proposed fiscal year State budget provides for successor agencies that will be required to retire redevelopment agency debts in accordance with existing payment schedules, and the federal and State Constitutions generally prohibit states from passing a law that impairs the obligation of contracts, the Agency cannot predict whether the final State budget legislation for fiscal year approved by the State Legislature and signed by the Governor will include the successor agency provisions proposed by the Governor or similar provisions to provide for payment of outstanding redevelopment agency debts in accordance with existing payment schedules. In the event such legislation does not provide for the payment of outstanding redevelopment agency debts in accordance with existing payment schedules, the Agency cannot predict whether or not a court would uphold the validity of such legislation based on an exception to the general federal and/or State Constitution prohibitions on the Legislature s impairment of contracts, or otherwise. Accordingly, the Agency is not able to predict the effect any such legislation, if enacted, would have on future Tax Revenues available for the payment of principal of and interest on the Bonds. Information about the State budget and State spending is available at various State maintained websites. Text of the Governor s Budget Summary for the proposed fiscal year State budget, text of the current State budget, and other documents related to the State budget may be found at the website of the Department of Finance, A nonpartisan analysis of the budget is posted by the Legislative Analyst Office at In addition, various State official statements, many of which contain a summary of the current and past State budgets may be found at the website of the State 22

29 Treasurer, None of such websites is in any way incorporated into this Official Statement, and the Agency makes no representation whatsoever as to the accuracy or completeness of any of the information on such websites. Redevelopment Plan Limitations on Tax Revenues Sections and of the Redevelopment Law require each redevelopment agency to either include in each redevelopment plan or to adopt by ordinance a limitation on the amount of taxes that may be divided and allocated to the redevelopment agency with respect to the related redevelopment project area. Pursuant to Section , taxes may not be allocated to a redevelopment agency beyond this limitation except by amendment of the redevelopment plan. In addition, under the provisions of Assembly Bill 1290, a redevelopment agency may not pay indebtedness or receive property taxes pursuant to Section of the Redevelopment Law after ten years from the termination of the effectiveness of a redevelopment plan (which is now limited to 40 years after the adoption of such redevelopment plan). Property Assessment Appeals An assessee of locally-assessed or state-assessed property may contest the taxable value enrolled by the county assessor or by the State Board of Equalization ( SBE ), respectively. The assessee of SBEassessed property or locally-assessed personal property, the valuation of which is subject to annual reappraisal, actually is contesting the determination of the full cash value of property when filing an assessment appeal. Because of the limitations to the determination of the full cash value of locally-assessed real property by Article XIIIA (described below), however, an assessee of locally assessed real property generally is contesting only the original determination of the base assessment value of the parcel, i.e. the value assigned after a change of ownership or completion of new construction. At the time of reassessment, after a change of ownership or completion of new construction, the assessee may appeal the base assessment value of the property. Under an appeal of a base assessment value, the assessee appeals the actual underlying market value of the sales transaction or the recently completed improvement. A base assessment appeal has significant future revenue impact because a reduced base year assessment will then reduce the compounded value of the property prospectively. Except for the 2 percent inflation factor, the value of the property cannot be increased until a change of ownership occurs or additional improvements are added. The assessee of locally-assessed real property also may contest the current assessment value (the base assessment value plus the compounded annual inflation factor) when specified conditions have caused the full cash value to drop below the current assessment value. Pursuant to Section 51(b) of the Revenue and Taxation Code, the assessor may place a value on the tax roll lower than the compounded base assessment value, if the full cash value of real property has been reduced by damage, destruction, depreciation, obsolescence, removal of property or other factors causing a decline in the value. Reductions in value pursuant to Section 51(b), commonly referred to as Proposition 8 appeals, can be achieved either by formal appeal or administratively by assessor staff appraising the property. A reduced full cash value placed on the tax roll does not change the base assessment value. The future impact of a parcel subject to a Proposition 8 appeal is dependent upon a change in the conditions which caused the drop in value. In fiscal years subsequent to a successful Proposition 8 appeal, the assessor may determine that the value of the property has increased as a result of corrective actions or improved market conditions and enroll a value on the tax roll up to the parcel s compounded base assessment value. 23

30 The taxable value of utility property may be contested by utility companies and railroads to the SBE. Generally, the impact of utility appeals is on the State-wide value of a utility determined by the SBE. As a result, the successful appeal of a utility may not affect the taxable value of a project area but could affect a project area s allocation of unitary property taxes. The actual impact on tax increment is dependent upon the actual revised value of assessments resulting from values determined by the Imperial County Assessment Appeals Board or through litigation and the ultimate timing of successful appeals. Because the County Controller adjusts revenues to the Agency to reflect roll corrections from successful appeals, the Agency may bear the burden of appeals. The actual valuation impact to the Project Area from successful assessment appeals will occur on the assessment roll prepared after the actual valuation reduction. Hazardous Substances An environmental condition that may result in the reduction in the assessed value of parcels would be the discovery of a hazardous substance that would limit the beneficial use of a property within the Project Area. In general, the owners and operators of a property may be required by law to remedy conditions of the property relating to releases or threatened releases of hazardous substances. The owner may be required to remedy a hazardous substance condition of property whether or not the owner or operator has anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the property within the Project Area be affected by a hazardous substance would be to reduce the marketability and value of the property by the costs of remedying the condition, causing a reduction of the Tax Increment Revenues available to pay debt service on the Bonds. Bankruptcy and Foreclosure On July 30, 1992 the United States court of Appeals for the Ninth Circuit issued an opinion in a bankruptcy case entitled In re Glasplv Marine Industries holding that ad valorem property taxes levied by a county in the State of Washington after the date that the property owner filed a petition for bankruptcy would not be entitled to priority over the claims of a secured creditor with a prior lien on the property. Similar results were reached by several circuit courts in other circuits. Subsequently, however, section 362(b)(18) of the Bankruptcy Code was enacted, effectively overturning this line of decisions and providing that local governments may rely on statutory property tax liens to secure payment of property taxes even after the filing of a bankruptcy petition. There is no assurance that the Congress will not amend the Bankruptcy Code in the future to restore the law at the time of the Glasplv decision. Enforceability of Remedies The remedies available to the respective Trustee and the registered owners of the Bonds upon an event of default under either Indenture or any other document described herein are in many respects dependent upon regulatory and judicial actions which are often subject to discretion and delay. Under existing law and judicial decisions, the remedies provided for under such documents may not be readily available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Bonds will be qualified to the extent that the enforceability of the legal documents with respect to the Bonds is subject to limitations imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally and by equitable remedies and proceedings generally. Loss of Tax Exclusion As discussed under the caption CONCLUDING INFORMATION Tax Matters, to maintain the exclusion from gross income for federal income tax purposes of the interest on the Bonds, the Agency has covenanted in each Indenture not to take any action, or fail to take any action, if such action or failure 24

31 to take such action would adversely affect the exclusion under Section 103 of the Internal Revenue Code of 1986 of interest on the Bonds from the owners thereof for federal income tax purposes. Interest on the Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date the Bonds were issued, as a result of acts or omissions of the Agency in violation of the Code. The Bonds are not subject to early redemption merely because an event of taxability has occurred; rather the Bonds will remain outstanding to maturity or until redeemed under the optional redemption or mandatory sinking fund redemption provisions of the Indenture. Assumptions and Projections Any reduction in Tax Revenues, whether for any of the foregoing reasons or any other reason, could have an adverse effect on the Agency s ability to make timely payments of principal of, premium, if any, and interest on the Bonds, which are secured by such Tax Revenues. To estimate the total Tax Revenues available to pay debt service on the Bonds, the Fiscal Consultant has made certain assumptions with regard to the assessed valuation in the Project Area, future tax rates, the percentage of taxes collected, the amount of funds available for investment and the interest rate at which those funds will be invested. The Agency believes these assumptions to be reasonable, but to the extent that the assessed valuations, the tax rates, the percentage of taxes collected or the interest rate at which funds are invested are less than the Agency s assumptions, the total Tax Revenues available will, in all likelihood, be less than those projected herein. See TAX INCREMENT REVENUES Projected Tax Increment Revenues and Debt Service Coverage herein. Limited Secondary Market As stated herein, investment in the Bonds poses certain economic risks which may not be appropriate for certain investors, and only persons with substantial financial resources who understand the risk of investment in the Bonds should consider such investment. There can be no guarantee that there will be a secondary market for purchase or sale of the Bonds or, if a secondary market exists, that the Bonds can or could be sold for any particular price. PROPERTY TAXATION IN CALIFORNIA Constitutional Amendments Affecting Tax Revenues The Tax Revenues includes a portion of the ad valorem taxes levied on real property within the Project Area. Article XIIIA of the California Constitution limits the amounts of ad valorem tax on real property to 1% of full cash value as determined by the county assessor. Article XIIIA defines full cash value to mean the County Assessor s valuation of real property as shown on the tax bill under full cash value, or thereafter the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment period. Furthermore, all real property valuation may be increased to reflect the inflationary rate, as shown by the consumer price index, not to exceed 2% per year, or may be reduced in the event of declining property values caused by damage, destruction or other factors, Article XIIIA exempts from the 1% tax limitation any taxes to repay indebtedness approved by the voters prior to July 1, 1978, and any bonded indebtedness for the acquisition or improvement of real property approved on or after July 1, 1978 by two-thirds of the voters voting on the proposition approving such bonds, and requires a vote of two-thirds of the qualified electorate to impose special taxes, while totally precluding the imposition of any additional ad valorem, sales or transaction tax on real property. In addition, Article XIIIA requires the approval of two-thirds of all members of the State legislature to change any State tax law resulting in increased tax revenues. 25

32 Article XIIIB of the California Constitution limits the annual appropriations from the proceeds of taxes of the State and any city, county, school district, authority or other political subdivision of the State to the level of appropriations for the prior fiscal year, as adjusted for changes in the cost of living, population and services rendered by the governmental entity. Article XIIIB includes a requirement that if an entity s revenues in any year exceed the amount permitted to be spent, the excess would have to be returned by revising tax or fee schedules over the subsequent two years. Section of the Redevelopment Law provides that the allocation of taxes to a redevelopment agency for the purpose of paying principal of, or interest on, loans, advances or indebtedness incurred for redevelopment activity shall not be deemed the receipt by such agency of proceeds of taxes within the meaning of Article XIIIB, nor shall such portion of taxes be deemed receipt of proceeds of taxes by, or any appropriation subject to the limitation of, any other public body within the meaning or the purpose of the Constitution and laws of the State, including Section of the Redevelopment Law. Two California appellate court decisions have upheld the constitutionality of Section 33678, and in the one case in which a petition for review was filed in the California Supreme Court, such petition was denied. Implementing Legislation Legislation enacted by the California Legislature to implement Article XIIIA (Statutes of 1978, Chapter 292, as amended) provides that, notwithstanding any other law, local agencies may not levy any property tax, except to pay debt service on indebtedness approved by the voters prior to July 1, 1978, and that each county will levy the maximum tax permitted by Article XIIIA of $4.00 per $100 assessed valuation (based on the traditional practice of using 25% of full cash value as the assessed value for tax purposes). The legislation further provided that, for Fiscal Year only, the tax levied by each county was to be appropriated among all taxing agencies within the county in proportion to their average share of taxes levied in certain previous years. Effective as of the Fiscal Year, assessors in California no longer record property values in the tax rolls at the assessed value of 25% of market values. All taxable property value is shown at full market value. In conformity with this change in procedure, all taxable property value included in this Official Statement (except as noted) is shown at 100% of market value and all general tax rates reflect the $1 per $100 of taxable value, Future assessed valuation growth allowed under Article XIIIA (i.e., new construction, change of ownership, and 2% annual value growth) will be allocated on the basis of situs among the jurisdictions that serve the tax rate area within which the growth occurs. Local agencies and schools will share the growth of base revenue from the tax rate area. Each year s growth allocation becomes part of each agency s allocation in the following year. The Agency is unable to predict the nature or magnitude of future revenue sources which may be provided by the State to replace lost property tax revenues. Article XIIIA effectively prohibits the levying of any other ad valorem property tax above those described above, even with the approval of the affected voters, Constitutional Challenges to Property Tax System There have been many challenges to Article XIIIA of the California Constitution. The United States Supreme Court heard the appeal in Nordlinger v. Hahn, a challenge relating to residential property. Based upon the facts presented in Nordlinger, the United States Supreme Court held that the method of property tax assessment under Article XIIIA did not violate the federal Constitution. The Agency cannot predict whether there will be any future challenges to California s present system of property tax assessment and cannot evaluate the ultimate effect on the Agency s receipt of Tax Revenues should a future decision hold unconstitutional the method of assessing property. 26

33 Property Tax Collection Procedures In California, property that is subject to ad valorem taxes is classified as secured or unsecured. The secured classification includes property on which any property tax levied by a county becomes a lien on that property sufficient, in the opinion of the county assessor, to secure payment of the taxes. Every tax levied by a county that becomes a lien on secured property has priority over all present and future private liens arising pursuant to State law on the secured property, regardless of the time of the creation of the other liens. A tax levied on unsecured property does not become a lien against the taxed unsecured property, but may become a lien on other property owned by the taxpayer. Secured and unsecured property are entered on separate parts of the assessment roll maintained by the county assessor. The payment of delinquent taxes with respect to property on the secured roll may be enforced only through the sale of the property securing the taxes to the State for the amount of taxes that are delinquent. Such property may thereafter be redeemed by payment of the delinquent taxes and penalties. Unsecured personal property taxes may be collected, in the absence of timely payment by the taxpayer, through (1) a civil action against the taxpayer; (2) filing a certificate of delinquency for record in the county recorder s office, in order to obtain a lien on property of the taxpayer; (3) seizure and sale of personal property, improvements or possessory interests belonging or assessed to the taxpayer; and (4) filing a certificate in the office of the County Clerk specifying certain facts in order to obtain a judgment lien on certain property of the taxpayer. Except for property assessed by the State, the valuation of taxable property is determined as of January 1 each year, and equal installments of taxes levied upon secured property become delinquent on the following December 10 and April 10. Taxes on unsecured property are due February 1 and become delinquent August 31, and such taxes are levied at the prior year s secured tax rate. The valuation of State-assessed property is determined on January 1 of each year. Supplemental Assessments A bill enacted in 1983, SB 813 (Statutes of 1983, Chapter 498) provides for the supplemental assessment and taxation of property as of the occurrence of a change of ownership or completion of new construction. Previously, statutes enabled the assessment of such changes only as of the next tax lien date following the change, and thus delayed the realization of increased property taxes from the new assessments for up to 14 months. As enacted, Chapter 498 provides increased revenue to redevelopment agencies to the extent that supplemental assessments as a result of new construction or changes of ownership occur within the boundaries of redevelopment projects subsequent to the lien date. To the extent such supplemental assessments occur within the Project Area, Tax Revenues may increase. Collection of taxes based on supplemental assessments will occur throughout the year. Taxes due will be pro-rated according to the amount of time remaining in the tax year, with the exception of tax bills dated June 1 through May 31, which will be calculated on the basis of the remainder of the current fiscal year and the full twelve months of the next fiscal year. Tax Collection Fees SB 2557 enacted in 1990 (Statutes of 1990, Chapter 466), authorized county auditors to determine property tax administration costs proportionately attributable to local jurisdictions and to submit invoices to the jurisdictions for such costs. Subsequent legislation, SB 1559 (Chapter 697, Statutes of 1992), specifically includes redevelopment agencies among entities subject to a property tax administration charge. The projections of tax revenues take such administrative costs into account. 27

34 Unitary Property Tax AB 454 (Statutes of 1987, Chapter 921) provides a revised method of reporting and allocating property tax revenues generated from most State-assessed unitary properties commencing with Fiscal Year Under AB 454, the State reports to each county auditor-controller only the county-wide unitary taxable value of each utility, without an indication of the distribution of the value among tax rate areas. AB 454 provides two formulas for auditor-controllers to use in order to determine the allocation of unitary property taxes generated by the county-wide unitary value, which are: (i) for revenue generated from the 1% tax rate, each jurisdiction is to receive up to 102% of its prior year unitary property Tax Revenue; however, if county-wide revenues generated from unitary properties are greater than 102% of prior year revenues, each jurisdiction receives a percentage share of the excess unitary revenues equal to the percentage of each jurisdiction s share of secured property taxes; (ii) for revenue generated from the application of the debt service tax rate to county-wide unitary taxable value, each jurisdiction is to receive a percentage share of revenue based on the jurisdiction s annual debt service requirements and the percentage of property taxes received by each jurisdiction from unitary property taxes. The provisions of AB 454 apply to all State-assessed property, except railroads and non-unitary properties the valuation of which will continue to be allocated to individual tax rate areas. The provisions of AB 454 do not constitute an elimination or a revision of the method of assessing utilities by the State Board of Equalization. AB 454 allows, generally, valuation growth or decline of State-assessed unitary property to be shared by all jurisdictions within a county. Business Inventory and Replacement Revenue Prior to 1979, the State reimbursed cities, counties, special districts and redevelopment agencies that portion of taxes which would have been generated by the exempted portion of business inventory value (50%). In 1979, the California Legislature enacted AB 66 (Statutes of 1979, Chapter 1150), eliminating the assessment and taxation of business inventory property and providing for replacement revenue for local agencies, except redevelopment agencies. In 1980, the California Legislature enacted AB 1994 (Statutes of 1980, Chapter 610), providing partial replacement revenue for the loss of business inventory revenues by redevelopment agencies. In 1990, the California Legislature amended Section of the California Government Code (Chapter 449, Statutes of 1990), which precludes redevelopment agencies from pledging special subvention revenues toward the payment of debt service for bonded indebtedness incurred after July 31, 1990 (the effective date of the legislation). The State Budget reduced the State s funding for the special subvention. As enacted under AB 222 (Chapter 188, Statutes of 1991), the Budget Act eliminated subvention payments for most redevelopment projects, including the Project Area. Additionally, the State Budget implemented further cuts in funding for the State s special subvention to redevelopment agencies. As a result, these revenues are not included in the projections of estimated tax revenues. Proposition 87 Under prior State law, if a taxing entity increased its tax rate to obtain revenues to repay general obligation bonds approved by two-thirds of the voters, the redevelopment agency with a project area that includes property affected by the tax rate increase would have realized a proportionate increase in tax increment. Proposition 87, approved by the voters of the State on November 8, 1988, requires that all revenues produced by such a tax rate increase (approved by the voters on or after January 1, 1989) go 28

35 directly to the taxing entity that increased the tax rate to repay the general obligation bonded indebtedness. As a result, redevelopment agencies no longer receive an increase in tax increment when taxes on property in the project area are increased to repay voter-approved general obligation debt. Future Initiatives Each of Article XIIIA, Article XIIIB and Proposition 87 was adopted as a measure that qualified for the ballot pursuant to California s initiative process. From time to time other initiative measures could be adopted, further affecting revenues of the Agency or the Agency s ability to expend revenues. The nature and impact of these measures cannot be anticipated by the Agency. General THE PROJECT AREA The Merged Central Business District and Residential Redevelopment Project Area are part of the City. The City of Calexico is located approximately seven miles south of U.S. Interstate 8 at the junction of State Routes 111 and 98. The City serves as a major port of entry for agricultural and industrial goods produced in Baja California and as a retail and service center for surrounding areas. The Southern Pacific Railroad links El Centro to Mexico via Calexico and consists of approximately 2,298 acres in twenty-four non-contiguous areas within the City. The Central Business District Project Area contains 183 acres in one contiguous area, while the Residential Project Area consists of 328 acres in four non-contiguous areas. Existing land uses in the merged Project Area are residential, commercial, industrial, governmental and institutional. As set forth in Agency documents, the Redevelopment Plan proposes to eliminate blighted conditions and encourage new economic investment in the community. Below market rate financing is and has been used to increase the supply of affordable housing as well as commercial rehabilitation grant programs. The Agency has taken an active role in providing such financing programs in recent years. The Project Area has increased in size since initially established. Amendment No. 1 to the Merged Central Business District and Residential Redevelopment Project Area was adopted on July 18, 1989 by Ordinance No. 905, adding approximately 342 acres (the Amendment No. 1 Area ) to the existing Merged Redevelopment Project, while Amendment No. 2 adopted on June 30, 1992 by Ordinance No. 920 added approximately 991 acres (the Amendment No. 2 Area ), and Amendment No. 3 adopted on December 28, 1993 by Ordinance No. 930 added approximately 300 acres (the Amendment No. 3 Area ). The Amendment No. 1 Area consists of seven non-contiguous sub-areas generally located in the northern and western sections of the City of Calexico which are predominantly urbanized and contain residential and non-residential uses as well as previously cultivated and vacant land. The Amendment No. 2 Area contains approximately 991 acres, divided into five noncontiguous sub-areas, generally located in the northern and western sections of the City. Much of Amendment No. 2 Area is developed with commercial and residential uses. The Agency believes the implementation of Amendment No. 2 will provide the Agency with a financing mechanism to supplement funding of needed public facilities. The Agency believes the use of tax increment financing will make possible a variety of residential and commercial improvement projects 29

36 as well as traffic/circulation and infrastructure improvement/rehabilitation projects, which will work towards the elimination of deficient conditions within the Amendment No. 2 Area. The Amendment No. 3 Area contains approximately 300 acres, divided into five non-contiguous sub-areas, generally located in the northern and western sections of the City. The Amendment No. 3 Area is predominantly urbanized, with residential, commercial, industrial, governmental and institutional land uses. It is expected that a redevelopment of the Project Area will be achieved through the removal or rehabilitation of physically obsolete or substandard structures and other physical blighting influences, the rehabilitation of existing commercial and industrial buildings, and the construction or reconstruction of streets, utilities, curbs, gutters, sidewalks and other associated public improvements. Public improvements necessary for the Project Area to stimulate additional residential, commercial and industrial activities include parking lots, streets, sidewalks, lights, water lines, traffic signals, and new road construction to alleviate congestion problems found at the border. Limitations and Requirements of the Redevelopment Plan Pursuant to the Redevelopment Plan, as amended, the total tax increment revenues received by the Agency over the life of the Redevelopment Project cannot exceed a combined total of $300,000,000 and the total amount of outstanding bonded indebtedness incurred by the Agency, payable from tax increment revenues which can be outstanding at any one time cannot exceed $75,000,000. As of the date of this Official Statement, the Agency has received approximately $75,170,089 in tax increment revenues. In compliance with the Redevelopment Law, not less than 20% of the tax increment revenues received from the Project Area must be used for the purpose of increasing and improving the supply of housing for families of low and moderate incomes. The Redevelopment Plan, as amended, provides that no loan, advance or indebtedness to finance, in whole or in part, the Project Area shall be established after twenty (20) years from the effective date of the ordinance approving the Redevelopment Plan or January 1, 2004 whichever comes later. In 2001 the California legislature amended the Redevelopment Law to permit agencies to eliminate this limit. Recent Development in the Project Area In 2010, there were 43 businesses that created 351 jobs in the project area. New and expanding businesses in the Project Area include clothing, blood bank, restaurants, adult day care, gas stations/mini marts and healthcare. In 2010, the City issued and renewed 1,441 business licenses. There were 194 commercial permits issued with a valuation of $5,822, The Agency assisted in six rehabilitation projects in To date, there are numerous commercial, residential rehabilitation and new construction projects still in progress. Historical Tax Increment Revenues TAX INCREMENT REVENUES The Agency s source of Tax Revenues pledged to pay debt service on the Bonds is the Tax Increment Revenues from the Project Area as reported by the Imperial County Auditor-Controller s office and the Agency. The following table provides a summary of the historical taxable valuation and resulting Tax Increment Revenues in the Project Area. This summary of historical assessed valuations and tax increment receipts is not intended to aid in the prediction of future Tax Revenues. 30

37 Table 1 PROJECT AREA HISTORICAL ASSESSED VALUATIONS AND TAX INCREMENT RECEIPTS Total Assessed Valuation $557,208,553 $595,910,298 $654,572,185 $720,859,742 $701,881,216 Less: Base Year Valuation 77,079,261 77,079,261 77,079,261 77,079,261 77,079,261 Incremental Valuation $480,129,292 $518,831,037 $577,492,924 $643,780,481 $624,801,955 Tax Rate % % % % % Gross Tax Revenues $4,801,293 $5,188,310 $5,774,929 $6,437,805 $6,248,020 Unitary Revenues (1) 82,746 82,746 82,746 82,746 86,483 Total Gross Revenues $4,884,039 $5,271,056 $5,857,675 $6,520,551 $6,330,766 Less: Senior Pass Through 369, , , , ,074 Tax Revenues (2) $4,514,080 $4,846,077 $5,407,882 $5,966,543 $5,769,692 Source: Urban Futures, Inc. (1) Numbers for fiscal years and are based on actual amounts received in such years. Numbers for fiscal years through are estimated based on fiscal year actual amounts. (2) Includes low and moderate income housing set-aside amounts. Set forth in the table below are the ten largest local secured taxpayers for the Project Area. Table 2 PROJECT AREA TEN LARGEST LOCAL SECURED TAXPAYERS (SECURED AND UNSECURED) Taxpayer Land Use Fiscal Year Assessed Value Percent of Total (1) Wal-Mart Real Estate Business Commercial $18,616, % PWIP LLC & WIP LLC Industrial/Commercial Mix 15,835, Victoria Manor Senior Apartments 2+ Residential Units 9,009, Smith s Food & Drug Centers Inc Commercial 7,607, A & M Calexico Investments LLC Commercial 6,227, Hpd Villa Del Este 2+ Residential Units 6,086, El Paseo-Calexico LLC Commercial 5,650, C W & Associates Ltd Commercial 5,365, Arellano Jr. Secundino Commercial 4,738, Choi John H Commercial 4,680, Total $83,818, % Source: Urban Futures, Inc. (1) Based on Fiscal Year secured assessed valuation of $643,855,

38 Assessment Appeals Table 3 LAND USES IN THE PROJECT AREA Land Use Parcels Secured Assessed Value Percent of Secured A.V. (1) Single Family Residential 2,164 $316,561, % Commercial ,710, Industrial 51 44,842, Residential Units 15 28,794, Single Family Residential ,144, Vacant Commercial 48 8,605, Vacant Industrial 43 6,769, Institutional 18 6,643, Vacant Residential 32 3,833, Miscellaneous 3 2,971, Residential Units 5 766, Recreational 1 211, Miscellaneous 4 1, Government Total All Secured 2,888 $643,855, % Source: Urban Futures, Inc. (1) Based on Fiscal Year secured assessed valuation of $643,855,845. There are currently four pending assessment appeals for the top ten tax payers in the Project Area with a total current aggregate assessed valuation of $21,460,604, for which the applicants opinions of value totals $11,212,770. Valuation reductions that may result from potential successful appeals have not been deducted from projected tax increment, as the outcome of the pending appeals cannot be predicted with certainty. See RISK FACTORS Assessment Appeals. Projected Tax Increment Revenues and Debt Service Coverage Receipt of projected Tax Increment Revenues in the amounts and at the time projected by the Agency s Fiscal Consultant depends on the realization of certain assumptions relating the Tax Increment Revenues. The projections of Tax Increment Revenues shown in the Fiscal Consultant s Report are based on the assumptions described therein. Based upon the projected Tax Increment Revenues, the Agency expects sufficient funds should be available to the Agency to pay principal of and interest on the Bonds. Although the Agency believes that the assumptions upon which the projected Tax Increment Revenues are based are reasonable, the Agency provides no assurance that the projected Tax Increment Revenues will be realized, To the extent that the assumptions are not actually realized, the Agency s ability to timely pay principal and interest on the Bonds may be adversely affected. The following tables summarize projected taxable valuations and Tax Revenues for the Project Area and estimated annual debt service coverage on the Bonds. 32

39 Table 4 PROJECT AREA PROJECTED TAXABLE VALUATION AND TAX REVENUES Total Assessed Valuation (1) $669,298,639 $674,338,458 $681,081,842 $694,703,479 $708,597,548 Less: Base Year Valuation 77,079,261 77,079,261 77,079,261 77,079,261 77,079,261 Incremental Valuation $592,219,378 $597,259,197 $604,002,581 $617,624,218 $631,518,287 Tax Rate % % % % % Gross Tax Revenues $5,922,194 $5,972,592 $6,040,026 $6,176,242 $6,315,183 Unitary Revenues (2) 86,483 86,483 86,483 86,483 86,483 Total Gross Revenues $6,008,677 $6,059,075 $6,126,509 $6,262,725 $6,401,666 Less: County Admin Fees 88,833 89,588 90,601 92,644 94,728 Less: Senior Pass Through 504, , , , ,397 Tax Revenues (3) $5,415,234 $5,456,670 $5,512,474 $5,626,368 $5,742,541 Source: Urban Futures, Inc. (1) Actual assessed valuation for Fiscal Year including utility values. Assessed valuation is increased by 0.753% in fiscal year per the California State Board of Equalization, 1% in fiscal year , with a 2% growth factor thereafter. (2) Estimated, based on Fiscal Year amounts. (3) Includes low and moderate income housing set-aside amounts. 33

40 Table 5 PROJECT AREA ESTIMATED DEBT SERVICE COVERAGE Fiscal Year Ending (June 30) Projected Tax Revenues Series 2000 Debt Service Series 2003A Debt Service Series 2003B Debt Service Series 2003C Debt Service Debt Service Coverage Series 2006 Debt Service Series 2011 Debt Service Total Debt Service 2011 $5,415,234 $52,765 $1,016,475 $451,081 $579,128 $460,823 $223,687 $2,783, % ,456,670 52,068 1,015, , , , ,200 3,077, ,512,474 51,303 1,467, , , ,200 3,070, ,626,368 60,538 1,462, , , ,200 3,077, ,742,541 59,263 1,462, , , ,200 3,072, ,852,832 57,988 1,471, , , ,200 3,076, ,965,333 56,713 1,464, , , ,200 3,073, ,080,077 55,369 1,469, , , ,200 3,077, ,197,120 54,025 1,467, , , ,200 3,077, ,316,505 52,682 1,467, , , ,200 3,077, ,438,275 51,338 1,470, , , ,200 3,073, ,562,479 49,994 1,464, , , ,200 3,075, ,689,170 48,650 1,466, , , ,200 3,074, ,818,394 47,307 1,464, , , ,200 3,078, ,950, , ,500 1,433, ,200 3,077, ,084, ,000 1,845, ,200 3,073, ,221, ,250 1,849, ,200 3,076, ,361, ,000 1,843, ,200 3,073, ,504, ,845, ,200 2,561, ,649, ,844, ,700 2,566, ,153, ,565,750 2,565, ,279, ,564,950 2,564, ,408, ,563,275 2,563, Total $147,286,810 $1,160,966 $19,629,375 $909,649 $10,959,378 $17,098,638 $18,130,962 $67,888,963 Source: Urban Futures, Inc. Section of the Redevelopment Law requires that the Agency file, not later than the first day of October of each year with the county auditor, a statement of indebtedness certified by the chief financial officer of the Agency for each redevelopment project for which the redevelopment plan provides for the division of taxes pursuant to section of the Redevelopment Law. The statement of indebtedness is required to contain, among other things, the date on which the bonds were delivered, the principal amount, term, purpose, interest rate and total interest of the bonds, the principal amount and the interest due in the fiscal year in which the statement of indebtedness is filed and the outstanding balance and amount due on the bonds. Similar information must be given for each loan, advance or indebtedness that the Agency has incurred or entered into which is payable from tax increment. As amended by AB 1290, section requires each redevelopment agency to file a reconciliation statement for each redevelopment project for which the redevelopment agency receives tax revenues pursuant to section The reconciliation statement is to show, among other things, (i) for each loan, advance or indebtedness, for each redevelopment project the total debt service obligations of the redevelopment agency to be paid in the fiscal year for which the statement of indebtedness is filed; (ii) the total debt service remaining to be paid on such indebtedness, and (iii) the available revenues as of the end of that fiscal year. Available revenues consist of all Tax Increment Revenues held by the 34

41 redevelopment agency as cash or cash equivalents and all cash or cash equivalents held by the redevelopment agency that are irrevocably pledged or restricted to payment of a loan, advance or indebtedness that the redevelopment agency has listed on a statement of indebtedness. For purposes of section 33675, amounts held in a redevelopment agency s Low and Moderate Income Housing Fund do not constitute available revenues, and amounts deposited by a redevelopment agency in its Low and Moderate Income Housing Fund constitute indebtedness of the redevelopment agency. Section 33675(g) has been amended by AB 1290 to provide that payments of Tax Increment Revenues from the county auditor to a redevelopment agency may not exceed the redevelopment agency s aggregate total outstanding debt service obligations minus the available revenues of the redevelopment agency, as shown on the reconciliation statement. Payments to a trustee under a bond resolution or indenture or payments to a public agency in connection with payments by such public agency pursuant to a bond issue shall not be disputed in any action under Section The Agency has determined that the amendments to Section limiting the payment of tax revenues to an amount not greater than the difference between a redevelopment agency s total outstanding debt obligations and total available revenues, as reported on the redevelopment agency s reconciliation statement, will not have an adverse impact on the Agency s ability to meet its debt service obligations. Section Payments Health & Safety Code Section permits taxing entities affected by the adoption of a redevelopment project area to adopt resolutions requiring the County to transfer a portion of the tax revenues otherwise payable to the Agency to such taxing entities. Affected taxing agencies which are school districts and community college districts are automatically eligible to receive such payments and do not have to adopt a resolution. Such payments are of tax revenues attributable to an increase in the tax rate imposed for the benefit of the affected taxing entity, and tax revenues attributable to the affected taxing entity equal to the difference between the amount of tax increment which a redevelopment agency would have received based on a plan amendment to receive tax increment using as the base year the year of the original plan adoption, and using as a base year the year of the plan amendment which permits the agency to receive tax increment revenues. Agency and Management THE AGENCY The Agency, acting pursuant to the Redevelopment Law, activated the Agency by Ordinance No. 759 of the City adopted on March 20, Under the terms of this Ordinance the City Council declared itself to be the governing body of the Agency. The Agency appoints an Executive Director to implement Agency policies and administer redevelopment activities. The City Manager presently serves as the Agency s Executive Director. The City provides all staff services to the Agency through a cooperation agreement, including fiscal services, planning, engineering, legal assistance, property services, relocation and other functions necessary for project development. As City employees, staff assigned to the Agency participate in all of the City s employee benefit programs. In addition, the Agency retains the services of independent consultants and advisors to assist in legal and financing aspects, property appraisal and acquisition, relocation, land use studies and such other areas of competence deemed necessary by the Board. 35

42 The current members of the City Council and their term expirations are as follows: Board Member Term Expires Agency Powers John Moreno, Chairman July 2012 Luis J. Castro, Vice-Chairman July 2012 Maritza Hurtado, Member July 2014 Daniel Romero, Member July 2012 Bill Hodge, Member July 2014 All powers of the Agency are vested in its five members who are elected members of the City Council. Pursuant to the Law, the Agency is a separate public body and may exercise governmental functions in planning and implementing redevelopment projects. The Agency may exercise broad governmental functions and authority to accomplish its purposes, including, but not limited to, the right to issue bonds or notes for authorized purposes and to expend their proceeds, and the right to acquire, sell, rehabilitate, develop, administer or lease property. The Agency may demolish buildings, clear land and cause to be constructed certain improvements, including streets, sidewalks and utilities, and can further prepare for use as a building site any real property which it owns or administers. The Agency may, from any funds made available to it for such purposes, pay for all or part of the value of land and the cost of buildings, facilities, or other improvements to be publicly owned and operated, provided that such improvements are of benefit to a redevelopment project area and cannot be financed by any other reasonable method. The Agency may not construct or develop buildings, with the exception of public buildings, and must sell or lease cleared property which it acquires within a redevelopment project area for redevelopment in conformity with a particular redevelopment plan, and may further specify a period within which such redevelopment must begin and be completed. 36

43 Overlapping Debt Statement COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF CALEXICO MERGED CENTRAL BUSINESS DISTRICT AND RESIDENTIAL REDEVELOPMENT PROJECT AREA Assessed Valuation: $669,298,639 Base Year Valuation: 77,079,260 Incremental Valuation: $592,219,379 DIRECT DEBT: % Applicable Debt 2/1/ Tax Allocation Bonds 100. % $ 710, Refunding Tax Allocation Bonds, Series A ,800, Refunding Tax Allocation Bonds, Series B , Refunding Tax Allocation Bonds, Series C ,065, Refunding Tax Allocation Bonds ,870,000 TOTAL DIRECT DEBT $32,285,000 (1) Ratio to Incremental Valuation: 5.45% OVERLAPPING TAX AND ASSESSMENT DEBT: Imperial Community College District 6.586% $ 5,156,275 Calexico Unified School District ,994,620 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $16,150,895 OVERLAPPING GENERAL FUND DEBT: Imperial County Certificates of Participation 0.894% $ 109,157 Imperial County Pension Obligations ,546 Imperial County Office of Education Certificates of Participation ,851 Imperial Community College District General Fund Obligations ,941 Calexico Unified School District Certificates of Participation ,540 City of Calexico General Fund Obligations ,043 TOTAL GROSS OVERLAPPING GENERAL FUND DEBT $1,145,078 Less: City of Calexico General Fund Obligations (100% supported by water and wastewater enterprise revenues) 164,043 TOTAL NET OVERLAPPING GENERAL FUND DEBT $ 981,035 GROSS COMBINED TOTAL DIRECT AND OVERLAPPING DEBT $49,580,973 (2) NET COMBINED TOTAL DIRECT AND OVERLAPPING DEBT $49,416,930 (1) Excludes tax allocation bonds to be sold. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations Ratios to Assessed Valuation: Gross Combined Total Direct and Overlapping Debt % Net Combined Total Direct and Overlapping Debt % STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/10: $0 Financial Information Included as APPENDIX B to this Official Statement are the audited financial statements of the Agency for the Fiscal Year ended June 30, The Agency s financial statements for the Fiscal Year ended June 30, 2010 have been audited by Caporicci & Larson, Inc., certified public accountants. Caporicci & Larson, Inc was not requested to consent to the inclusion of its report in APPENDIX B and it 37

44 has not undertaken to update its report or to take any action intended or likely to elicit information concerning the accuracy, completeness or fairness of the statements made in the Official Statement, and no opinion is expressed by Caporicci & Larson, Inc with respect to any event subsequent to the date of its report. Regulatory Issues The Agency is in material compliance with the provisions of the California Environmental Quality Act, constituting Division 13 (commencing with Section 21000) of the California Public Resources Code, with respect to the Project Area. Underwriting CONCLUDING INFORMATION The Bonds are being purchased for reoffering by Kinsell, Newcomb & De Dios, Inc. (the Underwriter ). The Underwriter has agreed to purchase the Bonds for $6,838, reflecting the par amount of the Bonds less an underwriter s discount of $89,000.00, and less a net original issue discount of $192, The contract of purchase pursuant to which the Underwriter is purchasing the Bonds provides that the Underwriter will purchase all the Bonds if any are purchased. The obligation of the Underwriter to make such purchase is subject to certain terms and conditions set forth in such contract of purchase. The Underwriter may offer and sell the Bonds to certain dealers and others at prices different from the prices stated on the cover page of this Official Statement. The Underwriter may change the offering prices from time to time. Legal Opinion Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel, will render an opinion substantially in the form set forth in APPENDIX E hereto, stating that the Indenture is a valid and binding contract of the Agency enforceable in accordance with its terms. The legal opinion is only as to legality and is not intended to be nor is it to be interpreted or relied upon as a disclosure document or an express or implied recommendation as to the investment quality of the Bonds. Tax Matters In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes, and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California personal income tax. Bond Counsel notes that, with respect to corporations, interest (and original issue discount) on the Bonds may be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of corporations. The difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of a maturity is to be sold to the public) and the stated redemption price at maturity with respect to the Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bondowner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Bondowner will 38

45 increase the Bondowner s basis in the applicable Bond. The amount of original issue discount that accrues to the owner of the Bond is excluded from gross income of such owner for federal income tax purposes, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and is exempt from State of California personal income tax. Bond Counsel s opinion as to the exclusion from gross income for federal income tax purposes of interest on the Bonds (and original issue discount) is based upon certain representations of fact and certifications made by the Agency and others and is subject to the condition that the Agency complies with all requirements of the Internal Revenue Code of 1986, as amended (the Code ), that must be satisfied subsequent to the issuance of the Bonds to assure that interest (and original issue discount) on the Bonds will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause the interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The Agency has covenanted to comply with all such requirements. The amount by which a Bond Owner s original basis for determining loss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable Bond premium, which must be amortized under Section 171 of the Code; such amortizable Bond premium reduces the Bond Owner s basis in the applicable Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Bond Owner realizing a taxable gain when a Bond is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the Owner. Purchasers of the Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable Bond premium. The Internal Revenue Service (the IRS ) has initiated an expanded program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the Bonds will be selected for audit by the IRS. It is also possible that the market value of the Bonds might be affected as a result of such an audit of the Bonds (or by an audit of similar bonds). No assurance can be given that in the course of an audit, as a result of an audit, or otherwise, Congress or the IRS might not change the Code (or interpretation thereof) subsequent to the issuance of the Bonds to the extent that it adversely affects the exclusion from gross income of interest (and original issue discount) on the Bonds or their market value. It is possible that subsequent to the issuance of the Bonds there might be federal, state, or local statutory changes (or judicial or regulatory interpretations of federal, state, or local law) that affect the federal, State, or local tax treatment of the Bonds or the market value of the Bonds. No assurance can be given that subsequent to the issuance of the Bonds such changes or interpretations will not occur. Bond Counsel s opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Bond Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. Bond Counsel s engagement with respect to the Bonds terminates upon their issuance and Bond Counsel disclaims any obligation to update the matters set forth in its opinion. The Indenture and the Tax Certificate relating to the Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with respect thereto. Bond Counsel expresses no opinion as to the effect on the exclusion from gross income for federal income tax purposes of interest (and original issue discount) with respect to any Bond as to which any such action is taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation. 39

46 Although Bond Counsel has rendered an opinion that interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes provided that the Agency continues to comply with certain requirements of the Code, the ownership of the Bonds and the accrual or receipt of interest (and original issue discount) with respect to the Bonds may otherwise affect the tax liability of certain persons. Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any of the Bonds, all potential purchasers should consult their tax advisors with respect to collateral tax consequences relating to the Bonds. No Litigation A copy of the proposed form of opinion of Bond Counsel is attached hereto as Appendix E. There is no action, suit or proceeding known to the Agency to be pending or threatened, restraining or enjoining the execution or delivery of the Bonds or the Indenture or in any way contesting or affecting the validity of the foregoing or any proceedings of the Agency taken with respect to any of the foregoing. In the opinion of the Agency and its counsel, there are no lawsuits or claims pending against the Agency which will materially affect the Agency s finances as to impair the ability to pay principal of or interest on the Bonds when due. Rating The Agency anticipates that Standard & Poor s, a division of The McGraw-Hill Companies Inc. ( S&P ) will assign its municipal bond rating of A- to the Bonds. Such rating reflects only the views of S&P and any desired explanation of the significance of such rating should be obtained from S&P, at the following address: Standard & Poor s Ratings Group, 55 Water Street, 45th Floor, New York, New York There is no assurance that the rating will continue for any given period of time or that S&P will not be revised downward or withdrawn entirely by S&P, if in the judgment of S&P circumstances so warrant. Any such downward revision or withdrawal of either of the ratings may have an adverse effect on the market price of the Bonds. Professional Fees In connection with the issuance of the Bonds, fees payable to certain professionals, including the Underwriter, Stradling Yocca Carlson & Rauth, a Professional Corporation, as Bond Counsel, Richards Watson & Gershon, A Professional Corporation, as Disclosure Counsel, Urban Futures, as financial advisor, and The Bank of New York Mellon Trust Co., N.A., as Trustee, are contingent upon the issuance of the Bonds. Miscellaneous All of the preceding summaries of the Indenture, the Redevelopment Law, other applicable legislation, the Redevelopment Plan, agreements and other documents are made subject to the provisions of such documents respectively and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the Agency for further information in connection therewith. This Official Statement does not constitute a contract with the purchasers of the Bonds. Any statements made in this Official Statement involving matters of opinion or estimates, whether or not expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized. 40

47 The execution and delivery of this Official Statement by the Agency has been duly authorized by the Executive Director of the Agency. COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF CALEXICO By: /s/ Oscar Rodriquez Acting Executive Director 41

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49 APPENDIX A CITY OF CALEXICO SUPPLEMENTAL INFORMATION The following information concerning the City of Calexico is presented as general background data, The Bonds are payable solely from Special Taxes levied by the District as described in the Official Statement. The Bonds are not an obligation of the City, and the taxing power of the City is not pledged to to the payment of the Bonds (except to the limited extent described herein). General Information The City of Calexico (the City ) is located in Imperial County, California, approximately 120 miles east of the City of San Diego and approximately 60 miles west of Yuma, Arizona. The City lies adjacent to the City of Mexicali, the capital of the State of Baja, Mexico, and its strategic border location makes it a prime link between the interior of Mexico and the major markets along the West Coast of the United States. Mexicali s population is approximately 1 million. As of July 1, 2010, the City had an estimated population of 40,075. The City encompasses an area of approximately four square miles with an average elevation at sea level. Its summers are hot and dry, with the winters being mild and generally dry. The average rainfall is 1.75 inches. The City is a general law city incorporated in 1908 with a Council/City Manager form of government consisting of five Council members elected to four-year overlapping terms. Transportation and Economy The City is served by California State Highways 98 and 111, with direct connection to Interstate 8 which lies seven miles north of the City. The City s location adjacent to the United States - Mexican border provides overnight trucking access to regional transportation hubs and the ports of Long Beach, California and Ensenada, Mexico. There are eighteen common carriers for intrastate and interstate truck service to the City. Rail service is provided by Union Pacific Railroad and connects the City with the main line to Portland, Oregon; Rock Island, Illinois; Tucumcari, New Mexico; St. Louis, Missouri; and New Orleans, Louisiana. The City is served by Calexico International Airport which is the U.S. Customs and Border Protection check-point for private passenger and air-cargo flights entering the U.S. from Mexico. General aviation facilities and scheduled passenger and air-cargo service to Los Angeles International Airport, Phoenix Sky Harbor International Airport, and other points are available at Imperial County Airport (Boley Field), located 17 miles north of the City. Each year, more than 1 million vehicles and pedestrians cross into the United States through the City s two ports-of-entry. The East Calexico Port-of-Entry provides an improved link to major trucking routes, and has increased the efficiency with which people and goods move between Mexico and the United States. Mexicali is a major business center, with large manufacturing and agricultural industries and a busy rail line into California. The economic growth in Mexicali relies on numerous assembly plants, mainly for products to be exported to the United States, including facilities operated by corporations that presently include: Daewoo, Mitsubishi, Honeywell, Cardinal Health, Bosch, Price Pfister, Gulfstream, Goodrich, Kenworth and Kwikset. Population The following table shows the estimated population growth for the City, the County and the State of California for calendar years 1980, 1990, 2000, and 2005 through A-1

50 Calendar Year City of Calexico CITY OF CALEXICO City, County and State Population Growth Calendar Years 1980, 1990, 2000, 2005 through 2010 (1) % Change from Prior Period Imperial County % Change from Prior Period State of California % Change from Prior Year , % (2) 92, % (2) 23,782, % (2) , , ,558, , , ,873, , , ,676, , , ,087, , , ,463, , , ,871, , , ,255, , , ,648, (1) Except for years 1990 and 2000 where estimates are as of April 1, all estimates are as of January 1. (2) Percent change since Source: State of California, Department of Finance estimates. Agriculture The City is located in the southeast portion of the Imperial Valley for which the Colorado River is the source of irrigation water. The eighty mile long All-American Canal delivers water to the region which is known for its midwinter vegetables crops (lettuce, cauliflower, broccoli, cabbage, asparagus and carrots) as well as spring production of warm-season vegetables (onions, sweet corn, bell pepper, chili peppers, cantaloupes, and melons). Alfalfa, baled for shipment to dairies throughout California, is the area s major agronomic crop, comprising approximately forty percent of the irrigated acreage in the Imperial Valley. Sugar beets are also a major crop, as well as wheat, and sudangrass for hay which is used for export. Livestock is also an integral part of the agricultural industry in Imperial County, including large-scale feedlot operations for cattle. The adjacent Mexicali Valley is the agricultural heart of Baja, Mexico, responsible for some of the largest crops in Mexico, including wheat and cotton. With an ensured supply of water from the Colorado River, Mexicali has also become an important exporter of asparagus, broccoli, green onion and radish. Education The Calexico Unified School District includes seven elementary schools (Charles Elementary, Dool Elementary, Jefferson Elementary, Kennedy Gardens Elementary, Mains Elementary and Rockwood Elementary), three junior high schools (William Moreno Junior High, Enrique Camarena Junior High and De Anza Junior High), two high schools (Aurora High and Calexico High) and the Robert F. Moreno Adult Education Center. Advanced education is available at two colleges: Imperial Valley College (a two-year campus) in Imperial, California and the Imperial Valley Campus (the Campus ) of the San Diego State University ( SDSU ), which is located in the City. Established in 1959 by an act of the State legislature, the Campus is accredited as an integral division of SDSU and offers the last two years of undergraduate education, graduate programs, and fifth year credential programs for teacher preparation. The Campus accepts students who have at least 60 transferable units from community colleges or other accredited institutions. A-2

51 The City of Mexicali offers many educational opportunities that contribute to the skilled work force in the region, including the Universidad Autónoma de Baja California, Instituto Teconológico de Mexicali, UNIVER Mexicali, and Universidad del Valle de Mexico Campus Mexicali. City s Taxable Valuation Taxable valuation within the City is established by the Imperial County Assessor (the County Assessor ), except for utility property, which is assessed by the State Board of Equalization. Article XIIIA of the State Constitution provides that, beginning with the fiscal year, property taxes in California are limited to one percent of full cash value, except for taxes to pay debt service on indebtedness approved by the voters prior to July 1, 1978 and debt service on bonded indebtedness for the acquisition or improvement of real property approved on or after July 1, 1978 by a two-thirds vote of the people. Article XIIIA defines full cash value as the County Assessor s valuation of real property as shown on the tax bill ( base year ) except in the case of newly-constructed property or property which undergoes a change in ownership. Yearly taxable value increases following the base year are limited to the growth in the consumer price index, but may not exceed two percent annually. For assessment and collection purposes, property is classified either as secured or unsecured, and is listed accordingly on separate parts of the assessment roll. The secured roll is that part of the assessment roll containing State assessed property and property the taxes on which are a lien on real property sufficient, in the opinion of the County Assessor, to secure payment of the taxes. Other property is assessed on the unsecured roll. A ten-year summary of the City s taxable valuation is set forth below. These figures are presented for historical comparison, with reference only to the time frame of the years shown inasmuch as Article XIIIA of the State Constitution, discussed previously, will have an effect upon future taxable valuation of the City. Fiscal Year Ending June 30 Secured Property Valuation (1) CITY OF CALEXICO TAXABLE VALUATION FOR THE PERIOD Unsecured Property Valuation Homeowners Exemption Net Secured Valuation 2002 $659,447,864 $44,122,158 $20,556,642 $724,126, ,682,029 47,340,197 20,873, ,895, ,071,025 45,551,014 21,891, ,513, ,832,477 46,483,442 23,107, ,423, ,115,402,355 52,014,072 24,781,082 1,192,197, ,220,076,346 59,801,312 25,629,812 1,305,507, ,455,449,206 61,412,763 26,552,099 1,543,414, ,546,160,140 71,120,072 26,678,203 1,643,958, ,481,620,454 67,535,957 26,570,510 1,575,726, ,435,339,986 59,552,243 25,955,833 1,520,848,062 Source: County of Imperial (1) Includes secured utility values A-3

52 Tax Rate A typical tax rate in the City of Calexico is made up as follows: CITY OF CALEXICO TYPICAL TAX RATE (TRA ) Bill Rate Basic 1% Levy % Calexico Unified Bonds Imperial Community College District 2004 Bonds Source: Urban Futures, Inc. Construction Activity The tables below summarize construction activity in Calexico and Imperial County for both single-family and attached living units and commercial units during the last five calendar years. CITY OF CALEXICO BUILDING PERMIT VALUATION (VALUATION IN THOUSANDS OF DOLLARS) Permit Valuation New Single-Family $64,717.4 $21,210.0 $18,107.7 $1,389.9 $2,970.9 New Multi-Family 7, , , Res. Alterations/Additions 2, , , ,464.3 Total Residential $74,642.4 $26,117.6 $29,098.9 $2,312.5 $4,435.2 New Commercial $4,081.9 $5,838.3 $10,415.5 $1,500.0 $0.0 New Industrial New Other 2, , , Com. Alterations/Additions 1, , , , ,155.9 Total Nonresidential $8,477.9 $10,727.2 $15,842.6 $5,082.4 $1,899.2 New Dwelling Units Single Family Multiple Family Total Source: Construction Industry Research Board, Building Permit Summary. A-4

53 IMPERIAL COUNTY BUILDING PERMIT VALUATION (VALUATION IN THOUSANDS OF DOLLARS) Permit Valuation New Single-Family $442,042.7 $292,528.1 $101,221.1 $40,193.0 $32,434.8 New Multi-Family 14, , , , Res. Alterations/Additions 9, , , , ,337.8 Total Residential $466,685.4 $319,754.7 $138,139.3 $62,656.4 $40,477.7 New Commercial $36,691.9 $38,658.5 $57,280.7 $23,839.8 $4,455.2 New Industrial , , New Other 11, , , , ,959.2 Com. Alterations/Additions 17, , , , ,369.2 Total Nonresidential $66,060.3 $71,952.0 $94,066.3 $50,074.2 $20,783.6 New Dwelling Units Single Family 2,722 1, Multiple Family Total 2,974 1,850 1, Source: Construction Industry Research Board, Building Permit Summary. Commerce The number of establishments selling merchandise subject to sales tax and the valuation of taxable transactions are presented in the following tables. CITY OF CALEXICO TAXABLE RETAIL STORES NUMBER OF PERMITS AND VALUATION OF TAXABLE TRANSACTIONS Year Taxable Permits Retail Stores Value of Transactions Taxable Permits Total All Outlets Value of Transactions ,323 $ 373,094,000 2,217 $ 404,590, , ,855,000 2, ,867, , ,141,000 1, ,425, , ,274,000 1, ,621, (1) 1, ,824,000 1, ,895,000 Source: California State Board of Equalization, Taxable Sales in California (Sales & Use Tax) (1) Food Stores are included in the Retail Stores category as of A-5

54 IMPERIAL COUNTY NUMBER OF PERMITS AND VALUATION OF TAXABLE TRANSACTIONS (Valuations in Thousands) Retail Stores Total All Outlets Year No. of Permits Taxable Transactions Percent Change No. of Permits Taxable Transactions Percent Change ,450 $ 1,436, % 4,343 $ 2,000, % ,571 1,566, ,421 2,148, ,443 1,554, ,079 2,253, ,481 1,426, ,118 2,179, (1) 2,373 1,216, ,432 1,773, (1) Food Stores are included in the Retail Stores category as of Source: California State Board of Equalization, Taxable Sales in California (Sales & Use Tax) Employment and History The following table summarizes the civilian labor force in Imperial County for the calendar years 2005 through These figures are countywide statistics and may not accurately reflect employment trends in the City. IMPERIAL COUNTY Annual Average Industrial Employment (1) Calendar Years 2005 through 2009 Industry Private, non-farm Goods producing: Natural resources, mining and construction 1,900 2,000 1,900 1,700 1,500 Manufacturing durable goods Manufacturing non-durable goods 1,500 1,700 1,700 1,800 1,800 Service Providing: Wholesale trade 1,700 1,600 1,900 1,800 1,700 Retail trade 7,300 7,700 7,500 7,600 7,000 Transport., warehousing and utilities 1,800 1,800 1,800 1,800 1,800 Information Financial activities 1,300 1,400 1,400 1,300 1,300 Professional and business services 2,200 2,600 2,700 3,000 2,700 Educational and health services 2,800 2,900 2,900 3,400 3,800 Leisure and hospitality 3,100 3,300 3,500 3,600 3,400 Other services 1,000 1,100 1,200 1, Subtotal 25,700 27,300 27,800 28,300 26,600 Government 16,800 17,400 18,100 18,500 18,800 Farm 10,600 11,500 10,100 11,400 9,200 (1) Total 53,100 56,200 56,000 58,200 54,600 Employment reported by place of work; does not include persons involved in labor-management disputes. Figures are rounded to the nearest hundred. Columns may not add due to rounding. Based on March 2009 benchmark. Not seasonally adjusted. Source: State of California, Employment Development Department. A-6

55 Personal Income Personal income information for Imperial County, the State of California and the United States are summarized in the table below. Industrial Development MEDIAN HOUSEHOLD EFFECTIVE BUYING INCOME (EBI) IMPERIAL COUNTY, CALIFORNIA AND UNITED STATES Year Imperial County State of California United States ,896 47,021 41, ,271 47,864 42,303 Source: Sales and Marketing Management, "Survey of Buying Power." The City has become a prime target area for manufacturing and assembly plants. Industrial development is on the move with the near future completion and expansion of several properties. Several sites within the City limits are zoned for light industry, the premier development being the 66-acre Industrial Park. The Industrial Park is being developed by the Calexico Community Action Council, Inc. This Park is in a prime industrial location situated two miles north of the Point of Entry along the State Highway 111. Seven miles to the north is Interstate 8 which provides highway access to all major western markets. Airport and rail services are also available. There are 410 acres in the city limits zoned for light industry; about 40% is vacant and available in parcels ranging in size from 1 to 10 acres. Included in this acreage total is one industrial park. The terrain is 1% slope. Drainage is generally good. Subsoil is adobe, and piling is not required. Sizes of water mains range from two to 18 inches. Sizes of sewer lines range from six to 36 inches. Description of sites zoned for industry outside the City limits in other tracts or districts: approximately 168 acres are zoned light industry and adjoins the City in the North. Utilities Water is supplied by the Calexico Water Department. Southern California Gas Company supplies natural gas, and electric power is provided by Imperial Irrigation District. Telephone service is available through Verizon Communications and trash collection is provided by Newco Company. Community Service Facilities The City has two general hospitals (El Centro Regional Medical Center and Pioneer Memorial Healthcare District) and several medical clinics serving its residents. The City has ten churches, one library, one daily newspaper, one weekly newspaper, two radio stations, one television station, one television cable system, four banks, one savings and loan, seven parks, two playgrounds and one theater. Other recreational facilities include the International Golf Course and Country Club and a multitude of activities in Mexicali, Baja California, and Mexico. A-7

56 The Calexico Community Center provides entertainment and recreation facilities for the community. A monthly publication Calexico Today also serves the City by providing important community information. Police and fire protection is maintained by the City to serve the residents. Other Geothermal energy is being produced in the area and solar and wind energy are both potentially important sources for future development. In addition, significant archaeological discoveries have been made in the area and there is continuing archaeological fieldwork. Recreational areas include the Glamis Dunes, the Salton Sea, which is the State s largest inland lake, the Laguna Mountains and the Colorado River. A-8

57 APPENDIX B AGENCY AUDITED FINANCIAL STATEMENTS FOR FISCAL YEAR ENDED JUNE 30, 2010 B-1

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59 Community Redevelopment Agency of the City of Calexico Calexico, California Basic Financial Statements and Independent Auditors Reports For the fiscal year ended June 30, 2010