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Home My WebLink AboutAgenda Packet - EVWD Board of Directors - 11/09/2022BOARD OF DIRECTORS NOVEMBER 9, 2022 East Valley Water District was formed in 1954 and provides water and wastewater services to 104,000 residents within the cities of San Bernardino and Highland, and portions of San Bernardino County. EVWD operates under the direction of a 5member elected Board. GOVERNING BOARD EXECUTIVE MANAGEMENT Phillip R. Goodrich Chairman of the Board Michael Moore General Manager/CEO James Morales, Jr. ViceChairman Brian W. Tompkins Chief Financial Officer Chris Carrillo Governing Board Member Jeff Noelte Director of Engineering & Operations Ronald L. Coats Governing Board Member Kelly Malloy Director of Strategic Services David E. Smith Governing Board Member Kerrie Bryan Director of Administrative Services Justine Hendricksen District Clerk Patrick Milroy Operations Manager Rocky Welborn Water Reclamation Manager Board of Directors Regular Meeting & Public Hearing November 09, 2022 5:30 PM Closed Session begins at 4:30 p.m. 31111 Greenspot Road, Highland, CA 92346 www.eastvalley.org PLEASE NOTE: Materials related to an item on this agenda submitted to the Board after distribution of the agenda packet are available for public inspection in the District’s office located at 31111 Greenspot Rd., Highland, during normal business hours. Also, such documents are available on the District’s website at eastvalley.org and are subject to staff’s ability to post the documents before the meeting. Pursuant to Government Code Section 54954.2(a), any request for a disabilityrelated modification or accommodation, including auxiliary aids or services, that is sought in order to participate in the above agendized public meeting should be directed to the District Clerk at (909) 8854900 at least 72 hours prior to said meeting. In order to comply with legal requirements for posting of agenda, only those items filed with the District Clerk by 12:00 p.m. on Wednesday prior to the following Wednesday meeting not requiring departmental investigation, will be considered by the Board of Directors. CALL TO ORDER ROLL CALL OF BOARD MEMBERS PUBLIC COMMENTS Any person wishing to speak to the Board of Directors is asked to complete a Speaker Card and submit it to the District Clerk prior to the start of the meeting. Each speaker is limited to three (3) minutes, unless waived by the Chairman of the Board. Under the State of California Brown Act, the Board of Directors is prohibited from discussing or taking action on any item not listed on the posted agenda. The matter will automatically be referred to staff for an appropriate response or action and may appear on the agenda at a future meeting. 1.AGENDA This agenda contains a brief general description of each item to be considered. Except as otherwise provided by law, no action shall be taken on any item not appearing on the following agenda unless the Board of Directors makes a determination that an emergency exists or that a need to take immediate action on the item came to the attention of the District subsequent to the posting of the agenda. a.Approval of Agenda RECESS INTO CLOSED SESSION 2.CLOSED SESSION a.CONFERENCE WITH LEGAL COUNSEL – ANTICIPATED LITIGATION [Government Code Section 54956.9(e)(3)] Claimant: Dale Downs Entity Subject to Claim: East Valley Water District b.CONFERENCE WITH LEGAL COUNSEL – EXISTING LITIGATION [Government Code Section 54956.9(d)(1)] Name of Case: East Valley Water District v. Brucie Cagle, et al., CASE NO. CIVSB 2112619 [CrossComplaint: Raley v. North Fork Water Company, et al.] 5:30 PM RECONVENE MEETING PLEDGE OF ALLEGIANCE ROLL CALL OF BOARD MEMBERS ANNOUNCEMENT OF CLOSED SESSION ACTIONS ITEMS PRESENTATIONS AND CEREMONIAL ITEMS Presentation to Norman Terry for 25 Years of Dedicated Public Service PUBLIC COMMENTS 3.APPROVAL OF CONSENT CALENDAR All matters listed under the Consent Calendar are considered by the Board of Directors to be routine and will be enacted in one motion. There will be no discussion of these items prior to the time the board considers the motion unless members of the board, the administrative staff, or the public request specific items to be discussed and/or removed from the Consent Calendar. a.Approve the October 12, 2022 Regular Board Meeting Minutes b.Approve the October 26, 2022 Regular Board Meeting Minutes c.Investment Transaction Report for Month Ended October 31, 2022 d.Approval of Directors' Fees and Expenses for October 2022 4.INFORMATIONAL ITEMS a.Legislative Update 5.DISCUSSION AND POSSIBLE ACTION ITEMS a.Formation of Community Facilities District (CFD) 20221 (Palm & Highland): Consider Adoption of Resolution 2022.21, CFD 20221 Resolution 2022.01, CFD 20221 Resolution 2022.02, and CFD 20221 Ordinance No. 1; Public Hearing b.Consider Approval of Agreement for LowIncome Household Water Assistance Program (LIHWAP) with Horne LLC, to Disperse Grant Funding c.Consider Authorization to Transfer Unclaimed Funds into the District's General Fund 6.REPORTS a.Board of Directors’ Reports b.General Manager/CEO Report c.Legal Counsel Report d.Board of Directors’ Comments ADJOURN BOARD OF DIRECTORSNOVEMBER 9, 2022East Valley Water District was formed in 1954 and provides water and wastewater services to104,000 residents within the cities of San Bernardino and Highland, and portions of SanBernardino County.EVWD operates under the direction of a 5member elected Board.GOVERNING BOARD EXECUTIVE MANAGEMENTPhillip R. GoodrichChairman of the Board Michael MooreGeneral Manager/CEOJames Morales, Jr.ViceChairman Brian W. TompkinsChief Financial OfficerChris CarrilloGoverning Board Member Jeff NoelteDirector of Engineering & OperationsRonald L. CoatsGoverning Board Member Kelly MalloyDirector of Strategic ServicesDavid E. SmithGoverning Board Member Kerrie BryanDirector of Administrative ServicesJustine HendricksenDistrict ClerkPatrick Milroy Operations Manager Rocky Welborn Water Reclamation Manager Board of Directors Regular Meeting & Public Hearing November 09, 2022 5:30 PM Closed Session begins at 4:30 p.m. 31111 Greenspot Road, Highland, CA 92346 www.eastvalley.org PLEASE NOTE: Materials related to an item on this agenda submitted to the Board after distribution of the agenda packet are available for public inspection in the District’s office located at 31111 Greenspot Rd., Highland, during normal business hours. Also, such documents are available on the District’s website at eastvalley.org and are subject to staff’s ability to post the documents before the meeting. Pursuant to Government Code Section 54954.2(a), any request for a disabilityrelated modification or accommodation, including auxiliary aids or services, that is sought in order to participate in the above agendized public meeting should be directed to the District Clerk at (909) 8854900 at least 72 hours prior to said meeting. In order to comply with legal requirements for posting of agenda, only those items filed with the District Clerk by 12:00 p.m. on Wednesday prior to the following Wednesday meeting not requiring departmental investigation, will be considered by the Board of Directors. CALL TO ORDER ROLL CALL OF BOARD MEMBERS PUBLIC COMMENTS Any person wishing to speak to the Board of Directors is asked to complete a Speaker Card and submit it to the District Clerk prior to the start of the meeting. Each speaker is limited to three (3) minutes, unless waived by the Chairman of the Board. Under the State of California Brown Act, the Board of Directors is prohibited from discussing or taking action on any item not listed on the posted agenda. The matter will automatically be referred to staff for an appropriate response or action and may appear on the agenda at a future meeting. 1.AGENDA This agenda contains a brief general description of each item to be considered. Except as otherwise provided by law, no action shall be taken on any item not appearing on the following agenda unless the Board of Directors makes a determination that an emergency exists or that a need to take immediate action on the item came to the attention of the District subsequent to the posting of the agenda. a.Approval of Agenda RECESS INTO CLOSED SESSION 2.CLOSED SESSION a.CONFERENCE WITH LEGAL COUNSEL – ANTICIPATED LITIGATION [Government Code Section 54956.9(e)(3)] Claimant: Dale Downs Entity Subject to Claim: East Valley Water District b.CONFERENCE WITH LEGAL COUNSEL – EXISTING LITIGATION [Government Code Section 54956.9(d)(1)] Name of Case: East Valley Water District v. Brucie Cagle, et al., CASE NO. CIVSB 2112619 [CrossComplaint: Raley v. North Fork Water Company, et al.] 5:30 PM RECONVENE MEETING PLEDGE OF ALLEGIANCE ROLL CALL OF BOARD MEMBERS ANNOUNCEMENT OF CLOSED SESSION ACTIONS ITEMS PRESENTATIONS AND CEREMONIAL ITEMS Presentation to Norman Terry for 25 Years of Dedicated Public Service PUBLIC COMMENTS 3.APPROVAL OF CONSENT CALENDAR All matters listed under the Consent Calendar are considered by the Board of Directors to be routine and will be enacted in one motion. There will be no discussion of these items prior to the time the board considers the motion unless members of the board, the administrative staff, or the public request specific items to be discussed and/or removed from the Consent Calendar. a.Approve the October 12, 2022 Regular Board Meeting Minutes b.Approve the October 26, 2022 Regular Board Meeting Minutes c.Investment Transaction Report for Month Ended October 31, 2022 d.Approval of Directors' Fees and Expenses for October 2022 4.INFORMATIONAL ITEMS a.Legislative Update 5.DISCUSSION AND POSSIBLE ACTION ITEMS a.Formation of Community Facilities District (CFD) 20221 (Palm & Highland): Consider Adoption of Resolution 2022.21, CFD 20221 Resolution 2022.01, CFD 20221 Resolution 2022.02, and CFD 20221 Ordinance No. 1; Public Hearing b.Consider Approval of Agreement for LowIncome Household Water Assistance Program (LIHWAP) with Horne LLC, to Disperse Grant Funding c.Consider Authorization to Transfer Unclaimed Funds into the District's General Fund 6.REPORTS a.Board of Directors’ Reports b.General Manager/CEO Report c.Legal Counsel Report d.Board of Directors’ Comments ADJOURN BOARD OF DIRECTORSNOVEMBER 9, 2022East Valley Water District was formed in 1954 and provides water and wastewater services to104,000 residents within the cities of San Bernardino and Highland, and portions of SanBernardino County.EVWD operates under the direction of a 5member elected Board.GOVERNING BOARD EXECUTIVE MANAGEMENTPhillip R. GoodrichChairman of the Board Michael MooreGeneral Manager/CEOJames Morales, Jr.ViceChairman Brian W. TompkinsChief Financial OfficerChris CarrilloGoverning Board Member Jeff NoelteDirector of Engineering & OperationsRonald L. CoatsGoverning Board Member Kelly MalloyDirector of Strategic ServicesDavid E. SmithGoverning Board Member Kerrie BryanDirector of Administrative ServicesJustine HendricksenDistrict ClerkPatrick Milroy Operations ManagerRocky Welborn Water Reclamation ManagerBoard of Directors Regular Meeting & Public HearingNovember 09, 2022 5:30 PMClosed Session begins at 4:30 p.m.31111 Greenspot Road, Highland, CA 92346 www.eastvalley.orgPLEASE NOTE:Materials related to an item on this agenda submitted to the Board after distribution of theagenda packet are available for public inspection in the District’s office located at 31111Greenspot Rd., Highland, during normal business hours. Also, such documents are availableon the District’s website at eastvalley.org and are subject to staff’s ability to post thedocuments before the meeting.Pursuant to Government Code Section 54954.2(a), any request for a disabilityrelatedmodification or accommodation, including auxiliary aids or services, that is sought in orderto participate in the above agendized public meeting should be directed to the District Clerkat (909) 8854900 at least 72 hours prior to said meeting. In order to comply with legal requirements for posting of agenda, only those items filed with the District Clerk by 12:00 p.m. on Wednesday prior to the following Wednesday meeting not requiring departmental investigation, will be considered by the Board of Directors. CALL TO ORDER ROLL CALL OF BOARD MEMBERS PUBLIC COMMENTS Any person wishing to speak to the Board of Directors is asked to complete a Speaker Card and submit it to the District Clerk prior to the start of the meeting. Each speaker is limited to three (3) minutes, unless waived by the Chairman of the Board. Under the State of California Brown Act, the Board of Directors is prohibited from discussing or taking action on any item not listed on the posted agenda. The matter will automatically be referred to staff for an appropriate response or action and may appear on the agenda at a future meeting. 1.AGENDA This agenda contains a brief general description of each item to be considered. Except as otherwise provided by law, no action shall be taken on any item not appearing on the following agenda unless the Board of Directors makes a determination that an emergency exists or that a need to take immediate action on the item came to the attention of the District subsequent to the posting of the agenda. a.Approval of Agenda RECESS INTO CLOSED SESSION 2.CLOSED SESSION a.CONFERENCE WITH LEGAL COUNSEL – ANTICIPATED LITIGATION [Government Code Section 54956.9(e)(3)] Claimant: Dale Downs Entity Subject to Claim: East Valley Water District b.CONFERENCE WITH LEGAL COUNSEL – EXISTING LITIGATION [Government Code Section 54956.9(d)(1)] Name of Case: East Valley Water District v. Brucie Cagle, et al., CASE NO. CIVSB 2112619 [CrossComplaint: Raley v. North Fork Water Company, et al.] 5:30 PM RECONVENE MEETING PLEDGE OF ALLEGIANCE ROLL CALL OF BOARD MEMBERS ANNOUNCEMENT OF CLOSED SESSION ACTIONS ITEMS PRESENTATIONS AND CEREMONIAL ITEMS Presentation to Norman Terry for 25 Years of Dedicated Public Service PUBLIC COMMENTS 3.APPROVAL OF CONSENT CALENDAR All matters listed under the Consent Calendar are considered by the Board of Directors to be routine and will be enacted in one motion. There will be no discussion of these items prior to the time the board considers the motion unless members of the board, the administrative staff, or the public request specific items to be discussed and/or removed from the Consent Calendar. a.Approve the October 12, 2022 Regular Board Meeting Minutes b.Approve the October 26, 2022 Regular Board Meeting Minutes c.Investment Transaction Report for Month Ended October 31, 2022 d.Approval of Directors' Fees and Expenses for October 2022 4.INFORMATIONAL ITEMS a.Legislative Update 5.DISCUSSION AND POSSIBLE ACTION ITEMS a.Formation of Community Facilities District (CFD) 20221 (Palm & Highland): Consider Adoption of Resolution 2022.21, CFD 20221 Resolution 2022.01, CFD 20221 Resolution 2022.02, and CFD 20221 Ordinance No. 1; Public Hearing b.Consider Approval of Agreement for LowIncome Household Water Assistance Program (LIHWAP) with Horne LLC, to Disperse Grant Funding c.Consider Authorization to Transfer Unclaimed Funds into the District's General Fund 6.REPORTS a.Board of Directors’ Reports b.General Manager/CEO Report c.Legal Counsel Report d.Board of Directors’ Comments ADJOURN BOARD OF DIRECTORSNOVEMBER 9, 2022East Valley Water District was formed in 1954 and provides water and wastewater services to104,000 residents within the cities of San Bernardino and Highland, and portions of SanBernardino County.EVWD operates under the direction of a 5member elected Board.GOVERNING BOARD EXECUTIVE MANAGEMENTPhillip R. GoodrichChairman of the Board Michael MooreGeneral Manager/CEOJames Morales, Jr.ViceChairman Brian W. TompkinsChief Financial OfficerChris CarrilloGoverning Board Member Jeff NoelteDirector of Engineering & OperationsRonald L. CoatsGoverning Board Member Kelly MalloyDirector of Strategic ServicesDavid E. SmithGoverning Board Member Kerrie BryanDirector of Administrative ServicesJustine HendricksenDistrict ClerkPatrick Milroy Operations ManagerRocky Welborn Water Reclamation ManagerBoard of Directors Regular Meeting & Public HearingNovember 09, 2022 5:30 PMClosed Session begins at 4:30 p.m.31111 Greenspot Road, Highland, CA 92346 www.eastvalley.orgPLEASE NOTE:Materials related to an item on this agenda submitted to the Board after distribution of theagenda packet are available for public inspection in the District’s office located at 31111Greenspot Rd., Highland, during normal business hours. Also, such documents are availableon the District’s website at eastvalley.org and are subject to staff’s ability to post thedocuments before the meeting.Pursuant to Government Code Section 54954.2(a), any request for a disabilityrelatedmodification or accommodation, including auxiliary aids or services, that is sought in orderto participate in the above agendized public meeting should be directed to the District Clerkat (909) 8854900 at least 72 hours prior to said meeting.In order to comply with legal requirements for posting of agenda, only those items filedwith the District Clerk by 12:00 p.m. on Wednesday prior to the following Wednesdaymeeting not requiring departmental investigation, will be considered by the Board ofDirectors.CALL TO ORDERROLL CALL OF BOARD MEMBERSPUBLIC COMMENTSAny person wishing to speak to the Board of Directors is asked to complete a SpeakerCard and submit it to the District Clerk prior to the start of the meeting. Each speaker islimited to three (3) minutes, unless waived by the Chairman of the Board. Under the Stateof California Brown Act, the Board of Directors is prohibited from discussing or takingaction on any item not listed on the posted agenda. The matter will automatically bereferred to staff for an appropriate response or action and may appear on the agenda at afuture meeting.1.AGENDAThis agenda contains a brief general description of each item to be considered.Except as otherwise provided by law, no action shall be taken on any item notappearing on the following agenda unless the Board of Directors makes adetermination that an emergency exists or that a need to take immediate action onthe item came to the attention of the District subsequent to the posting of theagenda.a.Approval of AgendaRECESS INTO CLOSED SESSION2.CLOSED SESSIONa.CONFERENCE WITH LEGAL COUNSEL – ANTICIPATED LITIGATION[Government Code Section 54956.9(e)(3)]Claimant: Dale DownsEntity Subject to Claim: East Valley Water Districtb.CONFERENCE WITH LEGAL COUNSEL – EXISTING LITIGATION[Government Code Section 54956.9(d)(1)]Name of Case: East Valley Water District v. Brucie Cagle, et al., CASENO. CIVSB 2112619 [CrossComplaint: Raley v. North Fork Water Company,et al.]5:30 PM RECONVENE MEETING PLEDGE OF ALLEGIANCE ROLL CALL OF BOARD MEMBERS ANNOUNCEMENT OF CLOSED SESSION ACTIONS ITEMS PRESENTATIONS AND CEREMONIAL ITEMS Presentation to Norman Terry for 25 Years of Dedicated Public Service PUBLIC COMMENTS 3.APPROVAL OF CONSENT CALENDAR All matters listed under the Consent Calendar are considered by the Board of Directors to be routine and will be enacted in one motion. There will be no discussion of these items prior to the time the board considers the motion unless members of the board, the administrative staff, or the public request specific items to be discussed and/or removed from the Consent Calendar. a.Approve the October 12, 2022 Regular Board Meeting Minutes b.Approve the October 26, 2022 Regular Board Meeting Minutes c.Investment Transaction Report for Month Ended October 31, 2022 d.Approval of Directors' Fees and Expenses for October 2022 4.INFORMATIONAL ITEMS a.Legislative Update 5.DISCUSSION AND POSSIBLE ACTION ITEMS a.Formation of Community Facilities District (CFD) 20221 (Palm & Highland): Consider Adoption of Resolution 2022.21, CFD 20221 Resolution 2022.01, CFD 20221 Resolution 2022.02, and CFD 20221 Ordinance No. 1; Public Hearing b.Consider Approval of Agreement for LowIncome Household Water Assistance Program (LIHWAP) with Horne LLC, to Disperse Grant Funding c.Consider Authorization to Transfer Unclaimed Funds into the District's General Fund 6.REPORTS a.Board of Directors’ Reports b.General Manager/CEO Report c.Legal Counsel Report d.Board of Directors’ Comments ADJOURN BOARD OF DIRECTORSNOVEMBER 9, 2022East Valley Water District was formed in 1954 and provides water and wastewater services to104,000 residents within the cities of San Bernardino and Highland, and portions of SanBernardino County.EVWD operates under the direction of a 5member elected Board.GOVERNING BOARD EXECUTIVE MANAGEMENTPhillip R. GoodrichChairman of the Board Michael MooreGeneral Manager/CEOJames Morales, Jr.ViceChairman Brian W. TompkinsChief Financial OfficerChris CarrilloGoverning Board Member Jeff NoelteDirector of Engineering & OperationsRonald L. CoatsGoverning Board Member Kelly MalloyDirector of Strategic ServicesDavid E. SmithGoverning Board Member Kerrie BryanDirector of Administrative ServicesJustine HendricksenDistrict ClerkPatrick Milroy Operations ManagerRocky Welborn Water Reclamation ManagerBoard of Directors Regular Meeting & Public HearingNovember 09, 2022 5:30 PMClosed Session begins at 4:30 p.m.31111 Greenspot Road, Highland, CA 92346 www.eastvalley.orgPLEASE NOTE:Materials related to an item on this agenda submitted to the Board after distribution of theagenda packet are available for public inspection in the District’s office located at 31111Greenspot Rd., Highland, during normal business hours. Also, such documents are availableon the District’s website at eastvalley.org and are subject to staff’s ability to post thedocuments before the meeting.Pursuant to Government Code Section 54954.2(a), any request for a disabilityrelatedmodification or accommodation, including auxiliary aids or services, that is sought in orderto participate in the above agendized public meeting should be directed to the District Clerkat (909) 8854900 at least 72 hours prior to said meeting.In order to comply with legal requirements for posting of agenda, only those items filedwith the District Clerk by 12:00 p.m. on Wednesday prior to the following Wednesdaymeeting not requiring departmental investigation, will be considered by the Board ofDirectors.CALL TO ORDERROLL CALL OF BOARD MEMBERSPUBLIC COMMENTSAny person wishing to speak to the Board of Directors is asked to complete a SpeakerCard and submit it to the District Clerk prior to the start of the meeting. Each speaker islimited to three (3) minutes, unless waived by the Chairman of the Board. Under the Stateof California Brown Act, the Board of Directors is prohibited from discussing or takingaction on any item not listed on the posted agenda. The matter will automatically bereferred to staff for an appropriate response or action and may appear on the agenda at afuture meeting.1.AGENDAThis agenda contains a brief general description of each item to be considered.Except as otherwise provided by law, no action shall be taken on any item notappearing on the following agenda unless the Board of Directors makes adetermination that an emergency exists or that a need to take immediate action onthe item came to the attention of the District subsequent to the posting of theagenda.a.Approval of AgendaRECESS INTO CLOSED SESSION2.CLOSED SESSIONa.CONFERENCE WITH LEGAL COUNSEL – ANTICIPATED LITIGATION[Government Code Section 54956.9(e)(3)]Claimant: Dale DownsEntity Subject to Claim: East Valley Water Districtb.CONFERENCE WITH LEGAL COUNSEL – EXISTING LITIGATION[Government Code Section 54956.9(d)(1)]Name of Case: East Valley Water District v. Brucie Cagle, et al., CASENO. CIVSB 2112619 [CrossComplaint: Raley v. North Fork Water Company,et al.]5:30 PM RECONVENE MEETINGPLEDGE OF ALLEGIANCEROLL CALL OF BOARD MEMBERSANNOUNCEMENT OF CLOSED SESSION ACTIONS ITEMSPRESENTATIONS AND CEREMONIAL ITEMSPresentation to Norman Terry for 25 Years of Dedicated Public ServicePUBLIC COMMENTS3.APPROVAL OF CONSENT CALENDARAll matters listed under the Consent Calendar are considered by the Board ofDirectors to be routine and will be enacted in one motion. There will be nodiscussion of these items prior to the time the board considers the motion unlessmembers of the board, the administrative staff, or the public request specific itemsto be discussed and/or removed from the Consent Calendar.a.Approve the October 12, 2022 Regular Board Meeting Minutesb.Approve the October 26, 2022 Regular Board Meeting Minutesc.Investment Transaction Report for Month Ended October 31, 2022d.Approval of Directors' Fees and Expenses for October 20224.INFORMATIONAL ITEMSa.Legislative Update5.DISCUSSION AND POSSIBLE ACTION ITEMSa.Formation of Community Facilities District (CFD) 20221 (Palm & Highland):Consider Adoption of Resolution 2022.21, CFD 20221 Resolution 2022.01,CFD 20221 Resolution 2022.02, and CFD 20221 Ordinance No. 1; PublicHearingb.Consider Approval of Agreement for LowIncome Household Water AssistanceProgram (LIHWAP) with Horne LLC, to Disperse Grant Fundingc.Consider Authorization to Transfer Unclaimed Funds into the District's GeneralFund6.REPORTSa.Board of Directors’ Reports b.General Manager/CEO Report c.Legal Counsel Report d.Board of Directors’ Comments ADJOURN Agenda Item #3a November 9, 20221 Meeting Date: November 9, 2022 Agenda Item #3a Consent Item 5 7 9 Regular Board Meeting TO: Governing Board Members FROM: General Manager/CEO SUBJECT: Approve the October 12, 2022 Regular Board Meeting Minutes RECOMMENDATION That the Board of Directors approve the October 12, 2022 Regular Board meeting minutes as submitted. AGENCY GOALS AND OBJECTIVES II - Maintain a Commitment To Sustainability, Transparency, and Accountability A. Practice Transparent and Accountable Fiscal Management B. Utilize Effective Communication Methods REVIEW BY OTHERS This agenda item has been reviewed by Administration. FISCAL IMPACT There is no fiscal impact associated with this agenda item. Recommended by: ________________ Michael Moore General Manager/CEO Respectfully submitted: ________________ Justine Hendricksen District Clerk ATTACHMENTS Draft October 12, 2022 regular board meeting minutes. Regular Board Meeting Meeting Date: October 12, 2022 CALL TO ORDER The Chairman of the Board called the meeting to order at 5:30 p.m. PLEDGE OF ALLEGIANCE Director Smith led the flag salute. ROLL CALL OF BOARD MEMBERS PRESENT Directors: Carrillo, Coats, Goodrich, Smith ABSENT Directors: Morales STAFF Michael Moore, General Manager/CEO; Brian Tompkins, Chief Financial Officer; Jeff Noelte, Director of Engineering and Operations; Rudy Guerrero, Finance Supervisor; William Ringland, Public Affairs/Conservation Manager; Patrick Milroy, Operations Manager; Rocky Welborn, Water Reclamation Manager; Christi Koide, Business Services Coordinator; Justine Hendricksen, District Clerk LEGAL COUNSEL Jean Cihigoyenetche GUESTS Members of the public. PUBLIC COMMENTS Chairman Goodrich declared the public participation section of the meeting open at 5:32 p.m. There being no written or verbal comments, the public participation section was closed. Subject to approval 6 0 0 1.APPROVAL OF AGENDA a.Approval of Agenda A motion was made by Director Coats, seconded by Director Carrillo, that the Board approve the October 12, 2022 agenda as submitted. The motion carried by the following: Ayes: Carrillo, Coats, Goodrich, Smith Noes: None Absent: Morales 2.APPROVAL OF CONSENT CALENDAR a.August 2022 Disbursements: Accounts payable disbursements for the period include check numbers 259849 through 260037, bank drafts, and ACH payments in the amount of $7,823,683.38 and $478,246.56 for payroll b.Approval of the August 10, 2022 Regular Board Meeting Minutes c.Approval of the September 14, 2022 Regular Board Meeting Minutes d.Approval of the September 28, 2022 Regular Board Meeting Minutes e.Approval of Directors’ Fees and Expenses for September 2022 A motion was made by Director Smith, seconded by Director Coats, that the Board approve the Consent Calendar items as submitted. The motion carried by the following: Ayes: Carrillo, Coats, Goodrich, Smith Noes: None Absent: Morales 3.INFORMATIONAL ITEMS a. Emergency Preparedness Program Update The Director of Strategic Services stated that the District is committed to maintaining critical services during emergency and non-emergency times, and that providing reliable water and sewer services is essential, especially in disaster recovery. She discussed the importance of ensuring District staff are prepared to respond to natural disasters and man-made emergencies, coordinating with other agencies and facilitating mutual assistance. She also discussed emergency preparedness oversight and examples of regulatory agencies involved with emergency preparedness efforts, the Incident Command System, Emergency Response Toolkit, and the District’s Emergency Response Plan. Mr. Fred Yauger asked a question regarding the IPAWS system and how it works with cell phones/providers. 6 0 0 Staff answered several questions from the Board. For information only. 4.DISSCUSSION AND POSSIBLE ACTION ITEMS a. Consider Adoption of Resolution 2022.19 – Imagine a Day Without Water The Director of Strategic Services provided a presentation regarding the District’s participation in Imagine a Day Without Water. A motion was made by Director Coats, seconded by Director Smith, that the Board adopt Resolution 2022.19 as submitted. The motion carried by the following: Ayes: Carrillo, Coats, Goodrich, Smith Noes: None Absent: Morales b. Consider Adoption of Resolution 2022.20 – Participation in the Great California ShakeOut The Director of Strategic Services provided a presentation regarding the District’s participation in the Great California ShakeOut. A motion was made by Director Carrillo, seconded by Director Smith, that the Board adopt Resolution 2022.20 as submitted. The motion carried by the following: Ayes: Carrillo, Coats, Goodrich, Smith Noes: None Absent: Morales 5.REPORTS a.Board of Directors’ Reports Director Carrillo reported on the following: October 5 he attended the City of San Bernadino Council meeting via Zoom; October 7 he discussed District business with the General Manager/CEO; and on October 11 he attended the Inland Action meeting via Zoom where Dr. Isaac, Chancellor of the Riverside Community College District spoke on the economic and educational disparities in the Inland Empire and different efforts the college is taking to mitigate those issues. Director Smith reported on the following: October 7 he discussed the agenda and District business with the General Manager/CEO; and October 11 he attended the San Bernardino Valley Water Conservation District’s regular board meeting. 6 0 0 Director Coats reported on the following: October 10 he attended the Association of San Bernardino County Special Districts board meeting; and October 11 he attended the City of San Bernardino Water Department meeting where they discussed a program that combined construction of three major elements of the greater digester gas beneficial use program into a single design construction package, the project has now been completed. Chairman Goodrich reported on the following: October 5 he attended the State of the County event; October 6 he discussed the agenda and District business with the General Manager/CEO. For information only. b.General Manager/CEO Report The General Manager/CEO announced the following: An unknown individual is asking to enter homes, claiming to be an employee of East Valley Water District. Please note, the District will never request to enter residences to inspect water quality. Customers are advised not to allow them into their home and contact law enforcement immediately. Whenever a customer has questions about District staff visiting homes they should call (909) 889-9501. On Thursday, October 13, a celebration of life service will be held for George “Skip” Wilson at the American Legion Post 421 in Highland at 2:00p.m. Mr. Wilson served as CFO of EVWD from 1988-1990 and Governing Board Member from 1997-2013. Construction is underway at the District’s Surface Water Treatment Plant (Plant 134) in preparation for the installation of Granular Activated Carbon (GAC) technology. On October 17, construction crews will be pouring approximately 180-200 yards of concrete for the GAC foundation. The General Manager/CEO asked that if you are interested in viewing the concrete pour, to please contact him to coordinate a time to meet at the site. (Times between 9am-12pm) On October 22, the District is hosting a conservation workshop at the headquarters beginning at 10:30 a.m. The workshop will discuss water-friendly gardens and how to create a lively garden that attracts butterflies and increases your home’s curb appeal. This will be the final conservation workshop in 2022. Last week was Customer Service Appreciation week. The customer service staff includes seven very talented people that provide a positive image to our customers. Recently the team was split up by having a few of them located at the SNRC. The team has overcome 6 0 0 the logistics of being separated and continued to provide excellent customer service from two locations. The team was celebrated with a dinner and other signs of appreciation. For information only. c.Legal Counsel Report No report at this time. d.Board of Directors’ Comments Director Smith thanked staff for their presentations this evening. Director Coats stated that he is amazed with how many positive comments he receives from the community regarding the world class public service they receive from District staff. Chairman Goodrich thanked the community for attending the meeting tonight. For information only. ADJOURN Chairman Goodrich adjourned the meeting at 6:30 p.m. Phillip R. Goodrich, Board President Michael Moore, Board Secretary Agenda Item #3b November 9, 20221 Meeting Date: November 9, 2022 Agenda Item #3b Consent Item 5 8 0 Regular Board Meeting TO: Governing Board Members FROM: General Manager/CEO SUBJECT: Approve the October 26, 2022 Regular Board Meeting Minutes RECOMMENDATION That the Board of Directors approve the October 26, 2022 regular Board meeting minutes as submitted. AGENCY GOALS AND OBJECTIVES II - Maintain a Commitment To Sustainability, Transparency, and Accountability A. Practice Transparent and Accountable Fiscal Management B. Utilize Effective Communication Methods REVIEW BY OTHERS This agenda item has been reviewed by Administration. FISCAL IMPACT There is no fiscal impact associated with this agenda item. Recommended by: ________________ Michael Moore General Manager/CEO Respectfully submitted: ________________ Justine Hendricksen District Clerk ATTACHMENTS Draft October 26, 2022 regular board meeting minutes. Regular Board Meeting Meeting Date: October 26, 2022 CALL TO ORDER The Chairman of the Board called the meeting to order at 5:30 p.m. PLEDGE OF ALLEGIANCE Director Coats led the flag salute. ROLL CALL OF BOARD MEMBERS PRESENT Directors: Carrillo, Coats, Goodrich, Morales, Smith ABSENT Directors: None STAFF Michael Moore, General Manager/CEO; Brian Tompkins, Chief Financial Officer; Jeff Noelte, Director of Engineering and Operations; Kerrie Bryan, Director of Administrative Services; Kelly Malloy, Director of Strategic Services; William Ringland, Public Affairs/Conservation Manager; Christi Koide, Business Services Coordinator; Justine Hendricksen, District Clerk LEGAL COUNSEL Marty Cihigoyenetche GUESTS Members of the public PUBLIC COMMENTS Chairman Goodrich declared the public participation section of the meeting open at 5:32 p.m. There being no written or verbal comments, the public participation section was closed. Subject to approval 6 0 0 1.APPROVAL OF AGENDA a.Approval of Agenda A motion was made by Director Coats, seconded by Director Carrillo, that the Board approve the October 26, 2022 agenda as submitted. The motion carried by the following: Ayes: Carrillo, Coats, Goodrich, Morales, Smith Noes: None Absent: None 2.APPROVAL OF CONSENT CALENDAR a.Approve Investment Report for Quarter Ended September 30, 2022 b.September 2022 Disbursements: Accounts payable disbursements for the period include check number 260038 through 260194, bank drafts, and ACH payments in the amount of $8,183,601.34 and $631,0941.60 for payroll c.Approve Plant 134 Access Road Permanent Easement d.Approve Conveyance of Sewer Easements for Mediterra Phase 1 and 2, Tract 18893 A motion was made by Director Smith, seconded by Director Coats, that the Board approve the Consent Calendar items as submitted. The motion carried by the following: Ayes: Carrillo, Coats, Goodrich, Morales, Smith Noes: None Absent: None 3.INFORMATIONAL ITEMS a. Sterling Natural Resource Center Update The Director of Strategic Services stated the Sterling Natural Resource Center project has been under construction since 2018, and once the facility it completed, it will treat and reclaim 8 million gallons of recycled water per day from wastewater within the District’s service area; this water will be used to recharge the local groundwater basin. She stated that the District is partnering with the San Bernardino Valley Municipal Water District for the regional recycled water pipeline and the Weaver Basin construction. The Director of Strategic Services provided an overview of the project, including but not limited to: Converting food waste to energy to minimize the impact to the electrical grid and reduce electrical costs for operations, installation of a new 30” steel pipeline, design and construction timeline for each of the 6 phases, community outreach, Weaver Basin construction, monitoring wells, equipment commissioning, operator training, 5th Street & Del Rosa Avenue signal relocation and the current program schedule. 6 0 0 Staff answered several questions from the Board. For information only. b. Plant 134 Granular Activated Carbon Update The Director of Engineering and Operations provided an update on the District’s Surface Water Treatment Plant, also known as Plant 134. He stated that Plant 134 treats imported water from the State Water Project or local surface water from the Santa Ana River through a membrane filtration and disinfection system. In 2021, the Board authorized a project to upgrade the plant to include the process of Granular Activated Carbon (GAC), which will allow control over trihalomethanes (THM) formation by removing naturally occurring organic carbon from the water. The Director of Engineering and Operations also provided an overview of the project, including, but not limited to: GAC treatment process, Progressive Design-Build milestones, status and anticipated completion of the project, GAC vessels, feed pump installation, sand filter removal, concrete pour and the preparation for the placement of the vessels. For information only. 4.REPORTS a.Board of Directors’ Reports Director Smith reported on the following: October 17 he attended the Association of San Bernardino County Special Districts monthly meeting where they discussed changes to the Brown Act; October 20 he participated in the Great California ShakeOut; October 25 he attended the Highland Chamber of Commerce meeting where Penny Lilburn provided information on the Highland Senior Center. Director Carrillo reported on the following: October 18 he attended the Inland Action meeting via Zoom where the Executive Director of the Delta Conveyance Design Construction Authority gave a presentation on the status of the project; October 19 he attended the City of San Bernadino Council meeting via Zoom; October 21 he discussed the agenda and District business with the General Manager/CEO; and October 25 he attended the Inland Action meeting via Zoom where they are getting ready to advocate for the federal platform for different issues affecting the Inland Empire and announced they will be going to Washington DC in February to discuss these items. Director Coats reported on the following: October 14 he attended California Special Districts Associations’ (CSDA) membership service committee meeting where they reviewed new services available to member agencies; October 17 he viewed construction progress at Plant 134; October 17 he attended the Association of San Bernardino County Special Districts membership meeting; October 18 he attended the 6 0 0 Rotary Club of San Bernardino meeting where the General Manager/CEO was the guest speaker; October 18 he attend the San Bernardino Valley Municipal Water District’s Board meeting; October 19 he discussed the agenda and District business with the General Manager/CEO; October 20 he attended San Bernardino Valley Municipal Water District’s Division 2 forum where they discussed equity aspects of water affordability and quality and agency and city commitments to water equity to the San Bernardino Valley; October 25 he attended the City of San Bernardino Water Department meeting where discussed a number of projects and approved increasing their water capacity charge 5.7%; and October 25 he attended the Highland Area Chamber of Commerce meeting where Penny Lilburn was the guest speaker. Vice Chairman Morales reported on the following: October 13 he attended the San Bernardino Valley Municipal Water District’s policy workshop where they reviewed federal and state legislative updates; October 14 he attended Yucaipa Valley Water District’s recycled water pipeline project; October 17 he viewed construction progress at Plant 134; October 18 he attend the San Bernardino Valley Municipal Water District’s Board meeting where they discussed reservoir operations and operations at the Seven Oaks Dam, he also stated that they have begun to approve items at the committee level; October 21 he discussed the agenda and District business with the General Manager/CEO; October 25 he attended the East Valley Association of Realtors meeting where they discussed legislative priorities; and October 25 he attended the Highland Area Chamber of Commerce meeting. Chairman Goodrich reported on the following: October 13 he attended the State of the City event where Larry McCallon highlighted development; October 17 he viewed construction progress at Plant 134; October 17 he attended the Association of San Bernardino County Special Districts membership meeting; and October 21 he discussed the agenda and District business with the General Manager/CEO. For information only. b.General Manager/CEO Report The General Manager/CEO announced the following: •On November 1st, a Finance & Human Resource Committee meeting will be held @ 4:00 p.m. •The District has Property/Liability Insurance thru Special District Risk Management Authority. The District had no paid claims in FY 21/22. This resulted in a reduction of approximately $2500 in this year’s insurance premium. In addition, the District participated in various safety training programs thru the Authority that resulted in an additional $15,000 reduction from our annual insurance premium. 6 0 0 •East Valley Water District is holding a canned and boxed food drive through November 22, 2022. Last year, over 470 food items, including over 100 lbs. of rice and beans were donated to our community. Any individual looking to participate can drop off items at District Headquarters and SNRC lobby. •With the holidays around the corner, scammers are looking for ways to make a quick buck. An unknown Instagram account is contacting East Valley Water District followers requesting personal information. The District does not use social media as a primary channel for account related matters. Customers are advised to report the account and advised to contact Customer Service for account questions. •North Fork Pipeline Overflow Update. •On Saturday, October 22, the District hosted a water-friendly landscape workshop providing customers with tips on how to create a lively garden and increase your home’s curb appeal. The event was a success with approximately 100 people in attendance. For information only. c.Legal Counsel Report No report at this time. d.Board of Directors’ Comments Director Smith clarified that on October 21 he discussed the agenda and District business with the General Manager/CEO; he also thanked staff for the presentation this evening. Director Coats commended District staff for all they do and for the amazing presentations that were presented this evening. Vice Chairman Morales stated that he appreciates the work of Inland Action and for their legislative advocacy on behalf of the region and for supporting the Sterling Natural Resource Center. He also offered his appreciation to staff for participating in the Great California ShakeOut and for always being prepared to respond to events. Chairman Goodrich offered his appreciation to staff for providing department weekly updates, and he is looking forward to the results of the Top Workplace. Lastly, he thanked staff and the community for attending the meeting this evening. For information only. 6 0 0 ADJOURN Chairman Goodrich adjourned the meeting at 6:35 p.m. Phillip R. Goodrich, Board President Michael Moore, Board Secretary Agenda Item #3c November 9, 20221 Meeting Date: November 9, 2022 Agenda Item #3c Consent Item 5 7 3 Regular Board Meeting TO: Governing Board Members FROM: General Manager/CEO SUBJECT: Investment Transaction Report for Month Ended October 31, 2022 RECOMMENDATION That the Board of Directors (Board) approve the attached Investment Transaction Report for the month ended October 31, 2022. BACKGROUND / ANALYSIS California Government Code §53607 requires the CFO/Treasurer of a public agency to submit a monthly investment transaction report to the Board when the Board has delegated to the CFO/Treasurer the authority to invest, reinvest, sell, or exchange securities held in the Agency’s investment portfolio. During October the District began the month with $11.09 million in funds invested with LAIF; but withdrew $4.0 million to help cover SNRC construction invoices, leaving an ending balance of $7.09 million. Investments with Citizens Business Bank Wealth Management (CBB) totaled $5.96 million - $5.41 million in government securities, and $0.55 million in liquidity funds at month end. There were no purchases, sales, or maturities of portfolio assets during October. Attached hereto, for the Board’s review, is the October LAIF Statement and a listing of investments held in the CBB account for the month ended October 31, 2022. AGENCY GOALS AND OBJECTIVES II - Maintain a Commitment To Sustainability, Transparency, and Accountability A. Practice Transparent and Accountable Fiscal Management Agenda Item #3c November 9, 20222 Meeting Date: November 9, 2022 Agenda Item #3c Consent Item 5 7 3 REVIEW BY OTHERS This agenda item has been reviewed by the Finance Department. FISCAL IMPACT There is no fiscal impact associated with this agenda item. Recommended by: ________________ Michael Moore General Manager/CEO Respectfully submitted: ________________ Brian Tompkins Chief Financial Officer ATTACHMENTS 1. Investment Transaction Report for Month Ended October 31, 2022 2. LAIF Statement for October 2022 EAST VALLEY WATER DISTRICT Investment Activity Month Ended October 31, 2022 Activity (Book Value) Purch Units /Maturity Amort Cost Adjusted Cost Matured /Adjusted Cost 10/31/2022 Market Date Issuer CUSIP Yield Face Value Date 10/1/2022 Adjustment 10/1/2022 Purchases Called Total Water Sewer Value 10/19/21 US Treasury Note 91282CAZ4 0.375%500,000 11/30/25 488,936.12 488,936.12 488,936.12 488,936.12 441,915.00 03/31/21 US Treasury Note 9128CBT7 0.750%500,000 03/31/26 495,703.13 495,703.13 495,703.13 495,703.13 442,245.00 01/21/20 Tenn Valley Authority 880591ER9 2.875%300,000 09/15/24 309,165.27 309,165.27 309,165.27 309,165.27 290,601.00 05/29/20 US Treasury Note 912828ZP8 0.125%300,000 05/15/23 299,203.13 299,203.13 299,203.13 299,203.13 292,980.00 08/31/22 US Treasury N/B 91282CFG1 3.125%300,000 08/31/24 299,740.76 299,740.76 299,740.76 299,740.76 293,073.00 07/30/20 Federal Home Loan Bank 3130AJUN7 0.550%250,000 07/30/24 249,937.50 249,937.50 249,937.50 249,937.50 231,910.00 08/06/20 Freddie Mac 3134GWMY9 0.625%100,000 08/19/25 100,000.00 100,000.00 100,000.00 100,000.00 89,323.00 09/30/21 Federal Home Loan Bank 3030APAZ8 1.030%200,000 09/30/26 200,000.00 200,000.00 200,000.00 200,000.00 173,964.00 03/30/21 Federal Home Loan Bank 3130ALUF9 1.000%300,000 03/30/26 300,000.00 300,000.00 300,000.00 300,000.00 264,912.00 03/30/21 Federal Home Loan Bank 3130ALPB4 0.800%300,000 05/30/25 300,000.00 300,000.00 300,000.00 300,000.00 270,984.00 03/30/21 Federal Home Loan Bank 3130ALU93 0.750%200,000 06/30/25 200,000.00 200,000.00 200,000.00 200,000.00 179,852.00 09/20/21 Federal Home Loan Bank 3130AKL79 0.250%115,000 12/28/23 114,902.25 114,902.25 114,902.25 114,902.25 108,919.95 09/30/21 Federal Home Loan Bank 3130AP6M2 1.020%400,000 09/30/26 400,000.00 400,000.00 400,000.00 400,000.00 347,792.00 10/18/21 Federal Home Loan Bank 3130AKC95 0.550%200,000 10/29/25 196,986.93 424.71 197,411.64 197,411.64 197,411.64 176,586.00 10/26/21 Federal Home Loan Bank 3130APJ55 1.250%300,000 10/26/26 299,997.00 299,997.00 299,997.00 299,997.00 262,671.00 10/27/21 Federal Home Loan Bank 3130AJK24 0.480%100,000 09/01/23 100,010.82 100,010.82 100,010.82 100,010.82 96,690.00 10/28/21 Federal Home Loan Bank 3130APLB9 0.850%100,000 10/28/24 100,000.00 100,000.00 100,000.00 100,000.00 92,385.00 11/24/21 Federal Home Loan Bank 3130APWP6 0.600%200,000 11/24/23 200,000.00 200,000.00 200,000.00 200,000.00 191,380.00 11/30/21 Federal Home Loan Bank 3130APUY9 1.000%200,000 02/28/25 200,000.00 200,000.00 200,000.00 200,000.00 183,164.00 11/30/21 Federal Home Loan Bank 3130AQ2H5 1.050%100,000 11/25/24 99,985.00 99,985.00 99,985.00 99,985.00 92,525.00 08/30/22 Federal Home Loan Bank 3130AT2N6 3.700%250,000 02/28/24 250,000.00 250,000.00 250,000.00 250,000.00 246,895.00 11/23/21 Federal Farm Credit Bank 3133ENEM8 1.430%200,000 11/23/26 200,000.00 200,000.00 200,000.00 200,000.00 175,520.00 5,415,000.00 5,404,567.91 424.71 5,404,992.62 --5,404,992.62 3,557,588.16 1,847,404.46 4,946,286.95 Attachment A Local Agency Investment Fund P.O. Box 942809 Sacramento, CA 94209-0001 (916) 653-3001 November 03, 2022 LAIF Home PMIA Average Monthly Yields EAST VALLEY WATER DISTRICT CHIEF FINANCIAL OFFICER P.O. BOX 3427 SAN BERNARDINO, CA 92413 Account Number: 90-36-009 October 2022 Statement Tran Type Definitions Effective Date Transaction Date Tran Type Confirm Number Web Confirm Number Authorized Caller Amount 10/14/2022 10/13/2022 QRD 1716036 N/A SYSTEM 42,745.43 Account Summary Total Deposit:42,745.43 Beginning Balance:7,093,791.78 Total Withdrawal:0.00 Ending Balance:7,136,537.21 Agenda Item #3d November 9, 20221 Meeting Date: November 9, 2022 Agenda Item #3d Consent Item 5 8 1 Regular Board Meeting with Closed Session TO: Governing Board Members FROM: General Manager/CEO SUBJECT: Approval of Directors' Fees and Expenses for October 2022 RECOMMENDATION That the Board of Directors approve the Directors' Fees and Expenses for October 2022. AGENCY GOALS AND OBJECTIVES II - Maintain a Commitment To Sustainability, Transparency, and Accountability A. Practice Transparent and Accountable Fiscal Management REVIEW BY OTHERS This agenda item has been reviewed by Administration. FISCAL IMPACT The fiscal impact associated with this agenda item is $9,999.34, which is included in the current fiscal year budget. Recommended by: ________________ Michael Moore General Manager/CEO Respectfully submitted: ________________ Justine Hendricksen District Clerk ATTACHMENTS October 2022 Director Expense Reports Meeting Date: November 9, 2022 Agenda Item #4{{ite Informational Item Agenda Item #4a 1 November 9, 2022 Regular Board Meeting TO: Governing Board Members FROM: General Manager/CEO SUBJECT: Legislative Update RECOMMENDATION This agenda item is for informational purposes only, no action required. BACKGROUND / ANALYSIS East Valley Water District (District) worked to monitor over 72 bills and advocate for the District’s 2021-22 Legislative Platform throughout the legislative session, ending September 30, 2022. Several signed bills impacting the District include indoor water standards, open/virtual meetings, and income tax exclusions for turf replacement rebates. Monitored legislation evolved dramatically throughout the revision process, with one water bill being vetoed by the Governor just before the deadline. This dynamic environment serves as a reminder for staff to remain vigilant and active throughout the legislative process. The District’s actions to advocate and propose amendments to pieces of legislation require the use of multiple tactics to help further local priorities. East Valley Water District staff worked alongside industry coalitions, such as CMUA, WateReuse, CSDA, and ACWA to participate in working groups, sign coalition letters, and engage in briefings with elected officials and their staff. The District partners with several lobbyists to engage legislators, secure funding sources, and build relationships across the State. This lobbying effort provides the opportunity to directly communicate with elected officials in Sacramento to provide comments on proposed legislation. Finally, the District takes a collaborative approach with industry counterparts in advocating, supporting, and changing pieces of legislation. This past session, District staff engaged with neighboring water agencies to advocate the challenges customers will face with new indoor water use objectives adopted in SB 1157. The past legislative session saw a significant number of bills passed relating to a wide variety of topics. Bills of note that received the Governor’s signature and will become law include: Meeting Date: November 9, 2022 Agenda Item #4{{ite Informational Item Agenda Item #4a 2 November 9, 2022 •AB 2142 - Income tax exclusions for turf replacement rebates •AB 2449 - Local agency public meeting teleconferencing •SB 991 - Progressive design-build for local agencies •SB 1157 - Urban water use objectives A bill opposed by the District and ACWA, passed by the State legislature, however, was subsequently vetoed by the Governor due to no funding source identified in the bill. SB 222 would have established water affordability assistance for drinking and wastewater services to low-income ratepayers. As the District prepares for the upcoming legislative session, there will be historic changes taking place in the legislature due to the recent redistricting efforts. Twenty-two seats are up for election and will be filled based on the election on November 8, 2022. Even with these changes, the District is anticipating a continued focus on climate change initiatives, drought management, and conservation regulations during the upcoming session. Staff will continue to work with elected officials, coalitions, and regional partners to help advocate on behalf of the District. AGENCY GOALS AND OBJECTIVES I -Implement Effective Solutions Through Visionary Leadership C. Strengthen Regional, State and National Partnerships REVIEW BY OTHERS This item has been reviewed by Public Affairs. FISCAL IMPACT There is no fiscal impact associated with this agenda item. Recommended by: Michael Moore General Manager/CEO Respectfully submitted: Kelly Malloy Director of Strategic Services ATTACHMENTS Presentation Board of Directors Legislative Update November 9, 2022 2 LEGISLATIVE APPROACH •Reflects priorities adopted by Board of Directors through: •2020 Legislative Platform •Engages staff, Board of Directors and Legislative Advocates •Provides guidance to coordinate with industry partners EVWD Legislative Platform Water Efficiency Water Affordability Supply & Storage Environmental Standards Legislative and regulatory impacts on East Valley Water District 3 DISTRICT ENGAGEMENT •Three phases of a new program include legislation, regulations, implementation •Throughout each stage, the team follows a multi- level approach to make an impact. •Participation in associations activities; legislative and administration staff interactions; and written position statements Legislation Regulations Implementation 4 LEGISLATIVE SESSION RECAP •Engaged and advocated the District’s 2021-22 Legislative Platform throughout the session •District monitored over 72 pieces of legislation •Key bills signed into law: •AB 361, AB 2449, AB 2647 –Local agency public meeting teleconferencing/Brown Act Requirements •AB 2142 –Income tax exclusions for turf replacement rebates •SB 1157 –Urban water use objectives •Key vetoed bill: •SB 222 –Water affordability for low-income customers •Changes to indoor residential water use standard •2025: 47 gallons per capita daily (gpcd) (Previously 52.5 gpcd) •2030: 42 gpcd (Previously 50 gpcd) •Department of Water Resources (DWR) and State Water Resources Control Board (SWRCB) can recommend an alternate date for the 2030 indoor residential use standard if it is likely to unduly impact affordability of water and wastewater services. •DWR estimates costs of $7 million to implement these requirements. SB 1157 NEXT STEPS SB 222 LIKELY TO RESURFACE •Aimed to provide affordability assistance for both drinking and wastewater services to low-income customers. •Highlights from Governor veto message •Bill has significant fiscal impact but no identified funding source •Items like this should be considered in the budget process 7 LOOKING AHEAD AT THE NEXT 2-YEAR SESSION •Sizable legislative changeover •Continued focus on climate change, emission reduction, and carbon neutrality •Enhancements to drought regulations and State oversight •Outdoor usage reductions •Statewide rebates programs •Standardization of water management •Assembly •22 "open" seats from term limits/ redistricting •Total includes those elected in mid-2022 special elections •Additional Tossup Races •Cooley vs. Hoover (District 7) •Valladares' new seat (District 38) •Senate •17 Democratic seats and 3 GOP seats up for election •7 of those seats are "open" and bringing new faces to the Senate •“Hot Races“ •Daniel Hertzberg (D) vs. Caroline Menjivar (D) •Target Book-identified "tossup" race: Hurtado (D) vs. Shepard (R) •Former Assemblymember Dave Jones (D) vs. Sacramento City Councilmember Angelique Ashby (D) A BIG NEW WAVE OF LAWMAKERS IN 2023 ADMINISTRATION’S WATER STRATEGY •The Governor’s 19-page strategy document, “California’s Water Supply Strategy, Adapting to a Hotter, Drier Future” •Among other actions, the document included: •“Consider adopting regulations that would allow for curtailments of water rights in years when there is not a declared drought emergency. The State currently lacks the authority in most years to implement the priority water rights system without a declared drought emergency.” •“Support enforcement staff to help address illegal and unauthorized diversions during dry conditions.“ •“Consider regulations, legislation, and pursuing resources needed to streamline and modernize the water right system, clarify senior water rights, and establish more equitable fees.” BUDGET: FROM SURPLUS TO POTENTIAL FISCAL CHALLENGES •2022-23 budget package includes $2.9 billion General Fund for water and drought- related activities •Among other items the package includes: •$665 million for immediate drought response activities •$300 million in grants for drought relief projects in small communities and urban areas •$176 million for technical assistance and emergency response •$441 million for water conservation efforts over the near and longer term, such as: •$185 million in grants for local agency projects and for replacing turf with drought- tolerant plants •$56 million for groundwater recharge projects related to implementing the requirements of the 2014 Sustainable Groundwater Management Act •Regularly participates in ACWA, CSDA, CMUA, and WateReuse legislative groups •Regular legislative updates •Working group discussions •Coalition lobbying efforts •ACWA has several legislative proposals for 2023 •Participating in CMUA 2023 priorities 11 STAYING PLUGGED INTO THE WATER INDUSTRY DISCUSSION Agenda Item #5a November 9, 20221 Meeting Date: November 9, 2022 Agenda Item #5a Public Hearing 5 7 8 Regular Board Meeting TO: Governing Board Members FROM: General Manager/CEO SUBJECT: Formation of Community Facilities District (CFD) 2022-1 (Palm & Highland): Consider Adoption of Resolution 2022.21, CFD 2022-1 Resolution 2022.01, CFD 2022-1 Resolution 2022.02, and CFD 2022-1 Ordinance No. 1; Public Hearing RECOMMENDATION That the Board of Directors (Board): 1. Adopt Resolution 2022.21 authorizing a levy of special tax and calling a special election for the proposed Community Facilities District 2022-1; 2. Authorize the General Manager/CEO to execute a Funding, Construction, and Acquisition Agreement for CFD 2022-1; 3. Adopt Resolution 2022.01 determining the necessity to incur bond indebtedness for CFD 2022-1; 4. Adopt Resolution 2022.02 certifying the results of election for Special Tax and Bond after the November 9, 2022 elections are complete; and 5. Adopt CFD 2022-1 Ordinance No. 1 authorizing the levy of a special tax within CFD 2022-1. BACKGROUND / ANALYSIS The Finance and Human Resources Committee recommended, at their November 1, 2022 meeting, that the Board of Directors adopt the Resolutions, Ordinance, and Agreement associated with the formation of CFD 2022-1. During the regular Board Meeting held on September 14, 2022, the Board accepted a petition from Pacific West Company, a California limited partnership, to form a CFD for the development project they have planned for their property on the northwest corner of Palm & Highland Avenues. The Board also adopted a resolution of intention regarding the formation of a CFD, and set the date of November 9, 2022, to hold a public hearing when formation of a CFD would be considered. Since the September meeting, a Public Report about CFD 2022-1 (attached) has been prepared by the District’s Special Tax Consultant, Koppel & Gruber, for entry into the record of the public hearing. The report includes: •A description of the CFD and facilities to be financed; •A cost estimate of the facilities; Agenda Item #5a November 9, 20222 Meeting Date: November 9, 2022 Agenda Item #5a Public Hearing 5 7 8 •Boundaries of the CFD; and •The method of levying special taxes within the CFD. After presentation and discussion of the CFD Report, the Board is asked to complete the formation of CFD 2022-1 by approving/adopting a series of items attached hereto. The first is a resolution to be considered while acting as the Board of East Valley Water District: Resolution 2022.21 - A Resolution of EVWD establishing CFD No. 2022-1, authorizing the levy of a special tax, and calling for an election; approving the Public Report for CFD 2022-1; and approving the Funding, Construction, and Acquisition Agreement. •The Funding, Constructions and Aquisition Agreement documents the understanding between EVWD and the Developer regarding responsibilities and obligations of each concerning CFD financial matters, construction of improvements, inspections, ownership of improvements, termination of agreement, and assignment of rights. After CFD 2022-1 has been established by the Board of East Valley Water District, the following resolution will need to be passed by the Board acting as the legislative body of CFD No. 2022-1: CFD 2022-1 Resolution 2022.01 - A Resolution determining the necessity to incur bonded indebtedness within the CFD, and calling of special elections: •Describes purpose for issuing bonded indebtedness and sets maximum term; and •Calls for special election to vote on three propositions: 1) to incur bonded indebtedness, 2) to set a special tax, and 3) to establish an appropriations limit. Pacific West Company, LLC and three individuals make up the ownership group for the prospective CFD 2022-1, and the County has confirmed that there are no registered voters within the project area. Therefore, the only persons/entities that can vote on the three propositions identified above are the four property owners. Ballots and voting instructions have been delivered to, and returned by, the owners, well before the deadline of November 9, 2022. The ballots will be tallied at the close of the public hearing by the Board Secretary and the Board, acting as the legislative body of the CFD, asked to certify the election by adopting the following: CFD 2022-1 Resolution 2022.02 - A Resolution certifying the results of the November 9, 2022 Special Tax and Bond elections. After the elections have been certified, the General Manager/CEO will need authorization from the Board, acting as the legislative body of the CFD, to determine Agenda Item #5a November 9, 20223 Meeting Date: November 9, 2022 Agenda Item #5a Public Hearing 5 7 8 the amount of special taxes needed each year, and to file the special tax assessment with the County Tax Assessor. Adoption of the following Ordinance will grant that authorization: CFD 2022-1 Ordinance No. 1 - Authorizes the General Manager/CEO to levy a special tax within CFD 2022-1. AGENCY GOALS AND OBJECTIVES IV - Promote Planning, Maintenance and Preservation of District Resources B. Enhance Planning Efforts that Respond to Future Demands REVIEW BY OTHERS This agenda item has been reviewed by the Finance Department, Finance and Human Resources Committee, and Bond Counsel. FISCAL IMPACT There is no fiscal impact associated with this agenda item. Recommended by: ________________ Michael Moore General Manager/CEO Respectfully submitted: ________________ Brian Tompkins Chief Financial Officer ATTACHMENTS 1. Public Report - CFD No. 2022-1 2. EVWD Resolution 2022.21 CFD 2022-1 3. Funding, Construction, and Acquisition Agreement 4. CFD 2022-1 Resolution 2022.01 5. CFD 2022-1 Resolution 2022.02 6. CFD 2022-1 Ordinance No. 1 COMMUNITY FACILITIES DISTRICT NO. 2022 -1 (PALM & HIGHLAND) OF THE EAST VALLEY WATER DISTRICT PUBLIC REPORT NOVEMBER 9, 2022 EAST VALLEY WATER DISTRICT BOARD OF DIRECTORS PHILLIP R. GOODRICH, CHAIRMAN OF THE BOARD JAMES MORALES JR., VICE CHAIRMAN OF THE BOARD CHRIS CARRILLO, BOARD MEMBER RONALD L. COATS, BOARD MEMBER DAVID E. SMITH, BOARD MEMBER GENERAL MANAGER/CEO MICHAEL MOORE CHIEF FINANCIAL OFFICER BRIAN TOMPKINS TABLE OF CONTENTS INTRODUCTION ........................................................................................................................................ 1 A. DESCRIPTION OF CFD NO. 2022-1 ............................................................................................... 1 B. DESCRIPTION OF FACILITIES .................................................................................................... 2 C. BOUNDARIES OF THE COMMUNITY FACILITIES DISTRICT ............................................. 3 D. COST ESTIMATE.............................................................................................................................. 3 E. RATE AND METHOD OF APPORTIONMENT ........................................................................... 3 F. GENERAL TERMS AND CONDITIONS ....................................................................................... 3 EXHIBIT A – BOUNDARY MAP .......................................................................................................... A-1 EXHIBIT B – COST ESTIMATES .........................................................................................................B-1 EXHIBIT C – RATES AND METHODS OF APPORTIONMENT .................................................... C-1 November 9, 2022 1 Community Facilities District No. 2022-1 (Palm & Highland) East Valley Water District Introduction The Board of Directors (the “Board”) of the East Valley Water District (the “EVWD”) did, pursuant to the provisions of the Mello-Roos Community Facilities Act of 1982, as amended (the “Act”), on September 14, 2022 adopt a resolution entitled “A Resolution of the Board of Directors of the East Valley Water District Declaring Its Intention to Establish Community Facilities District No. 2022-1 (Palm & Highland) of East Valley Water District, to Authorize the Levy of a Special Tax to Pay the Cost of Acquiring or Constructing Certain Public Facilities and Paying for Certain Incidental Expenses and to Pay Debt Service on Bonded Indebtedness” (the “Resolution of Intention”). In the Resolution of Intention the Board expressly ordered the preparation of a written Community Facilities District Report (the “Report”), for the proposed Community Facilities District No. 2022-1 (Palm & Highland) of the East Valley Water District (the “CFD No. 2022-1”). The Resolution of Intention ordering the Report did direct that the Report generally contain the following: 1. a brief description of the public facilities by type (“Authorized Facilities”) which are required to adequately meet the needs of CFD No. 2022-1; and 2. an estimate of the fair and reasonable cost of providing such public facilities and the incidental expenses to be incurred in connection therewith. For particulars, reference is made to the Resolution of Intention (Resolution Number 2022.15) for CFD No 2022-1, as previously approved and adopted by Board. Now, Therefore Koppel & Gruber Public Finance, the appointed responsible firm directed to prepare the Report, does hereby submit the following: A. Description of CFD No. 2022-1 CFD No. 2022-1, is comprised of approximately 8.20 net taxable acres of land located planned for residential lots within Tract Map No. 20495. At the time of formation, the CFD is expected to include 133 single family residential units. A map showing the boundaries of CFD No. 2022-1 is included in Exhibit “A” of this Report. Table 1 below shows the number of projected units, the taxable acreage, and the not to exceed bond amount within CFD No. 2022-1. November 9, 2022 2 Community Facilities District No. 2022-1 (Palm & Highland) East Valley Water District TABLE 1 CFD No. 2022-1 Projected Number of Units, Acreage and Bond Amount NO. OF PROJECTED TAXABLE UNITS MINIMUM TAXABLE ACREAGE NOT TO EXCEED BOND AMOUNT 133 8.20 $4,000,000 B. Description of Facilities The purpose of CFD No. 2022-1 is to provide for the cost of financing the construction of the Authorized Facilities to be constructed (as shown in detail and defined below), including the cost of planning and designing the Authorized Facilities, and the incidental expenses, related to financing, forming and administering CFD No. 2022-1. Descriptions of the Authorized Facilities, which are defined in Attachment B of the Resolution of Intention, are as follows:  The construction, purchase, modification, expansion, rehabilitation and/or improvement of water and sewer facilities of the EVWD as well the acquisition of capacity in the sewer system and/or water system of the EVWD, and all appurtenances and appurtenant work in connection with the foregoing water and sewer facilities, including, without limitation, the cost of engineering, planning, designing, materials testing, coordination, construction staking, construction management and supervision for such water and sewer facilities, and any other expenses incidental to the construction, acquisition, modification, rehabilitation, completion, inspection and financing of such facilities. Incidental Expenses – CFD No. 2022-1 may also finance incidental expenses as described in Section 4 of the Resolution of Intention and may include but is not limited to the following:  The costs of planning and designing the facilities; and  The costs of forming CFD No. 2022-1, issuing bonds, levying and collecting a special tax and the annual administration costs of CFD No. 2022-1. November 9, 2022 3 Community Facilities District No. 2022-1 (Palm & Highland) East Valley Water District C. Boundaries of the Community Facilities District A reduced map of the boundaries of CFD No. 2022-1 (“Boundary Map”) titled “Proposed Boundaries of Community Facilities District No. 2022-1 (Palm & Highland) of the East Valley Water District” is included in Exhibit “A” and is incorporated herein. The Boundary Map was recorded with the County Recorder in the County of San Bernardino in Book 90 of Maps of Assessment and Community Facilities Districts, Page 59, Document Number 2022-0324810. D. Cost Estimate The maximum bonded indebtedness to finance the Authorized Facilities and Incidental Expenses as approved in the Resolution of Intention for CFD No. 2022-1 is $4,000,000. This bonded indebtedness is proposed to fund Facilities for CFD No. 2022-1. Bonds will be sold by CFD No. 2022-1 in one or more series. The estimated costs of the Facilities are shown in 2022 dollars. For particulars on the estimated cost of Facilities, reference is made to Exhibit “B” of this Report. E. Rate and Method of Apportionment The Rate and Method of Apportionment (the “RMA”) provides sufficient information to allow a property owner within CFD No. 2022-1 to estimate the Maximum Special Tax for his or her property. It also includes method of prepayment in full or prepayment in part and the procedure for prepayments. For particulars on the rate and method of apportionment, reference is made to Exhibit “C” of this report. F. General Terms and Conditions The general terms and conditions of CFD No. 2022-1 are as follows:  Substitution of Facilities – The description of the Authorized Facilities is general in nature. The final nature and location of improvements and Authorized Facilities will be determined upon the preparation of final plans and specifications. The final plans and specifications may show substitutes in lieu of, or modifications to, proposed work. Any such substitution shall not be a change or modification in the proceedings as long as the Facilities provide a service substantially similar to that as set forth in the Report. November 9, 2022 4 Community Facilities District No. 2022-1 (Palm & Highland) East Valley Water District  Bonds – In order to finance the Authorized Facilities set forth in this Report, it is necessary that bonds be issued pursuant to the terms, conditions and authorizations as set forth in the Act, commencing with Section 53311 thereof and specifically, Article 5 therein. November 9, 2022 Community Facilities District No. 2022-1 (Palm & Highland) East Valley Water District A - 1 EXHIBIT A BOUNDARY MAP FOR COMMUNITY FACILITIES DISTRICT NO. 2022-1 A reduced copy of the Boundary Map follows. The original of such map is on file in the records of the County Recorder, County of San Bernardino, State of California. November 9, 2022 Community Facilities District No. 2022-1 (Palm & Highland) East Valley Water District A - 2 November 9, 2022 Community Facilities District No. 2022-1 (Palm & Highland) East Valley Water District B- 1 EXHIBIT B COST ESTIMATES The Estimated Costs of Authorized Facilities is shown in Table B-1 below. The total costs for CFD No. 2022-1 are estimates only in 2022 dollars. Actual costs of the Authorized Facilities will be paid; however, CFD No. 2022-1 has the ability to reallocate amounts between line items as long as the total costs do not exceed the total authorized bonded amounts. TABLE B-1 CFD No. 2022-1 Authorized Facilities DESCRIPTION OF AUTHORIZED FACILITIES ESTIMATED COST IN 2022$ 1,2 EVWD Capacity Improvements Water Capacity Charge (Residential Units) (¾" Meter) $1,059,212 Water Capacity Charge (Irrigation) (1½" Meter) 26,549 Sewer Capacity Charge, Residential Units 1,107,757 Total of Authorized Facilities $2,193,518 1. Estimated Cost is based on EVWD’s current fee amounts as of July 1, 2022 and the estimated number of dwelling units and equivalent dwelling units in the development. The amount eligible to be funded for Capacity Improvements shall be based on the actual number of dwelling units and equivalent dwelling units for which such fees are charged EVWD’s then-current schedule of fees in effect at the time that such fees are actually paid. 2. Individual, usable and completed EVWD Improvements shall be eligible to be financed and acquired at their total Actual Cost pursuant to the Funding Construction and Acquisition Agreement. In addition, for any EVWD Improvement with an estimated cost in excess of $1,000,000, the Developer and General Manager of the Water District may agree on discrete phases or portions of the EVWD Improvement for which the Actual Costs may be reimbursed prior to completion of the EVWD Improvement. November 9, 2022 Community Facilities District No. 2022-1 (Palm & Highland) East Valley Water District C- 1 EXHIBIT C COMMUNITY FACILITIES DISTRICT NO. 2022 -1 (PAL M & HIGH LAND ) OF THE EAST VALLEY WAT ER DISTRICT R ATE AND METHOD OF A PPORTIONMENT A Special Tax shall be levied on all Taxable Property (as defined below) within the boundaries of Community Facilities District No. 2022-1 (Palm & Highland), (“CFD No. 2022-1”) of the East Valley Water District (“Water District”) and collected each Fiscal Year commencing in Fiscal Year 2022/2023 in an amount determined by the Water District Board (as defined below), through the application of this Rate and Method of Apportionment of the Special Tax to the extent and in the manner herein provided. 1. DEFINITIONS “Acreage” or “Acre” means the land area of an Assessor’s Parcel as shown on an Assessor's Parcel Map, or if the land area is not shown on an Assessor's Parcel Map, the land area shown on the applicable Final Subdivision Map, parcel map, condominium plan, or other recorded County parcel map. An Acre means 43,560 square feet of land. “Act” means the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California. “Administrative Expenses” means the expenses incurred by the Water District on behalf of CFD No. 2022-1 related to the determination of the amount of the levy of Annual Special Taxes; the collection of Annual Special Taxes including, but not limited to, the expenses of collecting delinquencies; the administration of the Bonds; the payment of salaries and benefits or portion of for any employee of the Water District whose employment duties are directly related to the administration of CFD No. 2022-1; and the costs otherwise incurred in order to carry out authorized purposes of CFD No. 2022-1. “Annual Special Tax” means any Special Tax actually levied in any Fiscal Year on any Assessor’s Parcel. “Assessor” means the Assessor of the County. “Assessor’s Parcel” means a Lot or parcel shown on an Assessor’s Parcel Map with an assigned Assessor's Parcel number. November 9, 2022 Community Facilities District No. 2022-1 (Palm & Highland) East Valley Water District C- 2 “Assessor’s Parcel Map” means an official map of the County designating parcels by Assessor’s Parcel number. “Assigned Special Tax” means the Special Tax for each Land Use Class, as determined in accordance with Section 3 below. “Backup Special Tax” means the Special Tax amount applicable to each Assessor’s Parcel of Developed Property, as determined in accordance with Section 3.C below. “Bonds” means any obligation of CFD No. 2022-1 to pay or repay a sum of money, including obligations in the form of bonds, certificates of participation, long-term leases, loans from government agencies, or loans from banks, other financial institutions, private businesses, or individuals, or long-term contracts, or any refunding thereof, secured in whole or in part by the levy of Special Taxes. “Boundary Map” means that certain map entitled “Proposed Boundaries of Community Facilities District No. 2022-1 (Palm & Highland) of East Valley Water District” recorded in the Official Records of the County. “Building Permit” means a building permit for the construction of one or more Residential Units issued by the City, or another public agency in the event the City no longer issues building permits. “Building Square Footage” means the square footage of usable area within the perimeter of a residential structure, not including any carport, walkway, garage, overhang, or similar area. The determination of Building Square Footage of a Residential Unit shall be determined by reference to the Building Permit(s) for such Residential Unit and/or other information as may demonstrate that the Building Square Footage is specified incorrectly on the Building Permit(s). “Calendar Year” means the period commencing January 1 of any year and ending the following December 31. “CFD Administrator” means an authorized representative of the Water District, or designee thereof, responsible for determining the Special Tax Requirement, for preparing the Annual Special Tax roll and calculating the Backup Special Tax. “CFD No. 2022-1” means Community Facilities District No. 2022-1 (Palm & Highland) of the Water District. “City” means the City of San Bernardino, California. “County” means the County of San Bernardino, California. November 9, 2022 Community Facilities District No. 2022-1 (Palm & Highland) East Valley Water District C- 3 “Debt Service” means for each Fiscal Year, the total amount of principal and interest payable on any Outstanding Bonds during the Calendar Year commencing on January 1 of such Fiscal Year. “Developed Property” means for each Fiscal Year, all Assessor’s Parcels of Taxable Property, exclusive of Assessor’s Parcels of Provisional Undeveloped Property, for which a Building Permit was issued prior to May 1 of the previous Fiscal Year. “Exempt Property” means Assessor’s Parcels designated as being exempt from Special Taxes pursuant to Section 8. “Final Map” means a final map, or portion thereof, approved by the City pursuant to the Subdivision Map Act (California Government Code Section 66410 et seq) that creates Lots. The term “Final Map” shall not include any large-lot subdivision map, Assessor’s Parcel Map, or subdivision map or portion thereof, which does not create Lots, including Assessor’s Parcels that are designated as remainder parcels. “Final Map Property” means, in any Fiscal Year, all Lots created within Final Maps that had recorded prior to January 1 of the preceding Fiscal Year and which are not classified as Developed Property. “Fiscal Year” means the period starting on July 1 and ending the following June 30. “General Manager” means the General Manager of the Water District or his/her designee. “Indenture” means the indenture, fiscal agent agreement, resolution or other instrument pursuant to which Bonds are issued, as modified, amended and/or supplemented from time to time, and any instrument replacing or supplementing the same. “Land Use Class” means any of the classes listed in Table 1 and Table 2 under Section 3 below. “Lot” means an individual legal lot or condominium unit created by a Final Subdivision Map. “Maximum Special Tax” means the Maximum Special Tax, determined in accordance with Section 3 below, which may be levied in any Fiscal Year on any Assessor’s Parcel of Taxable Property. “Non-Residential Property” means all Assessor’s Parcels of Developed Property for which a building permit(s) was issued for non-residential use. “Outstanding Bonds” mean all Bonds, which are deemed to be outstanding under the Indenture. November 9, 2022 Community Facilities District No. 2022-1 (Palm & Highland) East Valley Water District C- 4 “Partial Prepayment Amount” means a prepayment of a portion of the Special Tax Obligation applicable to an Assessor’s Parcel of Taxable Property as set forth in Section 6.B below. “Proportionately” or “Proportionate” means for Developed Property, that the ratio of the actual Special Tax levy to the Maximum Special Tax is equal for all Assessor’s Parcels of Developed Property. For Undeveloped Property, “Proportionately” means that the ratio of the actual Special Tax levy per Acre to the Maximum Special Tax, as applicable, per Acre is equal for all Assessor's Parcels of Undeveloped Property. The term “Proportionately” may similarly be applied to other categories of Taxable Property as described in Section 3 below. “Provisional Undeveloped Property” means all Assessor’s Parcels of property that would otherwise be classified as Exempt Property pursuant to the provisions of Section 8, but cannot be classified as Exempt Property because to do so would reduce the Acreage of all Taxable Property below the required minimum Acreage as set forth in Section 8. “Residential Unit” means each separate residential dwelling unit that comprises an independent facility available for sale to an end user or rental separate from adjacent residential dwelling units. “Special Tax” means any special tax authorized to be levied within CFD No. 2022-1 pursuant to the Act and this Rate and Method of Apportionment. “Special Tax Obligation” means the total obligation of an Assessor’s Parcel of Taxable Property to pay the Special Tax for the remaining life of CFD No. 2022-1. “Special Tax Requirement” means that amount required in any Fiscal Year to: (i) pay Debt Service on all Outstanding Bonds; (ii) pay periodic costs on the Outstanding Bonds, including but not limited to, credit enhancement and rebate payments on the Outstanding Bonds; (iii) pay Administrative Expenses; (iv) pay any amounts required to establish or replenish any reserve funds for all Outstanding Bonds; (v) the costs associated with the release of funds from an escrow account established in association with the Bonds; (vi) accumulate funds to pay directly for acquisition or construction of facilities provided that the inclusion of such amount does not cause an increase in the Special Tax to be levied on Undeveloped Property or Provisional Undeveloped Property, and (vii) pay for reasonably anticipated delinquent Special Taxes based on the delinquency rate for Special Taxes levied in the previous Fiscal Year; less (viii) a credit for funds available to reduce the annual Special Tax levy, as determined by the CFD Administrator pursuant to the Indenture. “State” means the State of California. November 9, 2022 Community Facilities District No. 2022-1 (Palm & Highland) East Valley Water District C- 5 “Taxable Property” means all of the Assessor's Parcels within the boundaries of CFD No. 2022-1, which are not exempt from the levy of the Special Tax pursuant to law or Section 8 below. “Trustee” means the trustee or fiscal agent under the Indenture. “Undeveloped Property” means, for each Fiscal Year, all Taxable Property within the boundaries of CFD No. 2022-1 not classified as Developed Property, Final Map Property or Provisional Undeveloped Property. “Water District” means the East Valley Water District, California. “Water District Board” means the Board of Directors of the East Valley Water District, acting as the legislative body of CFD No. 2022-1, or its designee. 2. LAND USE CLASSIFICATION Each Fiscal Year, beginning with Fiscal Year 2022/2023, each Assessor’s Parcel within the boundaries of CFD No. 2022-1 shall be classified as Taxable Property or Exempt Property. In addition, all Taxable Property within CFD No. 2022-1 shall be classified as Developed Property, Final Map Property, Undeveloped Property or Provisional Undeveloped Property, and all such Taxable Property shall be subject to the levy of Special Taxes in accordance with this Rate and Method of Apportionment determined pursuant to Sections 3 and 4 below. Furthermore, each Assessor’s Parcel of Developed Property which is a Residential Unit shall be classified to a Land Use Class based on its Building Square Footage. In the event a Building Permit is issued for a Lot prior to May 1 of the previous Fiscal Year and an Assessor’s Parcel Number has not yet been assigned to such Lot for the current Fiscal Year, the applicable parent Assessor’s Parcel may be classified as both Developed Property and Undeveloped Property. In such an instance, the Special Taxes levied on such Assessor’s Parcel shall be the sum of the amount derived from the following (i) applying the Assigned Special Tax applicable to each Lot for which a Building Permit was issued prior to May 1 of the previous Fiscal Year and (ii) levying the acreage allocable to such actual or planned Lots for which a Building Permit has not been issued prior to May 1 of the previous Fiscal Year as Undeveloped Property; the allocable acreage shall be computed on a pro-rata basis based on the relative number of remaining Lots without a Building Permit to the total number of Lots entitled to be developed on such parent Assessor’s Parcel. The total number of Lots entitled to be developed on the applicable Assessor’s Parcel shall be determined from the recorded subdivision map, condominium map, condominium plan, applicable site plan, plot plan, or other appropriate records kept by the City as reasonably determined by the CFD Administrator. November 9, 2022 Community Facilities District No. 2022-1 (Palm & Highland) East Valley Water District C- 6 Once classified as Developed Property, an Assessor’s Parcel may not be subsequently re-classified as Undeveloped Property or changed to Exempt Property without the Special Tax being paid off in full accordance with Section 6 below. 3. MAXIMUM SPECIAL TAX RATES A. Developed Property The Maximum Special Tax applicable to an Assessor’s Parcel classified as Developed Property in CFD No. 2022-1 for Fiscal Year 2022/2023 shall be the greater of (i) the Assigned Special Tax determined pursuant to Table 1 below or (ii) the amount derived by application of the Backup Special Tax. Table 1 Assigned Special Tax Rates Fiscal Year 2022/2023 Land Use Class Building Square Footage Assigned Special Tax 1 Less than 1,800 Sq. Ft. $1,343 per Residential Unit 2 1,800 to 1,949 Sq. Ft. $1,367 per Residential Unit 3 1,950 to 2,099 Sq. Ft. $1,392 per Residential Unit 4 2,100 to 2,249 Sq. Ft. $1,466 per Residential Unit 5 2,250 to 2,399 Sq. Ft. $1,491 per Residential Unit 5 Greater than 2,399 Sq. Ft. $1,515 per Residential Unit Each July 1, commencing July 1, 2023, the Assigned Special Tax for Developed Property shall be increased by two percent (2.0%) of the amount in effect in the prior Fiscal Year. B. Final Map Property The Maximum Special Tax for Final Map Property is $1,424 per Lot for Fiscal Year 2022/2023, which amount shall increase on July 1, 2023, and each July 1 thereafter by an amount equal to 2.0% of the amount in effect for the prior Fiscal Year. C. Backup Special Tax and Undeveloped Property Maximum Special Tax The Backup Special Tax applicable to an Assessor’s Parcel classified as Developed Property or the Maximum Special Tax applicable to an November 9, 2022 Community Facilities District No. 2022-1 (Palm & Highland) East Valley Water District C- 7 Assessor’s Parcel of Undeveloped Property for Fiscal Year 2022/2023 shall be $23,107 per Acre or portion thereof for CFD No. 2022-1. Each July 1, commencing July 1, 2023, the Backup Special Tax for Developed Property and the Maximum Special Tax for Undeveloped Property shall be increased by two percent (2.0%) of the amount in effect in the prior Fiscal Year. D. Provisional Undeveloped Property The Maximum Special Tax for Provisional Undeveloped Property for Fiscal Year 2022/2023 shall be $23,107 per Acre or portion thereof for CFD No. 2022-1. Each July 1, commencing July 1, 2023, the Maximum Special Tax for Provisional Undeveloped Property shall be increased by two percent (2.0%) of the amount in effect in the prior Fiscal Year. 4. METHOD OF APPORTIONMENT A. Special Tax For each Fiscal Year, commencing Fiscal Year 2022/2023, the CFD Administrator shall calculate the Annual Special Tax on all Taxable Property in accordance with the following steps: Step 1: The Special Tax shall be levied Proportionately on each Assessor’s Parcel of Developed Property up to 100% of the applicable Assigned Special Tax to satisfy the Special Tax Requirement; Step 2: If additional monies are needed to satisfy the Special Tax Requirement after the first step has been completed, the Special Tax shall be levied Proportionately on each Assessor's Parcel of Final Map Property up to 100% of the Maximum Special Tax for Final Map Property; Step 3: If additional monies are needed to satisfy the Special Tax Requirement after the first two steps have been completed, the Special Tax shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property up to 100% of the Maximum Special Tax for Undeveloped Property; Step 4: If additional monies are needed to satisfy the Special Tax Requirement after the first three steps have been completed, then the levy of the Special Tax on each Assessor's Parcel of Developed Property whose Maximum Special Tax is determined through the application of the November 9, 2022 Community Facilities District No. 2022-1 (Palm & Highland) East Valley Water District C- 8 Backup Special Tax shall be increased Proportionately from the Assigned Special Tax up to 100% of the Maximum Special Tax for each such Assessor's Parcel; and Step 5: If additional monies are needed to satisfy the Special Tax Requirement after the first four steps have been completed, then the Special Tax shall be levied Proportionately on each Assessor’s Parcel of Provisional Undeveloped Property at up to 100% of the Maximum Special Tax for Provisional Undeveloped Property. Notwithstanding the above, under no circumstances will the Special Tax levied in any Fiscal Year against any Assessor’s Parcel of Developed Property for which an occupancy permit for private residential use has been issued be increased as a consequence of delinquency or default by the owner of any other Assessor’s Parcel within CFD No. 2022-1 by more than 10% of the amount that would have been levied in the Fiscal Year is the absence of such delinquency or default, except for those Assessor’s Parcels of Developed Property whose owners are also delinquent or in default on their Special Tax payments for one or more other properties within CFD No. 2022-1. 5. COLLECTON OF ANNUAL SPECIAL TAXES Collection of the Annual Special Tax shall be by the County in the same manner as ordinary ad valorem property taxes are collected and the Annual Special Tax shall be subject to the same penalties and the same lien priority in the case of delinquency as ad valorem taxes; provided, however, that the Water District may provide for (i) other means of collecting the Annual Special Tax, including direct billings thereof to the property owners; and (ii) judicial foreclosure of delinquent Special Taxes to meet the financial obligations of CFD No. 2022-1. 6. PREPAYMENT OF SPECIAL TAX OBLIGATION Property owners may prepay and permanently satisfy the Special Tax Obligation by a cash settlement with the Water District as permitted under Government Code Section 53344. Prepayment is permitted only under the following conditions: The following definitions apply to this Section 6: “Construction Fund” means the fund (regardless of its name) established pursuant to the Indenture to hold funds, which are currently available for expenditure to acquire or construct the facilities or pay fees. “Construction Inflation Index” means the annual percentage change in the Engineering News-Record Building Cost Index for the City of Los Angeles, measured as of the Calendar Year, which ends in the previous Fiscal Year. In the event this index ceases to be published, the Construction Inflation Index shall be November 9, 2022 Community Facilities District No. 2022-1 (Palm & Highland) East Valley Water District C- 9 another index as determined by the CFD Administrator that is reasonably comparable to the Engineering News-Record Building Cost Index for the City of Los Angeles. “Future Facilities Costs” means the Public Facilities Costs minus (i) costs previously paid from the Construction Fund to acquire or construct the facilities, (ii) monies currently on deposit in the Construction Fund, and (iii) monies currently on deposit in an escrow or other earmarked fund that are expected to be available to finance Public Facilities Costs. “Outstanding Bonds” means all Previously Issued Bonds, which remain outstanding as of the first interest and/or principal payment date following the current Fiscal Year excluding Bonds to be redeemed at a later date with proceeds of prior prepayments of Maximum Special Taxes. “Previously Issued Bonds” means all CFD No. 2022-1 Bonds that have been issued prior to the date of prepayment. “Public Facilities Costs” means $2,194,528 in 2022 dollars, which shall increase by the Construction Inflation Index (as defined above) on July 1, 2023, and on each July 1 thereafter, or such lower number as (i) shall be determined by the CFD Administrator as sufficient to acquire or construct the facilities to be financed under the authorized Mello-Roos financing program for CFD No. 2022-1, or (ii) shall be determined by the Water District concurrently with a covenant that it will not issue any more CFD No. 2022-1 Bonds (except refunding bonds) to be supported by Special Taxes. A. Prepayment in Full The Special Tax Obligation applicable to an Assessor’s Parcel may be prepaid and the obligation of the Assessor’s Parcel to pay any Special Tax permanently satisfied as described herein, provided that a prepayment may be made with respect to a particular Assessor’s Parcel only if there are no delinquent Special Taxes with respect to such Assessor’s Parcel at the time of prepayment. An owner of an Assessor’s Parcel intending to prepay the Special Tax Obligation shall provide the CFD Administrator with written notice of intent to prepay and the company or agency that will be acting as the escrow agent, if any. The CFD Administrator shall provide the owner with a statement of the Prepayment Amount (as defined below) for such Assessor’s Parcel within thirty (30) days of the request and may charge a reasonable fee for providing this service. Prepayment must be made more than sixty (60) days prior to any redemption date for the CFD No. 2022-1 Bonds to be redeemed with the proceeds of such prepaid Special Taxes, unless a shorter period is acceptable to the Trustee and the Water District. The Prepayment Amount (defined below) shall be calculated as summarized below (capitalized terms as defined below): November 9, 2022 Community Facilities District No. 2022-1 (Palm & Highland) East Valley Water District C- 10 Bond Redemption Amount plus Redemption Premium plus Future Facilities Prepayment Amount plus Defeasance Amount plus Prepayment Administrative Fees and Expenses less Reserve Fund Credit less Capitalized Interest Credit Total: equals Prepayment Amount As of the proposed date of prepayment, the Prepayment Amount (defined below) shall be calculated as follows: Paragraph No.: 1. Confirm that no Special Tax delinquencies apply to such Assessor’s Parcel. 2. For an Assessor’s Parcel of Developed Property, determine the Maximum Special Tax. For an Assessor’s Parcel of Undeveloped Property for which a Building Permit has been issued, compute the Maximum Special Tax for that Assessor’s Parcel as though it was already designated as Developed Property, based upon the Building Permit(s) which has already been issued for that Assessor’s Parcel. For an Assessor’s Parcel of Undeveloped Property for which a Building Permit has not been issued, compute the Maximum Special Tax for that Assessor’s Parcel. 3. Divide the Maximum Special Tax computed pursuant to paragraph 2 by the total estimated Maximum Special Tax for CFD No. 2022-1 based on the Developed Property Special Tax which could be levied in the current Fiscal Year on all expected development through build-out of CFD No. 2022-1 as determined by the CFD Administrator, excluding any Assessor’s Parcels for which the Special Tax Obligation has been prepaid. 4. Multiply the quotient computed pursuant to paragraph 3 by the Outstanding Bonds to compute the amount of Outstanding Bonds to be retired and prepaid (the “Bond Redemption Amount”). 5. Multiply the Bond Redemption Amount computed pursuant to paragraph 4 by the applicable redemption premium (expressed as a percentage), if any, on the Outstanding Bonds to be redeemed at the first available call date (the “Redemption Premium”). 6. Compute the current Future Facilities Costs. November 9, 2022 Community Facilities District No. 2022-1 (Palm & Highland) East Valley Water District C- 11 7. Multiply the quotient computed pursuant to paragraph 3 by the amount determined pursuant to paragraph 6 to compute the amount of Future Facilities Costs to be prepaid (the “Future Facilities Prepayment Amount”). 8. Compute the amount needed to pay interest on the Bond Redemption Amount from the first bond interest and/or principal payment date following the current Fiscal Year until the earliest redemption date for the Outstanding Bonds. 9. Compute the amount the CFD Administrator reasonably expects to derive from the reinvestment of the Prepayment Amount less the Future Facilities Amount and the Prepayment Administrative Fees and Expenses from the date of prepayment until the redemption date for the Outstanding Bonds to be redeemed with the prepayment. 10. Take the amount computed pursuant to paragraph 8 and subtract the amount computed pursuant to paragraph 9 (the “Defeasance Amount”). 11. Verify the administrative fees and expenses of CFD No. 2022-1, including the costs of computation of the prepayment, the costs to invest the prepayment proceeds, the costs of redeeming Bonds, and the costs of recording any notices to evidence the prepayment and the redemption (the “Prepayment Administrative Fees and Expenses”). 12. If reserve funds for the Outstanding Bonds, if any, are at or above 100% of the reserve requirement (as defined in the Indenture) on the prepayment date, a reserve fund credit shall be calculated as a reduction in the applicable reserve fund for the Outstanding Bonds to be redeemed pursuant to the prepayment (the “Reserve Fund Credit”). No Reserve Fund Credit shall be granted if reserve funds are below 100% of the reserve requirement. 13. If any capitalized interest for the Outstanding Bonds will not have been expended at the time of the first interest and/or principal payment following the current Fiscal Year, a capitalized interest credit shall be calculated by multiplying the larger quotient computed pursuant to paragraph 3 by the expected balance in the capitalized interest fund after such first interest and/or principal payment (the “Capitalized Interest Credit”). 14. The Special Tax Obligation is equal to the sum of the amounts computed pursuant to paragraphs 4, 5, 7, 10, and 11, less the amounts computed pursuant to paragraphs 12 and 13 (the “Prepayment Amount”). November 9, 2022 Community Facilities District No. 2022-1 (Palm & Highland) East Valley Water District C- 12 15. From the Prepayment Amount, the sum of the amounts computed pursuant to paragraphs 4, 5, and 10, less the amounts computed pursuant to paragraphs 12, and 13 shall be deposited into the appropriate fund as established under the Indenture and be used to retire Outstanding Bonds or make Debt Service payments. The amount computed pursuant to paragraph 7 shall be deposited into the Construction Fund. The amount computed pursuant to paragraph 11 shall be retained by CFD No. 2022-1. The Prepayment Amount may be sufficient to redeem an amount other than a $5,000 increment of Bonds. In such cases, the increment above $5,000 or integral multiple thereof will be retained in the appropriate fund established under the Indenture to redeem Bonds to be used with the next prepayment of Bonds. The CFD Administrator will confirm that all previously levied Special Taxes have been paid in full. With respect to any Assessor's Parcel that is prepaid in full, once the CFD Administrator has confirmed that all previously levied Special Taxes have been paid, the Water District shall cause a suitable notice to be recorded in compliance with the Act, to indicate the prepayment of Special Taxes and the release of the Special Tax lien on such Assessor’s Parcel, and the Special Tax Obligation of such Assessor's Parcel to pay the Special Tax shall cease. Notwithstanding the foregoing, no Special Tax prepayment shall be allowed unless the amount of Maximum Special Taxes less Administrative Expenses for each Fiscal Year that may be levied on Taxable Property, respectively, after the proposed prepayment is at least 1.1 times the annual Debt Service on all Outstanding Bonds. B. Partial Prepayment The Special Tax on an Assessor’s Parcel of Developed Property or for Undeveloped Property for which a Building Permit has been issued may be partially prepaid. The Partial Prepayment Amount shall be calculated as in Section 6.A.; except that a partial prepayment shall be calculated according to the following formula: PP = (PE – A) x F + A These terms have the following meaning: PP = the Partial Prepayment PE = the Prepayment Amount calculated according to Section 6.A. F = the percentage by which the owner of the Assessor’s Parcel(s) is partially prepaying the Special Tax. A= The Administrative Fees and Expenses from Section 6.A. November 9, 2022 Community Facilities District No. 2022-1 (Palm & Highland) East Valley Water District C- 13 The owner of any Assessor’s Parcel who desires such prepayment shall notify the CFD Administrator of (i) such owner’s intent to partially prepay the Special Tax, (ii) the percentage by which the Special Tax shall be prepaid, and (iii) the company or agency that will be acting as the escrow agent, if any. The CFD Administrator shall provide the owner with a statement of the amount required for the partial prepayment of the Special Tax for an Assessor’s Parcel within sixty (60) days of the request and may charge a reasonable fee for providing this service With respect to any Assessor’s Parcel that is partially prepaid, the Water District shall (i) distribute the funds remitted to it according to Section 6.A., and (ii) indicate in the records of CFD No. 2022-1 that there has been a partial prepayment of the Special Tax and that a portion of the Special Tax with respect to such Assessor’s Parcel, equal to the outstanding percentage (1.00 - F) of the remaining Maximum Special Tax, shall continue to be levied on such Assessor’s Parcel pursuant to Section 3. Notwithstanding the foregoing, no partial prepayment shall be allowed unless the amount of Maximum Special Taxes less Administrative Expenses for each Fiscal Year that may be levied on Taxable Property, respectively, after the proposed partial prepayment is at least 1.1 times the annual Debt Service on all Outstanding Bonds. 7. TERM OF SPECIAL TAX The Annual Special Tax shall be levied for a period of thirty-five (35) Fiscal Years after the last series of Bonds has been issued, provided that the Special Tax shall not be levied later than Fiscal Year 2072/2073. 8. EXEMPTIONS The CFD Administrator shall classify as Exempt Property (i) Assessor’s Parcels owned by the State of California, Federal or other local governments, (ii) Assessor’s Parcels which are used as places of worship and are exempt from ad valorem property taxes because they are owned by a religious organization, (iii) Assessor’s Parcels developed or planned to be developed exclusively for any type of Non-Residential Property use, (iv) Assessor’s Parcels with public utility easement by the restriction or other restriction, as determined reasonably by the CFD Administrator, provided that no such classification would reduce the sum of all Taxable Property within CFD No. 2022-1 to less than 8.20 Acres. Assessor’s Parcels which cannot be classified as Exempt Property because such classification would reduce the sum of all Taxable Property in CFD No. 2022-1 to less than 8.20 Acres shall be classified as Provisional Undeveloped Property, and will continue to be subject to the Special Tax accordingly. Tax exempt status for this purpose of this paragraph will be assigned by the CFD Administrator in the chronological order in which property becomes eligible for classification as Exempt Property. November 9, 2022 Community Facilities District No. 2022-1 (Palm & Highland) East Valley Water District C- 14 If the use of an Assessor’s Parcel of Exempt Property changes so that such Assessor’s Parcel is no longer classified as one of the uses set forth in the first paragraph of this Section 8 above that would make such Assessor’s Parcel eligible to be classified as Exempt Property, such Assessor’s Parcel shall cease to be classified as Exempt Property and shall be deemed to be Taxable Property. 9. APPEALS Any landowner who pays the Annual Special Tax and claims the amount of the Annual Special Tax levied on his or her Assessor’s Parcel is in error shall first consult with the CFD Administrator regarding such error not later than twelve (12) months after first having paid the first installment of the Annual Special Tax that is disputed. If following such consultation, the CFD Administrator determines that an error has occurred, the CFD Administrator may recommend changing the amount of the Annual Special Tax levied on such Assessor’s Parcel. If following such consultation and action, if any by the CFD Administrator, the landowner believes such error still exists, such person may file a written notice with the General Manager appealing the amount of the Annual Special Tax levied on such Assessor’s Parcel. Upon the receipt of such notice, the General Manager may establish such procedures as deemed necessary to undertake the review of any such appeal. The General Manager thereof shall interpret this Rate and Method of Apportionment and make determinations relative to the administration of the Annual Special Tax and any landowner appeals. The decision of the General Manager shall be final and binding as to all persons. East Valley Water District Resolution 2022.21 Page 1 of 6 RESOLUTION NO. 2022.21 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE EAST VALLEY WATER DISTRICT ESTABLISHING COMMUNITY FACILITIES DISTRICT NO. 2022-1 (PALM & HIGHLAND) OF EAST VALLEY WATER DISTRICT, AUTHORIZING THE LEVY OF A SPECIAL TAX AND CALLING AN ELECTION THEREIN WHEREAS, the Board of Directors (the “Board”) of East Valley Water District (the “District”), a county water district that is duly organized and existing under and by virtue of the laws of the State of California, has previously adopted Resolution No. 2022.15 on September 14, 2022 (the “Resolution of Intention”) stating its intention to form Community Facilities District No. 2022-1 (Palm & Highland) of East Valley Water District (the “Community Facilities District”) pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California (the “Act”); and WHEREAS, a copy of the Resolution of Intention setting forth a description of the proposed boundaries of the Community Facilities District, the public facilities and the incidental expenses to be financed by the Community Facilities District (the “Facilities” and “Incidental Expenses,” respectively) is on file with the Board Secretary, and the Resolution of Intention is incorporated herein by reference; and WHEREAS, a combined notice of a public hearing (the “Hearing”) to be held on November 9, 2022 was published and mailed to all landowners of the land proposed to be included within the Community Facilities District; and WHEREAS, on November 9, 2022, the Board opened the Hearing as required by law; and WHEREAS, at the Hearing there was filed with Board a report containing a description of the Facilities necessary to meet the needs of the Community Facilities District and an estimate of the cost of such Facilities as required by Section 53321.5 of the Act (the “Community Facilities District Report”); and WHEREAS, at the Hearing, all persons desiring to be heard on all matters pertaining to the proposed formation of the Community Facilities District and the levy of the special taxes and the issuance of bonded indebtedness were heard and a full and fair hearing was held; and WHEREAS, at the Hearing, evidence was presented to the Board on the matters before it, and the proposed formation of the Community Facilities District and the levy of special taxes was not precluded by a majority protest of the type described in Section 53324 of the Act, and the Board at the conclusion of the hearing is fully advised as to all matters relating to the formation of the Community Facilities District, the levy of the special taxes and the issuance of bonded indebtedness; and WHEREAS, the Board has determined that there have been no registered voters residing within the proposed boundaries of the Community Facilities District for the period of 90 days prior to the Hearing and that the qualified electors in the Community Facilities District are the landowners within the Community Facilities District; and East Valley Water District Resolution 2022.21 Page 2 of 6 WHEREAS, on the basis of all of the foregoing, the Board has determined at this time to proceed with the establishment of the Community Facilities District and with the calling of an election within the boundaries of the Community Facilities District: (i) the levy of special taxes within the Community Facilities District pursuant to the rate and method of apportionment of the special tax for the Community Facilities District; (ii) the issuance of bonds by the Community Facilities District to finance the Facilities and Incidental Expenses; and (iii) the establishment of an appropriations limit for the Community Facilities District; and WHEREAS, the property owners of all of the land in the Community Facilities District (the “Developer”) and the District desire to enter into a Funding, Construction and Acquisition Agreement (the “Acquisition Agreement”) in order to provide for the acquisition, construction and financing of the Facilities and Incidental Expenses within the Community Facilities District; NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the District as follows: Section 1. Findings. The Board hereby specifically finds and declares that each of the statements, findings and determinations of the District set forth in the above recitals and in the preambles of the documents approved herein are true and correct. Section 2. Formation. The Community Facilities District to be designated “Community Facilities District No. 2022-1 (Palm & Highland) of East Valley Water District, County of San Bernardino, State of California” is hereby established pursuant to the Act. The Board hereby finds and determines that all prior proceedings taken with respect to the establishment of the Community Facilities District were valid and in conformity with the requirements of law, including the Act. This finding is made in accordance with the provisions of Section 53325.1(b) of the Act. Section 3. Boundaries. The boundaries of the Community Facilities District are established as shown on the map designated “Boundary Map Community Facilities District No. 2022-1 (Palm & Highland) of East Valley Water District, County of San Bernardino, State of California,” which map is on file in the office of the Board Secretary and was recorded pursuant to Sections 3111 and 3113 of the Streets and Highways Code in the County of San Bernardino Book of Assessments and Community Facilities Districts in the County Recorder’s Office in Book No. 90 at page 59 as Document No. 2022-0324810 on September 27, 2022. Section 4. Types of Facilities to be Financed by the Community Facilities District. The types of Facilities and Incidental Expenses that are authorized to be provided for the Community Facilities District are those set forth in the Resolution of Intention. The estimated costs of the Facilities and Incidental Expenses to be financed is set forth in the Community Facilities District Report, which estimates may change as the Facilities are designed and bid for construction and acquisition. The District is authorized by the Act to contribute revenue to, or to construct or acquire the Facilities, all in accordance with the Act. The Board finds that the proposed Facilities are necessary to meet the increased demand that will be placed upon public infrastructure and the District as a result of new development within the Community Facilities District. Section 5. Special Taxes. The Board hereby adopts the rate and method of apportionment of special tax for the Community Facilities District attached to the Resolution of Intention as Exhibit C (the “Rate and Method”) as the rate and method of apportionment for the Community Facilities East Valley Water District Resolution 2022.21 Page 3 of 6 District. Except where funds are otherwise available, it is the intention of the Board, subject to the approval of the eligible voters within the Community Facilities District, to levy the proposed special taxes in the Community Facilities District at the rates set forth in the Rate and Method on all non- exempt property within the Community Facilities District in order to pay: (i) the cost of the Facilities and the principal of and interest and other periodic costs on the bonds proposed to be issued by the Community Facilities District to finance the Facilities and Incidental Expenses, including the establishment and replenishment of reserve funds, any remarketing, credit enhancement and liquidity facility fees (including such fees for instruments which serve as the basis of a reserve fund in lieu of cash) and other expenses of the type permitted by Section 53345.3 of the Act; and (ii) the Incidental Expenses. The Community Facilities District expects to incur, and in certain cases has already incurred, Incidental Expenses in connection with the creation of the Community Facilities District, providing for the issuance of bonds, the levying and collecting of the special tax, the completion and inspection of the Facilities and the annual administration of the bonds and the Community Facilities District. The Rate and Method for is described in detail in Exhibit C to the Resolution of Intention and incorporated herein by this reference, and the Board hereby finds that said Exhibit C contains sufficient detail to allow each landowner within the Community Facilities District to estimate the maximum amount that may be levied against each parcel. As described in greater detail in the Community Facilities District Report, which is incorporated by reference herein, the special tax is based on the expected demand that each parcel of real property within the Community Facilities District will place on the Facilities and, accordingly, is hereby determined to be reasonable. The special tax shall be levied on each assessor’s parcel in the Community Facilities District pursuant to the Rate and Method, but the special tax shall not be levied after Fiscal Year 2072-73. The special tax is apportioned to each parcel in the Community Facilities District on the foregoing bases pursuant to Section 53325.3 of the Act and such special tax is not a tax on or a tax based upon the ownership of real property. The District’s Chief Financial Officer will be responsible for preparing annually, or authorizing a designee to prepare, a current roll of special tax levy obligations by assessor’s parcel number and will be responsible for estimating future special tax levies pursuant to Section 53340.2 of the Act. The District’s Chief Financial Officer contact information is as follows: East Valley Water District, Attn: Chief Financial Officer, 31111 Greenspot Road, Highland, California 92346, (909) 889-9501. Section 6. Public Hearing. In the event that a portion of the property within the Community Facilities District shall become for any reason exempt, wholly or partially, from the levy of the special tax specified in the Rate and Method, the Board shall increase the levy to the extent necessary and permitted by law and these proceedings upon the remaining property within the Community Facilities District which is not delinquent or exempt in order to yield the required debt service payments on any outstanding bonds for the Community Facilities District or to prevent the Community Facilities District from defaulting on any other obligations or liabilities; provided, however, that under no circumstances shall the Special Tax levied on Residential Property (as such term is defined in the Rate and Method) be increased as a consequence of delinquency or default by the owner of any other parcel or parcels within the Community Facilities District by more than ten percent (10%) above the amount that would have been levied in that fiscal year had there never been any such delinquencies or defaults in the Community Facilities District. The amount of the special tax will be set in accordance with the Rate and Method. East Valley Water District Resolution 2022.21 Page 4 of 6 Section 7. Lien of Special Taxes. Upon recordation of a notice of special tax lien pursuant to Section 3114.5 of the Streets and Highways Code, a continuing lien to secure the levy of the special tax shall attach to all non-exempt real property in the Community Facilities District; and this lien shall continue in force and effect until the special tax obligation is prepaid and permanently satisfied and the lien canceled in accordance with law or until collection of the special tax by the Community Facilities District ceases. Section 8. Finding Related to Agricultural Land. Consistent with Section 53325.6 of the Act, the Board finds and determines that the land within the Community Facilities District, if any, devoted primarily to agricultural, timber or livestock uses and being used for the commercial production of agricultural, timber or livestock products is contiguous to other land within the Community Facilities District and will be benefited by the Facilities proposed to be provided within the Community Facilities District. Section 9. No Other Taxes. It is hereby further determined that there is no ad valorem property tax currently being levied on property within the proposed Community Facilities District for the exclusive purpose of paying the principal of or interest on bonds or other indebtedness incurred to finance the construction of capital facilities which provide the same services to the territory of the Community Facilities District as are proposed to be provided by the Facilities to be financed by the Community Facilities District. Section 10. No Protests. Written protests against the establishment of the Community Facilities District have not been filed by one half or more of the registered voters within the boundaries of the Community Facilities District or by the property owners of one half or more of the area of land within the boundaries of the Community Facilities District. The Board hereby finds that the proposed special tax has not been precluded by a majority protest pursuant to Section 53324 of the Act. Section 11. Elections. An election is hereby called within the Community Facilities District on the propositions of levying the special tax on the property within the Community Facilities District, establishing an appropriations limit for the Community Facilities District pursuant to Section 53325.7 of the Act and incurring bonded indebtedness for the Community Facilities District pursuant to Section 53351 of the Act. The propositions to be placed on the ballot are attached hereto as Exhibit A. The date of the elections within the Community Facilities District shall be November 9, 2022, or such later date as is consented to by the Board Secretary and the landowners within the Community Facilities District. The Board Secretary shall conduct the elections. Except as otherwise provided by the Act, the elections shall be conducted by personally delivered or mailed ballot and, except as otherwise provided by the Act, the elections shall be conducted in accordance with the provisions of law regulating elections of the District insofar as such provisions are determined by the Board Secretary to be applicable. Notwithstanding the foregoing, by unanimous consent of all landowners within the Community Facilities District, analysis and arguments with respect to the matters set forth on the ballots are waived. Section 12. No Registered Voters. It is hereby found that there are no registered voters within the territory of any of the Community Facilities District, and, pursuant to Section 53326 of the Act, each landowner who is the owner of record on the date hereof, or the authorized representative thereof, shall have one vote for each acre or portion thereof that he, she or it owns within the East Valley Water District Resolution 2022.21 Page 5 of 6 Community Facilities District. The voters shall be the landowners of record within the Community Facilities District as of November 9, 2022. Section 13. Community Facilities District Report. The preparation of the Community Facilities District Report is hereby ratified. The Community Facilities District Report, as submitted, is hereby approved and made a part of the record of the Hearing regarding the formation of the Community Facilities District and is ordered to be kept on file with the transcript of these proceedings and open for public inspection. Section 14. Acquisition Agreement. The Acquisition Agreement in substantially the form attached hereto is hereby approved. The President or Vice President of the Board or the General Manager of the District or the designee thereof are authorized and directed to execute and deliver the Acquisition Agreement with such changes, insertions and omissions as may be recommended by General Counsel or Stradling Yocca Carlson & Rauth, the District’s Bond Counsel, and approved by the person executing the same, said execution being conclusive evidence of such approval. Section 15. Legislative Body. In accordance with the Act, the Board of the District shall act as the governing board and legislative body of the Community Facilities District. Section 16. Other Actions. The President or Vice President of the Board or the General Manager or Chief Financial Officer of the District or the designee thereof and any other proper officers of the District, acting singly, are hereby authorized and directed to do any and all things and to execute and deliver any and all documents and certificates which such officers may deem necessary or advisable in order to effectuate the purposes of this Resolution, and such actions previously taken by such officers are hereby ratified and confirmed. Section 17. Effect. This Resolution shall take effect immediately. ADOPTED this 9th day of November, 2022. Ayes: Directors: Noes: Abstain: Absent: _____________________________________ Phillip R. Goodrich Board President East Valley Water District Resolution 2022.21 Page 6 of 6 ATTEST: ___________________________ Michael Moore Secretary, Board of Directors November 9, 2022 I HEREBY CERTIFY that the foregoing is a full, true and correct copy of Resolution 2022.21 adopted by the Board of Directors of East Valley Water District at its Regular Board Meeting held November 9, 2022. ___________________________ Michael Moore Secretary, Board of Directors A-1 EXHIBIT A SAMPLE BALLOT COMMUNITY FACILITIES DISTRICT NO. 2022-1 (PALM & HIGHLAND) OF EAST VALLEY WATER DISTRICT SPECIAL TAX AND SPECIAL BOND ELECTION November 9, 2022 This ballot represents ____ votes. To vote, write or stamp a cross (“+” or “X”) in the voting square after the word “YES” or after the word “NO”. All marks otherwise made are forbidden. All distinguishing marks are forbidden and make the ballot void. If you wrongly mark, tear or deface this ballot, return it to the Secretary of East Valley Water District and obtain another. PROPOSITION A: Shall Community Facilities District No. 2022-1 (Palm & Highland) of East Valley Water District (the “Community Facilities District”), incur an indebtedness and issue bonds in the maximum principal amount of $4,000,000, with interest at a rate or rates not to exceed the maximum interest rate permitted by law, to finance the Facilities and the Incidental Expenses described in Resolution No. 2022.15 of the Board of Directors of East Valley Water District? YES □ NO □ PROPOSITION B: Shall a special tax with a rate and method of apportionment as provided in Resolution No. 2022.15 of the Board of Directors of East Valley Water District be levied to pay for the Facilities and Incidental Expenses and the principal of and interest on bonds issued to finance the Facilities and Incidental Expenses and the other purposes described in Resolution No. 2022.15? YES □ NO □ PROPOSITION C: For each year commencing with Fiscal Year 2022-23, shall the appropriations limit, as defined by subdivision (h) of Section 8 of Article XIIIB of the California Constitution, for the Community Facilities District be an amount equal to $4,000,000? YES □ NO □ 4866-5956-2035v4/022497-0018 COMMUNITY FACILITIES DISTRICT NO. 2022-1 (PALM & HIGHLAND) OF EAST VALLEY WATER DISTRICT FUNDING, CONSTRUCTION AND ACQUISITION AGREEMENT THIS FUNDING, CONSTRUCTION AND ACQUISITION AGREEMENT (this “Agreement”) is made and entered into as of the date set forth on the signature page below by and between EAST VALLEY WATER DISTRICT (the “Water District”), acting for and on behalf of itself and COMMUNITY FACILITIES DISTRICT NO. 2022-1 (PALM & HIGHLAND) OF EAST VALLEY WATER DISTRICT (the “CFD”), WARMINGTON RESIDENTIAL CALIFORNIA, INC., a California corporation (the “Developer”), each individually a “Party” and collectively the “Parties.” RECITALS A. The Developer has requested that the Water District consider: (i) the formation of a community facilities district pursuant to the provisions of the Mello-Roos Community Facilities Act of 1982, as amended (the “Act”); (ii) the authorization of special taxes for the CFD (the “Special Taxes”); and (iii) the issuance of bonded indebtedness in the CFD (the “Bonds”) for the payment of the construction and/or acquisition of certain public improvements to be owned, operated or maintained by the Water District, including the acquisition of capacity in the Water District’s water and sewer systems and Incidental Expenses as defined by the Act. B. In order to proceed in a timely manner with development of its property within the CFD which is described in Exhibit A (the “Developer Property”), the Developer desires to fund through the CFD: (i) the Water District’s acquisition or construction, if any, of certain public improvements that are to be owned, operated and maintained by the Water District (the “EVWD Improvements”); and (ii) improvements included or to be included in the Water District’s water and sewer connection and capacity fee programs (the “Capacity Improvements”), as more particularly set forth and described in the Description of Cost Estimates set forth in Exhibit B (collectively, the “Improvements”). C. The Water District is authorized by the Act to form the CFD, to levy Special Taxes and to issue Bonds to fund the Improvements. D. The Water District’s Board of Directors has adopted policies and procedures (as amended from time to time, the “Policy”) concerning the use of special district financing programs to finance water and/or sewer system facilities. E. The purpose of this Agreement is to set forth a formal understanding between the Developer and the Water District (pursuant to the requirements of Government Code Section 53313.51 and other provisions of the Act and the Policy) concerning financial and other obligations and responsibilities related to the formation of the CFD and the Improvements to be financed by the CFD, when and if formed, to the extent that proceeds of Special Taxes and Bonds of the CFD are available, and to set forth the conditions upon which: (i) the CFD will reimburse the Developer or its designee for: (a) the amounts advanced by the Developer to form the CFD; and (b) the cost of the EVWD Improvements constructed by or on behalf of the Developer; and (ii) the CFD will fund Capacity Improvements and the Water District will grant credit against applicable water and sewer capacity and connection fees. 2 4866-5956-2035v4/022497-0018 AGREEMENT SECTION 1. FEASIBILITY STUDY At the Developer’s request, the Water District will undertake to analyze the propriety of forming the CFD to finance the Improvements. The Water District will retain, at the Developer’s expense, the necessary consultants to analyze the proposed formation thereof, including an engineer, special tax consultant, bond counsel, appraiser and other consultants which are deemed necessary by the Water District. In order to begin the process of analyzing the CFD’s formation, the Developer has entered into a Reimbursement Agreement Re Formation of Proposed Community Facilities District No. 2022-1 (Palm & Highland) of East Valley Water District (the “Reimbursement Agreement”) pursuant to which the Developer has advanced to the Water District a sum of money to cover the costs of forming the CFD. The Reimbursement Agreement requires the Developer to make additional advances for such costs, as necessary. The amounts advanced by the Developer pursuant to the Reimbursement Agreement and, to the extent determined reasonable and appropriate by the Water District, expenses incurred by the Developer for engineering consultant costs in connection with the formation of the CFD and the issuance of Bonds, will be reimbursable to the Developer, without interest, from the proceeds of Bonds issued by the CFD when and if formed, and/or from the proceeds of Special Taxes collected within the CFD. In the event that Bonds are not issued, or Special Taxes are not levied, to provide a source of reimbursement to the Developer, the Water District shall not have any liability to the Developer to reimburse it for any of the amounts which were previously advanced by the Developer and expended by the Water District. The Developer will assist the Water District and its consultants, at no cost to the Water District, in completing all reasonably necessary technical, financial and legal preparations required to form the CFD. In the event that the Developer fails to fulfill its responsibilities under this Agreement prior to formation of the CFD, the Water District shall have the unequivocal right to terminate its obligations, receive payment of its full actual incurred cost and terminate this Agreement. SECTION 2. REIMBURSEMENT PROCEDURE It is hereby agreed by the Parties that, if the qualified electors of the proposed CFD do not approve the proposed Special Tax to be levied within the CFD, the Water District shall return any funds which have been advanced by the Developer and have not been committed for any authorized purpose by the time of the election. It is the intention of the Parties to make eligible for reimbursement, without interest, to the extent permitted by law, any reasonable work undertaken, or expenses incurred, by or for the Developer with respect to the Improvements, to the extent determined reasonable and appropriate by the Water District. Any such reimbursement shall be payable only when and if the CFD is formed and Bonds are sold or Special Taxes are levied. Reimbursement for costs and incidental expenses of EVWD Improvements is conditional upon full compliance with the provisions of Sections 6 through 10 of this Agreement. The funding of the acquisition or construction of the EVWD Improvements from the proceeds of the Bonds shall not diminish any sewer and water capacity and connection fee credits which are available to the Developer as a result of such acquisition or construction, as provided in a Development Agreement for Water and Sewer Palm & Highland, TTM No. 20495, to be entered into between the Water District and the Developer (the “Development Agreement”). 3 4866-5956-2035v4/022497-0018 SECTION 3. SALE OF BONDS 3.1 Water District Policies. The Water District’s Board of Directors has adopted the Policy setting forth the Water District’s policies and procedures concerning the use of special district financing programs to finance water and/or sewer system facilities. Pursuant to the Policy, the total annual amount of the Special Taxes to be collected with respect to property within the CFD and all other taxes and assessments which will be collected with respect to such property must not exceed two percent (2%) of the projected initial sales price of a fully developed parcel. Also, the ratio of the value of all parcels of property within the CFD for which the Bonds are being issued to the amount of outstanding community facilities district or assessment district bonds attributable to such parcels (the “Value-to-Lien Ratio”) may not be less than four-to-one (4:1) unless the Water District’s Board of Directors determines that a Value-to-Lien Ratio of less than 4:1 does not present any unusual credit risk. The fair market value of the property within the CFD for purposes of determining such ratio will be determined based on the assessed value of the property or on the appraised value as determined by an appraisal made by an appraiser selected by the Water District with a valuation date within three (3) months of the issuance of the Bonds. Subject to satisfaction of applicable Water District policies and the requirements of this Agreement, the Water District shall use its best efforts to issue and sell the Bonds in one or more series for the CFD in an amount that is sufficient to fund the Improvements, and the payment of such Bonds may be supported by Special Taxes from the CFD. 3.2 Security for Payment of Special Taxes. Concurrently with the issuance and sale of each series of Bonds, the Water District shall determine the parcels of land within the CFD for which Bonds are being issued that are owned by the Developer or any affiliate of the Developer (the “Account Party”) for which the Maximum Special Taxes (as defined in the Rate and Method of Apportionment of Special Tax for the CFD (the “RMA”)) are equal to or exceed, in the aggregate, 20% of the Maximum Special Taxes in the CFD (the “Secured Parcels”). The Developer shall deliver to the Water District either: (i) a renewable, irrevocable instrument of credit from a financial institution (rated “A” or better); or (ii) cash in-lieu thereof (a “Security”) to secure the payment of the Special Taxes on the Secured Parcels. The Security shall be in an amount equal to 100% of the product of the maximum annual debt service on the Bonds multiplied by a fraction, the numerator of which is the Maximum Special Taxes on the Secured Parcels and the denominator of which is the Maximum Special Taxes of all taxable property within the CFD (the “Stated Amount”). The Security shall be maintained by the Account Party until the Secured Parcels owned by the Account Party are responsible for less than twenty percent (20%) of the Maximum Special Taxes which may be levied on all taxable property within the CFD. The Stated Amount of such Security may be reduced from time to time based on the foregoing formula, as hereinafter provided in this Section 3.2. All costs and fees related to the establishment, maintenance and sizing of the Security in accordance with the terms of this Agreement, including, but not limited to any fees of a financial institution to establish or maintain any funds or accounts for such purposes, shall be borne by the Account Party. Notwithstanding the foregoing, the Security shall be released at the end of a fiscal year (being June 30 of each year) if in the following fiscal year, the CFD will not levy any Special Taxes on Secured Parcels owned by the Account Party. The Security shall name the Water District, or its designee, as a beneficiary and shall provide that the Water District, or its designee, may draw an amount equal to any delinquencies in payment of semiannual installments of the Special Taxes levied on the Secured Parcels owned by the Account Party. The total amount to be drawn under the Security shall not exceed an amount that is equal to the Special Taxes levied on the Secured Parcels that are delinquent at the time that the draw is made. 4 4866-5956-2035v4/022497-0018 The amount drawn on the Security shall be applied in the same manner and for the same purposes as the delinquent Special Taxes would have been applied; provided, however, that the payment of a draw under the Security will not be deemed to cure the delinquency in payment of the Special Taxes. If, subsequent to a draw on the Security and prior to the satisfaction of any reimbursements due to the institution providing the Security (the “Security Provider”) pursuant to this Agreement, the Water District receives payment of all or a portion of the delinquent Special Taxes or the proceeds of a sale of delinquent real property pursuant to foreclosure proceedings (the “Delinquency Proceeds”) for a parcel for which the Security has been drawn, the Security Provider shall be reimbursed for such draws to the extent of Delinquency Proceeds net of the Water District’s costs of collection, provided that the Security is or has been concurrently reinstated to, or a Substitute Security (as defined below) provided for, the then applicable Stated Amount. The Security Provider is intended by the Parties to be a third party beneficiary of this Section 3.2. The Security shall be renewed, or a substitute Security which is reasonably satisfactory to the Water District (a “Substitute Security”) shall be provided, not less than thirty (30) calendar days prior to the expiration of the Security or Substitute Security then in effect. If the Account Party provides a Substitute Security to the Water District, then the Water District or its designee shall return any existing Security on the effective date of the Substitute Security to the Security Provider. If the Security is not renewed within thirty (30) days prior to its expiration date and the requirements for release or termination of the Security have not then been met, the full amount of the Security may be drawn by the Water District and deposited in an account established under the Indenture (as such term is defined herein) or in such account established with a financial institution selected by the Water District. Thereafter, amounts in such account shall be held as security, and if Special Taxes owed by the Account Party with respect to the Secured Parcels are not paid prior to delinquency, then such amounts in such account may be applied by the Water District to pay the delinquent Special Taxes owed by the Account Party with respect to such Secured Parcels on the same terms and conditions as are applicable hereunder to draws on the Security. At such time as the Security is renewed, or a Substitute Security is accepted by the Water District, or the requirement for the Security has been terminated pursuant to this Section 3.2, the Water District or its designee shall release all amounts in the Security account to the Security Provider within ten (10) calendar days from the date of renewal or acceptance. Following the sale or transfer by the Account Party of any property to a person other than the Account Party, or upon the prepayment of the Special Tax obligation for a parcel owned by the Account Party, the Account Party shall notify Water District of such event, in writing, and, if requested by the Account Party, the Stated Amount of the Security shall be reduced and be recalculated in accordance with this Section 3.2; provided, however, that Water District shall be required to recalculate such amount and reduce the Security a maximum of two times each calendar year, and any costs associated with the recalculation and reduction shall be borne by the Account Party. The Security shall be terminated when: (1) the Maximum Special Taxes which are applicable to all Secured Parcels owned by the Account Party comprise less than twenty percent (20%) of the Maximum Special Taxes of all taxable property within the CFD; (2) the Account Party has paid all Special Taxes on the Secured Parcels owned by the Account Party which are due in the current fiscal year and the Maximum Special Taxes on the Secured Parcels which are owned by the Account Party will be less than twenty percent (20%) of the Maximum Special Taxes which are applicable to all taxable property within the CFD in the next fiscal year; or (3) the Account Party has paid all Special 5 4866-5956-2035v4/022497-0018 Taxes on the Secured Parcels owned by the Account Party which are due in the current fiscal year and, in the following fiscal year, the CFD will not levy any Special Taxes on Secured Parcels owned by the Account Party. Reduction or termination of a Security shall occur automatically upon submission to the Security Provider by the Water District of a “Certificate of Reduction or Termination.” The Water District shall deliver to the Security Provider such Certificate of Reduction or Termination promptly upon receipt from the Account Party of a certification which shall be made under penalty of perjury and which shall indicate: (A) the legal description of all land that is owned by the Account Party; and either (B) a recalculation of the new Stated Amount that the Account Party proposes be applicable to the Security; or (C) if termination of the Security is requested, a statement either: (x) that the Secured Parcels owned by the Account Party are responsible for less than twenty percent (20%) of the Maximum Special Taxes which are applicable to all taxable property within the CFD in the current fiscal year; (y) the Account Party has paid all Special Taxes which are due in the current fiscal year and the Maximum Special Taxes applicable to Secured Parcels owned by the Account Party will be less than twenty percent (20%) of the Maximum Special Taxes applicable to all taxable property within the CFD in the next fiscal year; or (z) in the following fiscal year, the CFD will not levy any Special Taxes on Secured Parcels owned by the Account Party. The Account Party shall notify the Water District of any events that will result in a reduction of the Stated Amount of the Security and shall provide the Water District with verification of said events. The Account Party may provide the Water District with a Substitute Security in the reduced amount and the Water District shall release and return to the Security Provider the Security then in effect. The Parties expressly acknowledge that the Account Party’s failure to so notify the Water District or to reduce the Security at the times which are prescribed herein shall in no way effect or invalidate sale or transfer of property or recordation of maps on property. If the Secured Parcels are sold or transferred by an Account Party with the result that the Secured Parcels which are owned by the transferee or any of its affiliates (each, a “Transferee”) are responsible for twenty percent (20%) or more of the Maximum Special Taxes of all taxable property within the CFD in the current fiscal year, a Security on the same terms specified herein will be furnished by Transferee with respect to all Secured Parcels owned by such Transferee. Any applicable purchase and sale agreement and/or escrow instructions shall notify the Transferee of this Security requirement and obligate the Transferee to provide such Security, if applicable. The Security of the Account Party will not be reduced to reflect the sale or transfer of such Secured Parcels until a Security is furnished by the Transferee and accepted by the Water District. The issuing financial institution and the form and terms of said Security will be subject to reasonable prior approval by the Water District. All terms provided in this Section 3 are applicable to the Transferee by replacing the term “Account Party” at each place where it occurs in each section with the term “Transferee.” Each provider of a Security for a Transferee shall be an express third party beneficiary of the provisions of this Section 3. Any costs related to holding or maintaining the Security, including any fees of a fiscal agent, trustee or other depository shall be borne by the Account Party. 3.3 Major Landowner Initial and Continuing Disclosure. An owner of land within the CFD which is responsible for twenty percent (20%) or more of the Maximum Special Taxes within the CFD (a “Major Landowner”) will be required to provide all information regarding the development of its property, including the financing plan for such development, which is necessary 6 4866-5956-2035v4/022497-0018 to ensure that each official statement for the Bonds complies with the requirements of Rule 15c2-12 of the Securities and Exchange Commission (the “Rule”) and all other applicable federal and state securities laws. Additionally, the Developer acknowledges that, if it is a Major Landowner at the time of issuance of the Bonds, it will be necessary for the Developer to enter into a continuing disclosure agreement to provide such continuing disclosure pertaining to the development of the land which is owned by the Developer within the CFD as necessary to assist the Bond underwriter in complying with the continuing disclosure requirements of the Rule. 3.4 Bond Issuance Parameters. The terms and conditions upon which each series of Bonds shall be issued and sold, the method of sale of the Bonds (including competitive sales, negotiated underwritings and private placements), the timing of sale of the Bonds and the pricing of the Bonds shall be determined solely by the Water District in its reasonable discretion in conformance with the requirements of Government Code Section 53313.5, the Act, the Policy, other Water District policies, including its debt management policy, and this Agreement. Each series of Bonds shall be issued with a term not to exceed 31 years. The proceeds of the Bonds shall be used in the following priority: (1) to fund a reserve fund for the payment of principal and interest with respect to the Bonds in an amount equal to the least of: (i) ten percent (10%) of the initial principal amount of the Bonds; (ii) maximum annual debt service on Bonds; or (iii) 125% of average annual debt service; (2) to fund up to eighteen (18) months of capitalized interest; (3) to pay for the costs of forming the CFD and/or to reimburse the Developer or its designee pursuant to the Reimbursement Agreement for formation and issuance costs which have not already been reimbursed to the Developer from collected Special Taxes; (4) to pay for costs of issuance of the Bonds, including, without limitation, underwriter’s discount, bond counsel and disclosure counsel fees, municipal advisor, appraisal and special tax consultant fees, printing fees and fiscal agent fees; (5) to pay up to one year of estimated priority administrative costs related to the administration of the CFD; and (6) to pay for the actual costs of the Improvements. The CFD shall maintain records relating to the disbursements of proceeds of the sale of the Bonds. The Indenture or Resolution (the “Indenture”) under which the Bonds are issued shall establish an acquisition and construction fund or improvement fund (the “Improvement Fund”) into which shall be deposited initially the proceeds of the Bonds net of the amount of proceeds required to fund items (1) through (5) above. The Indenture shall also establish separate accounts of the Improvement Fund designated the “EVWD Improvements Account” and the “Capacity Improvements Account,” into which shall be deposited such portions of the Improvement Fund as directed by the Water District and in writing at or subsequent to the closing of the sale of the Bonds consistent with the following priorities: (a) An amount that is sufficient to fund the reasonable, current estimated cost of the Capacity Improvements which are anticipated to be funded out of the Bonds being issued shall be deposited in the Capacity Improvements Account (any Special Taxes levied in the CFD and collected by the CFD remaining after the payment of administrative expenses of the CFD and the reimbursement of the Developer for CFD formation and issuance costs pursuant to the Reimbursement Agreement shall be deposited into the Capacity Improvements Account at the time of Bond issuance, unless otherwise directed in writing by the Developer); and (b) If applicable, an amount to be agreed upon between the Developer and the CFD prior to the issuance of Bonds which is sufficient to fund the reasonable, current estimated costs of the EVWD Improvements shall be deposited, or later transferred, to the EVWD Improvements Account. 7 4866-5956-2035v4/022497-0018 Interest that is earned on moneys which are deposited in each of the Capacity Improvements Account and the EVWD Improvements Account shall remain in such accounts until such time as all of the Improvements have been funded. Additionally, the Developer may direct the CFD to transfer excess moneys in any of the Capacity Improvements Account or the EVWD Improvements Account to another account. The Indenture shall provide that amounts remaining in the Improvement Fund after funding all proposed Improvements or sooner, as specified by the Water District, shall be deposited in the special tax fund or bond service fund and be applied to pay debt service on the Bonds and/or to call Bonds in advance of maturity. The Indenture shall also provide that amounts in the reserve fund for the Bonds in excess of the reserve requirement shall be deposited in the special tax fund or bond service fund and applied to pay debt service on the Bonds. SECTION 4. LEVY AND ALLOCATION OF SPECIAL TAXES Beginning in the first fiscal year in which a parcel within the CFD is classified as “Developed Property” pursuant to the RMA, Special Taxes shall be levied on such parcel to pay administrative expenses of the CFD and to pay directly for Improvements. Such Special Taxes collected each fiscal year prior to the issuance of Bonds of the CFD that are in excess of the amount required to fund such administrative expenses shall be held by the Water District in a discrete fund (the “Special Fund”) and disbursed to fund Improvements in the same priority as disbursements of the proceeds of Bonds from the Improvement Fund. Upon sale and delivery of the Bonds or sooner, as specified by the Water District, the Board of Directors of the Water District, as the legislative body of the CFD, shall annually levy a Special Tax in the CFD as provided for in the RMA for the CFD. SECTION 5. NOTICE OF SPECIAL TAX The Developer, or the Developer’s successors or assigns, shall provide written notice to all potential initial purchasers of lots advising of the Special Tax obligation which is applicable to the Developer Property in the form required by Section 53341.5 of the Government Code. A sample copy as prepared by the Developer is set forth in Exhibit C. SECTION 6. DESIGN PLANS AND SPECIFICATIONS The requirements of this Section 6 shall not apply to any EVWD Improvement that was complete (as determined by the Water District’s Board of Directors) prior to the adoption by the Water District’s Board of Directors of the resolution forming the CFD, but they shall apply to all other EVWD Improvements. All plans, specifications and bid documents for the EVWD Improvements (the “Plans”) which are constructed or to be constructed by the Developer shall be prepared by the Developer at the Developer’s initial expense, subject to approval by the applicable public agency. Costs for preparation of the Plans will be eligible for reimbursement, conditioned upon the final approval of the applicable public agency and the availability of moneys in the Special Fund or Improvement Fund (the “Authorized Funds”). Reimbursement of costs for plan revisions will be considered on a case by case basis. All EVWD Improvements to be acquired with Authorized Funds shall be bid in accordance with “public works” requirements of Section 7.4 to be eligible for reimbursement. The Developer shall not award bids for construction, or commence or cause commencement of construction, of an EVWD Improvement until the Plans and bidding documents have been approved by the Water District. The bid opening for EVWD Improvements shall be coordinated with and take place at the Water District’s offices, with Water District personnel in attendance. 8 4866-5956-2035v4/022497-0018 SECTION 7. CONSTRUCTION OF IMPROVEMENTS The requirements of this Section 7 shall not apply to any EVWD Improvement that was complete (as determined by the Water District’s Board of Directors) prior to the adoption by the Water District’s Board of Directors of the resolution forming the CFD, but they shall apply to all other EVWD Improvements. 7.1 Construction or Acquisition Election. Upon the approval of Plans for an EVWD Improvement, the Developer and the Water District shall determine whether the Developer will provide for construction of such EVWD Improvement in accordance with Sections 7.2, 7.4 and 8 of this Agreement (the “Acquisition Election”) or whether the Water District will provide for construction of such EVWD Improvement in accordance with Section 7.3 of this Agreement (the “Construction Election”). Sections 7.2, 7.4 and 8 specify the requirements for construction of the EVWD Improvements pursuant to the Acquisition Election which the Water District believes are necessary to ensure that such EVWD Improvements are constructed as if they had been constructed under the direction and supervision or under the authority of the Water District. 7.2 Acquisition Election. If the Acquisition Election is selected with respect to EVWD Improvements in accordance with the provisions of Section 8, a qualified engineering firm (the “Field Engineer”) shall be employed by the Developer to provide all field engineering surveys which are determined to be necessary by the Water District’s inspection personnel. The Field Engineer shall promptly furnish to Water District a complete set of grade sheets listing all locations, offsets, etc., in accordance with good engineering practices, and attendant data and reports resulting from the Field Engineer’s engineering surveys and/or proposed facility design changes. The Water District shall have the right, but not the obligation, to review, evaluate and analyze whether such results comply with applicable specifications. A full-time soil-testing firm, approved by Water District, shall be employed by the Developer to conduct soil compaction testing and certification. The Developer shall promptly furnish results of all such compaction testing to the Water District for its review, evaluation and decision as to compliance with applicable specifications. In the event that the compaction is not in compliance with applicable specifications, the Developer shall be fully liable and responsible for the costs of achieving compliance. A final report certifying all required compaction in accordance with the specifications shall be a condition of final acceptance of facilities. The costs of all surveying, testing and reports associated with the EVWD Improvements which are furnished and constructed by the Developer’s contractor(s) shall be eligible to be paid from Authorized Funds in the EVWD Improvements Account. The Water District shall not be responsible for conducting any environmental, archaeological, biological or cultural studies or any mitigation requirements that may be requested by appropriate Federal, State, and/or local agencies. Any such work shall be paid for and conducted by the Developer and reimbursed out of the EVWD Improvements Account. 7.3 Construction Election. If the Construction Election is selected for an EVWD Improvement, upon the award of a construction contract for an EVWD Improvement to be constructed by the Water District, funds in the EVWD Improvements Account in an amount equal to the costs of the EVWD Improvement shall be reserved for payments under such contract and shall not be available for the funding of other EVWD Improvements until all payments which are required 9 4866-5956-2035v4/022497-0018 by such contract have been made. At the time of either or both: (i) the execution of a contract for the construction of an EVWD Improvement as to which the Construction Election has been made; and (ii) completion of construction of the EVWD Improvement, the Developer shall be entitled to reimbursement from Authorized Funds in the EVWD Improvements Account of any actual costs of such EVWD Improvements which were incurred by the Developer at that time. If Bonds have not been issued or insufficient funds are reserved in the Improvement Fund, the Water District agrees to accept advances of funds from the Developer (if the Developer agrees to make such advances in its sole discretion) upon the Water District’s award of a construction contract for an EVWD Improvement to be constructed by the Water District in an amount equal to the difference between the amount of reserved funds and the contract amount. The amount of such advances shall be reimbursed to the Developer to the extent of Authorized Funds in the EVWD Improvements Account. 7.4 Public Works Requirements. In order that the EVWD Improvements as to which the Acquisition Election is made may be properly and readily acquired by the Water District, the Developer shall comply with all of the following requirements with respect to any such EVWD Improvements to be acquired with Authorized Funds, and the Developer shall provide such proof to the Water District as the Water District may reasonably require and at such intervals and in such form as the Water District may reasonably require, that the following requirements have been satisfied as to the construction of all such EVWD Improvements: (a) The Developer shall prepare a bid package for review, comment and approval by the General Manager of the Water District or his or her designee (the “District Representative”). (b) The Developer shall, after obtaining at least three sealed bids for the construction of the EVWD Improvements, submit to the Water District written evidence of such competitive bidding procedure, including evidence of the means by which bids were solicited, a listing of all responsive bids and their amounts, and the name or names of the contractor or contractors to whom the Developer proposes to award the contracts for such construction, which shall be the lowest responsible bidder. (c) The District Representative shall attend the bid opening. If the District Representative is unable to attend the bid opening, the District Representative shall approve or disapprove of a contractor or contractors, in writing, within five (5) business days after receipt from the Developer of the name or names of such contractor or contractors which are recommended by the Developer. If the District Representative disapproves of any such contractor, the Developer shall select the next lowest responsible bidder from the competitive bids received which is acceptable to the District Representative. (d) The specifications and bid and contract documents shall require all such contractors to pay prevailing wages and to otherwise comply with applicable provisions of the Labor Code, the Government Code and the Public Contract Code relating to public works projects and as required by the procedures and standards of the Water District with respect to the construction of its public works projects. (e) The Developer shall submit faithful performance and payment bonds conforming in all respects to the requirements which are set forth in the Water District’s “Standard 10 4866-5956-2035v4/022497-0018 Water and/or Sewer Facilities and Service Agreement.” The following documents shall be submitted to the Water District along with the performance and payment bonds: (i) The original, or a certified copy, of the unrevoked appointment, power of attorney, bylaws or other instrument entitling or authorizing the person who executed the bond to do so; (ii) A certified copy of the certificate of authority of the insurer issued by the State of California’s Insurance Commissioner; and (iii) Copies of the insurer’s most recent annual and quarterly statements filed with the Department of Insurance. (f) The Developer and its contractor and subcontractors shall be required to provide proof of insurance coverage throughout the term of the construction of the EVWD Improvements, which they will construct in conformance with the Water District’s standard procedures and requirements. The Water District’s Insurance requirements are set out in Section 21. (g) The Developer and all such contractors shall comply with such other requirements relating to the construction of the EVWD Improvements which the Water District may impose by written notification delivered to the Developer and each such contractor at the time either prior to the receipt of bids by the Developer for the construction of such EVWD Improvements or, to the extent required as a result of changes in applicable laws, during the progress of construction thereof; provided that such other requirements shall only be imposed to the extent that the Water District reasonably determines they are required in order to comply with applicable law. In accordance with Section 8, the Developer shall be deemed the awarding body and shall be solely responsible for compliance and enforcement of the provisions of the Labor Code, Government Code and Public Contract Code. (h) A “Change Order” is an order from the Developer to a contractor authorizing a change in the work to be performed. The Developer shall receive comments from the District Representative prior to the Developer’s approval of any Change Order. The District Representative shall comment on or deny the Change Order request within five (5) business days of receipt of all necessary information. The Water District’s comments to a Change Order shall not be unreasonably delayed, conditioned or withheld. The Developer shall not be entitled to be compensated for costs associated with a Change Order that has not been approved by the District Representative. The Developer shall provide proof to the Water District, at such intervals and in such form as the Water District may reasonably require, that the foregoing requirements have been satisfied as to all of the EVWD Improvements as to which the Acquisition Election has been made which are funded through Bond proceeds. SECTION 8. INSPECTION; COMPLETION OF CONSTRUCTION The requirements of this Section shall not apply to any EVWD Improvement that was complete (as determined by the Water District’s Board of Directors) prior to the adoption by the Water District’s Board of Directors of the resolution forming the CFD, but they shall apply to all other EVWD Improvements. 11 4866-5956-2035v4/022497-0018 The Water District shall have primary responsibility for inspecting the EVWD Improvements to assure that the work is being accomplished in accordance with the Plans. Such inspection does not include inspection for compliance with safety requirements by the Developer’s contractor(s). The Water District’s personnel shall be granted access to each construction site at all reasonable times for the purpose of accomplishing such inspection. Upon satisfaction of the Water District’s inspectors, the Developer shall notify the Water District in writing that an EVWD Improvement has been completed in accordance with the Plans. Any actual costs reasonably incurred by the Water District for inspection which has not been previously paid by the Developer shall be reimbursed from Authorized Funds. Within three (3) business days of receipt of written notification from EVWD inspectors that an EVWD Improvement has been completed in accordance with the Plans, the District Representative shall notify the Developer in writing that such EVWD Improvement has been satisfactorily completed. Upon receiving such notification, the Developer shall file a Notice of Completion with the County of San Bernardino Recorder’s Office, pursuant to the provisions of Section 3093 of the Civil Code. The Developer shall furnish to the Water District a duplicate copy of each such Notice of Completion showing thereon the date of filing with the County of San Bernardino (the “County”). The Water District will in turn file a notice with the County for acceptance. SECTION 9. LIENS With respect to any EVWD Improvement that was complete (as determined by the Water District’s Board of Directors) prior to the adoption by the Water District’s Board of Directors of the resolution forming the CFD, prior to any payment by the CFD to the Developer for such EVWD Improvement, the Developer shall provide to the Water District such evidence or proof as the Water District shall require that all persons, firms and corporations supplying work, labor, materials, supplies and equipment for the construction of the EVWD Improvements have been paid, and that no claims of liens have been recorded by or on behalf of any such person, firm or corporation. With respect to EVWD Improvements, upon the earlier of: (i) receipt of all applicable lien releases; or (ii) expiration of the time for the recording of claim of liens as prescribed by Sections 3115 and 3116 of the Civil Code, the Developer shall provide to the Water District such evidence or proof as the Water District shall require that all persons, firms and corporations supplying work, labor, materials, supplies and equipment for the construction of the EVWD Improvements have been paid and that no claims of liens have been recorded by or on behalf of any such person, firm or corporation. SECTION 10. ACQUISITION; ACQUISITION PRICE; SOURCE OF FUNDS The acquisition price of an EVWD Improvement that was complete (as determined by the Water District’s Board of Directors) prior to the adoption by the Water District’s Board of Directors of the resolution forming the CFD shall be its fair market value, as determined by the District Representative or his or her designee, as of the date of acquisition. The Water District shall consider input and data provided by the Developer prior to determining the final fair market value. The costs eligible to be included in the acquisition price of an EVWD Improvement that is not described in the preceding paragraph (the “Actual Costs”) shall include: (i) The actual hard costs for the construction of such EVWD Improvement as established by the Water District-approved construction contracts and approved 12 4866-5956-2035v4/022497-0018 Change Orders, including costs of payment, performance and maintenance bonds and insurance costs, pursuant to this Agreement; (ii) The design and engineering costs of such EVWD Improvement including, without limitation, the costs incurred in preparing the Plans. Costs for Plan revisions will be considered on a case by case basis; (iii) The costs of environmental evaluations and public agency permits and approvals which are attributable to the EVWD Improvement; (iv) Costs incurred by the Developer for construction management and supervision of such EVWD Improvement, not to exceed five percent (5%) of the actual construction cost, subject to prior approval by the Water District of any construction management or supervision contract with respect to an EVWD Improvement; (v) Professional costs associated with the EVWD Improvement such as engineering, inspection, construction staking, materials, testing and similar professional services; and (vi) Costs approved by the Water District in accordance with the Act of acquiring any real property or interests therein required for the EVWD Improvement, including, without limitation, any water tank sites, temporary construction easements, temporary by-pass roads and maintenance easements. Provided that the Developer has complied with the requirements of this Agreement, the Water District agrees to pay the acquisition price of a completed EVWD Improvement to the Developer or its designee within thirty (30) days after the Developer’s satisfaction of the preconditions to such payment stated herein, but only to the extent that there are sufficient Authorized Funds available. Except in the case of an EVWD Improvement which described in the first paragraph of this Section 10, the acquisition price to be paid from Authorized Funds for the acquisition of an EVWD Improvement by the Water District shall be the least of: (1) the value of the EVWD Improvement; or (2) the total of the Actual Costs of the EVWD Improvement. As a condition to the payment of the acquisition price, the ownership of the completed EVWD Improvement shall be transferred to the Water District by grant deed, bill of sale or such other documentation as such public agency may require free and clear of all taxes, liens, encumbrances and assessments, but subject to any exceptions which the Water District determines do not interfere with the actual or intended use of the land or interest therein (including the lien of a community facilities district so long as the subject property is exempt from taxation or is otherwise not taxable by such community facilities district). Upon the transfer of ownership of EVWD Improvements or any portion thereof to the Water District, the Water District shall be responsible for the maintenance of such EVWD Improvements or the portion transferred. Notwithstanding the foregoing, the acquisition price of an EVWD Improvement may be paid prior to transfer of ownership and acceptance of the EVWD Improvement if it is substantially completed at the time of payment. The EVWD Improvement shall be considered “substantially complete” when it has been reasonably determined by the Water District to be usable, subject to final completion of such items as are not essential to the primary use or operation of the EVWD Improvement. For purposes of determining the acquisition price to be paid by the CFD for the acquisition of the EVWD Improvements by the Water District (other than EVWD Improvements described in the 13 4866-5956-2035v4/022497-0018 first paragraph of this Section 10), the value of such EVWD Improvements shall include the construction costs which are specified in the Water District-approved contracts and Water District- approved Change Orders conforming to Section 8. Water District approval is a condition prior to initiation of contract work. However, if the Water District reasonably determines that the additional Actual Costs are excessive and that the value of the EVWD Improvements is less than the total amount of such Actual Costs and such construction costs, the price to be paid for the acquisition of the EVWD Improvements shall be the value thereof as determined by the District Representative; subject, however, to the Developer’s right to appeal to the Water District’s Board of Directors. Upon completion of the construction of an EVWD Improvement, the Developer shall deliver or cause to be delivered to the Water District a Disbursement Request Form in substantially the form set forth in Exhibit D, copies of the contract(s) with the contractor(s) who have constructed the EVWD Improvement and other relevant documentation with regard to the payments made to such contractor(s) and each of them for the construction of the EVWD Improvement, documentation evidencing payment of prevailing wages, and invoices and purchase orders with respect to all equipment, materials and labor which were purchased for the construction of the EVWD Improvement. The District Representative shall complete its determination of the value of each EVWD Improvement as promptly as is reasonably possible. Notwithstanding the preceding provisions of this Section 10, the source of funds for the acquisition of the EVWD Improvements or any portion thereof shall be Authorized Funds. If for any reason beyond the Water District’s control the proceedings for the formation of the CFD are not completed or Bonds are not sold, the Water District shall not be required to acquire the EVWD Improvements from the Developer, except to the extent of funds deposited into the Special Fund. In such event, the Developer shall complete the design and construction and offer to the Water District ownership of such portions of the EVWD Improvements as are required to be constructed by the Developer pursuant to the Development Agreement (but only at such times as required by such condition), but need not construct any portion of the EVWD Improvements which it is not so required to construct. In addition to the foregoing, the Water District shall have the right to withhold payment for acquisition of an EVWD Improvement, if: (a) the Developer or any of its affiliates is delinquent in the payment of any Special Taxes levied by the CFD on properties then owned by the Developer or any of its affiliates within the CFD; or (b) the Developer is not then in substantial compliance with a condition or obligation imposed upon the Developer Property by the Water District, including but not limited to, payment of all applicable fees, dedication of all applicable rights-of-way or other property and construction requirements. The Water District shall immediately provide written notice to the Developer of the decision to withhold any such payment and shall specify the reason for such decision. If the payment is withheld as a result of the delinquency in the payment of Special Taxes, the notice shall identify the delinquent parcels and the amount of such delinquency. If the payment is withheld as a result of substantial non-compliance with a condition or obligation, the notice shall specify such condition or obligation and what action will be necessary by the Developer to substantially comply with such condition or obligation. Upon receipt of evidence reasonably satisfactory to the Water District that 14 4866-5956-2035v4/022497-0018 the Developer has paid the delinquent Special Taxes or complied with the subject condition or obligation, the Water District shall forthwith make all payments which have been withheld pursuant to the provisions of this Section 10. SECTION 11. EASEMENTS AND/OR FEE TITLE OWNERSHIP DEEDS Without limiting the Developer’s right to reimbursement for such grants pursuant to Section 10 above, the Developer shall, at the time that the Water District acquires the EVWD Improvements as provided in Section 10, grant or cause to be granted to the Water District, by appropriate instruments prescribed by the Water District, all easements across private property and/or fee title ownership deeds which may be reasonably necessary for the proper operation and maintenance of such EVWD Improvements, or any part thereof, but only to the extent located within the Developer Property. SECTION 12. PERMITS The Developer shall be responsible for obtaining all necessary construction permits from the city within which the work is to be done, if any (the “City”) and/or the County (as appropriate) covering construction and installation of the EVWD Improvement as to which the Acquisition Election has been made. The Water District will request the City and/or County to issue an “operate and maintain permit” to the Water District, which will become effective upon the completion of the EVWD Improvements and acceptance of ownership therewith by the Water District. SECTION 13. MAINTENANCE Prior to the transfer of ownership of an EVWD Improvement by the Developer to the Water District, as provided in Section 10, the Developer shall be responsible for the maintenance thereof and shall require its contractor(s) to repair all facilities damaged by any party other than the Water District, prior to acceptance by the Water District and/or make corrections which are determined to be necessary by the Water District’s inspection personnel. The Water District shall not be permitted to place any EVWD Improvement in service prior to acceptance of the same, unless the Developer otherwise consents in writing. SECTION 14. INSPECTION OF RECORDS The Water District shall have the right to review all books and records of the Developer pertaining to the costs and expenses incurred by the Developer for the design and construction of the EVWD Improvements during normal business hours by making arrangements with the Developer. The Developer shall have the right to review all books and records of the Water District pertaining to costs and expenses incurred by the Water District for services of the Field Engineer by making arrangements with the Water District. SECTION 15. OWNERSHIP OF IMPROVEMENTS Notwithstanding the fact that some or all of the EVWD Improvements may be constructed in dedicated street rights-of-way or on property which has been or will be dedicated to the Water District, each EVWD Improvement shall be and remain the property of the Developer until acquired by the Water District as provided in this Agreement. 15 4866-5956-2035v4/022497-0018 SECTION 16. MATERIALS AND WORKMANSHIP WARRANTY The requirements of this Section 16 shall not apply to any EVWD Improvement that was complete (as determined by the Water District’s Board of Directors) prior to the adoption by the Water District’s Board of Directors of the resolution forming the CFD, but they shall apply to all other EVWD Improvements. Upon the completion of the acquisition of an EVWD Improvement by the Water District, the performance bond related to such individual EVWD Improvement provided by the Developer pursuant to Section 7.4(e) shall be reduced by 90%, and the remaining 10% shall serve as a maintenance bond to guarantee that such EVWD Improvement will be free from defects due to faulty workmanship or materials for a period of one year. Release of performance and payment bonds is addressed in the Development Agreement. SECTION 17. CAPACITY IMPROVEMENTS Amounts deposited in the Capacity Improvements Account pursuant to Section 3.4 shall be disbursed at the written direction of the Water District upon the Developer’s submittal of a written payment request at the time or times that water and sewer connection or capacity fees are payable to the Water District. Upon receipt of the Developer’s request for disbursement, the Water District shall submit a written requisition for payment of the requested amount to the CFD Administrator (the “Administrator”), who shall directly pay the amount to the Water District, and the Developer shall receive credit against the applicable water and sewer connection or capacity fees. Pending the disbursement of said monies, the amounts in the Capacity Improvements Account shall be invested as directed in writing by the Water District and investment earnings shall either remain in such account or be transferred to the Improvement Fund to be used as provided in Section 3.4. The Water District shall expend any amounts disbursed to it from the Capacity Improvements Account on capital facilities. If the Developer is required to deposit security to assure payment of water and/or sewer connection or capacity fees of the Water District prior to the issuance of the Bonds or due to insufficient funds being on deposit in the Capacity Improvements Account, the Developer shall be reimbursed the full amount of deposit at such time as, and to the extent funds are subsequently available in the Capacity Improvements Account. The payment of a deposit as described in the preceding sentence shall not be construed as a dedication or gift of the water and/or sewer connection or capacity fees of the Water District or as a waiver of any right to reimbursement of such fees. SECTION 18. [RESERVED]. SECTION 19. INDEPENDENT CONTRACTOR In performing this Agreement, the Developer is an independent contractor and not the agent of the Water District. The Water District shall not have any responsibility for payment to any contractor or supplier of the Developer. It is not intended by the Parties that this Agreement create a partnership or joint venture among them and this Agreement shall not otherwise be construed. SECTION 20. INDEMNIFICATION The Developer shall assume the defense of, indemnify and save harmless, the Water District, its officers, employees and agents, and the CFD, its officers, employees and agents (each, an “Indemnified Party” and collectively, the “Indemnified Parties”), from and against all actions, 16 4866-5956-2035v4/022497-0018 damages, claims, losses or expenses of every type and description to which they may be subject or put, by reason of, or resulting from the Developer’s performance of its obligations under this Agreement, the issuance of the Bonds and the Developer’s construction of the EVWD Improvements for which an Acquisition Election is made pursuant to Section 7.2. No provision of this Agreement shall in any way limit the extent of the Developer’s responsibility for payment of damages resulting from the operations of the Developer and its contractors; provided, however, that the Developer shall not be required to assume the defense or indemnify and save harmless any Indemnified Party from and against any actions, damages, claims, losses or expenses resulting from the breach of this Agreement by, or the negligence or willful misconduct of, an Indemnified Party. SECTION 21. INSURANCE REQUIREMENTS Neither the Developer nor its contractor shall commence work on an EVWD Improvement under this Agreement prior to obtaining all insurance required hereunder with a company or companies acceptable to the Water District, nor shall the Developer’s contractor allow any subcontractor to commence work on its subcontract until all insurance required of the subcontractor has been obtained. The Developer shall, during the life of this Agreement, notify the Water District in writing of any incident giving rise to any potential bodily injury or property damage claim and any resultant settlements, whether in conjunction with this or any other project which may affect the limits of the required coverage, as soon as is reasonable and practical. Both the Developer and its contractor shall conform in every respect to the requirement set forth in the Standard Water and/or Sewer Facilities and Service Agreement, by and between the Water District and the Developer. SECTION 22. CONFLICT WITH OTHER AGREEMENTS Except as specifically provided herein, nothing contained herein shall be construed as releasing the Developer from any condition of development or requirement imposed by any other agreement with Water District. In the event of a conflicting provision, such other agreement shall prevail unless such conflicting provision is specifically waived or modified in writing by Water District. SECTION 23. TERMINATION The provisions of this Agreement related to the acquisition and financing of the Improvements shall terminate and be of no further force or effect if the first series of Bonds for the CFD is not sold within 10 years from the date of this Agreement, unless this Agreement extended by the Parties. If the Water District is unable to sell the first series of Bonds for the CFD after diligent, commercially reasonable efforts to do so, this Agreement shall terminate and be of no further force and effect; provided, however, that in such event, any collected Special Taxes remaining after the payment of administrative expenses of the CFD and reimbursement to the Developer of CFD formation costs shall be used to pay for Improvements in accordance with this Agreement and the Developer shall receive a credit against fees otherwise payable to Water District in the amount so used to pay for any Capacity Improvements. Eligibility for capacity and construction fee credits as a result of the construction of the EVWD Improvements shall be pursuant to the Development Agreement. 17 4866-5956-2035v4/022497-0018 SECTION 24. NOTICES Any notice, payment or instrument required or permitted by this Agreement to be given or delivered to either Party shall be deemed to have been received when either personally delivered or received through overnight delivery or seventy-two (72) hours following deposit of the same in any United States Post Office in California, registered or certified, postage prepaid. Any notice to the CFD or the Water District shall be addressed to East Valley Water District, 31111 Greenspot Road, Highland, CA 92346, Attention: General Manager. Any notice to the Developer shall be addressed to: Warmington Residential California, Inc., Attn: Matthew Esquivel, 3090 Pullman Street, Costa Mesa, California 92626, Phone: (714) 434-4416, Email: mesquivel@warmingtongroup.com. Each Party may change its address for delivery of notice by delivering written notice of such change of address to the other Party hereto. SECTION 25. NO GIFT OR WAIVER. 25.1 No Gift or Waiver for EVWD Improvements. The Developer and the Water District acknowledge that: (a) The Developer or its predecessor may have constructed or may be constructing EVWD Improvements before Authorized Funds that will be used to acquire them are available with the expectation that the Developer will be reimbursed for such EVWD Improvements to the extent and in the manner set forth in this Agreement. (b) The Water District may inspect EVWD Improvements and process Disbursement Request Forms even if Authorized Funds do not exist at the time of such inspection and processing or are not then sufficient to satisfy the Disbursement Request in full. (c) The Developer may convey EVWD Improvements to the Water District and the Water District may accept such EVWD Improvements even if Authorized Funds do not exist at the time of such conveyance and acceptance or are not then sufficient to satisfy the Disbursement Request in full. (d) If the Water District accepts EVWD Improvements before a Disbursement Request is paid in full, the unpaid balance of the Disbursement Request will be paid from time to time, in any number of installments and irrespective of the length of time that payment is deferred, as Authorized Funds become available. (e) The Developer’s conveyance or dedication of EVWD Improvements to the Water District before the availability of Authorized Funds to acquire the EVWD Improvements is not, and shall not be deemed to be, a gift or a waiver of the Developer’s right to payment of the purchase price of such EVWD Improvements pursuant to this Agreement. 25.2 No Gift or Waiver for Capacity Fees. The Developer and the Water District acknowledge that: (a) Prior to the availability of Authorized Funds, the Developer or its predecessor may have been or may be required to deposit funds to assure payment of water and/or sewer connection or capacity fees of the Water District. 18 4866-5956-2035v4/022497-0018 (b) The Developer or its predecessor has deposited or will be depositing such funds with the expectation that the Developer will be reimbursed for these deposits to the extent and in the manner set forth in this Agreement. (c) The reimbursement of such deposits pursuant to Section 17 may occur from time to time, in any number of installments and irrespective of the length of time that payment is deferred, as Authorized Funds become available. (d) The Developer’s deposit of such funds to the Water District before the availability of Authorized Funds to reimburse the Developer is not, and shall not be deemed, a gift or a waiver of the Developer’s right to reimbursement of such deposits pursuant to this Agreement. SECTION 26. GENERAL PROVISIONS (a) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the Water District and the Developer and their respective heirs, executors, legal representatives, successors, and authorized assigns. (b) Amendment. This Agreement may be amended at any time but only in writing signed by each Party hereto. (c) Entire Agreement. This Agreement, and the agreements referenced herein, contains the entire understanding and agreement between the Parties with respect to the matters that are provided for herein and supersedes all prior agreements and negotiations between the Parties with respect to the subject matter of this Agreement. There are no oral or written representations, understanding, undertakings or agreements which are not contained or expressly referred to herein, and any such representations, understandings or agreements are superseded by this Agreement. No evidence of any such representations, understandings or agreements shall be admissible in any proceeding of any kind or nature relating to the terms or conditions of this Agreement, its interpretation or breach. This Agreement shall be binding upon, and enforceable by and against the CFD upon the establishment of the CFD. (d) Exhibits. All exhibits attached hereto are incorporated into this Agreement by reference. (e) Severability. If any part of this Agreement is held to be illegal or unenforceable by a court of competent jurisdiction, the remainder of this Agreement shall be given effect to the fullest extent reasonably possible. (f) Waiver. Failure by a Party to insist upon the strict performance of any of the provisions of this Agreement by the other Parties hereto, or the failure by a Party to exercise its rights upon the default of another Party, shall not constitute a waiver of such party’s right to insist and demand strict compliance by such other Parties with the terms of this Agreement thereafter. (g) No Third Party Beneficiaries. Except as provided explicitly in this Agreement, no person or entity shall be deemed to be a third party beneficiary hereof, and nothing in this Agreement (either express or implied) is intended to confer upon any person or entity, other than the Water District, the CFD, and the Developer (and their respective successors and assigns), and the 19 4866-5956-2035v4/022497-0018 Security Provider (with respect to Section 3.2 only) any rights, remedies, obligations or liabilities under or by reason of this Agreement. (h) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which shall constitute but one instrument. (i) Assignment. The Developer may assign all or any of its rights pursuant to this Agreement to a purchaser of all or any portion of the Developer Property. Such a purchaser and assignee shall, as a condition to taking an assignment of such rights, enter into an assignment and assumption agreement with the Water District and the Developer, in a form reasonably acceptable to the Developer and the Water District, whereby such rights assigned are specified and such purchaser agrees, except as may be otherwise specifically provided therein, to assume the obligations of the Developer pursuant to this Agreement and to be bound thereby. A company that acquires all of the assets of the Developer, including ownership of the Developer itself, shall be deemed a successor and shall not require an assignment or assumption agreement to be bound by, and enjoy the benefits of, this Agreement. (j) Governing Law. This Agreement and any dispute arising hereunder shall be governed by and interpreted in accordance with the laws of the State of California. (k) Construction of Agreement. This Agreement has been reviewed by legal counsel for both the Water District and the Developer and shall be deemed for all purposes to have been jointly drafted by the Water District and the Developer. No presumption or rule that ambiguities shall be construed against the drafting Party shall apply to the interpretation or enforcement of this Agreement. (l) Attorneys’ Fees. In the event of any action or proceeding, including an arbitration or a reference pursuant to Section 638 et seq., of the Code of Civil Procedure brought by any Party against any other under this Agreement, the prevailing Party shall be entitled to recover its actual attorneys’ fees and all fees, costs and expenses incurred for prosecution, defense, consultation or advice in such action or proceeding. In addition to the foregoing, the prevailing Party shall be entitled to its actual attorneys’ fees and all fees, costs and expenses incurred in any post-judgment proceedings to collect or enforce the judgment. This provision is separate and several and shall survive the merger of this Agreement into any judgment on this Agreement. (m) Venue and Forum. Any action at law or in equity arising under this Agreement brought by any Party hereto for the purpose of enforcing, construing or determining the validity of any provision of this Agreement shall be filed and tried in the Superior Court of the County of San Bernardino, State of California, and the Parties waive all provisions of law providing for the filing, removal or change of venue to any other court. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] S-1 4866-5956-2035v4/022497-0018 IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year written below. Dated: November 9, 2022 EAST VALLEY WATER DISTRICT By: ________________________________________ Name: Michael Moore Title: General Manager/CEO WARMINGTON RESIDENTIAL CALIFORNIA, INC., a California corporation By: Name: Title: 4866-5956-2035v4/022497-0018 LIST OF EXHIBITS EXHIBIT A - DESCRIPTION OF DEVELOPER PROPERTY EXHIBIT B - DESCRIPTION OF COST ESTIMATES OF THE IMPROVEMENTS EXHIBIT C - NOTICE OF SPECIAL TAX (as prepared by Developer) EXHIBIT D - DISBURSEMENT REQUEST FORM A-1 4866-5956-2035v4/022497-0018 EXHIBIT A DESCRIPTION OF DEVELOPER PROPERTY Real property located in the County of San Bernardino, State of California, City of San Bernardino described as follows: B-1 4866-5956-2035v4/022497-0018 EXHIBIT B DESCRIPTION OF COST ESTIMATES OF THE IMPROVEMENTS The Improvements consist of the Capacity Improvements and the EVWD Improvements, as described below. I. CAPACITY IMPROVEMENTS. Water and sewer facilities included in EVWD’s water and sewer capacity and connection fee programs used to finance expansion projects, exclusive of in-tract facilities constructed by a property owner, but including and not limited to the following: water and sewer transmission pipelines, sewer treatment plants, disposal ponds, pumping plants, lift stations, and water reservoirs, including all costs of site acquisition, planning, design, engineering, legal services, materials testing, coordination, surveying, construction staking, construction inspection and any and all appurtenant facilities and appurtenant work relating to the foregoing. Estimated Cost of the Capacity Improvements Description Estimated Cost1 Water Capacity Charge (Residential Units - ¾” Meter) $1,059,212 Water Capacity Charge (Irrigation - 1½” Meter) 26,549 Sewer Capacity Charge (Residential Units) 1,107,757 Total Fees $2,193,518 II. EVWD IMPROVEMENTS. Estimated Cost of the EVWD Improvements Description2 Estimated Cost None $N/A 1 Estimated Cost is based on the Water District’s current fees and the estimated number of dwelling units and equivalent dwelling units in the development. The amount eligible to be funded for Capacity Improvements shall be based on the actual number of dwelling units and equivalent dwelling units for which such fees are charged and the Water District’s then-current schedule of fees in effect at the time that such fees are actually paid. 2 Individual, usable and completed EVWD Improvements shall be eligible to be financed and acquired at their total Actual Cost pursuant to this Agreement. In addition, for any EVWD Improvement with an estimated cost in excess of $1,000,000, the Developer and General Manager of the Water District may agree on discrete phases or portions of the EVWD Improvement for which the Actual Costs may be reimbursed prior to completion of the EVWD Improvement. C-1 4866-5956-2035v4/022497-0018 EXHIBIT C NOTICE OF SPECIAL TAX C-2 4866-5956-2035v4/022497-0018 C-3 4866-5956-2035v4/022497-0018 D-1 4866-5956-2035v4/022497-0018 EXHIBIT D DISBURSEMENT REQUEST FORM 1. Community Facilities District No. 2022-1 (Palm & Highland) of East Valley Water District (the “CFD”) is hereby requested to pay from the EVWD ________________________ Account, or any applicable account or sub-account thereof, established by the CFD in connection with its 20__ Special Tax Bonds (the “Bonds”) to East Valley Water District (the “Water District”) as payee, the sum set forth below: $_____________________ (the Requested Amount”) 2. The Requested Amount represents the payment of EVWD Fees for ___ lot(s) within the boundaries of the CFD (the “Property”). (Tract No. __________, Lot Nos. ________________). Or, EVWD Improvements as supported by attached documentation. 3. The Requested Amount is due and payable, has not formed the basis of any prior request or disbursement. 4. The Water District, as payee, is hereby directing payment of the Requested Amount be payable to [__], a [__] (the “Developer”), pursuant to the wiring instructions attached hereto. 5. The Requested Amount is authorized and payable pursuant to the terms of the certain Funding, Construction and Acquisition Agreement (the “Agreement”), by and between the Water District, acting for and on behalf of itself and the CFD, and the Developer. 6. Capitalized undefined terms used herein shall have the meaning ascribed to them in the Agreement. D-2 4866-5956-2035v4/022497-0018 [___], a [___] By: Name: Title: Dated: EAST VALLEY WATER DISTRICT By: Its: [ATTACH WIRING INSTRUCTIONS] East Valley Water District Resolution 2022.01 Page 1 of 4 RESOLUTION NO. 2022.01 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE EAST VALLEY WATER DISTRICT, ACTING AS THE LEGISLATIVE BODY OF COMMUNITY FACILITIES DISTRICT NO. 2022-1 (PALM & HIGHLAND) OF EAST VALLEY WATER DISTRICT, DETERMINING THE NECESSITY TO INCUR BONDED INDEBTEDNESS WITHIN THE COMMUNITY FACILITIES DISTRICT AND CALLING ELECTIONS THEREIN WHEREAS, the Board of Directors (the “Board”) of East Valley Water District (the “District”), a county water district that is duly organized and existing under and by virtue of the laws of the State of California, has previously adopted Resolution No. 2022.15 on September 14, 2022 (the “Resolution of Intention”) stating its intention to form Community Facilities District No. 2022-1 (Palm & Highland) of East Valley Water District (the “Community Facilities District”) pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California (the “Act”); and WHEREAS, on November 9, 2022, the Board also adopted Resolution No. 2022.16 stating its intention to incur bonded indebtedness within the proposed Community Facilities District in an amount not to exceed $4,000,000 to finance: (1) the purchase, construction, expansion, improvement or rehabilitation of public improvements identified in Exhibit B to the Resolution of Intention, including all furnishings, equipment and supplies related thereto (collectively, the “Facilities”); and (2) the incidental expenses to be incurred in financing the Facilities and forming and administering the Community Facilities District (the “Incidental Expenses”); and WHEREAS, a combined notice of a public hearing (the “Hearing”) to be held on November 9, 2022 was published and mailed to all landowners of the land proposed to be included within the Community Facilities District, which Hearing relates to the intention of the Board to form the proposed Community Facilities District and to incur bonded indebtedness; and WHEREAS, on November 9, 2022, the Board opened the Hearing to determine whether it should proceed to form the Community Facilities District, issue bonds to pay for the Facilities and Incidental Expenses and authorize a rate and method of apportionment of a special tax to be levied within the Community Facilities District for the purposes described in the Resolution of Intention; and WHEREAS, at the Hearing, all persons desiring to be heard on all matters pertaining to the formation of the Community Facilities District, the levy of a special tax and the issuance of bonds to pay for the cost of the proposed Facilities and Incidental Expenses were heard, and a full and fair hearing was held; and WHEREAS, subsequent to such Hearing, the Board adopted a resolution establishing the Community Facilities District (the “Resolution of Formation”); and WHEREAS, the Board desires to make the necessary findings to incur bonded indebtedness for the Community Facilities District, to declare the purpose for said indebtedness and to authorize the submittal of certain propositions to the voters of the Community Facilities District, being the owners of land within the Community Facilities District, all as authorized and required by law; East Valley Water District Resolution 2022.01 Page 2 of 4 NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the District as follows: Section 1. Findings. The Board hereby specifically finds and declares that each of the statements, findings and determinations set forth in the above recitals are true and correct. Section 2. Necessity of Incurring Bonded Indebtedness. It is necessary to incur bonded indebtedness of the Community Facilities District in a maximum aggregate principal amount not to exceed $4,000,000. Section 3. Purposes of Indebtedness. The indebtedness is to be incurred for the purposes of financing the costs of purchasing, constructing, modifying, expanding, improving or rehabilitating the Facilities, as described in the Resolution of Intention and the Resolution of Formation, financing the Incidental Expenses and carrying out the powers and purposes of the Community Facilities District, including, but not limited to, financing the costs of selling the bonds, establishing and replenishing bond reserve funds and paying remarketing, credit enhancement and liquidity facility fees (including such fees for instruments which serve as the basis of a reserve fund in lieu of cash), administrative expenses and other expenses of the type authorized by Section 53345.3 of the Act. Section 4. Payment of Bonded Indebtedness. The whole of the property within the Community Facilities District, other than property exempted from the special tax pursuant to the provisions of the rate and method of apportionment attached to the Resolution of Intention as Exhibit C, shall pay for the bonded indebtedness of the Community Facilities District pursuant to the levy of the special tax authorized by the Resolution of Formation. Section 5. Maximum Term. The maximum term of the bonds to be issued shall in no event exceed thirty-one (31) years from the September 1 next following the date of issuance of the bonds of such series, or such longer term as is then permitted by law. Section 6. Interest Rates. The bonds shall bear interest at the rate or rates not to exceed the maximum interest rate permitted by law, payable annually or semiannually, or in part annually and in part semiannually, except that the first interest payment may be for a period of less than six months, with the actual rate or rates and times of payment to be determined at the time or times of sale thereof. The bonds may bear a variable or fixed interest rate, provided that such variable rate or fixed rate shall not exceed the maximum rate permitted by Section 53531 of the California Government Code, or any other applicable provision of law limiting the maximum interest rate on the bonds. Section 7. Calling of Special Elections. Pursuant to Section 53351 of the Act, a special election is hereby called for the Community Facilities District on the proposition of incurring the bonded indebtedness for the Community Facilities District. The proposition relative to incurring bonded indebtedness for the Community Facilities District shall be in the forms set forth in Exhibit A to the Resolution of Formation. The elections in the Community Facilities District on the proposition of incurring bonded indebtedness shall be consolidated with the elections on the propositions to levy a special tax and to establish an appropriations limit for the Community Facilities District, which propositions shall be in the forms set forth in Exhibit A to the Resolution of Formation. Section 8. Conduct of Elections. The date of the consolidated special elections for the Community Facilities District shall be November 9, 2022, or such later date as is consented to by the East Valley Water District Resolution 2022.01 Page 3 of 4 Board Secretary of the District and the owners of land within the Community Facilities District. The elections shall be conducted by the Board Secretary of the District. Except as otherwise provided by the Act, the elections shall be conducted in accordance with the provisions of law regulating elections of the District insofar as such provisions are determined by the Board Secretary to be applicable. The Board Secretary is authorized to conduct the elections following the adoption of the Resolution of Formation and this resolution; and all ballots shall be received by, and the Board Secretary shall close the elections by 10:00 p.m. on the election day; provided that the elections shall be closed at such earlier time as all qualified electors have voted as provided in Section 53326(d) of the Act. It is hereby found that there are no registered voters within the territory of the Community Facilities District and, pursuant to Section 53351(j) of the Act, the ballots for the special elections shall be distributed in person or by mail with return postage prepaid to the landowners of record within the Community Facilities District as of the close of the November 9, 2022 Hearing regarding the formation of the Community Facilities District. Each landowner shall have one vote for each acre or portion thereof that he, she or it owns within the Community Facilities District, as provided in Section 53326 of the Act. Section 9. Effect. This Resolution shall take effect immediately. ADOPTED this 9th day of November, 2022. Ayes: Directors: Noes: Abstain: Absent: _____________________________________ Phillip R. Goodrich Board President ATTEST: ___________________________ Michael Moore Secretary, Board of Directors East Valley Water District Resolution 2022.01 Page 4 of 4 November 9, 2022 I HEREBY CERTIFY that the foregoing is a full, true and correct copy of Resolution 2022.01 adopted by the Board of Directors of East Valley Water District at its Regular Board Meeting held November 9, 2022. ___________________________ Michael Moore Secretary, Board of Directors East Valley Water District Resolution 2022.02 Page 1 of 2 RESOLUTION NO. 2022.02 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE EAST VALLEY WATER DISTRICT, ACTING AS THE LEGISLATIVE BODY OF COMMUNITY FACILITIES DISTRICT NO. 2022-1 (PALM & HIGHLAND) OF EAST VALLEY WATER DISTRICT, CERTIFYING THE RESULTS OF THE NOVEMBER 9, 2022 SPECIAL TAX AND BOND ELECTIONS WHEREAS, the Board of Directors (the “Board”) of East Valley Water District (the “District”), a county water district that is duly organized and existing under and by virtue of the laws of the State of California, acting as the legislative body of Community Facilities District No. 2022-1 (Palm & Highland) of East Valley Water District (the “Community Facilities District”), called and duly held elections on November 9, 2022 within the boundaries of the Community Facilities District pursuant to resolutions adopted on the date hereof for the purpose of presenting to the qualified electors within the Community Facilities District the propositions which are attached hereto as Exhibit A; and WHEREAS, there has been presented to the Board a certificate of the Board Secretary canvassing the results of the elections, a copy of which is attached hereto as Exhibit B; NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the District as follows: Section 1. Findings. The Board hereby specifically finds and declares that each of the statements, findings and determinations set forth in the above recitals are true and correct. Section 2. Propositions Approved. Propositions A, B and C presented to the qualified electors of the Community Facilities District on November 9, 2022 were approved by more than two-thirds of the votes cast at the election, and each of Propositions A, B and C has carried. The Board is hereby authorized to levy on the land within the Community Facilities District the special tax described in Proposition B for the purposes described therein and to take the necessary steps to levy the special tax authorized by Proposition B and to issue bonds in an amount not to exceed $4,000,000, as specified in Proposition A. Section 3. Recordation of Notice of Special Tax Lien. The Board Secretary is hereby directed to record in the Office of the County Recorder within fifteen days of the date hereof a notice of special tax lien for the Community Facilities District which Bond Counsel to the Community Facilities District shall prepare in the form required by Streets and Highways Code Section 3114.5. Section 4. Effect. This Resolution shall take effect immediately. ADOPTED this 9th day of November, 2022. East Valley Water District Resolution 2022.02 Page 2 of 2 Ayes: Directors: Noes: Abstain: Absent: _____________________________________ Phillip R. Goodrich Board President ATTEST: ___________________________ Michael Moore Secretary, Board of Directors November 9, 2022 I HEREBY CERTIFY that the foregoing is a full, true and correct copy of Resolution 2022.02 adopted by the Board of Directors of East Valley Water District at its Regular Board Meeting held November 9, 2022. ___________________________ Michael Moore Secretary, Board of Directors A-1 EXHIBIT A SAMPLE BALLOTS COMMUNITY FACILITIES DISTRICT NO. 2022-1 (PALM & HIGHLAND) OF EAST VALLEY WATER DISTRICT SPECIAL TAX AND SPECIAL BOND ELECTION November 9, 2022 This ballot represents ___ votes. To vote, write or stamp a cross (“+” or “X”) in the voting square after the word “YES” or after the word “NO”. All marks otherwise made are forbidden. All distinguishing marks are forbidden and make the ballot void. If you wrongly mark, tear or deface this ballot, return it to the Secretary of East Valley Water District and obtain another. PROPOSITION A: Shall Community Facilities District No. 2022-1 (Palm & Highland) of East Valley Water District (the “Community Facilities District”), incur an indebtedness and issue bonds in the maximum principal amount of $4,000,000, with interest at a rate or rates not to exceed the maximum interest rate permitted by law, to finance the Facilities and the Incidental Expenses described in Resolution No. 2022.15 of the Board of Directors of East Valley Water District? YES □ NO □ PROPOSITION B: Shall a special tax with a rate and method of apportionment as provided in Resolution No. 2022.15 of the Board of Directors of East Valley Water District be levied to pay for the Facilities and Incidental Expenses and the principal of and interest on bonds issued to finance the Facilities and Incidental Expenses and the other purposes described in Resolution No. 2022.15? YES □ NO □ PROPOSITION C: For each year commencing with Fiscal Year 2022-23, shall the appropriations limit, as defined by subdivision (h) of Section 8 of Article XIIIB of the California Constitution, for the Community Facilities District be an amount equal to $4,000,000? YES □ NO □ B-1 EXHIBIT B CERTIFICATE OF THE BOARD SECRETARY AS TO THE RESULTS OF THE CANVASS OF THE ELECTION RETURNS I, Michael Moore, Secretary of the East Valley Water District, do hereby certify that I have examined the returns of the Special Tax and Bond Elections for Community Facilities District No. 2022-1 (Palm & Highland) of East Valley Water District (the “Community Facilities District”). The elections were held in the boardroom of East Valley Water District at 31111 Greenspot Road, Highland, California 92346, on November 9, 2022. I caused to be delivered a ballot to the authorized representative of each qualified elector within the Community Facilities District. Four (4) ballots were returned. I further certify that the results of said elections and the number of votes cast for and against Propositions A, B and C are as follows: PROPOSITION A PROPOSITION B PROPOSITION C YES:YES:YES: NO:NO:NO: TOTAL: __TOTAL: __TOTAL: __ Dated this 9th day of November, 2022. Board Secretary East Valley Water District East Valley Water District CFD 2022-1 Ordinance No. 1 Page 1 of 4 CFD 2022-1 ORDINANCE NO. 1 AN ORDINANCE OF THE BOARD OF DIRECTORS OF EAST VALLEY WATER DISTRICT, ACTING AS THE LEGISLATIVE BODY OF COMMUNITY FACILITIES DISTRICT NO. 2022-1 (PALM & HIGHLAND) OF EAST VALLEY WATER DISTRICT, AUTHORIZING THE LEVY OF A SPECIAL TAX WITHIN THE COMMUNITY FACILITIES DISTRICT THE BOARD OF DIRECTORS OF EAST VALLEY WATER DISTRICT DOES HEREBY ORDAIN AS FOLLOWS: _________________________________________________________________________________ SECTION 1.Findings. (a) On September 14, 2022, the Board of Directors (the “Board”) of East Valley Water District (the “District”) adopted Resolution No. 2022.15 declaring its intention to form Community Facilities District No. 2022-1 (Palm & Highland) of East Valley Water District (the “Community Facilities District”) pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, comprising Chapter 2.5 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California (the “Act”), and adopted Resolution No. 2022-16 declaring its intention to incur bonded indebtedness of the Community Facilities District. (b) On November 9, 2022, after providing all notice required by the Act, the Board opened a public hearing required by the Act relative to the formation of the Community Facilities District, the proposed levy of a special tax within the Community Facilities District to finance certain public improvements described in Resolution No. 2022.15 and to secure the payment of any bonded indebtedness of the Community Facilities District, and the proposed issuance of up to $4,000,000 of bonded indebtedness. (c) At the public hearing, all persons desiring to be heard on all matters pertaining to the formation of the Community Facilities District, the proposed levy of the special tax within the Community Facilities District to finance the public facilities and incidental expenses described in Resolution No. 2022.15 and the proposed issuance of bonded indebtedness of the Community Facilities District were heard and a full and fair hearing was held. (d) On November 9, 2022, following the close of the public hearing, the Board adopted a resolution establishing the Community Facilities District (the “Resolution of Formation”) and a resolution determining the necessity to incur bonded indebtedness of the Community Facilities District (the “Resolution to Incur Bonded Indebtedness”), each of which called a consolidated special election on November 9, 2022 within the Community Facilities District on three propositions relating to the levying of a special tax, the incurring of bonded indebtedness and the establishment of an appropriations limit for the Community Facilities District. (e) On November 9, 2022, a special election was held within the Community Facilities District at which the qualified electors approved by more than a two-thirds vote Propositions A, B and C authorizing the levy of a special tax within the Community Facilities District for the purposes described in Resolution No. 2022.15 and the Resolution of Formation and the issuance of bonded East Valley Water District CFD 2022-1 Ordinance No. 1 Page 2 of 4 indebtedness for the Community Facilities District as described in the Resolution to Incur Bonded Indebtedness. SECTION 2.Ordinance Authorizing the Levy of a Special Tax within the Community Facilities District. (a) The above Findings are true and correct. (b) By the passage of this Ordinance, the Board authorizes the levy of a special tax within the Community Facilities District at the maximum rates and in accordance with the rate and method of apportionment set forth in Exhibit C to Resolution No. 2022.15 adopted on September 14, 2022, which rate and method of apportionment for the Community Facilities District is incorporated by reference herein (the “Rate and Method”). (c) The General Manager/CEO of the District is hereby further authorized and directed, on or before August 10 of each year, or such later date as is permitted by law, to determine the specific special tax rates and amounts to be levied for the next ensuing tax year for each parcel of real property and the amount to be levied on each parcel of land in the Community Facilities District pursuant to the Rate and Method. The special tax rate to be levied pursuant to the Rate and Method shall not exceed the maximum rate set forth therein, but the special tax may be levied at a lower rate. (d) Properties or entities of the state, federal or other local governments shall be exempt from the special tax, except as otherwise provided in Sections 53317.3 and 53317.5 of the Act and the Rate and Method. No other properties or entities are exempt from the special tax unless the properties or entities are expressly exempted in the Resolution of Formation, or in a resolution of consideration to levy a new special tax or special taxes or to alter the rate or method of an existing special tax as provided in Section 53334 of the Act. (e) All of the collections of the special tax pursuant to the Rate and Method shall be used as provided for in the Act and the Resolution of Formation. The special tax shall be levied within the Community Facilities District only so long as needed for the purposes described in the Resolution of Formation. (f) The special tax levied pursuant to the Rate and Method shall be collected in the same manner as ordinary ad valorem property taxes are collected and shall be subject to the same penalties and the same procedure, sale and lien priority in case of delinquency as is provided for ad valorem taxes (which such procedures include the exercise of all rights and remedies permitted by law to make corrections, including, but not limited to, the issuance of amended or supplemental tax bills), as such procedure may be modified by law or by the Board from time to time. (g) As a cumulative remedy, if any amount levied as a special tax for payment of the interest or principal of any bonded indebtedness of the Community Facilities District, together with any penalties and other charges accruing under this Ordinance, are not paid when due, the Board may, not later than four years after the due date of the last installment of principal on the bonds issued by the Community Facilities District, order that the same be collected by an action brought in the superior court to foreclose the lien of such special tax. (h) The specific authorization for adoption of this Ordinance is pursuant to the provisions of Section 53340 of the Act. East Valley Water District CFD 2022-1 Ordinance No. 1 Page 3 of 4 (i) The Board Secretary is hereby authorized to transmit a certified copy of this Ordinance to the San Bernardino County Assessor and Treasurer-Tax Collector, and to perform all other acts which are required by the Act, this Ordinance or by law in order to accomplish the purpose of this Ordinance. SECTION 3.Compliance with California Environmental Quality Act. The Board finds that this Ordinance is not subject to the California Environmental Quality Act (“CEQA”) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the State CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. Further, if the activity is deemed a project, the Board finds that this Ordinance is exempt pursuant to Section 15061(b)(3) of the State CEQA Guidelines. SECTION 4.Severability. If any provision of this Ordinance or the application thereof to any person or circumstance is held invalid, such invalidity shall not affect other provisions or applications of this Ordinance which can be given effect without the invalid provision or application, and to this end the provisions of this Ordinance are severable. The Board hereby declares that it would have adopted this Ordinance irrespective of the invalidity of any particular portion thereof. SECTION 5.Publication. The Board Secretary shall certify to the adoption of this Ordinance and cause it, or a summary of it, to be published in a newspaper of general circulation printed and published within the City of Highland, pursuant to all legal requirements. SECTION 6.Effect. This Ordinance shall take effect 30 days from the date of its adoption. The foregoing ordinance was duly passed and adopted at a meeting of the Board of Directors of the East Valley Water District, upon motion duly made, seconded and carried on November 9, 2022: ADOPTED this 9th day of November, 2022. ROLL CALL VOTE Ayes: Directors: Noes: Abstain: Absent: _____________________________________ Phillip R. Goodrich Board President East Valley Water District CFD 2022-1 Ordinance No. 1 Page 4 of 4 ATTEST: ___________________________ Michael Moore Secretary, Board of Directors November 9, 2022 I HEREBY CERTIFY that the foregoing is a full, true and correct copy of CFD 2022-1 Ordinance No. 1 adopted by the Board of Directors of East Valley Water District at its Regular Board Meeting held November 9, 2022. ___________________________ Michael Moore Secretary, Board of Directors Agenda Item #5b November 9, 20221 Meeting Date: November 9, 2022 Agenda Item #5b Discussion Item 5 5 7 Regular Meeting TO: Governing Board Member FROM: General Manager/CEO SUBJECT: Consider Approval of Agreement for Low-Income Household Water Assistance Program (LIHWAP) with Horne LLC, to Disperse Grant Funding RECOMMENDATION That the Board of Directors (Board): 1. Approve the Direct Payment Agreement with Horne LLP to receive federally- funded Low-Income Household Water Assistance Program (LIHWAP) grant funds to be applied to the accounts of eligible District customers through October 31, 2023; and 2. Authorize the General Manager/CEO to execute the Agreement and any related documents, and take any and all actions necessary, required, or advisable to implement the Agreement, including delegations to a Project Coordinator to administer the Agreement. BACKGROUND / ANALYSIS The Finance and Human Resources Committee recommended, at their November 1, 2022 meeting, that the Board of Directors approve and authorize the General Manager/CEO to execute all documents related to the Direct Payment Agreement with Horne LLP for LIHWAP grant funds. In 2020, the US Department of Health and Human Services in conjunction with the California Department of Community Services and Development (CSD), established the Low-Income Household Water Assistance Program, or LIHWAP, to help low-income residential water customers who have fallen behind on payment of their water utility bills. The LIHWAP program directly pays off delinquent water/sewer bills of qualified residential customers. Residential households are limited to a one-time credit (up to $2,000) following a review of their eligibility, which is affirmed for households making less than 60% of the State Median Income (approximately $59,000 for a household of four). After determining eligibility, the CSD then authorizes their contractor, Horne LLP, to disperse LIHWAP grant funding on behalf of delinquent water utility customers. Horne sends the funding directly to the eligible customer’s water service provider on their behalf, but for that payment to occur, the water agency must first enroll in the LIHWAP program and Agenda Item #5b November 9, 20222 Meeting Date: November 9, 2022 Agenda Item #5b Discussion Item 5 5 7 then enter into a Direct Payment Agreement with Horne. A copy of the agreement is attached. The CSD anticipates that the funding for LIHWAP will last through approximately October 31, 2023. If the Board approves the District’s enrollment in LIHWAP, staff will conduct outreach through social media, the website, bill inserts, and other notifications to inform customers about the availability of LIHWAP assistance. AGENCY GOALS AND OBJECTIVES II - Maintain a Commitment To Sustainability, Transparency, and Accountability C. Pursue Alternative Funding Sources REVIEW BY OTHERS This agenda item has been reviewed by the Finance Department and Finance and Human Resources Committee. FISCAL IMPACT Availability of LIHWAP grant funding is subject to federal allocations and EVWD does not incur any additional expenses associated with the Agreement. Recommended by: ________________ Michael Moore General Manager/CEO Respectfully submitted: ________________ Brian Tompkins Chief Financial Officer ATTACHMENTS Direct Payment Agreement DIRECT PAYMENT AGREEMENT THIS DIRECT PAYMENT AGREEMENT (Agreement) is made and entered into effective as of the date signed below (the “Effective Date”), by and between (“the Water System”), (Entity Address) and HORNE LLP, a Delaware limited liability partnership, having a place of business at 661 Sunnybrook Road, Suite 100, Ridgeland, MS 39157 (“HORNE”). WHEREAS, the California Department of Community Services and Development (“CSD”) is authorized to administer the Low-Income Household Water Assistance Program (“LIHWAP” or “Program”) to provide financial assistance to help low-income Californians manage their residential water utility costs; WHEREAS, CSD has contracted with HORNE to disburse direct payments to water systems to apply a LIHWAP credit to households identified as eligible for LIHWAP assistance by CSD or its Local Service Providers (LSPs); WHEREAS, CSD has authorized HORNE to enter into this Agreement with Water System; and WHEREAS, the Water System desires to enroll in LIHWAP and participate in the direct payment service established by the Direct Payment Program. NOW, THEREFORE, in consideration of the mutual covenants herein contained, the Water System agrees to receive direct payments from HORNE for the benefit of California residents who qualify for LIHWAP and agrees to abide by all terms and conditions below: 31111 Greenspot Road, Highland CA 92346 East Valley Water District Direct Payment Program General Terms and Conditions 1.1 To participate in the Direct Payment Program, a Water System must be defined as a “Community Water System” or “Community Water System Billing Entity”, “Wastewater Treatment Provider” or “Wastewater Billing Entity” (collectively referred to as a “Water System” in this Agreement). 1.2 A “Community Water System” means a public water system with at least 15 service connections used by yearlong residents or regularly services at least 25 yearlong residents. 1.3 A “Community Water System Billing Entity” means a third-party entity that is the designated billing entity for a community water system. 1.4 A “Wastewater Treatment Provider” means a city, county, special district, or joint powers authority that provides wastewater collection, treatment, or disposal service through a publicly owned treatment works. 1.5 A “Wastewater Billing Entity” means a local government entity (city, county, or special district) that is the designated billing entity for a wastewater treatment provider. 1.6 The Water System enrolled in the Direct Payment Program must be the responsible entity for applying the LIHWAP credit to customer accounts. 1.7 Qualified low-income residential customers will be identified by CSD and its LSP partners. CSD will provide HORNE with a direct pay file that contains customer account information as well as the amount for the direct payment to the Water System for each customer. Commercial customers are not eligible for the program. 1.8 HORNE will provide the Water System a direct pay file that contains customer account information and the LIHWAP benefit amount for the purpose of crediting the accounts of qualified low-income residential customers of the Water System who have been identified as eligible for water assistance payments under LIHWAP by CSD or its LSPs. 1.9 HORNE will establish a secure method to provide the direct pay file and customer information to the Water System and a secure method to receive the Direct Payment Summary from the Water System as described in 2.11. 1.10 The Water System is encouraged to offer a payment plan or other forms of assistance to customers who have a remaining balance after the LIHWAP benefit is applied to support the continuation of services or the restoration of services for accounts where services are terminated due to nonpayment. Obligations of the Water System 2.1 Water System shall provide water and/or wastewater services to each eligible and approved residential household for which payment is provided under LIHWAP. 2.2 Water System shall charge LIHWAP residential households using the Water System’s normal billing process, the difference between the actual amount due and the amount of the payment made by the LIHWAP payment. 2.3 Water System shall restore water services on a timely basis or remove disconnection status upon payment, if applicable, and shall confirm this action to HORNE by submission of the Direct Payment Summary report as specified in provision 2.11. 2.4 Water System shall charge all LIHWAP eligible residential households the same rates charged for home drinking water and/or wastewater services billed to other similarly situated residential households that are non-eligible, as determined by the approved rate setting process. 2.5 Water System shall not apply LIHWAP payments to account balances that have previously been written off. The Water System shall return the Direct Payment Summary specified in 2.11 identifying these payments to HORNE within 30 calendar days of receipt for accounts where the owed balance has been discharged (written off) in its entirety by the Water System Within one business day of submission of the Direct Payment Summary, HORNE will transmit an invoice for the amount of program funds to be returned. Water System shall have 3 business days following receipt of the invoice to return the funds identified. 2.6 Water System shall apply the LIHWAP benefit to closed accounts to cover the pending balance and shall return the Direct Payment Reconciliation Summary specified in 2.11 identifying any remaining amount of the LIHWAP payment to HORNE within 30 calendar days. Within one business day of submission of the Direct Payment Summary, HORNE will transmit an invoice for the amount of program funds to be returned. Water System shall have 3 business days following receipt of the invoice to return the funds identified. 2.7 Water Systems shall adhere to existing credit return policies when returning funds to a customer that received a LIHWAP benefit, and the account is later closed and there is a remaining LIHWAP credit balance on the account. 2.8 Water systems that include other services on the customer’s bill shall only apply LIHWAP payments towards the water, wastewater, and/or storm water amount owed including any applicable late fees, reconnection fees, taxes, and other charges. 2.9 Water System shall not discriminate against a LIHWAP eligible household with respect to terms, deferred payment plans, credit, conditions of sale, or discounts offered to other customers. 2.10 Water System shall post all payments to customer accounts within 5 business days from receipt of payment. 2.11 Water System shall submit to HORNE a Direct Payment Summary (in a format provided by HORNE) that reconciles the associated direct pay file and return payments that could not be credited to customer accounts within 30 calendar days of receipt of payment. The Direct Payment Summary must contain information on the date the credit was posted, direct pay file date; the total number of customer accounts that the Water System was successful in fully crediting; and the total number of customer accounts that the Water System was not successful in crediting. For those customer accounts that were not credited, the Water System shall reflect in the Direct Payment Summary the customer accounts that were not credited to include customer account information (customer name, account number, account address, benefit amount), and reason why the LIHWAP benefit was unable to be applied to the customer‘s account. The Water System shall use customer and account information contained in the direct pay file to complete the reporting and identification of customer accounts that were not credited. 2.12 Water System shall clearly enter, on the LIHWAP recipient’s bill, the amount of LIHWAP payment(s) received and identify the payment was received from LIHWAP. The credit should appear on the first billing statement after the credit has been posted. If posting on the LIHWAP recipient’s bill is not feasible, the Water System shall send customers a notification of the LIHWAP payment via phone call, letter, text, or email communication as soon as practicable. 2.13 Water System shall cooperate with any Federal or State investigation, audit, or program review related to the administration of LIHWAP to ensure funds are accurately applied to customer accounts in compliance with this Agreement, including allowing CSD and its designated representatives access to all books and records related to the receipt and posting of LIHWAP benefits under review. 2.14 Water System is informed that failure to cooperate with any Federal or State investigation, audit, or program review may result in the immediate suspension or disqualification from participation in LIHWAP. 2.15 Water System shall take corrective action in the time frame specified by the CSD if violations of this Agreement are discovered. Corrective action may include, but is not limited to, providing detailed documentation of changes made and detailed plans for future changes that will bring the Water System into compliance. 2.16 Water System is informed that failure to implement corrective actions may result in the immediate suspension or disqualification from participation in LIHWAP. 2.17 Water System shall comply with all federal and California privacy laws, and shall take all necessary steps to protect the confidentiality of the information provided by HORNE to the Water System. Water System agrees to provide required security to ensure the confidential, physical security and safekeeping of all data, information files, and documents (“customer information”) pertaining to the recipients of LIHWAP utility assistance payments, while such customer information is in its possession. Water System will, in accordance with applicable law and the terms of this Agreement, protect from unauthorized use and disclosure all sensitive data, documentation, or other customer information provided to Water System by HORNE, CSD, or CSD’s LSPs for purposes of this Agreement. Term 3.1 The term of this Agreement shall be the effective date of this contract through October 31, 2023. Project Coordinator 4.1 The Project Coordinator is designated to manage all HORNE inquiries regarding direct payments, issues with the direct payment process, mishandled or incorrect payments, clarification and updates of reports, and fraud and abuse. The Project Coordinator during the term of this Agreement is listed below. The Water System may designate a different Project Coordinator by notifying HORNE in writing. Water System’s Project Coordinator Name and Title: Company Name: Address: City, State, and ZIP Code: Email: Phone: ( ) - Additional Provisions 5.1 Amendment. All amendments to this Agreement shall be in writing, signed by HORNE and Water System. 5.2 Assignment. Neither this Agreement nor any of the rights, interests, or obligations under this Agreement shall be assigned by any party without the prior written consent of the other parties. 5.3 Merger/Entire Agreement. This Agreement (including the attachments, documents and instruments referred to in this Agreement) constitutes the entire agreement and understanding of the parties with respect to the subject matter of this Agreement and supersedes all prior understandings and agreements, whether written or oral, among the parties with respect to such subject matter. 5.4 Nonwaiver. The waiver by either party of any breach of any term, covenant, or condition contained in this Agreement, or any default in the performance of any obligations under this Agreement, shall not be deemed to be a waiver of any other breach or default of the same or any other term, covenant, condition, or obligation; nor shall any waiver of any incident of breach or default constitute a continuing waiver of the same. All waivers shall be in writing. 5.5 Severability. If any provision of this Agreement is found invalid or unenforceable in any respect for any reason, the validity and enforceability of any such provision in any other respect and of the remaining provisions of this Agreement will not be in any way impaired and shall remain in full force and effect. 5.6 Venue. In the event that suit shall be brought by either party to this Agreement, the parties agree that venue shall be exclusively vested in the State Courts of the County of Sacramento, or where otherwise appropriate, exclusively in the United States District Court for the Eastern District of California in Sacramento, California. IN WITNESS WHEREOF, the parties hereto have signed this Agreement, or caused it to be signed by their duly authorized representatives “below”. HORNE LLP By: Name: Loden Snell Title: Deputy Project Manager Date: Water System: By: Name: Title: Date: 4882-0103-6556, v. 4 Michael Moore General Manager/CEO East Valley Water District Agenda Item #5c November 9, 20221 Meeting Date: November 9, 2022 Agenda Item #5c Discussion Item 6 4 9 Regular Board Meeting TO: Governing Board Members FROM: General Manager/CEO SUBJECT: Consider Authorization to Transfer Unclaimed Funds into the District's General Fund RECOMMENDATION That the Board of Directors (Board) authorize the Chief Financial Officer (CFO) to perform procedures prescribed in the Government Code and Code of Civil Procedure for the purpose of unencumbering stale-dated checks and keeping the related funds from escheating to the State. BACKGROUND / ANALYSIS The Finance and Human Resources Committee recommended, at their November 1, 2022 meeting, that the Board of Directors authorize the CFO to perform financial procedures related to unencumbering stale-dated checks. The District’s checking account accumulates a long list of old, outstanding checks as a result of customer refunds relating to the closing of water accounts and paid vendors who failed to cash their check. All of the old checks make the reconciliation of the checking account unnecessarily cumbersome. Government Code sections 50050-50052 and Code of Civil Procedures section 1502(a)(2) describe procedures applied to unclaimed funds that are at least three years old. The procedure involves publishing a notice about the unclaimed funds once a week for two consecutive weeks in a paper of general circulation. Any claims that are submitted as a result of the notice will be investigated and approved or rejected by the CFO. Any funds remaining unclaimed 45 days after the first publication may be transferred to the District’s General Fund. Government Code section 50055 states that unclaimed funds of $15.00 or less that have been held by the District for more than one year do not need to be publicly noticed, but may be transferred into the District’s General Fund by simple action of the Board. Staff recommends that the Board authorize the CFO to write off all stale-dated checks that are more than one year old and are less than $15.00 (attached Schedule A totaling $30.05). Agenda Item #5c November 9, 20222 Meeting Date: November 9, 2022 Agenda Item #5c Discussion Item 6 4 9 Staff is also requesting that the Board authorize staff to publish a notice regarding all stale-dated checks that are more than $15.00 and are more than three years old (attached Schedule B totaling $1,246.22) in the San Bernardino Sun newspaper for the purpose of satisfying the requirements of the Government Code. AGENCY GOALS AND OBJECTIVES II - Maintain a Commitment To Sustainability, Transparency, and Accountability A. Practice Transparent and Accountable Fiscal Management REVIEW BY OTHERS This agenda item has been reviewed by the Finance Department and Finance and Human Resources Committee. FISCAL IMPACT The fiscal impact associated with this agenda item is $1,276.27 and could be converted from liability to Unrestricted Net Assets by following Government Code procedures to write off the checks listed on Attachments A and B. Recommended by: ________________ Michael Moore General Manager/CEO Respectfully submitted: ________________ Brian Tompkins Chief Financial Officer ATTACHMENTS 1. Schedule A 2. Schedule B SCHEDULE A UNCLAIMED CHECKS UNDER $15 & ONE YEAR OR OLDER PAYMENT DATE NUMBER VENDOR NAME AMOUNT 06/23/2021 257952 MJGF AVILA LLC $13.69 08/03/2021 258159 QUANG M CHIEM 10.25 08/18/2021 258225 RICHARD MCMILLAN 6.11 TOTAL $30.05 Page 1 of 1 SCHEDULE B UNCLAIMED CHECKS $15 AND OVER & THREE YEARS OR OLDER PAYMENT DATE NUMBER VENDOR NAME AMOUNT 12/05/2018 253397 3D REMODELING INC $46.10 12/12/2018 253427 ACE INVESTMENTS CAPITAL INC 78.44 12/13/2018 253464 TOUCH OF THE MASTER 140.00 01/03/2019 253530 PALOMA RAMOS-STARKEY 66.51 01/03/2019 253531 NIKKI PAVELKO 30.97 01/17/2019 253598 MOHAN PATEL 59.81 01/17/2019 253601 FELIX CENDEJAS 25.78 01/29/2019 253629 SUNCHO CHOE 18.25 03/26/2019 253945 TERESA CABELLO 100.00 04/10/2019 254024 PATRICIA AYALA 63.50 05/21/2019 254239 REAL ESTATE AND NOTARY SERVICES 96.45 05/21/2019 254246 SONIA CUARENTA 26.38 06/17/2019 254397 JULIE CUNNINGHAM 92.24 07/17/2019 254571 CUAHUTEMOC TELLES 43.91 08/21/2019 254759 JONATHAN GOMEZ 137.92 09/11/2019 254894 AMELIA ROMERO 60.71 09/11/2019 254898 SWIGART FAMILY LLC 51.95 09/25/2019 254980 EVANGELINA ZEPEDA 62.25 09/25/2019 254982 TINA GRAHAM 45.05 TOTAL $1,246.22 Page 1 of 1