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Agenda Packet - EVWD Board of Directors - 07/12/2023
BOARD OF DIRECTORS JULY 12, 2023 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 Kerrie Bryan Director of Administrative Services David E. Smith Governing Board Member Patrick Milroy Operations Manager Rocky Welborn Water Reclamation Manager Justine Hendricksen District Clerk Board of Directors Regular Meeting July 12, 2023 5:30 PM 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 PLEDGE OF ALLEGIANCE PRESENTATIONS AND CEREMONIAL ITEMS a.Communicator Award Announcement 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 2.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 June 28, 2023 Regular Board Meeting Minutes b.Approval of Directors' Fees and Expenses for June 2023 3.DISCUSSION AND POSSIBLE ACTION ITEMS a.Consider Candidate for California Special Districts Association (CSDA) Board of Directors Official Election b.Consider Adoption of Community Facilities District 20211 (Mediterra) Resolution 2023.01 c.Consider approval of Amendment No. 2 Reimbursement Agreement with the City of Highland for Law Enforcement Services d.Consider Approval of Contract with Web Advanced for Website Redesign Services 4.REPORTS a.Board of Directors’ Reports b.General Manager/CEO Report c.Legal Counsel Report d.Board of Directors’ Comments ADJOURN BOARD OF DIRECTORSJULY 12, 2023East 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 Kerrie BryanDirector of Administrative ServicesDavid E. SmithGoverning Board Member Patrick Milroy Operations ManagerRocky Welborn Water Reclamation ManagerJustine Hendricksen District Clerk Board of Directors Regular Meeting July 12, 2023 5:30 PM 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 PLEDGE OF ALLEGIANCE PRESENTATIONS AND CEREMONIAL ITEMS a.Communicator Award Announcement 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 2.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 June 28, 2023 Regular Board Meeting Minutes b.Approval of Directors' Fees and Expenses for June 2023 3.DISCUSSION AND POSSIBLE ACTION ITEMS a.Consider Candidate for California Special Districts Association (CSDA) Board of Directors Official Election b.Consider Adoption of Community Facilities District 20211 (Mediterra) Resolution 2023.01 c.Consider approval of Amendment No. 2 Reimbursement Agreement with the City of Highland for Law Enforcement Services d.Consider Approval of Contract with Web Advanced for Website Redesign Services 4.REPORTS a.Board of Directors’ Reports b.General Manager/CEO Report c.Legal Counsel Report d.Board of Directors’ Comments ADJOURN BOARD OF DIRECTORSJULY 12, 2023East 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 Kerrie BryanDirector of Administrative ServicesDavid E. SmithGoverning Board Member Patrick Milroy Operations ManagerRocky Welborn Water Reclamation ManagerJustine HendricksenDistrict ClerkBoard of Directors Regular MeetingJuly 12, 2023 5:30 PM31111 Greenspot Road, Highland, CA 92346www.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 PLEDGE OF ALLEGIANCE PRESENTATIONS AND CEREMONIAL ITEMS a.Communicator Award Announcement 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 2.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 June 28, 2023 Regular Board Meeting Minutes b.Approval of Directors' Fees and Expenses for June 2023 3.DISCUSSION AND POSSIBLE ACTION ITEMS a.Consider Candidate for California Special Districts Association (CSDA) Board of Directors Official Election b.Consider Adoption of Community Facilities District 20211 (Mediterra) Resolution 2023.01 c.Consider approval of Amendment No. 2 Reimbursement Agreement with the City of Highland for Law Enforcement Services d.Consider Approval of Contract with Web Advanced for Website Redesign Services 4.REPORTS a.Board of Directors’ Reports b.General Manager/CEO Report c.Legal Counsel Report d.Board of Directors’ Comments ADJOURN BOARD OF DIRECTORSJULY 12, 2023East 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 Kerrie BryanDirector of Administrative ServicesDavid E. SmithGoverning Board Member Patrick Milroy Operations ManagerRocky Welborn Water Reclamation ManagerJustine HendricksenDistrict ClerkBoard of Directors Regular MeetingJuly 12, 2023 5:30 PM31111 Greenspot Road, Highland, CA 92346www.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 ORDERPLEDGE OF ALLEGIANCEPRESENTATIONS AND CEREMONIAL ITEMSa.Communicator Award AnnouncementROLL 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 Agenda2.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 June 28, 2023 Regular Board Meeting Minutesb.Approval of Directors' Fees and Expenses for June 2023 3.DISCUSSION AND POSSIBLE ACTION ITEMS a.Consider Candidate for California Special Districts Association (CSDA) Board of Directors Official Election b.Consider Adoption of Community Facilities District 20211 (Mediterra) Resolution 2023.01 c.Consider approval of Amendment No. 2 Reimbursement Agreement with the City of Highland for Law Enforcement Services d.Consider Approval of Contract with Web Advanced for Website Redesign Services 4.REPORTS a.Board of Directors’ Reports b.General Manager/CEO Report c.Legal Counsel Report d.Board of Directors’ Comments ADJOURN Board of Directors COMMUNICATOR AWARD July 12, 2023 2 RECRUITMENT CAMPAIGN 3 CONSUMER CONFIDENCE REPORT DISCUSSION Agenda Item #2a July 12, 20231 Meeting Date: July 12, 2023 Agenda Item #2a Consent Item Regular Board Meeting TO: Governing Board Members FROM: General Manager/CEO SUBJECT: Approve the June 28, 2023 Regular Board Meeting Minutes RECOMMENDATION That the Board of Directors approve the June 26, 2023 regular Board meeting minutes as submitted AGENCY GOALS AND OBJECTIVES II - Maintain a Commitment To Sustainability, Transparency, and Accountability 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 June 26, 2023 Regular Board Meeting Minutes Regular Board Meeting Meeting Date: June 28, 2023 CALL TO ORDER The Chairman of the Board called the meeting to order at 5:30 p.m. PLEDGE OF ALLEGIANCE Director Carrillo led the flag salute. ROLL CALL OF BOARD MEMBERS PRESENT Directors: Carrillo, Coats, Goodrich, Morales, Smith ABSENT None STAFF Michael Moore, General Manager/CEO; Brian Tompkins, Chief Financial Officer; Jeff Noelte, Director of Engineering and Operations; Patrick Milroy, Operation Manager; Rocky Welborn, Water Reclamation Manager; William Ringland, Public Affairs/Conservation Manager; Rudy Guerrero, Finance Supervisor; Shayla Antrim, Administrative Specialist; Christi Koide, Business Services Coordinator LEGAL COUNSEL Jean Cihigoyenetche GUESTS Members of the public PUBLIC COMMENTS Chairman Goodrich declared the public participation section of the meeting open at 5:31 p.m. There being no written or verbal comments, the public participation section was closed. Draft pending approval 1 1 0 3 1.APPROVAL OF AGENDA a.Approval of Agenda A motion was made by Director Coats, seconded by Vice Chairman Morales, that the Board approve the June 28, 2023 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 the June 14, 2023 Regular Board Meeting Minutes b.Financial Statements for May 2023 c.Investment Transaction Report for Month Ended May 31, 2023 d.Consider Approval of Revised Debt Management Policy 7.3 e.May 2023 Disbursements A motion was made by Director Smith, seconded by Director Carrillo, 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 Engineering and Operations provided an update on the construction progress of the Sterling Natural Resource Center. He provided information including, but not limited to an overview of the project, current project timeline, staffing, current activity, remaining permits needed, construction budget and the next steps moving forward. Mark Falcone asked a question regarding the Sterling Natural Resource Center budget versus actual costs spent. Wayne Brown asked a question regarding the construction schedule of the Weaver Pipeline and the approval status from Caltrans to proceed with construction. For information only. b. Summer Readiness Plan for Water Production 1 1 0 3 The Operations Manager reviewed Water Production’s Summer Readiness Plan. He stated that to comply with state regulations, four wells will need to be taken out of service due to their proximity to recharge activities once the Sterling Natural Resource Center goes online. He stated that staff is reviewing short and long-term strategies to make up for the 15% groundwater loss. For information only. c. Government Finance Officers Association Presentation The Finance Supervisor provided information regarding the District’s recognition by the Government Financing Officers Association (GFOA). He briefly discussed the history and mission of the GFOA. He reviewed the awards program and criteria to receive an award from the GFOA, and stated that this is the District’s tenth year to receive the Distinguished Budget Presentation award, the fourth time receiving the Triple Crown and the first time receiving special recognition. For information only. 4.DISCUSSION AND POSSIBLE ACTION ITEMS a.Consider Adoption of Resolution 2023.09 Approving the Fiscal Year 2023- 2024 Operating and Capital Budgets The Chief Financial Officer provided an overview of the proposed FY 2023-24 Operating and Capital Budget document. He thanked several staff members who played a critical role in creating the budget document. The Chief Financial Officer responded to a question from Wayne Brown regarding how administrative costs are divided among the three funds: water, wastewater and water reclamation. A motion was made by Director Coats, seconded by Director Carrillo, that the Board adopt Resolution 2023.9 approving the Fiscal Year 2023-24 Operating and Capital Budgets. The motion carried by the following: Ayes: Carrillo, Coats, Goodrich, Morales Noes: None Absent: Smith 5.REPORTS a.Board of Directors’ Reports 1 1 0 3 Director Carrillo reported on the following: June 20 he attended the Inland Action Group meeting where Supervisor Rowe provided an update on the state of the County; June 21 and 26 he attended the City of San Bernardino City Council Meeting; and June 27 he met with the General Manager/CEO to review the agenda and to discuss District business. Director Coats reported on the following: June 19 he attended the Association of San Bernardino County Special Districts Monthly Membership meeting where guest speaker Supervisor Rowe spoke about the County budget; June 22 he attended the San Bernardino Valley Municipal Water District’s Sunrise Ranch Master Plan Workshop where they discussed the project; June 27 he attended the City of San Bernardino Water Department Board meeting where they approved an SRF loan for a system-wide pipeline replacement and voted to apply for septic-to-sewer grant funding; and June 27 he attended the Highland Chamber of Commerce monthly meeting where Andrea DeLeon was the guest speaker. Director Smith reported on the following: June 19 he attended the Association of San Bernardino County Special Districts monthly membership meeting where Supervisor Rowe was the speaker; June 24 he observed Conservation staff at the Lowe’s Popup event; and he reported that there was no Local Agency Formation Commission of San Bernardino County meeting this month. Vice Chairman Morales reported on the following: June 15 he attended San Bernardino Valley Municipal Water District’s (Valley District) Budget Workshop; June 16 he attended the Association of California Water Agencies State Legislative meeting; and June 20 he attended Valley District’s Board meeting where they approved the FY 2023-24 Budget and had discussions with the Basin Technical Advisory Committee on what to do with surplus water. Chairman Goodrich reported on the following: June 19 he attended the Top Workplace Celebration held at District Headquarters; June 2 he attended Valley District’s Santa Ana River Enhanced Recharge Groundbreaking event; June 8 he attended the Legislative & Public Outreach Committee meeting where they provided informative updates, reviewed the Consumer Confidence Report and discussed the District’s website redesign; and June 13 he attended the City of Highland City Council meeting where they voted to raise waste hauling rates. For information only. a.General Manager/CEO Report The General Manager/CEO announced the following: •July 4 - District offices will be closed in observance of Independence Day. 1 1 0 3 •July is Smart Irrigation Month and the District will be engaging with customers to promote efficient irrigation via social media and the District’s website. •The Consumer Confidence Report is available now. Go to eastvalley.org/CCR to view the report. He added that staff has done a fantastic job putting it together. •East Valley Water District has been facilitating meetings with San Bernardino Valley Water Conservation District, San Bernardino Valley Municipal Water District and the County of Orange to reduce flows from Seven Oaks Dam. Over 25,000 AF of water has been lost from local groundwater recharge to downstream agencies in Orange County. He stated that today the County of Orange reduced flows in the Santa Ana River, and it is no longer flowing past the 210 freeway for the first time this year and flows are all being captured in the local groundwater basin. •He stated that Conservation staff hosted a Community Popup event at Lowe’s in Highland over the weekend to inform customers of rebate programs and District services. •He provided a recap of the Arroyo Valley High School student’s Summer Internship. He stated that five students participated and completed the three- week program. •June 25 a local organization hosted a farmer’s market at the Sterling Natural Resource Center. For information only. b.Legal Counsel Report No report at this time. c.Board of Directors’ Comments Director Carrillo thanked the General Manager/CEO for the Seven Oaks Dam updates. Director Coats commended staff for doing an excellent job on the Consumer Confidence Report and Budget document. Vice Chairman Morales reminisced about a comment made by Tom Ash pertaining to being a water delivery agency, not a water sales agency. He made a comment regarding the 2022 electronic Consumer Confidence Report, and reminded the public that it’s important to attend workshops. 1 1 0 3 Chairman Goodrich reminded everyone that he and Director Coats will be participating in the City of Highland Independence Day parade by driving the District’s ’54 Chevy. He also offered his appreciation to staff for a wonderful Employee Movie Night event. For information only. ADJOURN Chairman Goodrich adjourned the meeting at 7:29 p.m. Phillip R. Goodrich, Board President Michael Moore, Board Secretary Agenda Item #2b July 12, 20231 Meeting Date: July 12, 2023 Agenda Item #2b Consent Item Regular Board Meeting TO: Governing Board Members FROM: General Manager/CEO SUBJECT: Approval of Directors' Fees and Expenses for June 2023 RECOMMENDATION That the Board of Directors approve the Directors' Fees and Expenses for June 2023 as submitted. 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 $9,767.36 which is included in the current fiscal year budget. Recommended by: ________________ Michael Moore General Manager/CEO Respectfully submitted: ________________ Justine Hendricksen District Clerk ATTACHMENTS June 2023 Director Expense Reports Name: Month / Year:2023 Meeting No.Stipend Written Oral 1 6 /06 225 2 6 /12 225 3 6 /14 225 4 6 /20 225 5 6 /21 225 6 6 /26 225 7 6 /27 225 8 6 /28 225 9 10 11 12 13 14 15 16 17 18 19 20 Meetings 0.655/mi No. 1 2 3 4 5 6 7 8 9 10 Subtotal TOTAL PAYMENT Date of Approval $0.00 Mileage Miscellaneous Reimbursement Description Inland Action City of San Bernardino Council Meeting City of San Bernardino Council Meeting Meeting with General Manager/CEO or Designee Regular Board Meeting Expense Type $1,800.00 $0.00 Reimbursement Administration Signature I certify that the above is correct and accurate to the best of my knowledge. Chris Carrillo Date Meeting / Event Description Date Inland Action Meeting with General Manager/CEO or Designee Regular Board Meeting $1,800.00 Chris Carrillo June / 0.00 X ( 8 ) Report Provided Subtotal Meetings' Stipend Mileage DIRECTOR EXPENSE / REIMBURSEMENT ACTIVITY SHEET 1 Name: Month / Year:2023 1 2 3 4 5 Chris Carrillo June / As part of the District's commitment to transparency, please provide a brief description of any meeting/event(s) that you will not be providing a report during the Board meeting at which your Director's Expense Sheet is being approved. Meeting Date: Event Description: Attended Inland Action meeting via Zoom. 6 / 6 / 2023 Inland Action Brief Description of Meeting/Event Value to EVWD Meeting Date:6 / 12 / 2023 Event Description:Meeting with General Manager/CEO or Designee Brief Description of Meeting/Event Value to EVWD Meeting Date:6 / 14 / 2023 Event Description:Regular Board Meeting Meeting with General Manager/CEO to review agenda and discuss District business. Brief Description of Meeting/Event Value to EVWD Attended EVWD regular board meeting. Meeting Date:6 / 20 / 2023 Event Description:Inland Action Brief Description of Meeting/Event Value to EVWD Attended Inland Action meeting via Zoom. Meeting Date:6 / 21 / 2023 Event Description:City of San Bernardino Council Meeting Brief Description of Meeting/Event Value to EVWD Attended City of San Bernardino City Council Meeting via Zoom. DIRECTOR EXPENSE / REIMBURSEMENT ACTIVITY SHEET AB 1234 SUPPLEMENTAL REPORT FORM 2 Name: Month / Year:2023 6 7 8 9 10 Meeting Date:6 / 26 / 2023 Event Description:City of San Bernardino Council Meeting Brief Description of Meeting/Event Value to EVWD Attended City of San Bernardino City Council Meeting via Zoom. Meeting Date:6 / 27 / 2023 Event Description:Meeting with General Manager/CEO or Designee Brief Description of Meeting/Event Value to EVWD Meeting with General Manager/CEO to review agenda and discuss District business. Meeting Date:6 / 28 / 2023 Event Description:Regular Board Meeting Brief Description of Meeting/Event Value to EVWD Attended EVWD regular board meeting. Meeting Date: Event Description: Brief Description of Meeting/Event Value to EVWD Meeting Date: Event Description: Brief Description of Meeting/Event Value to EVWD Chris Carrillo June / As part of the District's commitment to transparency, please provide a brief description of any meeting/event(s) that you will not be providing a report during the Board meeting at which your Director's Expense Sheet is being approved. DIRECTOR EXPENSE / REIMBURSEMENT ACTIVITY SHEET AB 1234 SUPPLEMENTAL REPORT FORM 3 Name: Month / Year:2023 Meeting No.Stipend Written Oral 1 6 /01 225 2 6 /01 0 3 6 /02 225 4 6 /06 225 5 6 /09 0 6 6 /12 0 7 6 /12 225 8 6 /13 0 9 6 /13 225 10 6 /14 225 11 6 /19 225 12 6 /22 225 13 6 /27 225 14 6 /27 0 15 6 /27 0 16 6 /28 225 17 18 19 20 Meetings 0.655/mi No. 1 2 3 4 5 6 7 8 9 10 Subtotal TOTAL PAYMENT Date of Approval $0.00 Mileage Miscellaneous Reimbursement Description Regular Board Meeting ASBCSD San Bernardino Valley MWD/Sunrise Ranch Plan San Bernardino Board of Water Commissioners CSDA Webinar Employee Movie Night Meeting with General Manager/CEO or Designee ASBCSD Board Meeting San Bernardino Board of Water Commissioners Expense Type $2,250.00 $92.36 Reimbursement Administration Signature I certify that the above is correct and accurate to the best of my knowledge. Ronald L. Coats Date Meeting / Event Description Meeting with General Manager/CEO or Designee Regular Board Meeting Date CSDA Committee Meeting Top Work Place Lunch San Bernardino Valley MWD Groundbreaking $2,342.36 Ronald L. Coats June / 141.00 X ( 10 ) 141.00 Report Provided Subtotal Meetings' Stipend Mileage Highland Chamber of Commerce Finance & Human Resources Committee Meeting DIRECTOR EXPENSE / REIMBURSEMENT ACTIVITY SHEET 1 Name: Month / Year:2023 1 2 3 4 5 Ronald L. Coats June / As part of the District's commitment to transparency, please provide a brief description of any meeting/event(s) that you will not be providing a report during the Board meeting at which your Director's Expense Sheet is being approved. Meeting Date: Event Description: Attended Professional Development Committee meeting to discuss financials for 2023, CSDA award selections and 2023 Conference 6 / 1 / 2023 CSDA Committee Meeting Brief Description of Meeting/Event Value to EVWD Meeting Date:6 / 1 / 2023 Event Description:Top Work Place Lunch Brief Description of Meeting/Event Value to EVWD Meeting Date:6 / 2 / 2023 Event Description:San Bernardino Valley MWD Groundbreaking Attended the Top Work Place celebration for the employees Brief Description of Meeting/Event Value to EVWD Attended ground breaking for the Santa Ana River Enhanced Recharge Phase 1B project Meeting Date:6 / 6 / 2023 Event Description:CSDA Webinar Brief Description of Meeting/Event Value to EVWD Attended a live webinar for The Spread of CVRA Challenges to At-Large Board Elections Meeting Date:6 / 9 / 2023 Event Description:Employee Movie Night Brief Description of Meeting/Event Value to EVWD Attended Movie Night for the employees and their families DIRECTOR EXPENSE / REIMBURSEMENT ACTIVITY SHEET AB 1234 SUPPLEMENTAL REPORT FORM 2 Name: Month / Year:2023 6 7 8 9 10 Meeting Date:6 / 12 / 2023 Event Description:Meeting with General Manager/CEO or Designee Brief Description of Meeting/Event Value to EVWD Met with the general manager for an agenda review and discussed other district business Meeting Date:6 / 12 / 2023 Event Description:ASBCSD Board Meeting Brief Description of Meeting/Event Value to EVWD Attended our monthly board meeting; discussed association business and our general meeting next week Meeting Date:6 / 13 / 2023 Event Description:San Bernardino Board of Water Commissioners Brief Description of Meeting/Event Value to EVWD They approved MOU's with their employee groups which covers the next 5 years; they approved contracts for some equipment replacements and Commissioner Tom Brickley was re-appointed to the board for another 6 year term. Their commissioners are appointed and not elected. Meeting Date:6 / 13 / 2023 Event Description:Finance & Human Resources Committee Meeting Brief Description of Meeting/Event Value to EVWD We reviewed the Debt Management Policy; the Safety and Risk Management Program; Finance and Human Resource activities. Meeting Date:6 / 14 / 2023 Event Description:Regular Board Meeting Brief Description of Meeting/Event Value to EVWD See official Board Meeting minutes Ronald L. Coats June / As part of the District's commitment to transparency, please provide a brief description of any meeting/event(s) that you will not be providing a report during the Board meeting at which your Director's Expense Sheet is being approved. DIRECTOR EXPENSE / REIMBURSEMENT ACTIVITY SHEET AB 1234 SUPPLEMENTAL REPORT FORM 3 Name: Month / Year:2023 11 12 13 14 15 Meeting Date:6 / 19 / 2023 Event Description:ASBCSD Brief Description of Meeting/Event Value to EVWD Our guest speaker was Chairperson of the County Board of Supervisors and 3rd District Supervisor Dawn Rowe. She spoke on the challenges and accomplishments of her tenure on the board. This coming fiscal year the county budget is $9.3 Billion and they have a balanced budget. 20% of their budget goes into reserves. Meeting Date:6 / 22 / 2023 Event Description:San Bernardino Valley MWD/Sunrise Ranch Plan Brief Description of Meeting/Event Value to EVWD Attended the Sunrise Ranch Master Plan Workshop 1 where they discussed the overall who, what, when, where, why and how the overall project will commence. There will be three more workshops, in the fall of 2023, spring of 2024 and summer of 2024. Meeting Date:6 / 27 / 2023 Event Description:San Bernardino Board of Water Commissioners Brief Description of Meeting/Event Value to EVWD They approved a resolution for a SRF loan for system wide pipeline replacement $11,334,250, at 2.1% interest rate; They voted to apply for a grant for septic to sewer for 257 residential parcels estimated at $12,327,882; They voted for several vendor contracts including one for Biosolids Strategic Plan Update for 2023. Meeting Date:6 / 27 / 2023 Event Description:Highland Chamber of Commerce Brief Description of Meeting/Event Value to EVWD Guest speaker was Andrea DeLong who spoke on the San Bernardino Symphony and what it brings to the community Meeting Date:6 / 27 / 2023 Event Description:Meeting with General Manager/CEO or Designee Brief Description of Meeting/Event Value to EVWD Met with Michael Moore to review tonight's agenda and discuss other district business Ronald L. Coats June / As part of the District's commitment to transparency, please provide a brief description of any meeting/event(s) that you will not be providing a report during the Board meeting at which your Director's Expense Sheet is being approved. DIRECTOR EXPENSE / REIMBURSEMENT ACTIVITY SHEET AB 1234 SUPPLEMENTAL REPORT FORM 4 Name: Month / Year:2023 16 17 18 19 20 Meeting Date:6 / 28 / 2023 Event Description:Regular Board Meeting Brief Description of Meeting/Event Value to EVWD See official Board Meeting minutes Meeting Date: Event Description: Brief Description of Meeting/Event Value to EVWD Meeting Date: Event Description: Brief Description of Meeting/Event Value to EVWD Event Description: Brief Description of Meeting/Event Value to EVWD Ronald L. Coats June / As part of the District's commitment to transparency, please provide a brief description of any meeting/event(s) that you will not be providing a report during the Board meeting at which your Director's Expense Sheet is being approved. Meeting Date: Event Description: Brief Description of Meeting/Event Value to EVWD Meeting Date: DIRECTOR EXPENSE / REIMBURSEMENT ACTIVITY SHEET AB 1234 SUPPLEMENTAL REPORT FORM 5 Name: Month / Year:2023 Meeting No.Stipend Written Oral 1 6 /01 0 2 6 /02 225 3 6 /07 225 4 6 /08 225 5 6 /13 225 6 6 /14 225 7 6 /19 225 8 6 /22 225 9 6 /26 225 10 6 /27 225 11 6 /28 225 12 13 14 15 16 17 18 19 20 Meetings 0.655/mi No. 1 2 3 4 5 6 7 8 9 10 Subtotal TOTAL PAYMENT Date of Approval Phillip R. Goodrich June / 0.00 X ( 10 ) Report Provided Subtotal Meetings' Stipend Mileage Meeting with General Manager/CEO or Designee Administration Signature I certify that the above is correct and accurate to the best of my knowledge. Phillip R. Goodrich Date Meeting / Event Description Date EVWD Event SBVMWD Event Agenda Review $2,250.00 $2,250.00 $0.00 Reimbursement Mileage Miscellaneous Reimbursement Description Chamber of Commerce Event Regular Board Meeting Legislative & Public Affairs Committee Meeting City of Highland Council Meeting Regular Board Meeting ASBCSD Agenda Review Expense Type $0.00 DIRECTOR EXPENSE / REIMBURSEMENT ACTIVITY SHEET 1 Name: Month / Year:2023 1 2 3 4 5 Event Description:City of Highland Council Meeting Brief Description of Meeting/Event Value to EVWD Represent District at Monthly City Council meeting Brief Description of Meeting/Event Value to EVWD With CEO and Vice Chair for review of current agenda Meeting Date:6 / 8 / 2023 Event Description:Legislative & Public Affairs Committee Meeting Brief Description of Meeting/Event Value to EVWD Attend committee meeting,updates on CCR, current legislations and all Dept. activities Meeting Date:6 / 13 / 2023 Meeting Date:6 / 2 / 2023 Event Description:SBVMWD Event Brief Description of Meeting/Event Value to EVWD Meeting Date:6 / 7 / 2023 Event Description:Agenda Review Represent District at the Valley District Enhanced Recharge Ribbon Cutting Phillip R. Goodrich June / As part of the District's commitment to transparency, please provide a brief description of any meeting/event(s) that you will not be providing a report during the Board meeting at which your Director's Expense Sheet is being approved. Meeting Date: Event Description: Attend Top Work Place Recognition, celebration luncheon 6 / 1 / 2023 EVWD Event Brief Description of Meeting/Event Value to EVWD DIRECTOR EXPENSE / REIMBURSEMENT ACTIVITY SHEET AB 1234 SUPPLEMENTAL REPORT FORM 2 Name: Month / Year:2023 6 7 8 9 10 Phillip R. Goodrich June / As part of the District's commitment to transparency, please provide a brief description of any meeting/event(s) that you will not be providing a report during the Board meeting at which your Director's Expense Sheet is being approved. Met with CEO and Vice Chair to discuss Distrist business Meeting Date:6 / 27 / 2023 Event Description:Chamber of Commerce Event Brief Description of Meeting/Event Value to EVWD Attend Monthly luncheon Speaker Andrea Deleon. Event Description:Agenda Review Brief Description of Meeting/Event Value to EVWD with Staff and Vice chair for review of current agenda Meeting Date:6 / 26 / 2023 Event Description:Meeting with General Manager/CEO or Designee Brief Description of Meeting/Event Value to EVWD Attend Regular board meeting Ref. Mins this day Meeting Date:6 / 19 / 2023 Event Description:ASBCSD Brief Description of Meeting/Event Value to EVWD Attend Monthly Special Districts meeting Speaker Dawn Rowe updates on District 3 activities Meeting Date:6 / 22 / 2023 Meeting Date:6 / 14 / 2023 Event Description:Regular Board Meeting Brief Description of Meeting/Event Value to EVWD DIRECTOR EXPENSE / REIMBURSEMENT ACTIVITY SHEET AB 1234 SUPPLEMENTAL REPORT FORM 3 Name: Month / Year:2023 11 12 13 14 15 Phillip R. Goodrich June / As part of the District's commitment to transparency, please provide a brief description of any meeting/event(s) that you will not be providing a report during the Board meeting at which your Director's Expense Sheet is being approved. Event Description: Brief Description of Meeting/Event Value to EVWD Meeting Date: Event Description: Brief Description of Meeting/Event Value to EVWD Meeting Date: Event Description: Brief Description of Meeting/Event Value to EVWD Meeting Date: Event Description:Regular Board Meeting Brief Description of Meeting/Event Value to EVWD Attend Regular board meeting Ref. Mins. This date Meeting Date: Event Description: Brief Description of Meeting/Event Value to EVWD Meeting Date:6 / 28 / 2023 DIRECTOR EXPENSE / REIMBURSEMENT ACTIVITY SHEET AB 1234 SUPPLEMENTAL REPORT FORM 4 Name: Month / Year:2023 Meeting No.Stipend Written Oral 1 6 /01 225 2 6 /02 0 3 6 /02 225 4 6 /06 225 5 6 /07 225 6 6 /08 225 7 6 /09 225 8 6 /13 225 9 6 /14 225 10 6 /16 225 11 6 /20 0 12 6 /22 0 13 6 /26 0 14 6 /28 225 15 16 17 18 19 20 Meetings 0.655/mi No. 1 2 3 4 5 6 7 8 9 10 Subtotal TOTAL PAYMENT Date of Approval James Morales, Jr.June / 0.00 X ( 10 ) Report Provided Subtotal Meetings' Stipend Mileage Regular Board Meeting Regular Board Meeting Administration Signature I certify that the above is correct and accurate to the best of my knowledge. James Morales, Jr. Date Meeting / Event Description Date San Bernardino Valley MWD San Bernardino Valley MWD ACWA Event $2,250.00 $2,250.00 $0.00 Reimbursement Mileage Miscellaneous Reimbursement Description ACWA Event San Bernardino Valley MWD Meeting with General Manager/CEO or Designee Meeting with General Manager/CEO or Designee San Bernardino Valley MWD Meeting with General Manager/CEO or Designee Legislative & Public Affairs Committee Meeting East Valley Association of Realtors San Bernardino Valley MWD Expense Type $0.00 DIRECTOR EXPENSE / REIMBURSEMENT ACTIVITY SHEET 1 Name: Month / Year:2023 1 2 3 4 5 Event Description:Meeting with General Manager/CEO or Designee Brief Description of Meeting/Event Value to EVWD District update and operations, agenda. Brief Description of Meeting/Event Value to EVWD State Legislative Meeting. Regulatory roundup. Meeting Date:6 / 6 / 2023 Event Description:San Bernardino Valley MWD Brief Description of Meeting/Event Value to EVWD Please refer to public agenda. Board report assignment. SAWPA Budget, ACWA President endorsement, appropriation/property tax expenditure limit. Bernardino County Flood Control. Meeting Date:6 / 7 / 2023 Meeting Date:6 / 2 / 2023 Event Description:San Bernardino Valley MWD Brief Description of Meeting/Event Value to EVWD Meeting Date:6 / 2 / 2023 Event Description:ACWA Event Board report assignment. Santa Ana River Recharge groundbreaking. No charge, more than one meeting per diem. James Morales, Jr.June / As part of the District's commitment to transparency, please provide a brief description of any meeting/event(s) that you will not be providing a report during the Board meeting at which your Director's Expense Sheet is being approved. Meeting Date: Event Description: Please refer to public agenda. Board report assignment. Employee compensation, COLA adjustments, benefit plan adjustments, Director daily per diem. Facility Divestiture Project. 6 / 1 / 2023 San Bernardino Valley MWD Brief Description of Meeting/Event Value to EVWD DIRECTOR EXPENSE / REIMBURSEMENT ACTIVITY SHEET AB 1234 SUPPLEMENTAL REPORT FORM 2 Name: Month / Year:2023 6 7 8 9 10 James Morales, Jr.June / As part of the District's commitment to transparency, please provide a brief description of any meeting/event(s) that you will not be providing a report during the Board meeting at which your Director's Expense Sheet is being approved. Pleae refer to public agenda. Meeting Date:6 / 16 / 2023 Event Description:ACWA Event Brief Description of Meeting/Event Value to EVWD State Legislative Committee Board Meeting. Regulatory roundup. Event Description:San Bernardino Valley MWD Brief Description of Meeting/Event Value to EVWD Please refer to public agenda. Board report assignment. Watershed resiliency program, Sunrise Rance Master Plan, surplus State Project Water. Meeting Date:6 / 14 / 2023 Event Description:Regular Board Meeting Brief Description of Meeting/Event Value to EVWD Please refer to public agenda. Meeting Date:6 / 9 / 2023 Event Description:East Valley Association of Realtors Brief Description of Meeting/Event Value to EVWD Pleae refer to public agenda. Meeting Date:6 / 13 / 2023 Meeting Date:6 / 8 / 2023 Event Description:Legislative & Public Affairs Committee Meeting Brief Description of Meeting/Event Value to EVWD DIRECTOR EXPENSE / REIMBURSEMENT ACTIVITY SHEET AB 1234 SUPPLEMENTAL REPORT FORM 3 Name: Month / Year:2023 11 12 13 14 15 James Morales, Jr.June / As part of the District's commitment to transparency, please provide a brief description of any meeting/event(s) that you will not be providing a report during the Board meeting at which your Director's Expense Sheet is being approved. Event Description:Regular Board Meeting Brief Description of Meeting/Event Value to EVWD Please refer to public agenda. Meeting Date: Event Description: Brief Description of Meeting/Event Value to EVWD District operational update. Agenda. No charge, more than 10 mettings per reporting period. Meeting Date:6 / 26 / 2023 Event Description:Meeting with General Manager/CEO or Designee Brief Description of Meeting/Event Value to EVWD District operational update. No charge, more than 10 meetings per reporting period. Meeting Date:6 / 28 / 2023 Event Description:San Bernardino Valley MWD Brief Description of Meeting/Event Value to EVWD Please refer to public agenda. Board report assignment. General fund budget. BTAC syrplus water update. No charge, more than 10 meetings per reporting period. Meeting Date:6 / 22 / 2023 Event Description:Meeting with General Manager/CEO or Designee Brief Description of Meeting/Event Value to EVWD Meeting Date:6 / 20 / 2023 DIRECTOR EXPENSE / REIMBURSEMENT ACTIVITY SHEET AB 1234 SUPPLEMENTAL REPORT FORM 4 Agenda Item #3d July 12, 20231 Meeting Date: July 12, 2023 Agenda Item #3d Discussion Item 1 1 3 0 Regular Board Meeting TO: Governing Board Members FROM: General Manager/CEO SUBJECT: Consider Candidate for California Special Districts Association (CSDA) Board of Directors Official Election RECOMMENDATION That the Board of Directors identify the candidate to be selected on behalf of the East Valley Water District for the CSDA Board of Directors Election Ballot, Southern Network, Seat C, for the term 2024-2026. BACKGROUND / ANALYSIS California Special Districts Association (CSDA) is a 501c(6), not-for-profit association that was formed in 1969 to promote good governance and improved core local services through professional development, advocacy, and other services for all types of independent special districts. For over 40 years, CSDA has been offering its members cost-efficient programs and representation at the State Capitol with a membership of over 1,000 organizations. CSDA provides education, insurance programs, industry-wide litigation, and legislative advocacy. The CSDA has been valuable to East Valley Water District with many of its training and insurance programs. The CSDA Board of Directors is the governing body responsible for all policy decisions related to CSDA’s member services, legislative advocacy, education and resources. CSDA is governed by an 18-member Board of Directors elected by mail ballots. The Board consists of three directors from each of the six networks throughout California. Each Regular Member (district) in good standing shall be entitled to vote for one (1) person to represent its Network in Seat C. The candidates include: • Arlene Schafer, Costa Mesa Sanitary District* • Al Nederhood, Municipal Water District of Orange County • John Skerbelis, Rubidoux Community Services District *Incumbent Ballots are due by electronic vote by July 14, 2023, and will be counted and verified on Agenda Item #3d July 12, 20232 Meeting Date: July 12, 2023 Agenda Item #3d Discussion Item 1 1 3 0 July 18, 2023. AGENCY GOALS AND OBJECTIVES I - Implement Effective Solutions Through Visionary Leadership C. Strengthen Regional, State and National Partnerships 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 Candidate Statements 2023 CSDA BOARD CANDIDATE INFORMATION SHEET The following information MUST accompany your nomination form and Resolution/minute order: Name: Arlene Schafer District/Company: Costa Mesa Sanitary District Title: Board of Directors – Vice President Elected/Appointed/Staff: Elected Length of Service with District: 25 Years 1.Do you have current involvement with CSDA (such as committees, events, workshops, conferences, Governance Academy, etc.): I served on CSDA Board of Directors and several committees including chair of the membership and professional development committees and served on the legislative and fiscal, and I served on the Alliance Executive Council. I have completed the Special District Leadership Academy, Good Governance Foundation workshop and I attend the annual conference and Legislative Days. 2.Have you ever been associated with any other state-wide associations (CSAC, ACWA, League, etc.): I have been associated with the Solid Waste Association of North America (SWANA) of Southern California, and the Independent Special Districts of Orange County (ISDOC) and 3.List local government involvement (such as LAFCo, Association of Governments, etc.): I am a current member of the Board of Directors for CSDA Finance Corporation, and I am the former Vice President of ISDOC and the former commissioner of the Orange County Local Formation Commission (LAFCO). I am also the former Mayor of the City of Costa Mesa. 4.List civic organization involvement: Harbor Mesa Lions Club, Costa Mesa Chamber of Commerce, Ambassador for the City Costa Mesa during special events. **Candidate Statement – Although it is not required, each candidate is requested to submit a candidate statement of no more than 300 words in length. Any statements received in the CSDA office after the nomination deadlines will not be included with the ballot. Candidate Statement Arlene Schafer Costa Mesa Sanitary District Southern Network, Seat C It has been an honor serving you on CSDA’s Board of Directors for the past nineteen years. I have had the privilege of establishing long lasting relationships with local officials that forged an organization to become one of the leading advocacy groups in California on statewide and national issues. I am proud of my past and current board members for the accomplishments we achieved to enhance special district’s visibility in the capital, as well as broadening educational opportunities to help you govern effectively and openly. There is much more important work to be done, so I humbly ask for your trust and support in re-electing me to Seat C of the Southern Network. I believe we are approaching a year that could have an everlasting effect on the way we provide services. It is very likely the November 2024 Statewide Ballot will have Initiative 21-0042A1, which is now Initiative 1935. If approved by the voters, this initiative will significantly restrict how we fund critical services like fire, parks, libraries, sewers, water, etc. Initiative 1935 will jeopardize the ability of special districts to deliver essential services, which is why as your CSDA representative I am committed to helping defeat this deceptive and dangerous measure. In addition to my advocacy efforts, I believe CSDA provides some of the best training and professional development programs for local government officials. I will continue serving on the Professional Development Committee to work with CSDA staff and others on making sure you continue receiving top quality workshops, seminars, and conferences. I hope I earned your trust by voting for me by July 14, 2023. 2023 CSDA BOARD CANDIDATE INFORMATION SHEET The following informa on MUST accompany your nomina on form and Resolu on/minute order: Name: __Albert M. Nederhood________________________________________________________ District/Company: __Municipal Water District of Orange County (MWDOC)_____________________ Title: __Director _____________________________________________________________ Elected/Appointed/Staff: ___Elected____________________________________________________ Length of Service with District: _2 years with MWDOC, 4 years with Yorba Linda Water District as elected Board Member__________ 1. Do you have current involvement with CSDA (such as commi ees, events, workshops, conferences, Governance Academy, etc.): I have a ended most of the quarterly mee ngs for ISDOC (Independent Special Districts of Orange County) over the last 6 years. I spent 2 years working with Jim Fisler and Saundra Jacobs (both past ISDOC Presidents) to successfully revise the Special District dues structure created in 2000 to more accurately and fairly reflect revenue and dues payable to LAFCO._As part of this process I a ended virtually all ISDOC Board mee ngs for 2 years._____________ 2. Have you ever been associated with any other state-wide associa ons (CSAC, ACWA, League, etc.): Over the last 6 years I have a ended most of the conferences held by the Urban Water Ins tute, ACWA, the Colorado River Water Users, as well as many Metropolitan Water District Board mee ngs._________ ___________________________ 3. List local government involvement (such as LAFCo, Associa on of Governments, etc.): _For the 2 years that it took to ini ate, revise and successfully change the LAFCO dues required of Special Districts in Orange County, I a ended virtually all of the monthly OC-LAFCO mee ngs._________________________________________________________________ 4. List civic organiza on involvement: _I was elected twice and served on the Yorba Linda Water District Board, a Special District. I’ve ac vely par cipated in the WACO (Water Advisory Commi ee of Orange County) both in a endance and planning of the mee ngs.___________________________________________________________________________ Al Nederhood MWDOC Board Elect to CSDA Board Southern Network Seat C 6 Years as Elected Official for Special Districts , Yorba Linda Water District (YLWD) & Municipal Water District of Orange County (MWDOC) LAFCO dues revision through Independent Special Districts of Orange County. First revision after 20 years saving small districts thousands of dollars annually. Heli-Hydrant sponsor , supporter creating nations first system (helicopter enabled fire suppression in wild -fire zones) President of a Non-Profit 30 years of Senior Management Leadership positions with nationally known firms President of an Educational Institution with $100 million in revenue, 500 staff and 5000 students. BA, Long Beach State MA, Central Michigan University Retired, Married for 50+ years, 4 kids and 12 grandkids Here’s a sample of my history of measurable change created by active questioning and positive decision making based on the facts. Seven years ago, I identified, initiated, and transformed an outdated LAFCO dues system on behalf of special districts in Orange County. The dues structure was developed in 2002 by ISDOC to fulfill their legal responsibility, but over time, it resulted in small districts subsidizing the large districts. After two years of work ing with my fellow Special Districts, the new dues structure was unanimously approved and implemented. This effort created a balanced and proportionate LAFCO dues structure for Special Districts throughout the county, saving smaller districts with smaller operating budgets thousands of dollars each year. As a Board Member for Yorba Linda Water District we investigated and implemented the nation’s first Heli - hydrant to modernize fighting wild fires. YLWD now has two heli-hydrants with a third in development with Metropolitan Water District. I would appreciate your Board voting for me, Al Nederhood. If you want to contact me: Al Nederhood MWDOC, Director Division One anederhood@mwdoc.com C. 714-261-3964 Agenda Item #3b July 12, 20231 Meeting Date: July 12, 2023 Agenda Item #3b Discussion Item 8 2 6 Regular Board Meeting TO: Governing Board Members FROM: General Manager/CEO SUBJECT: Consider Adoption of Community Facilities District 2021-1 (Mediterra) Resolution 2023.01 RECOMMENDATION That the Board of Directors of East Valley Water District, acting as the legislative body of Community Facilities District 2021-1 (Mediterra) of East Valley Water District, adopt Resolution 2023.01, including Exhibit A, and other required bond documents related to the issuance of CFD 2021-1, Improvement Area 1 Bonds for an amount not to exceed $7,200,000. BACKGROUND / ANALYSIS On March 27, 2023, the District received a bond issuance request from DR Horton Los Angeles Holding Company, Inc. to commence the issuance of EVWD Community Facilities District (CFD) 2021-1 (Mediterra) Improvement Area (IA) 1 bonds. IA 1 consists of 149 homes – 56 are completed and sold, 7 others are available for sale (3 are models), 27 are under construction, and the remaining 59 are partially improved lots. The issuance of CFD bonds was declared necessary for the acquisition or financing of capital improvements within the Mediterra CFD, by Resolution 2021.01, adopted on December 8th, 2021 as part of the Mediterra CFD’s formation proceedings. The consultant team that was assembled to facilitate the formation of CFD 2021-1 was also tasked to gather the information and create the documents needed to issue bonds. The consultant team consists of the following: •Municipal Advisors •Bond Counsel •Special Tax Consultant •Appraiser The information assembled or developed by these advisors has been incorporated into the following documents for the Board’s review and consideration: Resolution 2023.01 – A Resolution of the Board of Directors of East Valley Water District, acting as the Legislative Body of Community Facilities District 2021-1, Agenda Item #3b July 12, 20232 Meeting Date: July 12, 2023 Agenda Item #3b Discussion Item 8 2 6 Authorizing the Issuance of 2023 Improvement Area 1 Special Tax Bonds. Preliminary Official Statement – This document gives potential investors in the CFD 2021-1 bonds a detailed description of the Mediterra project, an Improvement Area 1 development summary, special taxes, and other information in order to assess risk. Bond Indenture – This Agreement is between CFD 2021-1 of the East Valley Water District and US Bank Trust Company, National Association (Trustee). Under the Indenture, the Trustee shall, among other things: •Establish accounts for bond proceeds and special tax collections. •Make interest payments to Bond owners and Redeem bonds when presented for payment at maturity. •Pursue any available remedies in the event of default. Continuing Disclosure Certificate – This is a commitment by the issuer, CFD 2021-1 (Mediterra) of the East Valley Water District, to issue a report by April 1st of each year. The report will include audited financial information, if available, and the following: •Amount of tax delinquencies, and special tax prepayments, in IA 1 •Land ownership summary •Principal amount of bonds outstanding •Total assessed value •Updated value to lien ratios for property subject to special taxes •Any changes to the Rates and Method of Apportionment Debt Management Policy – This policy was recently updated and approved by the Board on June 28, 2023, should be adopted by, and incorporated into the procedures of, CFD 2021-1 as issuer of the IA 1 Special Tax bonds. SB 1029, which became effective January 1, 2017, requires that all issuers certify they have policies concerning the use of debt when reporting to the California Debt & Investment Advisory Commission (CDIAC). Bond Purchase Contract – This Agreement between EVWD and Hilltop Securities, LLC (Underwriter) determines the Terms and Conditions for Purchase of the CFD 2021-1, Improvement Area 1 bonds in a negotiated sale. If the Board authorizes the sale of bonds, staff and the consulting team will work to finalize all documents, review the markets for similar transactions, and then complete negotiations with Hilltop Securities, LLC for the sale of the bonds. AGENCY GOALS AND OBJECTIVES II - Maintain a Commitment To Sustainability, Transparency, and Accountability Agenda Item #3b July 12, 20233 Meeting Date: July 12, 2023 Agenda Item #3b Discussion Item 8 2 6 A. Practice Transparent and Accountable Fiscal Management REVIEW BY OTHERS This agenda item has been reviewed by Legal Counsel, Bond Counsel, and the consultant team working to issue the special tax bonds. FISCAL IMPACT A CFD 2021-1 bond issue will have no fiscal impact on the District as bonds will be repaid by special tax assessments to property owners within CFD 2021-1 Improvement Area 1, and administrative costs incurred by the District are reimbursable by bond and tax proceeds. Recommended by: ________________ Michael Moore General Manager/CEO Respectfully submitted: ________________ Brian Tompkins Chief Financial Officer ATTACHMENTS 1. Fieldman Rolapp and Assoc - Presentation 2. CFD 2021-1 Resolution 2023.01 3. Bond Indenture 4. Debt Management Policy 5. Bond Purchase Contract 6. Continuing Disclosure Certificate 7. Preliminary Official Statement East Valley Water District July 12, 2023 Community Facilities District No. 2021-1 (Mediterra) 2023 Special Tax Bonds (Improvement Area No. 1) Adam Bauer CEO & President 949.295.5735 cell abauer@fieldman.com Jennifer Bustamante Associate 949.564.6804 cell jbustamante@fieldman.com 2 Summary of Market Conditions Municipal Market Data (MMD): ‘AAA’ rated yield curve published daily by Thomsen Reuters. Most tax-exempt municipal bonds price based on a spread to MMD As a result of inflationary pressures and expected Fed interest rate policy, municipal tax-exempt rates significantly increased in 2022 but have improved since November Current MMD (6/23/23): 3.46% Source: Refinitiv 3 Overview On December 8,2021,the Board of Directors of East Valley Water District (“Water District”) approved a resolution to form Community Facilities District No.2021-1,Improvement Area No.1 (“CFD No.2021-1,IA No.1”)and authorized the issuance of bonds in an aggregate principal amount not to exceed $8,000,000 The Water District intends to issue one series of special tax bonds (“2023 Bonds”) in the not-to- exceed amount of $7,200,000 to fund the acquisition of certain public facilities and improvements 2023 Bonds are secured by special tax revenues from CFD No. 2021-1, IA No. 1 CFD No. 2021-1, IA No. 1 consists of 149 residential units Independent appraisal conducted by Integra Realty Resources Date of Value : May 15, 2023 Appraised Value : $60,017,000 57 residential units have closed to individual homeowners 92 units currently owned by the developer in various stages of development 4 Series 2023 Bonds Overview* *Preliminary, subject to change. Based on current market conditions as of June 2023. SOURCES Bond Proceeds: Par Amount 5,565,000.00$ Net Premium 22,988.15 5,587,988.15 Other Sources of Funds: Fiscal Year 2022-23 Special Tax Collections 140,501.24 5,728,489.39$ USES Project Fund Deposits: Project Fund 4,783,519.40$ Other Fund Deposits: Capitalized Interest Account 160,766.67 Debt Service Reserve Fund 480,728.32 641,494.99 Delivery Date Expenses Cost of Issuance 200,000.00 Underwriter's Discount 83,475.00 283,475.00 Other Uses of Funds: Fiscal Year 2022-23 Administrative Expenses 20,000.00 5,728,489.39$ Sources and Uses of Funds Period Ending Revenue Contraints Principal Interest Total Proposed Debt Service Capitalized Interest Coverage 3/1/2024 - - 160,767 160,767 9/1/2024 472,569 125,000 139,125 424,892 111.22% 9/1/2025 318,039 15,000 272,000 287,000 110.81% 9/1/2026 324,399 20,000 271,250 291,250 111.38% 9/1/2027 330,887 30,000 270,250 300,250 110.20% 9/1/2028 337,505 35,000 268,750 303,750 111.11% 9/1/2029 344,255 45,000 267,000 312,000 110.34% 9/1/2030 351,140 50,000 264,750 314,750 111.56% 9/1/2031 358,163 60,000 262,250 322,250 111.14% 9/1/2032 365,327 70,000 259,250 329,250 110.96% 9/1/2033 372,633 80,000 255,750 335,750 110.99% 9/1/2034 380,086 90,000 251,750 341,750 111.22% 9/1/2035 387,687 100,000 247,250 347,250 111.65% 9/1/2036 395,441 115,000 242,250 357,250 110.69% 9/1/2037 403,350 130,000 236,500 366,500 110.05% 9/1/2038 411,417 140,000 230,000 370,000 111.19% 9/1/2039 419,645 155,000 223,000 378,000 111.02% 9/1/2040 428,038 170,000 215,250 385,250 111.11% 9/1/2041 436,599 185,000 206,750 391,750 111.45% 9/1/2042 445,331 205,000 197,500 402,500 110.64% 9/1/2043 454,238 225,000 187,250 412,250 110.18% 9/1/2044 463,322 245,000 176,000 421,000 110.05% 9/1/2045 472,589 265,000 163,750 428,750 110.22% 9/1/2046 482,041 285,000 150,500 435,500 110.69% 9/1/2047 491,681 310,000 136,250 446,250 110.18% 9/1/2048 501,515 335,000 120,750 455,750 110.04% 9/1/2049 511,545 360,000 104,000 464,000 110.25% 9/1/2050 521,776 385,000 86,000 471,000 110.78% 9/1/2051 532,212 415,000 66,750 481,750 110.47% 9/1/2052 542,856 445,000 46,000 491,000 110.56% 9/1/2053 553,713 475,000 23,750 498,750 111.02% Total $12,810,002 $5,565,000 6,002,392 11,567,392 $160,767 CFD No. 2021-1, IA No. 1 2023 Bonds Debt Service 5 Financing Documents Resolution of Issuance. Authorizes the issuance of the 2023 Bonds. Approves form of documents (e.g., Bond Indenture, BPA, POS, Continuing Disclosure Undertakings) and determines the parameters under which bonds can be issued. Sets forth security provisions and covenants with which the Water District must comply, flow of funds, pledge of revenues and events of default and remedies. Authorizes certain authorized officers to do all services necessary to proceed with the sale and issuance of the bonds. Bond Indenture. Agreement between the Water District and Trustee that includes the terms of the 2023 Bonds, provides for the funds and accounts to be held by the Trustee, the bond redemption provisions and the certain covenants of the Water District Bond Purchase Agreement. Agreement between the Water District and Underwriter whereby the Water District agrees to sell the 2023 Bonds to the Underwriter and the Underwriter agrees to buy the 2023 Bonds from the Water District and sell them to the public Preliminary Official Statement. Disclosure document used by the Underwriter to inform investors about the upcoming bond sale and provide all material information for the potential investors to make a decision whether or not to buy the 2023 Bonds Continuing Disclosure Certificate. Specifies the Water District’s obligation to provide annual disclosure to the municipal bond market related to the 2023 Bonds by preparing and filing annual disclosure reports, and provides for the Water District to give notices of certain material events related to the CFD and the 2023 Bonds, if they occur Letter of Credit. Agreement between the Water District and Developer whereby the Developer agrees to provide CFD No. 2021-1 a letter of credit to secure payment of Special Taxes 6 Financing Schedule* July 12, 2023 Board of Directors Meeting Approval of Bond Issuance and Financing Documents July 13, 2023 Post Preliminary Official Statement July 20, 2023 +/- Bond Pricing August 3, 2023 +/- Bond Closing * Preliminary, subject to change. East Valley Water District Resolution 2023.01 Page 1 of 5 RESOLUTION NO. 2023.01 A RESOLUTION OF THE BOARD OF DIRECTORS OF EAST VALLEY WATER DISTRICT, ACTING AS THE LEGISLATIVE BODY OF COMMUNITY FACILITIES DISTRICT NO. 2021-1 (MEDITERRA) OF EAST VALLEY WATER DISTRICT, AUTHORIZING THE ISSUANCE OF ITS 2023 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 1) IN A PRINCIPAL AMOUNT NOT TO EXCEED SEVEN MILLION TWO HUNDRED THOUSAND DOLLARS ($7,200,000) AND APPROVING CERTAIN DOCUMENTS AND TAKING CERTAIN OTHER ACTIONS IN CONNECTION THEREWITH WHEREAS, the Board of Directors of East Valley Water District (the “Water District”), located in Highland, California (hereinafter sometimes referred to as the “legislative body of the District” or the “Board”), has heretofore undertaken proceedings and declared the necessity of Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District (the “District”) to issue bonds pursuant to the terms and provisions of the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5 of the Government Code of the State of California (the “Act”), up to the aggregate principal amount of $8,000,000 for Improvement Area No. 1 of the District; and WHEREAS, pursuant to Resolution No. 2021.02 adopted by the legislative body of the District on December 8, 2021, certain propositions were submitted to the qualified electors within Improvement Area No. 1 the District, and were approved by more than two-thirds of the votes cast at the elections held within the District on December 8, 2021; and WHEREAS, pursuant to the Act, the District desires to finance the acquisition and/or construction of certain public facilities and improvements within Improvement Area No. 1 of the District; and WHEREAS, in order to finance such public facilities and improvements within the Water District, the District desires to issue bonds in an aggregate principal amount not to exceed $7,200,000 designated as the “Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District 2023 Special Tax Bonds (Improvement Area No. 1)” (the “Bonds”); and WHEREAS, in order to affect the issuance of the Bonds, the legislative body of the District desires to approve the form of a Preliminary Official Statement for the Bonds and to approve the forms of and authorize the execution and delivery of a Bond Indenture, a Bond Purchase Agreement and a Continuing Disclosure Certificate for the Bonds, the forms of which are on file with the Board Secretary; and WHEREAS, to assist in issuing the Bonds, the legislative body of the District desires to retain Stradling Yocca Carlson & Rauth, a Professional Corporation, to act as Bond Counsel and Disclosure Counsel to the District; and WHEREAS, the legislative body of the District has determined in accordance with Government Code Section 53360.4 that a negotiated sale of the Bonds to Hilltop Securities Inc. (the “Underwriter”), in accordance with the terms of the Bond Purchase Agreement for the Bonds to be East Valley Water District Resolution 2023.01 Page 2 of 5 entered into by the District and the Underwriter (the “Purchase Contract”) will result in a lower overall cost to the District than a public sale; and WHEREAS, the legislative body of the District has determined that it is necessary and prudent in the management of its fiscal affairs to issue the Bonds; and WHEREAS, the aggregate appraised value of the real property in Improvement Area No. 1 of the District that is subject to the special tax to pay debt service on the Bond is not less than three times the principal amount of the Bonds and the principal amount of all other bonds outstanding that are secured by a special tax levied pursuant to the Act or a special assessment levied on property within Improvement Area No. 1 of the District, which fact is required as a precondition to the issuance of the Bonds; and WHEREAS, the aggregate principal amount of the Bonds shall not exceed one-third of the appraised value of the improved property within Improvement Area No. 1 of the District, as determined by an independent appraisal to be prepared by Integra Realty Resources, Inc.; and WHEREAS, in accordance with Section V of the Board’s Goals and Policies for Community Facilities Districts, the projected amount of the special taxes to be levied to repay the bonds (the “Special Taxes”), together with ad valorem property taxes, special assessments, and other direct and overlapping debt within Improvement Area No. 1 of the District, shall not exceed two percent (2.00%) of the projected assessed value of each improved parcel within Improvement Area No. 1 of the District that shall be subject to the Special Taxes; and WHEREAS, none of the faith, credit or taxing power of the Board shall be pledged to the repayment of the Bonds, nor shall the Board be obligated to replenish the reserve fund to be established in connection with the Bonds except from Special Taxes or foreclosure proceeds; and WHEREAS, in accordance with Government Code Section 5852.1, the Board has obtained and wishes to disclose the information set forth in Exhibit A hereto; NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of East Valley Water District, acting as the legislative body of Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District, as follows: Section 1. Recitals. Each of the above recitals is true and correct and is adopted by the legislative body of the District. Section 2. Issuance of Bonds. The issuance of the Bonds pursuant to the Act in a principal amount not to exceed $7,200,000 is hereby authorized, with the exact principal amount of the Bonds to be determined by the official signing the Purchase Contract in accordance with Section 5 below. The legislative body of the District hereby determines that it is necessary and prudent in the management of its fiscal affairs to issue the Bonds, and that none of the faith, credit or taxing power of the Board shall be pledged to the repayment of the Bonds, nor shall the Board be obligated to replenish the reserve fund to be established in connection with the Bonds except from Special Taxes or foreclosure proceeds. The legislative body of the District hereby further determines that: East Valley Water District Resolution 2023.01 Page 3 of 5 (a) the Bonds shall be dated their date of issuance, and be in the denominations, have the maturity dates, and be payable at the place and be in the form specified in the Purchase Contract to be executed on behalf of the District in accordance with Section 6 hereof; and (c) the Underwriter’s discount for the Bonds shall not exceed 1.50% of the aggregate principal amount thereof. Section 3. Approval of Indenture. The Bonds shall be governed by the terms and conditions of the Bond Indenture, dated as of the first day of the month in which the Bonds are issued, by and between the District and U.S. Bank Trust Company, National Association, as trustee, relating to the Bonds. The Bond Indenture shall be prepared by Bond Counsel to the District and executed by the General Manager/CEO of the Water District or the designee thereof, or the written designee of one of the foregoing (individually, the “General Manager/CEO or designee”), substantially in the form presented at this meeting, with such additions thereto and changes therein as the General Manager/CEO or designee executing the same deem necessary to cure any ambiguity or defect therein if such addition or change does not materially alter the substance or content thereof, to insert the offering price(s), interest rate(s), selling compensation, principal amount per maturity, redemption dates and prices and such other related terms and provisions as limited by Section 6 hereof, or to conform any provisions therein to the Purchase Contract and the Official Statement delivered to the purchasers of the Bonds. Approval of such changes shall be conclusively evidenced by the execution and delivery of the Bond Indenture by the General Manager/CEO or designee. Capitalized terms used in this Resolution which are not defined herein have the meanings ascribed to them in the Bond Indenture. Section 4. Execution of Bonds. The Bonds shall be executed on behalf of the District by the manual or facsimile signature of the General Manager/CEO or designee and the seal of the District or the Board, or a facsimile thereof, may be impressed or imprinted thereon and shall be attested with the manual or facsimile signature of the Board Secretary. U.S. Bank Trust Company, National Association, is hereby appointed to act as trustee for the Bonds. Section 5. Approval of Covenants. The covenants set forth in the Bond Indenture to be executed in accordance with Section 3 above are hereby approved, shall be deemed to be covenants of the legislative body of the District and shall be complied with by the District and its officers. Section 6. Approval of Purchase Contract. The form of the Purchase Contract presented at this meeting is hereby approved, and the General Manager/CEO or designee are hereby authorized to execute the Purchase Contract, with such additions thereto and changes therein as the General Manager/CEO or designee executing the same deems necessary, including relating to such dates, numbers and redemption provisions as are necessary to conform the Purchase Contract to the dates, amounts, interest rates and redemption provisions that are applicable to the Bonds as of the sale date. Approval of such additions and changes shall be conclusively evidenced by the execution and delivery of the Purchase Contract; provided, however, that the Purchase Contract shall be signed only if the Bonds are purchased by the Underwriter at a true interest cost that does not exceed 6.50% and the discount paid to the Underwriter (exclusive of original issue discount) does not exceed the amount that is set forth in Section 2(c) above. is the General Manager/CEO or designee are authorized to determine the day on which the Bonds are to be priced in order to attempt to produce the lowest borrowing cost for the District and may reject any terms presented by the Underwriter if determined not to be in the best interest of the District. East Valley Water District Resolution 2023.01 Page 4 of 5 Section 7. Approval of Continuing Disclosure Certificate. The form of the Continuing Disclosure Certificate presented at this meeting is hereby approved, and the General Manager/CEO or designee are hereby authorized and directed to execute the Continuing Disclosure Certificate in the form hereby approved, with such additions therein and changes thereto, executing the same deem necessary to cure any defect or ambiguity therein if such change does not materially alter the substance or content thereof, with such approval to be conclusively evidenced by the execution and delivery of the Continuing Disclosure Certificate. Section 8. Approval of Preliminary Official Statement. The form of the Preliminary Official Statement presented at this meeting is hereby approved, and the Underwriter is hereby authorized to distribute the Preliminary Official Statement to prospective purchasers of the Bonds in the form hereby approved, together with such additions thereto and changes therein as are determined to be necessary by the General Manager/CEO or designee to make the Preliminary Official Statement final as of its date. The General Manager/CEO or designee are hereby authorized and directed to execute and deliver a certificate deeming the Preliminary Official Statement final as of its date in accordance with Rule 15c2-12 promulgated under the Securities Exchange Act of 1934. The General Manager/CEO or designee are hereby authorized to execute a final Official Statement in the form of the Preliminary Official Statement, together with such changes as are determined necessary by the General Manager/CEO or designee executing the Official Statement to make such Official Statement complete and accurate as of its date. The Underwriter is further authorized to distribute the final Official Statement for the Bonds and any supplement thereto to the purchasers thereof upon its execution on behalf of the District as described above. Section 9. Findings. In accordance with the requirements of Section 53345.8 of the Act, the legislative body of the District hereby determines that the aggregate appraised value of the real property in Improvement Area No. 1 of the District that is subject to the special tax to pay debt service on the Bonds (as determined in part by an appraisal of certain property within Improvement Area No. 1 of the District that will be subject to the Special Tax) is not less than three times the principal amount of the Bonds and the principal amount of all other bonds outstanding that are secured by a special tax levied pursuant to the Act or a special assessment levied on property within Improvement Area No. 1 of the District. Section 10. Special Services. The General Manager/CEO or designed are authorized to provide for all services necessary to affect the issuance of the Bonds. Such services shall include, but not be limited to, obtaining legal services, trustee services, special tax consultant services, appraisal services and any other services deemed appropriate by the General Manager/CEO or designee, are authorized to pay for the cost of such services, together with other Costs of Issuance (as such term is defined in the Bond Indenture) from Bond proceeds. Section 11. Approval of Bond and Disclosure Counsel. The General Manager/CEO or designee are authorized to execute a contract with Stradling Yocca Carlson & Rauth, a Professional Corporation, to act as Bond Counsel and Disclosure Counsel to the District. Section 12. Other Actions Authorized. The General Manager/CEO or designee are hereby authorized and directed to take any actions and to execute and deliver any and all documents as are necessary to accomplish the issuance, sale and delivery of the Bonds in accordance with the provisions of this Resolution, and the fulfillment of the purposes of the Bonds as described in the Bond Indenture, including, but not limited to, providing certificates as to the accuracy of any information relating to the District which is included in the Official Statement and amendments to the East Valley Water District Resolution 2023.01 Page 5 of 5 Bond Indenture and entering into an agreement under which the developer of the property within Improvement Area No. 1 of the District will provide a letter of credit to secure the payment of Special Taxes. Any document authorized herein to be signed by the Board Secretary may be signed by a duly appointed deputy clerk. Section 13. Effect. This Resolution shall take effect immediately. ADOPTED this 12th day of July, 2023. Ayes: Directors: Noes: Abstain: Absent: Phillip R. Goodrich Board President ATTEST: _____________________________ Michael Moore Secretary, Board of Directors July 12, 2023 I HEREBY CERTIFY that the foregoing is a full, true and correct copy of Resolution 2023.01 adopted by the Board of Directors of East Valley Water District at its Regular Meeting held July 12, 2023. _____________________________ Michael Moore Secretary, Board of Directors East Valley Water District Resolution 2023.01 Page A-1 EXHIBIT A GOVERNMENT CODE SECTION 5852.1 DISCLOSURE The following information consists of estimates that have been provided by the Underwriter and has been represented by such party to have been provided in good faith: (A) True Interest Cost of the Bonds: 5.25% (B) Finance Charge of the Bonds (Sum of all fees/charges paid to third parties): $303,475 (C) Net Proceeds of the Bonds to be Received (net of finance charges, reserves and capitalized interest, if any): $4,643,018 (D) Total Payment Amount through Maturity of the Bonds: $11,567,392 The foregoing constitute good faith estimates only. The principal amount of the Bonds, the true interest cost of the Bonds, the finance charges thereof, the amount of proceeds received therefrom and total payment amount with respect thereto may differ from such good faith estimates due to: (a) the actual date of the sale of the Bonds being different than the date assumed for purposes of such estimates; (b) the actual principal amount of Bonds sold being different from the estimated amount used for purposes of such estimates; (c) the actual amortization of the Bonds being different than the amortization assumed for purposes of such estimates; (d) the actual market interest rates at the time of sale of the Bonds being different than those estimated for purposes of such estimates; (e) other market conditions; or (f) alterations in the District’s financing plan, or a combination of such factors. The actual date of sale of the Bonds and the actual principal amount of Bonds sold will be determined by the District based on a variety of factors. The actual interest rates borne by the Bonds will depend on market interest rates at the time of sale thereof. The actual amortization of the Bonds will also depend, in part, on market interest rates at the time of sale thereof. Market interest rates are affected by economic and other factors beyond the control of the District. Stradling Yocca Carlson & Rauth Draft of 6/28/23 4868-7058-8510v7/022497-0019 BOND INDENTURE By and Between COMMUNITY FACILITIES DISTRICT NO. 2021-1 (MEDITERRA) OF EAST VALLEY WATER DISTRICT and U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, as Trustee Relating to $_________ COMMUNITY FACILITIES DISTRICT NO. 2021-1 (MEDITERRA) OF EAST VALLEY WATER DISTRICT 2023 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 1) Dated as of August 1, 2023 i 4868-7058-8510v7/022497-0019 ARTICLE I DEFINITIONS Section 1.1. Definitions...............................................................................................................1 ARTICLE II GENERAL AUTHORIZATION AND BOND TERMS Section 2.1. Amount, Issuance, Purpose and Nature of Bonds and Parity Bonds ......................8 Section 2.2. Type and Nature of Bonds and Parity Bonds..........................................................9 Section 2.3. Equality of Bonds and Parity Bonds and Pledge of Net Taxes...............................9 Section 2.4. Description of Bonds; Interest Rates.....................................................................10 Section 2.5. Place and Form of Payment...................................................................................11 Section 2.6. Form of Bonds and Parity Bonds..........................................................................11 Section 2.7. Execution and Authentication...............................................................................12 Section 2.8. Bond Register........................................................................................................12 Section 2.9. Registration of Exchange or Transfer ...................................................................13 Section 2.10. Mutilated, Lost, Destroyed or Stolen Bonds or Parity Bonds...............................13 Section 2.11. Validity of Bonds and Parity Bonds......................................................................14 Section 2.12. Book Entry System................................................................................................14 Section 2.13. Initial Depository and Nominee............................................................................17 ARTICLE III CREATION OF FUNDS AND APPLICATION OF PROCEEDS Section 3.1. Creation of Funds; Application of Proceeds .........................................................17 Section 3.2. Deposits to and Disbursements from Special Tax Fund .......................................18 Section 3.3. Administrative Expenses Account of the Special Tax Fund.................................18 Section 3.4. Interest Account and Principal Account of the Special Tax Fund........................19 Section 3.5. Redemption Account of the Special Tax Fund .....................................................20 Section 3.6. Reserve Account of the Special Tax Fund............................................................21 Section 3.7. Rebate Fund...........................................................................................................22 Section 3.8. Surplus Fund..........................................................................................................24 Section 3.9. Costs of Issuance Fund..........................................................................................25 Section 3.10. Project Fund ..........................................................................................................25 Section 3.11. Investments............................................................................................................25 ARTICLE IV REDEMPTION OF BONDS AND PARITY BONDS Section 4.1. Redemption of Bonds............................................................................................27 Section 4.2. Selection of Bonds and Parity Bonds for Redemption..........................................29 Section 4.3. Notice of Redemption ...........................................................................................29 Section 4.4. Partial Redemption of Bonds or Parity Bonds ......................................................30 ii 4868-7058-8510v7/022497-0019 Section 4.5. Effect of Notice and Availability of Redemption Money.....................................30 ARTICLE V COVENANTS AND WARRANTY Section 5.1. Security..................................................................................................................31 Section 5.2. Covenants..............................................................................................................31 ARTICLE VI AMENDMENTS TO INDENTURE Section 6.1. Supplemental Indentures or Orders Not Requiring Bondowner Consent.............36 Section 6.2. Supplemental Indentures or Orders Requiring Bondowner Consent....................36 Section 6.3. Notation of Bonds or Parity Bonds; Delivery of Amended Bonds or Parity Bonds37 ARTICLE VII TRUSTEE Section 7.1. Trustee...................................................................................................................38 Section 7.2. Removal of Trustee...............................................................................................39 Section 7.3. Resignation of Trustee...........................................................................................39 Section 7.4. Liability of Trustee................................................................................................39 Section 7.5. Merger or Consolidation .......................................................................................42 ARTICLE VIII EVENTS OF DEFAULT; REMEDIES Section 8.1. Events of Default...................................................................................................42 Section 8.2. Remedies of Owners .............................................................................................42 Section 8.3. Application of Revenues and Other Funds After Default.....................................43 Section 8.4. Power of Trustee to Control Proceedings..............................................................44 Section 8.5. Appointment of Receivers.....................................................................................44 Section 8.6. Non-Waiver...........................................................................................................44 Section 8.7. Limitations on Rights and Remedies of Owners...................................................44 Section 8.8. Termination of Proceedings ..................................................................................45 ARTICLE IX DEFEASANCE AND PARITY BONDS Section 9.1. Defeasance.............................................................................................................45 Section 9.2. [CONFIRM] Conditions for the Issuance of Parity Bonds and Other Additional Indebtedness..........................................................................................................47 iii 4868-7058-8510v7/022497-0019 ARTICLE X MISCELLANEOUS Section 10.1. Cancellation of Bonds and Parity Bonds...............................................................49 Section 10.2. Execution of Documents and Proof of Ownership................................................49 Section 10.3. Unclaimed Moneys................................................................................................49 Section 10.4. Provisions Constitute Contract..............................................................................50 Section 10.5. Future Contracts....................................................................................................50 Section 10.6. Further Assurances................................................................................................50 Section 10.7. Severability............................................................................................................50 Section 10.8. Notices...................................................................................................................50 1 4868-7058-8510v7/022497-0019 BOND INDENTURE THIS BOND INDENTURE, dated as of August 1, 2023 (the “Indenture”), by and between COMMUNITY FACILITIES DISTRICT NO. 2021-1 (MEDITERRA) OF EAST VALLEY WATER DISTRICT (the “District”) and U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, as trustee (the “Trustee”), governs the terms of the Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District 2023 Special Tax Bonds (Improvement Area No. 1) and any Parity Bonds issued in accordance herewith from time to time. RECITALS A. The Board of Directors of East Valley Water District (the “Water District”), located in San Bernardino County, California (the “legislative body of the District” or the “Board”), as legislative body of the District, has previously undertaken proceedings and declared the necessity for the District to issue bonds pursuant to the terms and provisions of the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5, of the Government Code of the State of California (the “Act”). B. Based upon certain resolutions adopted by the legislative body of the District and an election held on December 8, 2021 authorizing the levy of a special tax and the issuance of bonds by the District on behalf of Improvement Area No. 1 of the District (“Improvement Area No. 1”), the District on behalf of Improvement Area No. 1 was authorized to issue bonds for one or more series, pursuant to the Act, in an aggregate principal amount not to exceed $8,000,000. C. The District desires to finance the acquisition of certain public facilities and improvements within Improvement Area No. 1 of the District. D. In order to accomplish the acquisition of such public facilities and improvements within the District, the legislative body of the District has determined to issue the $_____ Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District 2023 Special Tax Bonds (Improvement Area No. 1) (the “Bonds”). E. The District has determined that all requirements of the Act for the issuance of the Bonds have been satisfied. In order to establish the terms and conditions upon and subject to which the Bonds are to be issued, and in consideration of the promises and the mutual covenants contained herein and the purchase and acceptance of the Bonds by the Owners thereof, and for other valuable consideration, the receipt of which is hereby acknowledged, the District does hereby covenant and agree, for the benefit of the Owners of the Bonds and any Parity Bonds (as such term is defined herein) which may be issued hereunder from time to time, as follows: ARTICLE I DEFINITIONS Section 1.1. Definitions. Unless the context otherwise requires, the following terms shall have the following meanings: 2 4868-7058-8510v7/022497-0019 “Account” means any account created pursuant to this Indenture. “Act” means the Mello-Roos Community Facilities Act of 1982, as amended, being Sections 53311 et seq. of the California Government Code. “Administrative Expenses” means the administrative costs with respect to the calculation and collection of the Special Taxes, including all attorneys’ fees and other costs related thereto, the fees and expenses of the Trustee, any fees and related costs for credit enhancement for the Bonds or any Parity Bonds which are not otherwise paid as Costs of Issuance, any costs related to the District’s compliance with state and federal laws requiring continuing disclosure of information concerning the Bonds and the District, and any other costs otherwise incurred by the Water District staff on behalf of the District in order to carry out the purposes of the District as set forth in the Resolution of Formation and any obligation of the District hereunder. “Administrative Expenses Account” means the account by that name created and established in the Special Tax Fund pursuant to Section 3.1. “Administrative Expenses Cap” means an initial amount equal to $20,000 per Bond Year, escalated by 2% per annum commencing July 1, 2024, or such lesser amount as may be designated in written instructions from an Authorized Representative of the District. “Alternative Penalty Account” means the account by that name created and established in the Rebate Fund pursuant to Section 3.1. “Annual Debt Service” means the principal amount of any Outstanding Bonds or Parity Bonds payable in a Bond Year either at maturity or pursuant to a Sinking Fund Payment and any interest payable on any Outstanding Bonds or Parity Bonds in such Bond Year, if the Bonds and any Parity Bonds are retired as scheduled. “Authorized Representative of the Water District” means the President or Vice President of the Board or the General Manager or Chief Financial Officer of the Water District or the designee thereof and any other proper officers of the Water District, or any other person or persons designated by the President or Vice President of the Board or the General Manager or Chief Financial Officer of the Water District or the designee thereof and any other proper officers of the Water District by a written certificate signed by the President or Vice President of the Board or the General Manager or Chief Financial Officer of the Water District or the designee thereof and any other proper officers of the Water District and containing the specimen signature of each such person. “Authorized Representative of the District” the President or Vice President of the Board or the General Manager or Chief Financial Officer of the Water District or the designee thereof and any other proper officers of the Water District, or any other person or persons designated by the President or Vice President of the Board or the General Manager or Chief Financial Officer of the Water District or the designee thereof and any other proper officers of the Water District by a written certificate signed by the President or Vice President of the Board or the General Manager or Chief Financial Officer of the Water District or the designee thereof and any other proper officers of the Water District and containing the specimen signature of each such person, acting on behalf of the District. “Board” means the Board of Directors of the Water District. 3 4868-7058-8510v7/022497-0019 “Bond Counsel” means an attorney at law or a firm of attorneys selected by the District of nationally recognized standing in matters pertaining to the tax-exempt nature of interest on bonds issued by states and their political subdivisions duly admitted to the practice of law before the highest court of any state of the United States of America or the District of Columbia. “Bond Register” means the books which the Trustee shall keep or cause to be kept on which the registration and transfer of the Bonds and any Parity Bonds shall be recorded. “Bondowner” or “Owner” means the person or persons in whose name or names any Bond or Parity Bond is registered on the Bond Register. “Bonds” means the Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District 2023 Special Tax Bonds (Improvement Area No. 1) issued under this Indenture. “Bond Year” means the twelve month period commencing on September 2 of each year and ending on September 1 of the following year, except that the first Bond Year for the Bonds or an issue of Parity Bonds shall begin on the Delivery Date and end on the first September 1 which is not more than 12 months after the Delivery Date. “Business Day” means a day which is not a Saturday or Sunday or a day of the year on which banks in New York, New York, Los Angeles, California, or the city where the corporate trust office of the Trustee is located are not required or authorized to remain closed. “Capitalized Interest Account” means the account by that name created and established in the Special Tax Fund pursuant to Section 3.1. “Certificate of an Authorized Representative” means a written certificate executed by an Authorized Representative of the Water District or and Authorized Representative of the District, as applicable. “Code” means the Internal Revenue Code of 1986, as amended, and any Regulations, rulings, judicial decisions, and notices, announcements, and other releases of the United States Treasury Department or Internal Revenue Service interpreting and construing it. “Continuing Disclosure Certificate” means the Continuing Disclosure Certificate of the District, dated as of the Delivery Date of the Bonds, relating to the Bonds. “Costs of Issuance” means the costs and expenses incurred in connection with the issuance and sale of the Bonds or any Parity Bonds, including the acceptance and initial annual fees and expenses of the Trustee, legal fees and expenses, costs of printing the Bonds and Parity Bonds and the preliminary and final official statements for the Bonds and Parity Bonds, fees of financial consultants and all other related fees and expenses, as set forth in a Certificate of an Authorized Representative of the Water District. “Costs of Issuance Fund” means the fund by that name established pursuant to Section 3.1. “Delivery Date” means, with respect to the Bonds and each issue of Parity Bonds, the date on which the bonds of such issue were issued and delivered to the initial purchasers thereof. 4 4868-7058-8510v7/022497-0019 “Depository” means The Depository Trust Company, New York, New York, and its successors and assigns as securities depository for the Bonds, or any other securities depository acting as Depository under Article II. “District” means Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District established pursuant to the Act and the Resolution of Formation. “Event of Default” means an event described in Section 8.1. “Federal Securities” means any of the following: (a) Treasuries; (b) evidence of ownership of proportionate interests in future interest and principal payments on Treasuries held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying Treasuries are not available to any person claiming through the custodian or to whom the custodian may be obligated; and (c) pre-refunded municipal obligations rated AAA and Aaa by Standard & Poor’s and Moody’s, respectively (or any combination thereof). “Fiscal Year” means the period beginning on July 1 of each year and ending on June 30 of the following year. “Governmental Authority” means any governmental or quasi-governmental entity, including any court, department, commission, board, bureau, agency, administration, central bank, service, district or other instrumentality of any governmental entity or other entity exercising executive, legislative, judicial, taxing, regulatory, fiscal, monetary or administrative powers or functions of or pertaining to government, or any arbitrator, mediator or other person with authority to bind a party at law. “Improvement Area No. 1” means Improvement Area No. 1 of the District as designated by the legislative body of the District in the Resolution of Formation. “Independent Financial Consultant” means a financial consultant or firm of such consultants generally recognized to be well qualified in the financial consulting field, appointed and paid by the District, who, or each of whom: (a) is in fact independent and not under the domination of the District; (b) does not have any substantial interest, direct or indirect, in the District; and (c) is not connected with the District as a member, officer or employee of the District, but who may be regularly retained to make annual or other reports to the District. “Indenture” means this Bond Indenture, together with any Supplemental Indenture approved pursuant to Article VI. “Interest Account” means the account by that name created and established in the Special Tax Fund pursuant to Section 3.1. “Interest Payment Date” means each March 1 and September 1 of each year, commencing March 1, 2024; provided, however, that, if any such day is not a Business Day, interest up to the Interest Payment Date will be paid on the following Business Day. “Investment Agreement” means an investment agreement supported by appropriate opinions of counsel, provided that the guarantor thereof is rated, at the time of issuance, at least 5 4868-7058-8510v7/022497-0019 “AA” and “Aa” by Standard & Poor’s and Moody’s, respectively, and as further described in the definition of “Permitted Investments.” “Maximum Annual Debt Service” means the maximum sum obtained for any Bond Year prior to the final maturity of the Bonds and any Parity Bonds by adding the following for each Bond Year: (a) the principal amount of all Outstanding Bonds and Parity Bonds payable in such Bond Year either at maturity or pursuant to a Sinking Fund Payment; and (b) the interest payable on the aggregate principal amount of all Bonds and Parity Bonds Outstanding in such Bond Year if the Bonds and Parity Bonds are retired as scheduled. “Moody’s” means Moody’s Investors Service, Inc., and its successors and assigns. “Net Taxes” means Special Taxes less amounts set aside to pay Administrative Expenses not to exceed the Administrative Expenses Cap. “Nominee” means the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to Article II. “Ordinance” means CFD 2021-1 Ordinance No. 1 adopted by the legislative body of the District on December 8, 2021, providing for the levy of the Special Tax. “Outstanding” or “Outstanding Bonds and Parity Bonds” means all Bonds and Parity Bonds theretofore issued by the District, except: (a) Bonds and Parity Bonds cancelled or surrendered for cancellation in accordance with Section 10.1; (b) Bonds and Parity Bonds for the payment or redemption of which moneys shall have been deposited in trust (whether upon or prior to the maturity or the redemption date of such Bonds or Parity Bonds), provided that, if such Bonds or Parity Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as provided in this Indenture or any applicable Supplemental Indenture for Parity Bonds; and (c) Bonds and Parity Bonds that have been surrendered to the Trustee for transfer or exchange pursuant to Section 2.9 or for which a replacement has been issued pursuant to Section 2.10. “Parity Bonds” means all bonds, notes or other similar evidences of indebtedness hereafter issued, payable out of the Net Taxes and which, as provided in this Indenture or any Supplemental Indenture, rank on a parity with the Bonds. “Participants” means those broker-dealers, banks and other financial institutions from time to time for which the Depository holds Bonds or Parity Bonds as securities depository. “Permitted Investments” means any of the following which at the time of investment are legal investments under the laws of the State for the moneys proposed to be invested therein: (a) for all purposes, including: (i) as defeasance investments in refunding escrow accounts; and (ii) for the purpose of investing (and receiving premium credit for) accrued and capitalized interest: (1) cash; or (2) Federal Securities; and (b) for all purposes other than: (i) defeasance investments in refunding escrow accounts; and (ii) investing (and receiving credit for) accrued and capitalized interest: (1) obligations of any of the following federal agencies which obligations represent full faith and credit of the United States of America, including the Export Import Bank; Farmers Home Administration; General Services Administration; U.S. Maritime Administration; Small Business Administration; 6 4868-7058-8510v7/022497-0019 Government National Mortgage Association (GNMA); U.S. Department of Housing & Urban Development (PHAs); and Federal Housing Administration; (2) bonds, notes or other evidences of indebtedness rated “AAA” and “Aaa” by the applicable Rating Agency issued by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation with remaining maturities not exceeding three years; (3) U.S. dollar denominated deposit accounts, certificates of deposit, federal funds and banker’s acceptances with domestic commercial banks, which may include the Trustee and its affiliates, which: (I) have a rating on their short term certificates of deposit on the date of purchase of “A-1” or “A-1+” by Standard & Poor’s and “P-1” by Moody’s; or (II) deposits insured by the Federal Deposit Insurance Corporation maturing no more than 360 days after the date of purchase (ratings on holding companies are not considered as the rating of the bank); (4) commercial paper which is rated at the time of purchase in the single highest classification, “A-1+” by Standard & Poor’s and “P-1” by Moody’s and which matures not more than 270 days after the date of purchase; (5) investments in a money market fund rated “AAm” or “AAm-G” or better by Standard & Poor’s, including funds for which the Trustee or its affiliates provide investment advisory or other management services, but excluding funds with a floating net asset value; (6) pre-refunded municipal obligations defined as follows: any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice and which are rated, based on the escrow, in the highest rating category of Standard & Poor’s and Moody’s, or any successor thereto; (7) any Investment Agreement; (8) the Local Agency Investment Fund of the State of California; and (9) any other investment permitted by law. “Person” means natural persons, firms, corporations, partnerships, associations, trusts, public bodies and other entities. “Prepayments” means any amounts paid by the District to the Trustee and designated by the District as a prepayment of Special Taxes for one or more parcels in Improvement Area No. 1 made in accordance with the Rate and Method. “Principal Account” means the account by that name created and established in the Special Tax Fund pursuant to Section 3.1. “Principal Office of the Trustee” means the office of the Trustee located in Los Angeles, California, or such other office or offices as the Trustee may designate from time to time, or the office of any successor Trustee where it principally conducts its business of serving as trustee under indentures pursuant to which municipal or governmental obligations are issued. “Project” means those public facilities described in the Resolution of Formation which were acquired or constructed within and outside of Improvement Area No. 1 with the proceeds of the Bonds, including all engineering, planning and design services and other incidental expenses related to such facilities and other facilities, if any, authorized by the qualified electors within Improvement Area No. 1 from time to time. “Project Costs” means the amounts necessary to finance the Project, to create and replenish any necessary reserve funds, to pay the initial and annual costs associated with the Bonds or any Parity Bonds, including, but not limited to, remarketing, credit enhancement, Trustee and other fees and expenses relating to the issuance of the Bonds or any Parity Bonds and the formation of the District, and to pay any other “incidental expenses” of the District, as such term is defined in the Act. 7 4868-7058-8510v7/022497-0019 “Project Fund” means the fund by that name created and established pursuant to Section 3.1. “Rate and Method” means the document by such name attached to the Resolution of Formation. “Rating Agency” means Moody’s and Standard & Poor’s, or both, as the context requires. “Rebate Account” means the account by that name created and established in the Rebate Fund pursuant to Section 3.1. “Rebate Fund” means the fund by that name established pursuant to Section 3.1 in which there are established the Accounts described in Section 3.1. “Rebate Regulations” means any final, temporary or proposed Regulations promulgated under Section 148(f) of the Code. “Record Date” means the fifteenth day of the month preceding an Interest Payment Date, regardless of whether such day is a Business Day. “Redemption Account” means the account by that name created and established in the Special Tax Fund pursuant to Section 3.1. “Regulations” means the regulations adopted or proposed by the Department of Treasury from time to time with respect to obligations issued pursuant to Section 103 of the Code. “Representation Letter” means the Blanket Letter of Representations from the District to the Depository as described in Article II. “Reserve Account” means the account by that name created and established in the Special Tax Fund pursuant to Section 3.1. “Reserve Requirement” means, as of the date of calculation, an amount equal to the least of: (a) Maximum Annual Debt Service; (b) 125% of average Annual Debt Service on the then-Outstanding Bonds and any Parity Bonds; or (c) ten percent (10%) of the initial outstanding principal amount of the Bonds and any Parity Bonds. “Resolution of Formation” means Resolution No. 2021.01 adopted by the Board on December 8, 2021, pursuant to which the Board formed the District and designated Improvement Area No. 1. “Sinking Fund Payment” means the annual payment to be deposited in the Redemption Account to redeem a portion of the Term Bonds in accordance with the schedules set forth in Section 4.1(b) and any annual sinking fund payment schedule to retire any Parity Bonds that are designated as Term Bonds. “Six-Month Period” means the period of time beginning on the Delivery Date of each issue of Bonds or Parity Bonds, as applicable, and ending six consecutive months thereafter, and each six-month period thereafter until the latest maturity date of the Bonds and the Parity Bonds (and any obligations that refund an issue of the Bonds or Parity Bonds). 8 4868-7058-8510v7/022497-0019 “Special Tax Fund” means the fund by that name created and established pursuant to Section 3.1. “Special Taxes” means the taxes authorized to be levied by the District on property within Improvement Area No. 1 in accordance with the Ordinance, the Resolution of Formation, the Act and the voter approval obtained at the December 8, 2021 election in Improvement Area No. 1, including any scheduled payments and any Prepayments thereof, and the net proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes to the amount of said lien and penalties and interest thereon. “Standard & Poor’s” means S&P Global Ratings, a Standard & Poor’s Financial Services LLC business, and its successors and assigns. “Supplemental Indenture” means any supplemental indenture amending or supplementing this Indenture. “Surplus Fund” means the fund by that name created and established pursuant to Section 3.1. “Tax Certificate” means the certificate by that name to be executed by the District on a Delivery Date to establish certain facts and expectations and which contains certain covenants relevant to compliance with the Code. “Tax-Exempt” means, with reference to a Permitted Investment, a Permitted Investment the interest earnings on which are excludable from gross income for federal income tax purposes pursuant to Section 103(a) of the Code, other than one described in Section 57(a)(5)(C) of the Code. “Term Bonds” means the Bonds maturing on September 1, 20__ and any term maturities of an issue of Parity Bonds as specified in a Supplemental Indenture. “Treasuries” means non-callable direct obligations of the United States of America, including United States Treasury Notes, Certificates and Bonds and State and Local Government Series. “Trustee” means U.S. Bank Trust Company, National Association, a national banking association duly organized and existing under and by virtue of the laws of the United States, having a principal corporate trust office in Los Angeles, California, and its successors or assigns, or any other bank, national banking association or trust company which may at any time be substituted in its place as provided in Sections 7.2 or 7.3 and any successor thereto. “Water District” means the East Valley Water District. ARTICLE II GENERAL AUTHORIZATION AND BOND TERMS Section 2.1. Amount, Issuance, Purpose and Nature of Bonds and Parity Bonds. Under and pursuant to the Act, the Bonds in the aggregate principal amount of $________shall be issued for the purpose of acquiring the Project, funding a reserve fund for the Bonds and paying Costs of Issuance. The Bonds and any Parity Bonds shall be and are limited obligations of the 9 4868-7058-8510v7/022497-0019 District and shall be payable as to the principal thereof and interest thereon and any premiums upon the redemption thereof solely from the Net Taxes and the other amounts in the Special Tax Fund (other than amounts in the Administrative Expenses Account of the Special Tax Fund). The aggregate principal amount of the Bonds and any Parity Bonds shall not exceed the total indebtedness presently authorized or subsequently authorized by the qualified electors of the District in accordance with the Act. Section 2.2. Type and Nature of Bonds and Parity Bonds. Neither the faith and credit nor the taxing power of the Water District, the State of California or any political subdivision thereof other than the District is pledged to the payment of the Bonds or any Parity Bonds. Except for the Net Taxes, no other taxes are pledged to the payment of the Bonds or any Parity Bonds. The Bonds and any Parity Bonds are neither general or special obligations of the Water District nor general obligations of the District, but are limited obligations of the District payable solely from certain amounts deposited by the District in the Special Tax Fund (exclusive of the Administrative Expenses Account), as more fully described herein. The District’s limited obligation to pay the principal of, premium, if any, and interest on the Bonds and any Parity Bonds from amounts in the Special Tax Fund (exclusive of the Administrative Expenses Account) is absolute and unconditional, free of deductions and without any abatement, offset, recoupment, diminution or set-off whatsoever. No Owner of the Bonds or any Parity Bonds may compel the exercise of the taxing power by the District (except as pertains to the Special Taxes) or the Water District or the forfeiture of any of their property. The principal of and interest on the Bonds and any Parity Bonds and premiums upon the redemption thereof, if any, are not a debt of the Water District, the State of California or any of its political subdivisions within the meaning of any constitutional or statutory limitation or restriction. The Bonds and any Parity Bonds are not a legal or equitable pledge, charge, lien or encumbrance upon any of the District’s property, or upon any of its income, receipts or revenues except the Net Taxes and other amounts in the Special Tax Fund (exclusive of the Administrative Expenses Account) which are, under the terms of this Indenture and the Act, set aside for the payment of the Bonds, any Parity Bonds and interest thereon. Neither the members of the legislative body of the District or the Board nor any persons executing the Bonds or any Parity Bonds are liable personally on the Bonds or any Parity Bonds by reason of their issuance. Notwithstanding anything to the contrary contained in this Indenture, the District shall not be required to advance any money derived from any source of income other than the Net Taxes for the payment of the interest on or the principal of the Bonds and any Parity Bonds, or for the performance of any covenants contained herein. The District may, however, advance funds for any such purpose, provided that such funds are derived from a source legally available for such purpose. Section 2.3. Equality of Bonds and Parity Bonds and Pledge of Net Taxes. Pursuant to the Act and this Indenture, the Bonds and any Parity Bonds shall be equally payable from and secured by a pledge and lien upon the Net Taxes and other amounts in the Special Tax Fund (exclusive of the Administrative Expenses Account), without priority for number, date of the Bonds or Parity Bonds, date of sale, date of execution or date of delivery, and the payment of the interest on and principal of the Bonds and any Parity Bonds and any premiums upon the redemption thereof shall be exclusively paid from the Net Taxes and other amounts in the Special Tax Fund (exclusive of the Administrative Expenses Account), which are hereby set aside for the payment of the Bonds and any Parity Bonds. Amounts in the Special Tax Fund (other than the Administrative Expenses Account therein) shall constitute a trust fund held for the benefit of the Owners to be applied to the payment of the interest on and principal of the Bonds and any Parity Bonds; and, so long as any of the Bonds and any Parity Bonds or interest thereon remains Outstanding, amounts in the Special Tax 10 4868-7058-8510v7/022497-0019 Fund shall not be used for any other purpose, except as permitted by this Indenture or any Supplemental Indenture. Notwithstanding any provision contained in this Indenture to the contrary, Net Taxes deposited in the Rebate Fund and the Surplus Fund shall no longer be considered to be pledged to the Bonds or any Parity Bonds, and none of the Rebate Fund, the Surplus Fund, the Costs of Issuance Fund, the Project Fund or the Administrative Expenses Account of the Special Tax Fund shall be construed as a trust fund held for the benefit of the Owners. Nothing in this Indenture or any Supplemental Indenture shall preclude: (a) subject to the limitations contained hereunder, the redemption prior to maturity of any Bonds or Parity Bonds subject to call and redemption, and the payment of said Bonds or Parity Bonds from proceeds of refunding bonds issued under the Act as the same now exists or as hereafter amended, or under any other law of the State of California; or (b) the issuance, subject to the limitations contained herein, of Parity Bonds which shall be payable from Net Taxes. Section 2.4. Description of Bonds; Interest Rates. The Bonds and any Parity Bonds shall be issued in fully registered form in denominations of $5,000 or any integral multiple thereof. The Bonds and any Parity Bonds shall be initially issued in the form of a single certificated fully registered bond for each maturity. The Bonds shall be designated “Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District 2023 Special Tax Bonds (Improvement Area No. 1).” The Bonds shall be dated as of their Delivery Date and shall mature and be payable on September 1 in the years and in the aggregate principal amounts and shall be subject to and shall bear interest at the rates set forth in the table below payable on each Interest Payment Date: Maturity Date (September 1)Principal Amount Interest Rate 20__$ % __________ * Term Bond. The District and the Trustee may treat and consider the person in whose name each Bond is registered in the Bond Register as the holder and absolute owner of such Bond for the purpose of payment of principal, premium, if any, and interest on such Bond, for the purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of registering transfers with respect to such Bond, and for all other purposes whatsoever. The Trustee shall pay all principal 11 4868-7058-8510v7/022497-0019 of, premium, if any, and interest on the Bonds only to or upon the order of the respective Owners or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the District’s obligations with respect to payment of principal of, premium, if any, and interest on the Bonds to the extent of the sum or sums so paid. No person other than an Owner shall receive a certificated Bond evidencing the obligation of the District to make payments of principal, premium, if any, and interest pursuant to this Indenture. Interest shall be payable on each Bond and Parity Bond from the date established in accordance with Section 2.5 below on each Interest Payment Date thereafter until the principal sum of such Bond or Parity Bond has been paid; provided, however, that if at the maturity date of any Bond or Parity Bond (or if the same is redeemable and shall be duly called for redemption, then at the date fixed for redemption) funds are available for the payment or redemption thereof in full, in accordance with the terms of this Indenture, such Bonds and Parity Bonds shall then cease to bear interest. Interest due on the Bonds and Parity Bonds shall be calculated on the basis of a 360-day year comprised of twelve 30-day months. Section 2.5. Place and Form of Payment. The Bonds and Parity Bonds shall be payable both as to principal and interest, and as to any premiums upon the redemption thereof, in lawful money of the United States of America. The principal of the Bonds and Parity Bonds and any premiums due upon the redemption thereof shall be payable upon presentation and surrender thereof at the Principal Office of the Trustee, or at the designated office of any successor Trustee. Interest on any Bond or Parity Bond shall be payable from the Interest Payment Date next preceding the date of authentication of such Bond or Parity Bond, unless: (a) such date of authentication is an Interest Payment Date, in which event interest shall be payable from such date of authentication; (b) the date of authentication is after a Record Date but prior to the immediately succeeding Interest Payment Date, in which event interest shall be payable from the Interest Payment Date immediately succeeding the date of authentication; or (c) the date of authentication is prior to the close of business on the first Record Date occurring after the issuance of such Bond or Parity Bond, in which event interest shall be payable from the dated date of such Bond or Parity Bond, as applicable; provided, however, that if at the time of authentication of such Bond or Parity Bond, interest is in default, interest on such Bond or Parity Bond shall be payable from the last Interest Payment Date to which the interest has been paid or made available for payment or, if no interest has been paid or made available for payment on such Bond or Parity Bond, interest on such Bond or Parity Bond shall be payable from its dated date. Interest on any Bond or Parity Bond shall be paid to the person whose name shall appear in the Bond Register as the Owner of such Bond or Parity Bond as of the close of business on the Record Date. Such interest shall be paid by check of the Trustee mailed on the applicable Interest Payment Date by first class mail, postage prepaid, to such Bondowner at his or her address as it appears on the Bond Register. In addition, upon a request in writing received by the Trustee on or before the applicable Record Date from an Owner of $1,000,000 or more in principal amount of the Bonds or of any issue of Parity Bonds, payment shall be made on the Interest Payment Date by wire transfer in immediately available funds to an account designated in writing by such Owner. Section 2.6. Form of Bonds and Parity Bonds. The definitive Bonds may be printed from steel engraved or lithographic plates or may be typewritten. The Bonds and the certificate of authentication shall be substantially in the form set forth in Exhibit A, which form is hereby approved and adopted as the form of such Bonds and of the certificate of authentication. Each issue of Parity Bonds and the certificate of authentication therefor shall be in the form provided in the Supplemental Indenture for such issue of Parity Bonds. 12 4868-7058-8510v7/022497-0019 Until definitive Bonds or Parity Bonds, as applicable, are prepared, the District may cause to be executed and delivered in lieu of such definitive Bonds or Parity Bonds temporary bonds in typed, printed, lithographed or engraved form and in fully registered form, subject to the same provisions, limitations and conditions as are applicable in the case of definitive Bonds or Parity Bonds, except that they may be in any denominations authorized by the District. Until exchanged for definitive Bonds or Parity Bonds, as applicable, any temporary bond shall be entitled and subject to the same benefits and provisions of this Indenture as definitive Bonds and Parity Bonds. If the District issues temporary Bonds or Parity Bonds, it shall execute and furnish definitive Bonds or Parity Bonds, as applicable, without unnecessary delay and thereupon any temporary Bond or Parity Bond may be surrendered to the Trustee at its office, without expense to the Owner, in exchange for a definitive Bond or Parity Bond of the same issue, maturity, interest rate and principal amount in any authorized denomination. All temporary Bonds or Parity Bonds so surrendered shall be cancelled by the Trustee and shall not be reissued. Section 2.7. Execution and Authentication. The Bonds and Parity Bonds shall be signed on behalf of the District by the manual or facsimile signature of the President or Vice President of the Water District and countersigned by the manual or facsimile signature of the Board Secretary, or any duly appointed deputy Board Secretary, in their capacity as officers of the District, and the seal of the District (or a facsimile thereof) may be impressed, imprinted, engraved or otherwise reproduced thereon, and attested by the signature of the Board Secretary. In case any one or more of the officers who shall have signed or sealed any of the Bonds or Parity Bonds shall cease to be such officer before the Bonds or Parity Bonds so signed and sealed have been authenticated and delivered by the Trustee (including new Bonds or Parity Bonds delivered pursuant to the provisions hereof with reference to the transfer and exchange of Bonds or Parity Bonds or to lost, stolen, destroyed or mutilated Bonds or Parity Bonds), such Bonds and Parity Bonds shall nevertheless be valid and may be authenticated and delivered as herein provided, and may be issued as if the person who signed or sealed such Bonds or Parity Bonds had not ceased to hold such office. Only the Bonds that bear a certificate of authentication (which may be signed manually or electronically) in the form set forth in Exhibit A shall be entitled to any right or benefit under this Indenture, and no Bond shall be valid or obligatory for any purpose until such certificate of authentication shall have been duly executed by the Trustee. Section 2.8. Bond Register. The Trustee will keep or cause to be kept, at the Principal Office of the Trustee, sufficient books for the registration and transfer of the Bonds and any Parity Bonds which shall upon reasonable prior notice be open to inspection by the District during all regular business hours, and, subject to the limitations set forth in Section 2.9 below, upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it may prescribe, register, transfer or cause to be transferred on said Bond Register, Bonds and any Parity Bonds as herein provided. The District and the Trustee may treat the Owner of any Bond or Parity Bond whose name appears on the Bond Register as the absolute Owner thereof for any and all purposes, and the District and the Trustee shall not be affected by any notice to the contrary. The District and the Trustee may rely on the address of the Bondowner as it appears in the Bond Register for any and all purposes. It shall be the duty of the Bondowner to give written notice to the Trustee of any change in the Bondowner’s address so that the Bond Register may be revised accordingly. 13 4868-7058-8510v7/022497-0019 Section 2.9. Registration of Exchange or Transfer. Subject to the limitations set forth in the following paragraph, the registration of any Bond or Parity Bond may, in accordance with its terms, be transferred upon the Bond Register by the person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such Bond or Parity Bond for cancellation at the Principal Office of the Trustee, accompanied by delivery of a written instrument of transfer in a form acceptable to the Trustee and duly executed by the Bondowner or his or her duly authorized attorney. Prior to any transfer of the Bonds outside the book-entry system (including, but not limited to, the initial transfer outside the book-entry system) the transferor shall provide or cause to be provided to the Trustee all information necessary to allow the Trustee to comply with any applicable tax reporting obligations, including without limitation any cost basis reporting obligations under Internal Revenue Code Section 6045, as amended. The Trustee shall conclusively rely on the information provided to it and shall have no responsibility to verify or ensure the accuracy of such information. Bonds or Parity Bonds may be exchanged at the Principal Office of the Trustee for a like aggregate principal amount of Bonds or Parity Bonds for other authorized denominations of the same maturity and issue. The Trustee shall not collect from the Owner any charge for any new Bond or Parity Bond issued upon any exchange or transfer, but shall require the Bondowner requesting such exchange or transfer to pay any tax or other governmental charge required to be paid with respect to such exchange or transfer. Whenever any Bonds or Parity Bonds shall be surrendered for registration of transfer or exchange, the District shall execute and the Trustee shall authenticate and deliver a new Bond or Bonds or a new Parity Bond or Parity Bonds, as applicable, of the same issue and maturity, for a like aggregate principal amount; provided that the Trustee shall not be required to register transfers or make exchanges of: (a) Bonds or Parity Bonds for a period of 15 days next preceding any selection of the Bonds or Parity Bonds to be redeemed; or (b) any Bonds or Parity Bonds chosen for redemption. Section 2.10. Mutilated, Lost, Destroyed or Stolen Bonds or Parity Bonds. If any Bond or Parity Bond shall become mutilated, the District shall execute, and the Trustee shall authenticate and deliver, a new Bond or Parity Bond of like tenor, date, issue and maturity in exchange and substitution for the Bond or Parity Bond so mutilated, but only upon surrender to the Trustee of the Bond or Parity Bond so mutilated. Every mutilated Bond or Parity Bond so surrendered to the Trustee shall be cancelled by the Trustee pursuant to Section 10.1. If any Bond or Parity Bond is lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee and, if such evidence is satisfactory to the Trustee and, if any indemnity satisfactory to the Trustee shall be given, the District shall execute and the Trustee shall authenticate and deliver a new Bond or Parity Bond, as applicable, of like tenor, maturity and issue, numbered and dated as the Trustee shall determine in lieu of and in substitution for the Bond or Parity Bond so lost, destroyed or stolen. Any Bond or Parity Bond issued in lieu of any Bond or Parity Bond alleged to be mutilated, lost, destroyed or stolen shall be equally and proportionately entitled to the benefits hereof with all other Bonds and Parity Bonds issued hereunder. The Trustee shall not treat both the original Bond or Parity Bond and any replacement Bond or Parity Bond as being Outstanding for the purpose of determining the principal amount of Bonds or Parity Bonds which may be executed, authenticated and delivered hereunder or for the purpose of determining any percentage of Bonds or Parity Bonds Outstanding hereunder, but both the original and replacement Bond or Parity Bond shall be treated as one and the same. Notwithstanding any other provision of this Section, in lieu of delivering a new 14 4868-7058-8510v7/022497-0019 Bond or Parity Bond which has been mutilated, lost, destroyed or stolen, and which has matured, the Trustee may make payment with respect to such Bonds or Parity Bonds. Section 2.11. Validity of Bonds and Parity Bonds. The validity of the authorization and issuance of the Bonds and any Parity Bonds shall not be affected in any way by any defect in any proceedings taken by the District for the financing or acquisition of the Project, or by the invalidity, in whole or in part, of any contracts made by the District in connection therewith, and shall not be dependent upon the completion of the Project or upon the performance by any Person of such Person’s obligation with respect to the Project, and the recital contained in the Bonds or any Parity Bonds that the same are issued pursuant to the Act and other applicable laws of the State of California shall be conclusive evidence of their validity and of the regularity of their issuance. Section 2.12. Book Entry System. (a) Election of Book Entry System. Prior to the issuance of the Bonds and any Parity Bonds, the District may provide that such Bonds and Parity Bonds shall be initially issued as book entry bonds. If the District shall elect to deliver any Bonds or Parity Bonds in book entry form, then the District shall cause the delivery of a separate single fully registered bond (which may be typewritten) for each maturity date of such Bonds or Parity Bonds in an authorized denomination corresponding to that total principal amount of the Bonds or Parity Bonds designated to mature on such date. Upon initial issuance, the ownership of each such Bond or Parity Bond shall be registered in the Bond Register in the name of the Nominee, as nominee of the Depository, and ownership of the Bonds or Parity Bonds, or any portion thereof may not thereafter be transferred except as provided in subsection (e). With respect to book entry Bonds or Parity Bonds, the District and the Trustee shall have no responsibility or obligation to any Participant or to any person on behalf of which such a Participant holds an interest in such book entry bonds. Without limiting the immediately preceding sentence, the District and the Trustee shall have no responsibility or obligation with respect to: (i) the accuracy of the records of the Depository, the Nominee, or any Participant with respect to any ownership interest in book entry bonds; (ii) the delivery to any Participant or any other person, other than an Owner as shown in the Bond Register, of any notice with respect to book entry bonds, including any notice of redemption; (iii) the selection by the Depository and its Participants of the beneficial interests in book entry bonds to be redeemed in the event that the District redeems the Bonds or Parity in part; or (iv) the payment by the Depository or any Participant or any other person, of any amount of principal of, premium, if any, or interest on book entry bonds. The District and the Trustee may treat and consider the person in whose name each book entry bond is registered in the Bond Register as the absolute Owner of such book entry bond for the purpose of payment of principal of, premium and interest on such Bond or Parity Bond, for the purpose of giving notices of redemption and other matters with respect to such Bond or Parity Bond, for the purpose of registering transfers with respect to such Bond or Parity Bonds, and for all other purposes whatsoever. The Trustee shall pay all principal of, premium, if any, and interest on the Bonds or Parity Bonds only to or upon the order of the respective Owner, as shown in the Bond Register, or such Owner’s respective attorney duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the District’s obligations with respect to payment of principal of, premium, if any, and interest on the Bonds or Parity Bonds to the extent of the sum or sums so paid. No person other than an Owner, as shown in the Bond Register, shall receive a Bond or Parity Bond evidencing the obligation to make payments of principal of, premium, if any, and interest on the Bonds or Parity Bonds. Upon delivery by the Depository to the District and the Trustee, of written notice to the effect that the Depository 15 4868-7058-8510v7/022497-0019 has determined to substitute a new nominee in place of the Nominee, and subject to the provisions herein with respect to Record Dates, the word Nominee in the Indenture shall refer to such nominee of the Depository. (b) Delivery of Representation Letter. In order to qualify the Bonds for the Depository’s book entry system, the District and the Trustee (if required by the Depository) shall execute and deliver to the Depository a Representation Letter. The execution and delivery of a Representation Letter shall not in any way impose upon the District or the Trustee any obligation whatsoever with respect to persons having interests in such book entry bonds other than the Owners, as shown on the Bond Register. By executing a Representation Letter, the Trustee shall agree to take all action necessary at all times so that the Trustee will be in compliance with all representations of the Trustee in such Representation Letter. In addition to the execution and delivery of a Representation Letter, the District and the Trustee shall take such other actions, not inconsistent with the Indenture, as are reasonably necessary to qualify book entry bonds for the Depository’s book entry program. (c) Selection of Depository. In the event that: (i) the Depository determines not to continue to act as securities depository for book entry bonds; or (ii) the District determines that continuation of the book entry system is not in the best interest of the beneficial owners of the Bonds, the Parity Bonds or the District, then the District will discontinue the book entry system with the Depository. If the District determines to replace the Depository with another qualified securities depository, the District shall prepare or direct the preparation of a new single, separate, fully registered bond for each of the maturity dates of such book entry bonds, registered in the name of such successor or substitute qualified securities depository or its Nominee as provided in subsection (e). If the District fails to identify another qualified securities depository to replace the Depository, then the Bonds or Parity Bonds shall no longer be restricted to being registered in such Bond Register in the name of the Nominee, but shall be registered in whatever name or names the Owners transferring or exchanging such Bonds or Parity Bonds shall designate, in accordance with the provisions of this Indenture. (d) Payments To Depository. Notwithstanding any other provision of the Indenture to the contrary, so long as all Outstanding Bonds or Parity Bonds are held in book entry form and registered in the name of the Nominee, all payments of principal of, redemption premium, if any, and interest on such Bonds or Parity Bonds and all notices with respect thereto shall be made and given, respectively to the Nominee, as provided in the Representation Letter or as otherwise instructed by the Depository and agreed to by the Trustee notwithstanding any inconsistent provisions herein. (e) Transfer of Bonds to Substitute Depository. (1) The Bonds shall be initially issued as provided in Section 2.1. Registered ownership of such Bonds, or any portions thereof, may not thereafter be transferred except: (i) to any successor of the Depository or its nominee, or of any substitute depository designated pursuant to clause (ii) below (a “Substitute Depository”); provided that any successor of the Depository or Substitute Depository shall be qualified under any applicable laws to provide the service proposed to be provided by it; (ii) to any Substitute Depository, upon: (I) the resignation of the Depository or its successor (or any Substitute Depository or its successor) from its functions as 16 4868-7058-8510v7/022497-0019 depository; or (II) a determination by the District that the Depository (or its successor) is no longer able to carry out its functions as depository; provided that any such Substitute Depository shall be qualified under any applicable laws to provide the services proposed to be provided by it; or (iii) to any person as provided below, upon: (I) the resignation of the Depository or its successor (or any Substitute Depository or its successor) from its functions as depository; or (II) a determination by the District that the Depository or its successor (or Substitute Depository or its successor) is no longer able to carry out its functions as depository. (2) In the case of any transfer pursuant to clauses (i) or (ii) of subsection (1), upon receipt of all Outstanding Bonds by the Trustee, together with a written request of the District to the Trustee designating the Substitute Depository, a single new Bond, which the District shall prepare or cause to be prepared, shall be issued for each maturity of Bonds then Outstanding, registered in the name of such successor or such Substitute Depository or their Nominees, as the case may be, all as specified in such written request of the District. In the case of any transfer pursuant to clause (iii) of subsection (1), upon receipt of all Outstanding Bonds by the Trustee, together with a written request of the District to the Trustee, new Bonds, which the District shall prepare or cause to be prepared, shall be issued in such denominations and registered in the names of such persons as are requested in such written request of the District, subject to the limitations of Section 2.1; provided that the Trustee shall not be required to deliver such new Bonds within a period of less than sixty (60) days from the date of receipt of such written request from the District. (3) In the case of a partial redemption or an advance refunding of any Bonds evidencing a portion of the principal maturing in a particular year, the Depository or its successor (or any Substitute Depository or its successor) shall make an appropriate notation on such Bonds indicating the date and amounts of such reduction in principal, in form acceptable to the Trustee, all in accordance with the Representation Letter. The Trustee shall not be liable for such Depository’s failure to make such notations or errors in making such notations and the records of the Trustee as to the Outstanding principal amount of such Bonds shall be controlling. (4) The District and the Trustee shall be entitled to treat the person in whose name any Bond is registered as the Owner thereof for all purposes of the Indenture and any applicable laws, notwithstanding any notice to the contrary received by the Trustee or the District; and the District and the Trustee shall not have responsibility for transmitting payments to, communicating with, notifying, or otherwise dealing with any beneficial owners of the Bonds. Neither the District nor the Trustee shall have any responsibility or obligation, legal or otherwise, to any such beneficial owners or to any other party, including the Depository or its successor (or Substitute Depository or its successor), except to the Owner of any Bonds, and the Trustee may rely conclusively on its records as to the identity of the Owners of the Bonds. (f) Transfer Outside Book Entry System. In connection with any proposed transfer outside a book entry system, the District or DTC shall provide or cause to be provided to the Trustee all information necessary to allow the Trustee to comply with any applicable tax reporting obligations, including without limitation any cost basis reporting obligations under Internal Revenue Code Section 6045. The Trustee may rely on the information provided to it and shall have no responsibility to verify or ensure the accuracy of such information. 17 4868-7058-8510v7/022497-0019 Section 2.13. Initial Depository and Nominee. The initial Depository under this Article shall be The Depository Trust Company, New York, New York. The initial Nominee shall be Cede & Co., as Nominee of The Depository Trust Company, New York, New York. ARTICLE III CREATION OF FUNDS AND APPLICATION OF PROCEEDS Section 3.1. Creation of Funds; Application of Proceeds. (a) There are hereby created and established and shall be maintained by the Trustee the following funds and accounts: (1) The Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District 2023 Special Tax Bonds (Improvement Area No. 1) Special Tax Fund (the “Special Tax Fund”) (in which there shall be established and created an Interest Account, a Capitalized Interest Account, a Principal Account, a Redemption Account, a Reserve Account and an Administrative Expenses Account). (2) The Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District 2023 Special Tax Bonds (Improvement Area No. 1) Rebate Fund (the “Rebate Fund”) (in which there shall be established a Rebate Account and an Alternative Penalty Account). (3) The Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District 2023 Special Tax Bonds (Improvement Area No. 1) Costs of Issuance Fund (the “Costs of Issuance Fund”). (4) The Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District 2023 Special Tax Bonds (Improvement Area No. 1) Surplus Fund (the “Surplus Fund”). (5) The Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District 2023 Special Tax Bonds (Improvement Area No. 1) Project Fund (the “Project Fund”). The amounts on deposit in the foregoing funds, accounts and subaccounts shall be held by the Trustee and the Trustee shall invest and disburse the amounts in such funds, accounts and subaccounts in accordance with the provisions of this Article III and shall disburse investment earnings thereon in accordance with the provisions of Section 3.11 hereof. The Trustee may, in its discretion, establish temporary funds or accounts in its books and records to facilitate such transfers. In connection with the issuance of any Parity Bonds, the Trustee, at the direction of an Authorized Representative of the District, may create new funds, accounts or subaccounts, or may create additional accounts and subaccounts within any of the foregoing funds and accounts for the purpose of separately accounting for the proceeds of the Bonds and any Parity Bonds. 18 4868-7058-8510v7/022497-0019 (b) The proceeds of the sale of the Bonds shall be received by the Trustee on behalf of the District and deposited and transferred as follows: (1) $_______ shall be transferred to the Costs of Issuance Fund to pay the Costs of Issuance of the Bonds; (2) $_______ shall be transferred to the Reserve Account of the Special Tax Fund to fund the Reserve Requirement; (3) $_______ shall be transferred to the Capitalized Interest Account to pay capitalized interest on the Bonds through _________, 20__; (4) $_______ shall be transferred to the Administrative Expenses Account; and (5) $_______ shall be transferred to the Project Fund. The Trustee may, in its discretion, establish temporary funds or accounts in its books and records to facilitate such transfers. Section 3.2. Deposits to and Disbursements from Special Tax Fund. (a) Except for the portion of any Prepayment to be deposited in the Redemption Account as specified in a Certificate of an Authorized Representative, the Trustee shall, on each date on which the Special Taxes are received from the District, deposit the Special Taxes in the Special Tax Fund to be held in trust for the Owners. The Trustee shall transfer the Special Taxes on deposit in the Special Tax Fund on the dates and in the amounts set forth in the following Sections, in the following order of priority, to: (1) the Administrative Expenses Account of the Special Tax Fund in an amount up to the Administrative Expenses Cap; (2) the Interest Account of the Special Tax Fund; (3) the Principal Account of the Special Tax Fund; (4) the Redemption Account of the Special Tax Fund; (5) the Reserve Account of the Special Tax Fund; (6) the Rebate Fund; (7) the Administrative Expenses Account, to the extent necessary; and (8) the Surplus Fund. (b) Upon the maturity of all of the Bonds and Parity Bonds and, after all principal and interest then due on the Bonds and Parity Bonds then Outstanding has been paid or provided for and any amounts owed to the Trustee have been paid in full, moneys in the Special Tax Fund and any accounts therein may be used by the District for any lawful purpose. 19 4868-7058-8510v7/022497-0019 Section 3.3. Administrative Expenses Account of the Special Tax Fund. The Trustee shall transfer from the Special Tax Fund and deposit in the Administrative Expenses Account of the Special Tax Fund from time to time amounts necessary to make timely payment of Administrative Expenses as set forth in a Certificate of an Authorized Representative of the District; provided, however, that, except as set forth in the following sentence, the total amount transferred in a Bond Year shall not exceed the Administrative Expenses Cap until such time as there has been deposited to the Interest Account and the Principal Account an amount which, together with any amounts already on deposit therein, is sufficient to pay the interest and principal on all Bonds and Parity Bonds due in such Bond Year and to restore the Reserve Account to the Reserve Requirement, all as determined by the District. Notwithstanding the foregoing, amounts in excess of the Administrative Expenses Cap may be transferred to the Administrative Expenses Account to the extent necessary to collect delinquent Special Taxes, as directed in writing by an Authorized Representative of the District. Moneys in the Administrative Expenses Account of the Special Tax Fund may be invested in any Permitted Investments as directed in writing by an Authorized Representative of the District and shall be disbursed as directed in a Certificate of an Authorized Representative. Section 3.4. Interest Account and Principal Account of the Special Tax Fund. The principal of (including any Sinking Fund Payment) and interest due on the Bonds and any Parity Bonds until maturity, other than principal due upon redemption under Sections 4.1(a) and (c), shall be paid by the Trustee from the Principal Account and the Interest Account of the Special Tax Fund, respectively. For the purpose of assuring that the payment of principal of (including any Sinking Fund Payment) and interest on the Bonds and any Parity Bonds will be made when due, after making the transfer required by Section 3.3, at least one Business Day prior to each March 1 and September 1, the Trustee shall, after having made any transfers required to be made from the Capitalized Interest Account to the Interest Account as described below, make the below-described transfers from the Special Tax Fund first to the Interest Account and then to the Principal Account; provided, however, that to the extent that deposits have been made in the Interest Account or the Principal Account from the proceeds of the sale of an issue of the Bonds, any Parity Bonds, or otherwise, the transfer from the Special Tax Fund need not be made; and provided, further, that, if amounts in the Special Tax Fund (exclusive of the Reserve Account) are inadequate to make the foregoing transfers, then any deficiency shall be made up by an immediate transfer from the Reserve Account; and provided further that at least one Business Day prior to each March 1 and September 1 through September 1, 20__, the Trustee shall transfer the respective amount set forth in the following table from the Capitalized Interest Account to the Interest Account before making any transfer from the Special Tax Fund to the Interest Account: Interest Payment Date Amount Transferred From Capitalized Interest Account to Interest Account March 1, 202_$_______ September 1, 202_ _______ Any amount remaining in the Capitalized Interest Account on September 2, 20__ shall be transferred to the Special Tax Fund and the Capitalized Interest Account shall thereafter be closed. (a) To the Interest Account, an amount such that the balance in the Interest Account one Business Day prior to each Interest Payment Date shall be equal to the installment of interest due on the Bonds and any Parity Bonds on said Interest Payment Date and any installment of interest due on 20 4868-7058-8510v7/022497-0019 a previous Interest Payment Date that remains unpaid. Moneys in the Interest Account shall be used for the payment of interest on the Bonds and any Parity Bonds as the same become due. (b) To the Principal Account, an amount such that the balance in the Principal Account one Business Day prior to September 1 of each year shall equal the principal payment (including any Sinking Fund Payment) due on the Bonds and any Parity Bonds maturing on such September 1 and any principal payment due on a previous September 1 which remains unpaid. Moneys in the Principal Account shall be used for the payment of the principal (including any Sinking Fund Payment) of such Bonds and any Parity Bonds as the same become due at maturity. Section 3.5. Redemption Account of the Special Tax Fund. (a) After making the deposits to the Administrative Expenses Account, the Interest Account and the Principal Account of the Special Tax Fund pursuant to Sections 3.3 and 3.4, or to call Parity Bonds for optional redemption as set forth in any Supplemental Indenture for Parity Bonds, the Trustee shall transfer from the Special Tax Fund and deposit in the Redemption Account moneys available for the purpose and sufficient to pay the principal and the premiums, if any, payable on the Bonds or Parity Bonds called for optional redemption; provided, however, that amounts in the Special Tax Fund (other than the Administrative Expenses Account therein) may be applied to optionally redeem Bonds and Parity Bonds only if immediately following such redemption the amount in the Reserve Account will equal the Reserve Requirement, as determined by the District. (b) Prepayments deposited to the Redemption Account at least 90 days before a redemption date shall be applied on the next redemption date established pursuant to Section 4.1(c) for the use of such Prepayments to the payment of the principal of, premium, and interest on the Bonds and Parity Bonds to be redeemed with such Prepayments. Prepayments received less than 90 days before a redemption date shall be applied to redeem Bonds in accordance with Section 4.1(c) on the succeeding redemption date. (c) Moneys set aside in the Redemption Account shall be used solely for the purpose of redeeming Bonds and Parity Bonds, shall be applied on or after the redemption date to the payment of principal of and premium, if any, on the Bonds or Parity Bonds to be redeemed upon presentation and surrender (if required) of such Bonds or Parity Bonds and, in the case of an optional redemption or an extraordinary redemption from Prepayments, to pay the interest thereon; provided, however, that in lieu or partially in lieu of such call and redemption, moneys deposited in the Redemption Account may be used to purchase Outstanding Bonds or Parity Bonds in the manner hereinafter provided. Purchases of Outstanding Bonds or Parity Bonds may be made by the District at public or private sale as and when and at such prices as the District may in its discretion determine, but only at prices (including brokerage or other expenses) not more than par plus accrued interest, plus, in the case of moneys set aside for an optional redemption or an extraordinary redemption, the premium applicable at the next following call date according to the premium schedule established pursuant to Sections 4.1(a) or 4.1(c), as applicable, or in the case of Parity Bonds the premium established in any Supplemental Indenture. Any accrued interest payable upon the purchase of Bonds or Parity Bonds may be paid from the amount reserved in the Interest Account of the Special Tax Fund for the payment of interest on the next following Interest Payment Date. 21 4868-7058-8510v7/022497-0019 Section 3.6. Reserve Account of the Special Tax Fund. There shall be maintained in the Reserve Account of the Special Tax Fund an amount equal to the Reserve Requirement. If funded, the amounts in the Reserve Account shall be applied as follows: (a) Moneys in the Reserve Account shall be used solely for the purpose of paying the principal of, including Sinking Fund Payments, and interest on the Bonds and any Parity Bonds when due in the event that the moneys in the Interest Account and the Principal Account of the Special Tax Fund are insufficient therefor or moneys in the Redemption Account of the Special Tax Fund are insufficient to make a Sinking Fund Payment when due, and for the purpose of making any required transfer to the Rebate Fund pursuant to Section 3.7 upon written direction from the District. If the amounts in the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund are insufficient to pay the principal of, including Sinking Fund Payments, or interest on any Bonds and Parity Bonds when due, or amounts in the Special Tax Fund are insufficient to make transfers to the Rebate Fund when required, the Trustee shall withdraw from the Reserve Account for deposit in the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund or the Rebate Fund, as applicable, moneys necessary for such purposes. (b) Whenever moneys are withdrawn from the Reserve Account, after making the required transfers referred to in Sections 3.3, 3.4 and 3.5, the Trustee shall transfer to the Reserve Account from available moneys in the Special Tax Fund, or from any other legally available funds that the District elects to apply to such purpose, the amount needed to restore the moneys held in the Reserve Account to the Reserve Requirement. Moneys in the Special Tax Fund shall be deemed available for transfer to the Reserve Account only if the Trustee determines that such amounts will not be needed to make the deposits required to be made to the Administrative Expenses Account, the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund on or before the next September 1. If amounts in the Special Tax Fund, together with any other amounts transferred to replenish the Reserve Account, are inadequate to restore the Reserve Account to the Reserve Requirement, then the District shall include the amount necessary fully to restore the Reserve Account to the Reserve Requirement in the next annual Special Tax levy to the extent of the maximum permitted Special Tax rates. (c) In connection with a redemption of Bonds pursuant to Section 4.1(a) or (c) or Parity Bonds in accordance with any Supplemental Indenture, or a partial defeasance of Bonds or Parity Bonds in accordance with Section 9.1, amounts in the Reserve Account may be applied to such redemption or partial defeasance so long as the amount on deposit in the Reserve Account following such redemption or partial defeasance equals the Reserve Requirement. The District shall set forth in a Certificate of an Authorized Representative the amount in the Reserve Account to be transferred to the Redemption Account on a redemption date or to be transferred pursuant to Section 9.1(c) to partially defease Bonds, and the Trustee shall make such transfer on the applicable redemption or defeasance date, subject to the limitation in the preceding sentence. (d) To the extent that the Reserve Account is at the Reserve Requirement as of the first day of the final Bond Year for the Bonds or an issue of Parity Bonds, amounts in the Reserve Account may be applied to pay the principal of and interest due on the Bonds and Parity Bonds, as applicable, in the final Bond Year for such issue. Moneys in the Reserve Account in excess of the Reserve Requirement that are not transferred in accordance with the preceding provisions of this section shall be withdrawn from the Reserve Account on the Business Day before each March 1 and September 1 and shall be transferred to the Interest Account of the Special Tax Fund. 22 4868-7058-8510v7/022497-0019 (e) The Reserve Requirement may be initially satisfied in whole or part by the deposit of a reserve fund surety policy or similar instrument therein. The District will have no obligation to replace such a policy or similar instrument or to fund the Reserve Account with cash if, at any time that the Bonds are Outstanding, any rating assigned to the provider of the policy or similar instrument is downgraded, suspended or withdrawn, or amounts are not available under such policy or similar instrument other than as a result of a draw thereon. Section 3.7. Rebate Fund. (a) When required, the Trustee shall establish and maintain a fund separate from any other fund established and maintained hereunder designated as the Rebate Fund and shall establish a separate Rebate Account and Alternative Penalty Account therein. All money at any time deposited in the Rebate Account or the Alternative Penalty Account of the Rebate Fund shall be held by the Trustee in trust, for payment to the United States Treasury. A separate subaccount of the Rebate Account and the Alternative Penalty Account shall be established for the Bonds and each issue of Parity Bonds the interest on which is excluded from gross income for federal income tax purposes. All amounts on deposit in the Rebate Fund with respect to the Bonds or an issue of Parity Bonds shall be governed by this Section 3.7 and the Tax Certificate for such issue, unless the District obtains an opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes of interest payments on the Bonds and Parity Bonds will not be adversely affected if such requirements are not satisfied. (1) Rebate Account. The following requirements shall be satisfied with respect to each subaccount of the Rebate Account: (i) Annual Computation. Within 55 days of the end of each Bond Year, the District shall calculate or cause to be calculated the amount of rebatable arbitrage for the Bonds and each issue of Parity Bonds to which this Section 3.7 is applicable, in accordance with Section 148(f)(2) of the Code and Section 1.148-3 of the Rebate Regulations (taking into account any applicable exceptions with respect to the computation of the rebatable arbitrage described in the Tax Certificate for each issue (e.g., the temporary investments exceptions of Section 148(f)(4)(B) and (C) of the Code), and taking into account whether the election pursuant to Section 148(f)(4)(C)(vii) of the Code (the “1½% Penalty”) has been made), for this purpose treating the last day of the applicable Bond Year as a computation date, within the meaning of Section 1.148-1(b) of the Rebate Regulations (the “Rebatable Arbitrage”). The District shall obtain expert advice as to the amount of the Rebatable Arbitrage to comply with this Section. (ii) Annual Transfer. Within 55 days of the end of each Bond Year for which Rebatable Arbitrage must be calculated as required by the Tax Certificate for each issue, upon the written direction of an Authorized Representative of the District, an amount shall be deposited to each subaccount of the Rebate Account by the Trustee from any funds so designated by the District if and to the extent required, so that the balance in the Rebate Account shall equal the amount of Rebatable Arbitrage so calculated by or on behalf of the District in accordance with subsection (a)(1)(i) with respect to the Bonds and each issue of Parity Bonds to which this Section 3.7 is applicable. In the event that immediately following any transfer required by the previous sentence, or the date on which the District determines that no transfer is required for such Bond Year, the amount then on deposit to the credit of the applicable subaccount of the Rebate Account exceeds the amount required to be on deposit therein, upon written instructions from an 23 4868-7058-8510v7/022497-0019 Authorized Representative of the District, the Trustee shall withdraw the excess from the appropriate subaccount of the Rebate Account and then credit the excess to the Special Tax Fund. (iii) Payment to the Treasury. The Trustee shall pay, as directed in writing by an Authorized Representative of the District, to the United States Treasury, out of amounts in each subaccount of the Rebate Account: (X) not later than 60 days after the end of: (A) the fifth Bond Year for the Bonds and each issue of Parity Bonds to which this Section 3.7 is applicable; and (B) each applicable fifth Bond Year thereafter, an amount equal to at least 90% of the Rebatable Arbitrage calculated as of the end of such Bond Year for the Bonds and each issue of Parity Bonds, as applicable; and (Y) not later than 60 days after the payment or redemption of all of the Bonds or an issue of Parity Bonds, as applicable, an amount equal to 100% of the Rebatable Arbitrage calculated as of the end of such applicable Bond Year, and any income attributable to the Rebatable Arbitrage, computed in accordance with Section 148(f) of the Code. In the event that, prior to the time that any payment is required to be made from the Rebate Account, the amount in the Rebate Account is not sufficient to make such payment when such payment is due, the District shall calculate or cause to be calculated the amount of such deficiency and deposit an amount received from any legally available source equal to such deficiency prior to the time such payment is due. Each payment required to be made pursuant to this subsection (a)(1) shall be made to the Internal Revenue Service Center, Ogden, Utah 84201 on or before the date on which such payment is due, and shall be accompanied by Internal Revenue Service Form 8038-T prepared by the District, or shall be made in such other manner as provided under the Code. The Trustee may rely conclusively upon the District’s determinations, calculations and certifications required by this Section. The Trustee shall have no responsibility to independently make any calculation or determination or to review the District’s calculations hereunder. (2) Alternative Penalty Account. (i) Six-Month Computation. If the 1½% Penalty has been elected for the Bonds or an issue of Parity Bonds, within 85 days of each particular Six-Month Period, the District shall determine or cause to be determined whether the 1½% Penalty is payable (and the amount of such penalty) as of the close of the applicable Six-Month Period. The District shall obtain expert advice in making such determinations. (ii) Six-Month Transfer. Within 85 days of the close of each Six-Month Period, the Trustee, at the written direction of an Authorized Representative of the District, shall deposit an amount in the appropriate subaccounts of the Alternative Penalty Account from any source of funds held by the Trustee pursuant to this Indenture and designated by the District in such written directions or provided to it by the District, if and to the extent required, so that the balance in each subaccount of the Alternative Penalty Account equals the amount of 1½% Penalty due and payable to the United States Treasury determined as provided in subsection (a)(2)(i). In the event that immediately following any transfer provided for in the previous sentence, or the date on which the District determines that no transfer is required for such Bond Year, the amount then on deposit in a subaccount of the Alternative Penalty Account exceeds the amount required to be on deposit therein to make the payments required by subsection (a)(2)(iii), the Trustee, at the written direction of an Authorized Representative of the District, may withdraw the excess from the applicable subaccount of the Alternative Penalty Account and credit the excess to the Special Tax Fund. 24 4868-7058-8510v7/022497-0019 (iii) Payment to the Treasury. The Trustee shall pay, as directed in writing by an Authorized Representative of the District, to the United States Treasury, out of amounts in a subaccount of the Alternative Penalty Account, not later than 90 days after the close of each Six-Month Period the 1½% Penalty, if applicable and payable, computed with respect to the Bonds and any issue of Parity Bonds in accordance with Section 148(f)(4) of the Code. In the event that, prior to the time that any payment is required to be made from a subaccount of the Alternative Penalty Account, the amount in such subaccount is not sufficient to make such payment when such payment is due, the District shall calculate the amount of such deficiency and direct the Trustee, in writing, to deposit an amount equal to such deficiency into such subaccount of the Alternative Penalty Account from any funds held by the Trustee pursuant to this Indenture and designated by the District in such written directions prior to the time such payment is due. Each payment required to be made pursuant to this subsection (a)(2) shall be made to the Internal Revenue Service, Ogden, Utah 84201 on or before the date on which such payment is due, and shall be accompanied by Internal Revenue Service Form 8038-T prepared by the District or shall be made in such other manner as provided under the Code. (b) Disposition of Unexpended Funds. Any funds remaining in the Accounts of the Rebate Fund with respect to the Bonds or an issue of Parity Bonds after redemption and payment of such issue and after making the payments described in subsections (a)(1)(iii) or (a)(2)(iii) (whichever is applicable), may be withdrawn by the Trustee at the written direction of the District and utilized in any manner by the District. (c) Survival of Defeasance and Final Payment. Notwithstanding anything in this Section or this Indenture to the contrary, the obligation to comply with the requirements of this Section shall survive the defeasance and final payment of the Bonds and any Parity Bonds with respect to which an Account has been created in the Rebate Fund. (d) Amendment Without Consent of Owners. This Section 3.7 may be deleted or amended in any manner without the consent of the Owners, provided that prior to such event there is delivered to the District an opinion of Bond Counsel to the effect that such deletion or amendment will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds and any issue of Parity Bonds issued on a tax-exempt basis. Section 3.8. Surplus Fund. After making the transfers required by Sections 3.3, 3.4, 3.5, 3.6 and 3.7, as soon as practicable after each September 1, and in any event prior to each March 1, the Trustee shall transfer all remaining amounts in the Special Tax Fund to the Surplus Fund, unless on or prior to such date, it has received a Certificate of an Authorized Representative of the District directing that certain amounts be retained in the Special Tax Fund because the District has included such amounts as being available in the Special Tax Fund in calculating the amount of the levy of Special Taxes for such Fiscal Year pursuant to Section 5.2(b). Moneys deposited in the Surplus Fund will be transferred by the Trustee at the direction of an Authorized Representative of the District: (a) to the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund to pay the principal of, including Sinking Fund Payments, premium, if any, and interest on the Bonds and any Parity Bonds when due in the event that moneys in the Special Tax Fund and the Reserve Account of the Special Tax Fund are insufficient therefor; (b) to the Reserve Account in order to replenish the Reserve Account to the Reserve Requirement; (c) to the Administrative Expenses Account of the Special Tax Fund to pay Administrative Expenses to the extent that the amounts on deposit in the Administrative Expenses Account of the Special Tax Fund are insufficient to pay Administrative Expenses; or (d) for any other lawful purpose of the District. 25 4868-7058-8510v7/022497-0019 The amounts in the Surplus Fund are not pledged to the repayment of the Bonds or the Parity Bonds and may be used by the District for any lawful purpose. In the event that the District reasonably expects to use any portion of the moneys in the Surplus Fund to pay debt service on any Outstanding Bonds or Parity Bonds, the District will notify the Trustee in a Certificate of an Authorized Representative and the Trustee will segregate such amount into a separate subaccount and the moneys on deposit in such subaccount of the Surplus Fund shall be invested at the written direction of the District in Permitted Investments the interest on which is excludable from gross income under Section 103 of the Code (other than bonds the interest on which is a tax preference item for purposes of computing the alternative minimum tax of individuals and corporations under the Code) or in Permitted Investments at a yield not in excess of the yield on the issue of Bonds or Parity Bonds to which such amounts are to be applied, unless, in the opinion of Bond Counsel, investment at a higher yield will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds or any Parity Bonds which were issued on a tax-exempt basis for federal income tax purposes. Section 3.9. Costs of Issuance Fund. The moneys in the Costs of Issuance Fund shall be disbursed by the Trustee pursuant to a Certificate of an Authorized Representative of the District, and any balance therein shall be transferred by the Trustee to the Project Fund as directed in writing by an Authorized Representative of the District or 90 days following the issuance of the Bonds, whichever is earlier. The Costs of Issuance Fund shall thereafter be closed. Each such Certificate of an Authorized Representative of the District shall be sufficient evidence to the Trustee of the facts stated therein and the Trustee shall have no duty to confirm the accuracy of such facts. Section 3.10. Project Fund. (a) The moneys in the Project Fund shall be applied exclusively to pay the Project Costs. Amounts for Project Costs shall be disbursed by the Trustee from the Project Fund as specified in a Project Fund Requisition, substantially in the form of Exhibit B. A properly executed Project Fund Requisition must be submitted in connection with each requested disbursement and the Trustee may rely thereon without investigating the accuracy thereof. (b) Upon receipt of a Certificate of an Authorized Representative of the District stating that: (i) all or a specified portion of the amount remaining in the Project Fund is no longer needed to pay Project Costs; and (ii) the District has provided 30-day written notice of the District’s intention to close the Project Fund to D.R. HORTON LOS ANGELES HOLDING COMPANY, INC., a California corporation, and has not received an objection to closing the Project Fund from such entity within such 30-day period, the Trustee shall: (1) transfer all or such specified portion, as applicable, of the moneys remaining on deposit in the Project Fund to the Interest Account, the Principal Account or Redemption Account of the Special Tax Fund or to the Surplus Fund, as directed in such Certificate of an Authorized Representative of the District, provided that in connection with any direction to transfer amounts to the Surplus Fund there shall have been delivered to the Trustee with such Certificate of an Authorized Representative of the District an opinion of Bond Counsel to the effect that such transfer to the Surplus Fund will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds or any Parity Bonds which were issued on a tax-exempt basis for federal income tax purposes; and (2) thereafter, close the Project Fund. Section 3.11. Investments. Moneys held in any of the funds, Accounts and subaccounts under this Indenture shall be invested at the written direction of the District in accordance with the 26 4868-7058-8510v7/022497-0019 limitations set forth below only in Permitted Investments which shall be deemed at all times to be a part of such funds, Accounts and subaccounts. Any loss resulting from such Permitted Investments shall be credited or charged to the fund, Account or subaccount from which such investment was made, and any investment earnings on a fund, Account or subaccount shall be applied as follows: (i) investment earnings on all amounts deposited in the Costs of Issuance Fund, the Special Tax Fund, the Surplus Fund, the Project Fund and the Rebate Fund and each Account therein (other than the Reserve Account of the Special Tax Fund) shall be deposited in those respective funds and Accounts; and (ii) investment earnings on all amounts deposited in the Reserve Account shall be deposited therein to be applied as set forth in Section 3.6. Moneys in the funds, Accounts and subaccounts held under this Indenture may be invested by the Trustee as directed in writing (filed by the District with the Trustee two (2) Business Days in advance of the making of the investment), from time to time, in Permitted Investments subject to the following restrictions: (a) Moneys in the Costs of Issuance Fund, the Project Fund and the Interest Account, the Principal Account and the Redemption Account of the Special Tax Fund shall be invested only in Permitted Investments which will by their terms mature, or in the case of an investment agreement are available for withdrawal without penalty, on such dates so as to ensure the payment of principal of, premium, if any, and interest on the Bonds and any Parity Bonds as the same become due. Notwithstanding anything herein to the contrary, amounts in the Acquisition and Construction Fund or the Accounts therein three years after the Delivery Date for the Bonds and the proceeds of each issue of Parity Bonds issued on a tax-exempt basis which are remaining on deposit therein on the date which is three years following the date of issuance of such issue of Parity Bonds shall be invested by the District only in Authorized Investments the interest on which is excluded from gross income under Section 103 of the Code (other than bonds the interest on which is a tax preference item for purposes of computing the alternative minimum tax of individuals under the Code) or in Authorized Investments at a yield not in excess of the yield on the issue of Bonds or Parity Bonds from which such proceeds were derived, unless in the opinion of Bond Counsel such restriction is not necessary to prevent interest on the Bonds or any Parity Bonds which were issued on a tax-exempt basis for federal income tax purposes from being included in gross income for federal income tax purposes. (b) Moneys in the Reserve Account of the Special Tax Fund may be invested only in Permitted Investments which, taken together, have a weighted average maturity not in excess of five years; provided that such amounts may be invested in an investment agreement to the later of the final maturity of the Bonds or any Parity Bonds so long as such amounts may be withdrawn at any time, without penalty, for application in accordance with Section 3.6; and provided that no such Permitted Investment of amounts in the Reserve Account allocable to the Bonds or an issue of Parity Bonds shall mature later than the respective final maturity date of the Bonds or the issue of Parity Bonds, as applicable. (c) Moneys in the Rebate Fund shall be invested only in Permitted Investments of the type described in clause (a) of the definition thereof which by their terms will mature, as nearly as practicable, on the dates such amounts are needed to be paid to the United States Government pursuant to Section 3.7, or in Permitted Investments of the type described in clause (g) of the definition thereof. (d) In the absence of written investment directions from the District, the Trustee shall hold such moneys uninvested. 27 4868-7058-8510v7/022497-0019 The Trustee shall sell, or present for redemption, any Permitted Investment as directed in writing by the District whenever it may be necessary to do so in order to provide moneys to meet any payment or transfer to such funds and Accounts or from such funds and Accounts. For the purpose of determining at any given time the balance in any such funds and Accounts, any such investments constituting a part of such funds and Accounts shall be valued at their cost, except that amounts in the Reserve Account shall be valued at the market value thereof at least semiannually on or before each Interest Payment Date. In making any valuations hereunder, the Trustee may utilize such computerized securities pricing services as may be available to it, including, without limitation, those available through its regular accounting system, and conclusively rely thereon. Notwithstanding anything herein to the contrary, the Trustee shall not be responsible for any loss from investments, sales or transfers undertaken in accordance with the provisions of this Indenture. The Trustee or an affiliate may act as principal or agent in the making or disposing of any investment and shall be entitled to its customary fee for such investment. The Trustee may sell, or present for redemption, any Permitted Investment so purchased whenever it shall be necessary to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the fund or account to which such Permitted Investment is credited, and, subject to the provisions of Section 7.4, the Trustee shall not be liable or responsible for any loss resulting from such investment. For investment purposes, the Trustee may commingle the funds and accounts established hereunder, but shall account for each separately. The District acknowledges that, to the extent that regulations of the Comptroller of the Currency or other applicable regulatory entity grant the District the right to receive brokerage confirmations of security transactions as they occur, the District specifically waives receipt of such confirmations to the extent permitted by law. The Trustee will furnish the District periodic cash transaction statements which include detail for all investment transactions made by the Trustee hereunder. ARTICLE IV REDEMPTION OF BONDS AND PARITY BONDS Section 4.1. Redemption of Bonds. (a) Optional Redemption. The Bonds are subject to redemption prior to their stated maturity dates at the option of the District on September 1, 20__ or any Interest Payment Date thereafter, from such maturities as selected by the District (and by lot within any one maturity), in integral multiples of $5,000, from moneys derived by the District from any source, at a redemption price (expressed as a percentage of the principal amount of the Bonds to be redeemed), together with accrued interest to the date of redemption, as follows: Redemption Date Redemption Price September 1, 20__ and March 1, 20__% September 1, 20__ and March 1, 20__ September 1, 20__ and March 1, 20__ September 1, 20__ and any Interest Payment Date thereafter In the event that the District elects to redeem Bonds as provided above, the District shall, at least 45 days prior to the redemption date, give written notice to the Trustee of its election to so 28 4868-7058-8510v7/022497-0019 redeem, the redemption date and the principal amount of the Bonds, among maturities, to be redeemed. In the event of redemption pursuant to Section 4.1(a) or (c), the District shall provide the Trustee with a revised sinking fund schedule giving effect to the redemption so completed. (b) Mandatory Sinking Fund Redemption. The Term Bonds maturing on September 1, 20__ (the “Term Bonds”) shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account, on September 1, 20__, and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows: Redemption Date (September 1)Principal Amount 20__$ 20__ 20__* _____________ * Maturity. If, during the Fiscal Year immediately preceding one of the redemption dates specified above, the District purchases Bonds, at least 45 days prior to the redemption date the District shall notify the Trustee as to the principal amount purchased and the amount of Bonds so purchased shall be credited at the time of purchase, to the extent of the full principal amount thereof, to reduce such upcoming Sinking Fund Payment for the Bonds so purchased. All Bonds purchased pursuant to this subsection shall be cancelled pursuant to Section 10.1. In the event of a partial optional redemption or extraordinary redemption of the Bonds, each of the remaining Sinking Fund Payments for such Bonds, as described above, will be reduced, as nearly as practicable, on a pro rata basis, in integral multiples of $5,000, as directed by the District. (c) Extraordinary Redemption. The Bonds are subject to extraordinary redemption as a whole, or in part by lot, on any Interest Payment Date, and shall be redeemed by the Trustee, from Prepayments deposited to the Redemption Account pursuant to Section 3.5(b), plus amounts transferred from the Reserve Account pursuant to Section 3.6(c), among maturities as directed in writing by the District, at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the redemption date: 29 4868-7058-8510v7/022497-0019 Redemption Date Redemption Price Any Interest Payment Date from (and including) March 1, 20__through (and including) March 1, 20__ % September 1, 20__ and March 1, 20__ September 1, 20__ and March 1, 20__ September 1, 20__ and any Interest Payment Date thereafter The District shall notify the Trustee of any extraordinary prepayment at least 45 days prior to the Interest Payment Date on which such prepayment shall occur. (d) The redemption provisions for Parity Bonds shall be set forth in a Supplemental Indenture. Section 4.2. Selection of Bonds and Parity Bonds for Redemption. If less than all of the Bonds or Parity Bonds Outstanding are to be redeemed, the portion of any Bond or Parity Bond of a denomination of more than $5,000 to be redeemed shall be in the principal amount of $5,000 or an integral multiple thereof. The Trustee shall promptly notify the District in writing of the Bonds or Parity Bonds, or portions thereof, selected for redemption. Section 4.3. Notice of Redemption. When Bonds or Parity Bonds are due for redemption under Section 4.1 or the terms of a Supplemental Indenture, respectively, the Trustee shall give notice, in the name of the District, of the redemption of such Bonds or Parity Bonds; provided, however, that a notice of a redemption to be made from other than from Sinking Fund Payments shall be conditioned on there being on deposit on the redemption date sufficient money to pay the redemption price of the Bonds or Parity Bonds to be redeemed. Such notice of redemption shall: (a) specify the CUSIP numbers (if any), the bond numbers and the maturity date or dates of the Bonds or Parity Bonds selected for redemption, except that where all of the Bonds or all of an issue of Parity Bonds are subject to redemption, or all of the Bonds or Parity Bonds of one maturity, are to be redeemed, the bond numbers of such issue need not be specified; (b) state the date fixed for redemption and surrender of the Bonds or Parity Bonds to be redeemed; (c) state the redemption price; (d) state the place or places where the Bonds or Parity Bonds are to be redeemed; (e) in the case of Bonds or Parity Bonds to be redeemed only in part, state the portion of such Bond or Parity Bond that is to be redeemed; (f) state the date of issue of the Bonds or Parity Bonds as originally issued; (g) state the rate of interest borne by each Bond or Parity Bond being redeemed; and (h) state any other descriptive information needed to identify accurately the Bonds or Parity Bonds being redeemed as shall be specified by the Trustee. Such notice shall further state that on the date fixed for redemption, there shall become due and payable on each Bond, Parity Bond or portion thereof called for redemption, the principal thereof, together with any premium, and interest accrued to the redemption date, and that from and after such date, interest thereon shall cease to accrue and be payable. At least 20 days but no more than 60 days prior to the redemption date, the Trustee shall mail a copy of such notice, by first class mail, postage prepaid, to the respective Owners thereof at their addresses appearing on the Bond Register. The actual receipt by the Owner of any Bond or Parity Bond or the original purchaser of any Bond or Parity Bond of notice of such redemption shall not be a condition precedent to redemption, and neither the failure to receive nor any defect in such notice shall affect the validity of the proceedings for the redemption of such Bonds or Parity Bonds, or the cessation of interest on the redemption date. A certificate by the Trustee that notice of such redemption has been given as herein provided shall be conclusive as against all parties, and the Owner shall not be entitled to show that he or she failed to receive notice of such redemption. 30 4868-7058-8510v7/022497-0019 In addition to the foregoing notice, further notice shall be given by the Trustee as set out below, but no defect in said further notice nor any failure to give all or any portion of such further notice shall in any manner defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed. In addition to providing any notice of redemption to the Bondowners, if the Bonds are held in book-entry form, each further notice of redemption shall be sent not later than the date that notice of redemption is mailed to the Bondowners by registered or certified mail or overnight delivery service to the Depository and by electronic notice to the Municipal Securities Rulemaking Board. Upon the payment of the redemption price of any Bonds and Parity Bonds being redeemed, each check or other transfer of funds issued for such purpose shall to the extent practicable bear the CUSIP number (if any) identifying, by issue and maturity, the Bonds and Parity Bonds being redeemed with the proceeds of such check or other transfer. With respect to any notice of optional redemption or extraordinary redemption of Bonds or Parity Bonds, such notice shall state that such redemption shall be conditional upon the receipt by the Trustee on or prior to the date fixed for such redemption of moneys sufficient to pay the principal of, premium, if any, and interest on such Bonds or Parity Bonds to be redeemed and that, if such moneys shall not have been so received, said notice shall be of no force and effect and the Trustee shall not be required to redeem such Bonds or Parity Bonds. In the event that such notice of redemption contains such a condition and such moneys are not so received, the redemption shall not be made, and the Trustee shall within a reasonable time thereafter give notice, in the manner in which the notice of redemption was given, that such moneys were not so received. Section 4.4. Partial Redemption of Bonds or Parity Bonds. Upon surrender by the Owner of a Bond, at the option of such Owner, for mandatory redemption at the Principal Office of the Trustee, payment of such mandatory redemption of the principal amount of a Bond will be paid to such Owner. Upon surrender of any Bond or Parity Bond to be redeemed in part only, the District shall execute and the Trustee shall authenticate and deliver to the Bondowner, at the expense of the District, a new Bond or Bonds or a new Parity Bond or Parity Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Bonds surrendered, with the same interest rate and the same maturity or, in the case of surrender of a Parity Bond, a new Parity Bond or Parity Bonds subject to the foregoing limitations. Such mandatory redemption shall be valid upon payment of the amount thereby required to be paid to such Owner, and the District and the Trustee shall be released and discharged from all liability to the extent of such payment. Section 4.5. Effect of Notice and Availability of Redemption Money. Notice of redemption having been duly given, as provided in Section 4.3, and the amount necessary for the redemption having been made available for that purpose and being available therefor on the date fixed for such redemption: (a) the Bonds and Parity Bonds, or portions thereof, designated for redemption shall, on the date fixed for redemption, become due and payable at the redemption price thereof as provided in this Indenture or in any Supplemental Indenture with respect to any Parity Bonds, anything in this Indenture or in the Bonds or the Parity Bonds to the contrary notwithstanding; (b) upon presentation and surrender thereof at the Principal Office of the Trustee, the redemption price of such Bonds and Parity Bonds shall be paid to the Owners thereof; 31 4868-7058-8510v7/022497-0019 (c) as of the redemption date, the Bonds or the Parity Bonds, or portions thereof so designated for redemption shall be deemed to be no longer Outstanding and such Bonds or Parity Bonds, or portions thereof, shall cease to bear further interest; and (d) as of the date fixed for redemption, no Owner of any of the Bonds, Parity Bonds or portions thereof so designated for redemption shall be entitled to any of the benefits of this Indenture or any Supplemental Indenture, or to any other rights, except with respect to payment of the redemption price and interest accrued to the redemption date from the amounts so made available. ARTICLE V COVENANTS AND WARRANTY Section 5.1. Security. The District shall preserve and protect the security pledged hereunder to the Bonds and any Parity Bonds against all claims and demands of all persons. Section 5.2. Covenants. So long as any of the Bonds or Parity Bonds issued hereunder are Outstanding and unpaid, the District makes the following covenants with the Bondowners under the provisions of the Act and this Indenture (to be performed by the District or its proper officers, agents or employees), which covenants are necessary and desirable to secure the Bonds and Parity Bonds and tend to make them more marketable; provided, however, that said covenants do not require the District to expend any funds or moneys other than the Special Taxes and other amounts deposited to the Special Tax Fund: (a) Punctual Payment; Against Encumbrances. The District covenants that it will receive all Special Taxes in trust for the Owners and will instruct the Chief Financial Officer of the Water District to deposit all Special Taxes with the Trustee immediately upon their apportionment to the District, and the District shall have no beneficial right or interest in the amounts so deposited except as provided by this Indenture. All such Special Taxes shall be disbursed, allocated and applied solely to the uses and purposes set forth herein, and shall be accounted for separately and apart from all other money, funds, accounts or other resources of the District. The District covenants that it will duly and punctually pay or cause to be paid the principal of and interest on every Bond and Parity Bond issued hereunder, together with the premium, if any, thereon on the date, at the place and in the manner set forth in the Bonds and the Parity Bonds and in accordance with this Indenture to the extent that Net Taxes and other amounts pledged hereunder are available therefor, and that the payments into the funds and Accounts created hereunder will be made, all in strict conformity with the terms of the Bonds, any Parity Bonds, this Indenture and any Supplemental Indenture, and that it will faithfully observe and perform all of the conditions, covenants and requirements of this Indenture and all Supplemental Indentures and of the Bonds and any Parity Bonds issued hereunder. The District will not mortgage or otherwise encumber, pledge or place any charge upon any of the Net Taxes except as provided in this Indenture, and will not issue any obligation or security having a lien or charge upon the Net Taxes superior to or on a parity with the Bonds, other than Parity Bonds. Nothing herein shall prevent the District from issuing or incurring indebtedness that is payable from a pledge of Net Taxes which is subordinate in all respects to the pledge of Net Taxes to repay the Bonds and the Parity Bonds. 32 4868-7058-8510v7/022497-0019 (b) Levy of Special Tax. Beginning in Fiscal Year 2023-24 and continuing so long as any Bonds or Parity Bonds issued under this Indenture are Outstanding, the legislative body of the District covenants to levy the Special Tax in an amount sufficient, together with other amounts on deposit in the Special Tax Fund and available for such purpose, to pay: (i) the principal of and interest on the Bonds and any Parity Bonds when due; (ii) the Administrative Expenses; and (iii) any amounts required to replenish the Reserve Account of the Special Tax Fund to the Reserve Requirement. The District further covenants that it will take no actions that would discontinue or cause the discontinuance of the Special Tax levy or the District’s authority to levy the Special Tax for so long as the Bonds and any Parity Bonds are Outstanding. (c) Commence Foreclosure Proceedings. Pursuant to Section 53356.1 of the Act, the District hereby covenants with and for the benefit of the Owners that, on or about July 15 of each Fiscal Year (or as reasonably practicable thereafter as Fiscal Year-end collection information is available from the County of San Bernardino), the District will review or cause to be reviewed the public records of the County of San Bernardino in connection with the Special Tax of the District levied in the Fiscal Year ending on the July 1 prior to such July 15 in order to determine the amount of Special Taxes actually collected in such Fiscal Year. (1) Individual Delinquencies. If the District determines that any single parcel which is subject to the Special Tax is delinquent in the payment of all or a portion of four semi- annual installments of Special Taxes (regardless of the amount of such delinquency), the District shall, not later than 45 days after such determination, send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to the property owner. If a delinquency remains uncured, the District shall cause judicial foreclosure proceedings to be commenced and filed in the Superior Court of the County of San Bernardino not later than 120 days after such determination against any parcel for which a notice of delinquency was given pursuant to this Section and for which such Special Taxes remain delinquent, to the extent permissible under applicable law, and cause such proceedings to be diligently pursued until such delinquency is paid. (2) Aggregate Delinquencies. With respect to aggregate delinquencies throughout the District, if the District determines: (i) that the total amount of delinquent Special Taxes for the prior Fiscal Year, including the total of individual delinquencies in described in the paragraph above, exceeds 5% of the total Special Taxes due and payable for the prior Fiscal Year; and (ii) amounts (or the stated amount of a reserve fund surety policy or similar instrument) in the Reserve Account are (or, after applying amounts in the Reserve Account to cover such delinquencies, will be) less than the Reserve Requirement, then the District shall, not later than 45 days after such determination, send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to the owner of each delinquent parcel (regardless of the amount of such delinquency). The District shall cause judicial foreclosure proceedings to be commenced and filed in the Superior Court in the County of San Bernardino not later than 120 days after such determination against any parcel for which a notice of delinquency was given pursuant to this provision and for which such Special Taxes remain delinquent, and cause such proceedings to be diligently pursued until such delinquency is paid. Notwithstanding the foregoing, in certain instances the amount of a Special Tax delinquency on a particular parcel in relation to the cost of appropriate foreclosure proceedings may be such that the costs do not warrant the foreclosure proceedings costs. In such cases, foreclosure proceedings may, in the District’s discretion, be delayed by the District until there are sufficient Special Tax delinquencies accruing to such parcel (including interest and penalties thereon) to warrant the foreclosure proceeding’s cost. The District shall notify the Trustee on or 33 4868-7058-8510v7/022497-0019 about 75 days after the determinations of delinquencies as set forth in this paragraph of any delinquency potentially requiring the commencement of a foreclosure action pursuant hereto. (3) Limiting Provisions. Notwithstanding the foregoing, however, the District shall not be required to order, or take action upon, the commencement of foreclosure proceedings described above with respect to individual delinquencies or aggregate delinquencies, if such delinquencies, if not remedied, will not result in a draw on the Reserve Account such that the amount therein will fall below the Reserve Requirement, and no draw has been made on the Reserve Account which has not been restored, such that the Reserve Account shall be funded to at least the Reserve Requirement. The foregoing sentence shall not affect the requirement(s) for notices of delinquencies as provided for above with respect to individual delinquencies. The District reserves the right to elect to accept payment from a property owner of at least the enrolled amount of the Special Taxes for a parcel(s) but less than the full amount of the penalties, interest, costs and attorneys’ fees related to the Special Tax delinquency for such parcel(s). The District is expressly authorized to include costs and attorneys’ fees related to foreclosure of delinquent Special Taxes as Administrative Expenses pursuant to this Indenture. (d) Payment of Claims. The District will pay and discharge any and all lawful claims for labor, materials or supplies which, if unpaid, might become a lien or charge upon the Net Taxes or other funds in the Special Tax Fund (other than the Administrative Expenses Account therein), or which might impair the security of the Bonds or any Parity Bonds then Outstanding; provided, however, that nothing herein contained shall require the District to make any such payments so long as the District shall in good faith contest the validity of any such claims. (e) Books and Accounts. The District will keep proper books of records and accounts, separate from all other records and accounts of the District, in which complete and correct entries shall be made of all transactions relating to the Project, the levy of the Special Tax and the deposits to the Special Tax Fund. Such books of records and accounts shall at all times during business hours be subject to the inspection of the Trustee, the Owners of not less than 10% of the principal amount of the Bonds or the Owners of not less than 10% of any issue of Parity Bonds then Outstanding or their representatives authorized in writing. (f) Federal Tax Covenants. Notwithstanding any other provision of this Indenture, absent an opinion of Bond Counsel that the exclusion from gross income of interest on the Bonds and any Parity Bonds issued on a tax-exempt basis for federal income tax purposes will not be adversely affected for federal income tax purposes, the District covenants to comply with all applicable requirements of the Code necessary to preserve such exclusion from gross income and specifically covenants, without limiting the generality of the foregoing, as follows: (1) Private Activity. The District will take no action and refrain from taking any action or making any use of the proceeds of the Bonds or any Parity Bonds or of any other moneys or property which would cause the Bonds or any Parity Bonds issued on a tax-exempt basis for federal income tax purposes to be “private activity bonds” within the meaning of Section 141 of the Code; (2) Arbitrage. The District will make no use of the proceeds of the Bonds or any Parity Bonds or of any other amounts or property, regardless of the source, and will not take any action or refrain from taking any action which will cause the Bonds or any Parity Bonds issued on a 34 4868-7058-8510v7/022497-0019 tax-exempt basis for federal income tax purposes to be “arbitrage bonds” within the meaning of Section 148 of the Code; (3) Federal Guaranty. The District will make no use of the proceeds of the Bonds or any Parity Bonds and will not take or omit to take any action that would cause the Bonds or any Parity Bonds issued on a tax-exempt basis for federal income tax purposes to be “federally guaranteed” within the meaning of Section 149(b) of the Code; (4) Information Reporting. The District will take or cause to be taken all necessary action to comply with the informational reporting requirement of Section 149(e) of the Code; (5) Hedge Bonds. The District will make no use of the proceeds of the Bonds or any Parity Bonds or any other amounts or property, regardless of the source, and will not take any action or refrain from taking any action that would cause the Bonds or any Parity Bonds issued on a tax-exempt basis for federal income tax purposes to be considered “hedge bonds” within the meaning of Section 149(g) of the Code unless the District takes all necessary action to assure compliance with the requirements of Section 149(g) of the Code to maintain the exclusion from gross income for federal income tax purposes of interest on the Bonds and any applicable Parity Bonds; (6) Miscellaneous. The District will take no action and refrain from taking any action inconsistent with its expectations stated in the Tax Certificate executed on the Delivery Date by the District in connection with the Bonds and any issue of Parity Bonds and will comply with the covenants and requirements stated therein and incorporated by reference herein; (7) Other Tax-Exempt Issues. The District will not use proceeds of other tax-exempt securities to redeem any Bonds or Parity Bonds without first obtaining the written opinion of Bond Counsel that doing so will not impair the exclusion from gross income for federal income tax purposes of interest on the Bonds and any Parity Bonds issued on a tax-exempt basis; and (8) Subsequent Opinions. If the District obtains a subsequent opinion of Bond Counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation (“SYCR”), where such opinion is required in connection with a change or amendment to this Indenture or the procedures set forth in the Tax Certificate, it will obtain an opinion substantially to the effect originally delivered by SYCR that interest on the Bonds and Parity Bonds which are the subject of such change or amendment is excluded from gross income for federal income tax purposes. (g) Reduction of Maximum Special Taxes. The District hereby finds and determines that, historically, delinquencies in the payment of special taxes authorized pursuant to the Act in community facilities districts in Southern California have from time to time been at levels that required the levy of special taxes at the maximum authorized rates in order to make timely payment of principal of and interest on the outstanding indebtedness of such community facilities districts. For this reason, the District hereby determines that a reduction in the maximum Special Tax rates authorized to be levied on parcels in the District below the levels provided in this Section 5.2(g) would interfere with the timely retirement of the Bonds and Parity Bonds. The District determines it to be necessary in order to preserve the security for the Bonds and Parity Bonds to covenant, and, to the maximum extent that the law permits it to do so, the District hereby does covenant, that it shall not initiate proceedings to reduce the maximum Special Tax rates for the District. 35 4868-7058-8510v7/022497-0019 (h) Covenants to Defend. The District covenants that, in the event that any initiative is adopted by the qualified electors in the District which purports to reduce the maximum Special Tax below the levels specified in Section 5.2(g) above or to limit the power of the District to levy the Special Taxes for the purposes set forth in Section 5.2(b) above, it will commence and pursue legal action in order to preserve its ability to comply with such covenants. (i) Limitation on Right to Tender Bonds. The District hereby covenants that it will not adopt any policy pursuant to Section 53341.1 of the Act permitting the tender of Bonds or Parity Bonds in full payment or partial payment of any Special Taxes unless the District shall have first received a certificate from an Independent Financial Consultant that the acceptance of such a tender will not result in the District having insufficient Special Tax revenues to pay the principal of and interest on the Bonds and Parity Bonds when due. (j) Continuing Disclosures. The District covenants to comply with the terms of the Continuing Disclosure Certificate and with the terms of any continuing disclosure agreement executed by the District with respect to any Parity Bonds in order to assist the underwriter thereof in complying with Rule 15(c)2-12 adopted by the Securities and Exchange Commission. (k) Further Assurances. The District shall make, execute and deliver any and all such further agreements, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Indenture and for the better assuring and confirming unto the Owners of the Bonds and any Parity Bonds of the rights and benefits provided in this Indenture. ARTICLE VI AMENDMENTS TO INDENTURE Section 6.1. Supplemental Indentures or Orders Not Requiring Bondowner Consent. The District may from time to time, and at any time, without notice to or consent of any of the Bondowners, adopt Supplemental Indentures for any of the following purposes: (a) to cure any ambiguity, to correct or supplement any provisions herein which may be inconsistent with any other provision herein or to make any other provision with respect to matters or questions arising under this Indenture or in any additional resolution or order, provided that such action is not materially adverse to the interests of the Bondowners; (b) to add to the covenants and agreements of and the limitations and the restrictions upon the District contained in this Indenture, other covenants, agreements, limitations and restrictions to be observed by the District which are not contrary to or inconsistent with this Indenture as theretofore in effect or which further secure Bond or Parity Bond payments; (c) to provide for the issuance of any Parity Bonds, and to provide the terms and conditions under which such Parity Bonds may be issued, subject to and in accordance with the provisions of this Indenture; (d) to modify, amend or supplement this Indenture in such manner as to permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect, or to comply with the Code or regulations issued thereunder, and to add such other 36 4868-7058-8510v7/022497-0019 terms, conditions and provisions as may be permitted by said act or similar federal statute, and which shall not materially adversely affect the interests of the Owners of the Bonds or any Parity Bonds then Outstanding; (e) subject to the provisions of Section 5.2(g), to modify, alter or amend the Rate and Method in any manner so long as such changes do not reduce the maximum Special Taxes that may be levied in each year on property within Improvement Area No. 1 of the District to an amount which is less than 110% of the principal and interest due in each corresponding future Bond Year with respect to the Bonds and Parity Bonds Outstanding as of the date of such amendment; or (f) to modify, alter, amend or supplement this Indenture in any other respect which is not materially adverse to the Bondowners. Section 6.2. Supplemental Indentures or Orders Requiring Bondowner Consent. Exclusive of the Supplemental Indentures described in Section 6.1, the Owners of not less than a majority in aggregate principal amount of the Bonds and Parity Bonds Outstanding shall have the right to consent to and approve the adoption by the District of such Supplemental Indentures as shall be deemed necessary or desirable by the District for the purpose of waiving, modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in this Indenture; provided, however, that nothing herein shall permit, or be construed as permitting: (a) an extension of the maturity date of the principal, or the payment date of interest on, any Bond or Parity Bond; (b) a reduction in the principal amount of, or redemption premium on, any Bond or Parity Bond or the rate of interest thereon; (c) a preference or priority of any Bond or Parity Bond over any other Bond or Parity Bond; or (d) a reduction in the aggregate principal amount of the Bonds and Parity Bonds the Owners of which are required to consent to such Supplemental Indenture, without the consent of the Owners of all Bonds and Parity Bonds then Outstanding. If at any time the District shall desire to adopt a Supplemental Indenture, which pursuant to the terms of this Section shall require the consent of the Bondowners, the District shall so notify the Trustee and shall deliver to the Trustee a copy of the proposed Supplemental Indenture. The Trustee shall, at the expense of the District, cause notice of the proposed Supplemental Indenture to be mailed, by first class mail, postage prepaid, to all Bondowners at their addresses as they appear in the Bond Register. Such notice shall briefly set forth the nature of the proposed Supplemental Indenture and shall state that a copy thereof is on file at the Principal Office of the Trustee for inspection by all Bondowners. The failure of any Bondowners to receive such notice shall not affect the validity of such Supplemental Indenture when consented to and approved by the Owners of not less than a majority in aggregate principal amount of the Bonds and Parity Bonds Outstanding as required by this Section. Whenever at any time within one year after the date of the first mailing of such notice, the Trustee shall receive an instrument or instruments purporting to be executed by the Owners of not less than a majority in aggregate principal amount of the Bonds and Parity Bonds Outstanding, which instrument or instruments shall refer to the proposed Supplemental Indenture described in such notice, and shall specifically consent to and approve the adoption thereof by the District substantially in the form of the copy referred to in such notice as on file with the Trustee, such proposed Supplemental Indenture, when duly adopted by the District, shall thereafter become a part of the proceedings for the issuance of the Bonds and any Parity Bonds. In determining whether the Owners of a majority of the aggregate principal amount of the Bonds and Parity Bonds have consented to the adoption of any Supplemental Indenture, Bonds or Parity Bonds that are owned by the District, or by any person directly or indirectly controlling or controlled by or under the direct or indirect common 37 4868-7058-8510v7/022497-0019 control with the District, shall be disregarded and shall be treated as though they were not Outstanding for the purpose of any such determination. Upon request of the Trustee, the District shall specify in an Certificate of an Authorized Representative of the District to the Trustee those Bonds disqualified pursuant to this Section and the Trustee may conclusively rely on such certificate. Upon the adoption of any Supplemental Indenture and the receipt of consent to any such Supplemental Indenture from the Owners of not less than a majority in aggregate principal amount of the Outstanding Bonds and Parity Bonds in instances where such consent is required pursuant to the provisions of this Section, this Indenture shall be, and shall be deemed to be, modified and amended in accordance therewith, and the respective rights, duties and obligations under this Indenture of the District and all Owners of Outstanding Bonds and Parity Bonds shall thereafter be determined, exercised and enforced hereunder, subject in all respects to such modifications and amendments. Section 6.3. Notation of Bonds or Parity Bonds; Delivery of Amended Bonds or Parity Bonds. After the effective date of any action taken as hereinabove provided, the District may determine that the Bonds or any Parity Bonds may bear a notation, by endorsement in form approved by the District, as to such action, and in that case upon demand of the Owner of any Outstanding Bond or Parity Bond at such effective date and presentation of such Owner’s Bond or Parity Bond for the purpose at the Principal Office of the Trustee or at such additional offices as the Trustee may select and designate for that purpose, a suitable notation as to such action shall be made on such Bonds or Parity Bonds. If the District shall so determine, new Bonds or Parity Bonds so modified as, in the opinion of the District, shall be necessary to conform to such action shall be prepared and executed, and in that case upon demand of the Owner of any Outstanding Bond or Parity Bond at such effective date such new Bonds or Parity Bonds shall be exchanged at the Principal Office of the Trustee or at such additional offices as the Trustee may select and designate for that purpose, without cost to each Owner of Outstanding Bonds or Parity Bonds, upon surrender of such Outstanding Bonds or Parity Bonds. In executing, or accepting the additional trusts created by any Supplemental Indenture permitted by this Article or the modification thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and shall be fully protected in relying upon, an opinion of counsel stating that the execution of such Supplemental Indenture is authorized or permitted by this Indenture and complies with the terms hereof. The Trustee may, but shall not be obligated to, enter into any such Supplemental Indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. ARTICLE VII TRUSTEE Section 7.1. Trustee. U.S. Bank Trust Company, National Association shall be the Trustee for the Bonds and any Parity Bonds unless and until another Trustee is appointed by the District hereunder. The District may, at any time, appoint a successor Trustee satisfying the requirements of Section 7.2 for the purpose of receiving all money that the District is required to deposit with the Trustee hereunder and to allocate, use and apply the same as provided in this Indenture. 38 4868-7058-8510v7/022497-0019 The Trustee is hereby authorized to and shall mail by first class mail, postage prepaid, or wire transfer in accordance with Section 2.5, interest payments to the Bondowners, to select Bonds and Parity Bonds for redemption, and to maintain the Bond Register. The Trustee is hereby authorized to pay the principal of and premium, if any, on the Bonds and Parity Bonds when the same are duly presented to it for payment at maturity or on call and redemption, to provide for the registration of transfer and exchange of Bonds and Parity Bonds presented to it for such purposes, to provide for the cancellation of Bonds and Parity Bonds and to provide for the authentication of Bonds and Parity Bonds, and shall perform all other duties assigned to or imposed on it as provided in this Indenture. The Trustee shall keep accurate records of all funds administered by it and all Bonds and Parity Bonds paid, discharged and cancelled by it. The Trustee is hereby authorized to redeem the Bonds and Parity Bonds when duly presented for payment at maturity, or on redemption prior to maturity. The Trustee shall cancel all Bonds and Parity Bonds upon payment thereof in accordance with the provisions of Section 10.1. The District shall from time to time, subject to any agreement between the District and the Trustee then in force, pay to the Trustee compensation for its services, reimburse the Trustee for all of its advances and expenditures, including, but not limited to, advances to and fees and expenses of independent accountants or counsel employed by it in the exercise and performance of its powers and duties hereunder, and indemnify and save the Trustee, its officers, directors, employees and agents, harmless against costs, claims, expenses and liabilities, including, without limitation, fees and expenses of its attorneys, not arising from its own negligence or willful misconduct as finally adjudicated by a court of competent jurisdiction which it may incur in the exercise and performance of its powers and duties hereunder. The foregoing obligation of the District to compensate and indemnify the Trustee shall survive the removal or resignation of the Trustee or the discharge of the Bonds. Section 7.2. Removal of Trustee. The District may at any time at its sole discretion, and shall at the direction of a majority of the Owners, remove the Trustee initially appointed, and any successor thereto, by delivering to the Trustee a 30-day written notice of its decision to remove the Trustee. The District shall appoint a successor or successors thereto, provided that any such successor shall be a bank, national banking association or trust company having a combined capital (exclusive of borrowed capital) and surplus of at least $100,000,000, and subject to supervision or examination by federal or state authority. If any bank, national banking association or trust company appointed as a successor publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purposes of this Section the combined capital and surplus of such bank, national banking association or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. Any removal of the Trustee and appointment of a successor Trustee shall become effective only upon acceptance of appointment by the successor Trustee and notice being sent by the successor Trustee to the Bondowners of the successor Trustee’s identity and address. Section 7.3. Resignation of Trustee. The Trustee may at any time resign by giving written notice to the District and by giving to the Owners notice of such resignation, which notice shall be mailed to the Owners at their addresses appearing in the registration books at the Principal Office of the Trustee. Upon receiving such notice of resignation, the District shall promptly appoint a successor Trustee satisfying the criteria in Section 7.2 by an instrument in writing. Any resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon acceptance of appointment by the successor Trustee. If no successor Trustee shall have been 39 4868-7058-8510v7/022497-0019 appointed and have accepted appointment within 45 days of giving notice of removal or notice of resignation as aforesaid, the resigning Trustee or any Bondowner (on behalf of itself and all other Bondowners) may petition, at the District’s expense, any court of competent jurisdiction for the appointment of a successor Trustee, and such court may thereupon, after such notice (if any) as it may deem proper, appoint such successor Trustee. Section 7.4. Liability of Trustee. The recitals of fact and all promises, covenants and agreements contained herein and in the Bonds and any Parity Bonds shall be taken as statements, promises, covenants and agreements of the District, and the Trustee assumes no responsibility for the correctness of the same and makes no representations as to the validity or sufficiency of this Indenture, the Bonds or any Parity Bonds, and shall incur no responsibility in respect thereof, other than in connection with its duties or obligations specifically set forth herein, in the Bonds and any Parity Bonds, or in the certificate of authentication assigned to or imposed upon the Trustee. The Trustee shall be under no responsibility or duty with respect to the issuance of the Bonds or any Parity Bonds for value. The Trustee shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful misconduct. The Trustee shall be protected in acting upon any notice, resolution, request, consent, order, certificate, report, Bond, Parity Bond, facsimile transmission, electronic mail or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. The Trustee may consult with counsel, who may be counsel to the District, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered hereunder in good faith and in accordance therewith. The Trustee shall not be bound to recognize any person as the Owner of a Bond or Parity Bond unless and until such Bond or Parity Bond is submitted for inspection, if required, and title thereto is satisfactorily established, if disputed. Whenever in the administration of its duties under this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof is specifically prescribed herein) may, in the absence of bad faith on the part of the Trustee, be deemed to be conclusively proved and established by a written certificate of the District, and such certificate shall be full warrant to the Trustee for any action taken or suffered under the provisions of this Indenture upon the faith thereof, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable. The Trustee shall have no duty or obligation whatsoever to enforce the collection of Special Taxes or other funds to be deposited with it hereunder, or as to the correctness of any amounts received, but its liability shall be limited to the proper accounting for such funds as it shall actually receive. No provision in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of its rights or powers. The Trustee shall not be deemed to have knowledge of any default or Event of Default until an officer at the Trustee’s corporate trust office who is responsible for the administration of its duties hereunder shall have actual knowledge thereof or the Trustee shall have received written notice thereof at its corporate trust office. 40 4868-7058-8510v7/022497-0019 The Trustee shall not be considered in breach of or in default in its obligations hereunder or progress in respect thereto in the event of enforced delay in the performance of such obligations due to unforeseeable causes beyond its control and without its fault or negligence, including, but not limited to, Acts of God or of the public enemy or terrorists, acts of a government, acts of the other party, fires, floods, epidemics, quarantine restrictions, strikes, freight embargoes, earthquakes, explosion, mob violence, riot, inability to procure or general sabotage or rationing of labor, equipment, facilities, sources of energy, material or supplies in the open market, litigation or arbitration involving a party or others relating to zoning or other governmental action or inaction pertaining to the Project, malicious mischief, condemnation, and unusually severe weather or delays of suppliers or subcontractors due to such causes or any similar event and/or occurrences beyond the control of the Trustee. The Trustee shall have the right to accept and act upon instructions, including funds transfer instructions (“Instructions”) given pursuant to this Indenture and delivered using Electronic Means. (“Electronic Means” shall mean the following communications methods: e-mail, facsimile transmission, secure electronic transmission containing applicable authorization codes, passwords and/or authentication keys issued by the Trustee, or another method or system specified by the Trustee as available for use in connection with its services hereunder). The District shall provide to the Trustee an incumbency certificate listing officers with the authority to provide such Instructions (“Authorized Officers”) and containing specimen signatures of such Authorized Officers, which incumbency certificate shall be amended by the District whenever a person is to be added or deleted from the listing. If the District elects to give the Trustee Instructions using Electronic Means and the Trustee in its discretion elects to act upon such Instructions, the Trustee’s understanding of such Instructions shall be deemed controlling. The District understands and agrees that the Trustee cannot determine the identity of the actual sender of such Instructions and that the Trustee shall conclusively presume that directions that purport to have been sent by an Authorized Officer listed on the incumbency certificate provided to the Trustee have been sent by such Authorized Officer. The District shall be responsible for ensuring that only Authorized Officers transmit such Instructions to the Trustee and that the District and all Authorized Officers are solely responsible to safeguard the use and confidentiality of applicable user and authorization codes, passwords and/or authentication keys upon receipt by the District. The Trustee shall not be liable for any losses, costs or expenses arising directly or indirectly from the Trustee’s reliance upon and compliance with such Instructions notwithstanding the fact that such directions conflict or are inconsistent with a subsequent written instruction. The District agrees: (i) to assume all risks arising out of the use of Electronic Means to submit Instructions to the Trustee, including without limitation the risk of the Trustee acting on unauthorized Instructions, and the risk of interception and misuse by third parties; (ii) that it is fully informed of the protections and risks associated with the various methods of transmitting Instructions to the Trustee and that there may be more secure methods of transmitting Instructions than the method(s) selected by the District; (iii) that the security procedures (if any) to be followed in connection with its transmission of Instructions provide to it a commercially reasonable degree of protection in light of its particular needs and circumstances; and (iv) to notify the Trustee immediately upon learning of any compromise or unauthorized use of the security procedures. The permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty and it shall not be answerable for other than its negligence or willful misconduct. All immunities, indemnifications and releases from liability granted herein to the Trustee will extend to the directors, employees, officers and agents thereof. 41 4868-7058-8510v7/022497-0019 The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Owners pursuant to the provisions of this Indenture unless such Owners shall have offered to the Trustee security or indemnity reasonably satisfactory to the Trustee against the costs, expenses and liabilities which may be incurred therein or thereby. The Trustee shall not be responsible for or accountable to anyone for the subsequent use or application of any moneys which shall be released or withdrawn in accordance with the provisions hereof. The Trustee may execute any of the trusts or powers hereof and perform the duties required of it hereunder either directly or by or through attorneys or agents, shall not be liable for the acts or omissions of such attorneys or agents appointed with due care, and shall be entitled to rely on advice of counsel concerning all matters of trust and its duty hereunder. The Trustee, prior to the occurrence of an Event of Default and after the curing of all Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Event of Default has occurred (which has not been cured) the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. The Trustee shall have no responsibility or liability with respect to any information, statements or recital in any offering memorandum or other disclosure material prepared or distributed with respect to the issuance of these Bonds. The Trustee shall not be required to determine the legality or suitability of any investments. The Trustee shall have no duty to review, verify or analyze any financial statements furnished to it by the District and shall hold such financial statements solely as a repository for Owners of the Bonds. The Trustee shall not be deemed to have notice of any information contained therein or any Event of Default that may be disclosed therein in any manner. In no event shall the Trustee be responsible or liable for special, indirect, punitive, incidental or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action. Section 7.5. Merger or Consolidation. Any company into which the Trustee may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, shall be the successor to the Trustee without the execution or filing of any paper or further act, anything herein to the contrary notwithstanding. 42 4868-7058-8510v7/022497-0019 ARTICLE VIII EVENTS OF DEFAULT; REMEDIES Section 8.1. Events of Default. Any one or more of the following events shall constitute an “Event of Default”: (a) default in the due and punctual payment of the principal of or redemption premium, if any, on any Bond or Parity Bond when and as the same shall become due and payable, whether at maturity as therein expressed, by declaration or otherwise; (b) default in the due and punctual payment of the interest on any Bond or Parity Bond when and as the same shall become due and payable; or (c) except as described in subsections (a) or (b), default by the District in the observance of any of the agreements, conditions or covenants on its part contained in this Indenture, the Bonds or any Parity Bonds, and such default shall have continued for a period of 30 days after the District shall have been given notice in writing of such default by the Trustee or the Owners of 25% in aggregate principal amount of the Outstanding Bonds and Parity Bonds; provided, however, that such default shall not constitute an Event of Default hereunder if the District shall commence to cure such default within said 30-day period and thereafter diligently and in good faith proceed to cure such default within a reasonable period of time not to exceed 90 days after such notice. The Trustee agrees to give notice to the Owners as soon as practicable upon the occurrence of an Event of Default under subsections (a) or (b) above and within 30 days of the Trustee’s knowledge of an event of default under subsection (c) above. Section 8.2. Remedies of Owners. Upon the occurrence of an Event of Default, the Trustee may pursue any available remedy at law or in equity to enforce the payment of the principal of, premium, if any, and interest on the Outstanding Bonds and Parity Bonds, and to enforce any rights of the Trustee under or with respect to this Indenture, including: (a) by mandamus or other suit or proceeding at law or in equity to enforce the Trustee’s rights against the District and any of the members, officers and employees of the District, and to compel the District or any such members, officers or employees to perform and carry out their duties under the Act and their agreements with the Owners as provided in this Indenture; (b) by suit in equity to enjoin any actions or things which are unlawful or violate the rights of the Owners; or (c) by a suit in equity to require the District and its members, officers and employees to account as the trustee of an express trust. If an Event of Default shall have occurred and be continuing and if requested so to do by the Owners of at least twenty-five percent (25%) in aggregate principal amount of Outstanding Bonds and Parity Bonds and if indemnified to its satisfaction, the Trustee shall be obligated to exercise such one or more of the rights and powers conferred by this Article VIII, as the Trustee, being advised by counsel, shall deem most expedient in the interests of the Owners of the Bonds and Parity Bonds. 43 4868-7058-8510v7/022497-0019 No remedy herein conferred upon or reserved to the Trustee or to the Owners is intended to be exclusive of any other remedy. Every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing, at law or in equity or by statute or otherwise, and may be exercised without exhausting and without regard to any other remedy conferred by the Act or any other law. Section 8.3. Application of Revenues and Other Funds After Default. All amounts received by the Trustee pursuant to any right given or action taken by the Trustee under the provisions of this Indenture relating to the Bonds and Parity Bonds shall be applied by the Trustee in the following order upon presentation of the several Bonds and Parity Bonds: First, to the payment of the fees, costs and expenses of the Trustee in declaring such Event of Default and in carrying out the provisions of this Article VIII, including reasonable compensation to its agents, attorneys and counsel, and to the payment of all other outstanding fees and expenses of the Trustee; and Second, to the payment of the whole amount of interest on and principal of the Bonds and Parity Bonds then due and unpaid, with interest on overdue installments of principal and interest to the extent permitted by law at the net effective rate of interest then borne by the Outstanding Bonds and Parity Bonds; provided, however, that in the event that such amounts shall be insufficient to pay the full amount of such interest and principal, then such amounts shall be applied in the following order of priority: (a) first to the payment of all installments of interest on the Bonds and Parity Bonds then due and unpaid on a pro rata basis based on the total amount then due and owing, (b) second, to the payment of all installments of principal, including Sinking Fund Payments, of the Bonds and Parity Bonds then due and unpaid on a pro rata basis based on the total amount then due and owing; and (c) third, to the payment of interest on overdue installments of principal and interest on the Bonds and Parity Bonds on a pro rata basis based on the total amount then due and owing. Section 8.4. Power of Trustee to Control Proceedings. In the event that the Trustee, upon the happening of an Event of Default, shall have taken any action, by judicial proceedings or otherwise, pursuant to its duties hereunder, whether upon its own discretion or upon the request of the Owners of twenty-five percent (25%) in aggregate principal amount of the Bonds and Parity Bonds then Outstanding, it shall have full power, in the exercise of its discretion for the best interests of the Owners of the Bonds and Parity Bonds, with respect to the continuance, discontinuance, withdrawal, compromise, settlement or other disposal of such action; provided, however, that the Trustee shall not, unless there no longer continues an Event of Default, discontinue, withdraw, compromise or settle, or otherwise dispose of any litigation pending at law or in equity, if at the time there has been filed with it a written request signed by the Owners of a majority in aggregate principal amount of the Outstanding Bonds and Parity Bonds hereunder opposing such discontinuance, withdrawal, compromise, settlement or other such litigation. Any suit, action or proceeding that any Owner of Bonds or Parity Bonds shall have the right to bring to enforce any right or remedy hereunder may be brought by the Trustee for the equal benefit and protection of all Owners of Bonds and Parity Bonds similarly situated and the Trustee is hereby appointed (and the 44 4868-7058-8510v7/022497-0019 successive respective Owners of the Bonds and Parity Bonds issued hereunder, by taking and holding the same, shall be conclusively deemed so to have appointed it) the true and lawful attorney in fact of the respective Owners of the Bonds and Parity Bonds for the purposes of bringing any such suit, action or proceeding and to do and perform any and all acts and things for and on behalf of the respective Owners of the Bonds and Parity Bonds as a class or classes, as may be necessary or advisable in the opinion of the Trustee as such attorney-in-fact. Section 8.5. Appointment of Receivers. Upon the occurrence of an Event of Default hereunder, and upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Trustee and of the Owners of the Bonds and Parity Bonds under this Indenture, the Trustee shall be entitled, as a matter of right, to the appointment of a receiver or receivers of the Net Taxes and other amounts pledged hereunder, pending such proceedings, with such powers as the court making such appointment shall confer. Section 8.6. Non-Waiver. Nothing in this Article VIII or in any other provision of this Indenture, or in the Bonds or the Parity Bonds, shall affect or impair the obligation of the District, which is absolute and unconditional, to pay the interest on and principal of the Bonds and Parity Bonds to the respective Owners of the Bonds and Parity Bonds at the respective dates of maturity, as herein provided, out of the Net Taxes and other moneys herein pledged for such payment. A waiver of any default or breach of duty or contract by the Trustee or any Owners shall not affect any subsequent default or breach of duty or contract, or impair any rights or remedies on any such subsequent default or breach. No delay or omission of the Trustee or any Owner of any of the Bonds or Parity Bonds to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or an acquiescence therein; and every power and remedy conferred upon the Trustee or the Owners by the Act or by this Article VIII may be enforced and exercised from time to time and as often as shall be deemed expedient by the Trustee or the Owners, as the case may be. Section 8.7. Limitations on Rights and Remedies of Owners. No Owner of any Bond or Parity Bond issued hereunder shall have the right to institute any suit, action or proceeding at law or in equity, for any remedy under or upon this Indenture, unless: (a) such Owner shall have previously given to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of a majority in aggregate principal amount of all the Bonds and Parity Bonds then Outstanding shall have made written request upon the Trustee to exercise the powers hereinbefore granted or to institute such action, suit or proceeding in its own name; (c) said Owners shall have tendered to the Trustee indemnity reasonably acceptable to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request; and (d) the Trustee shall have refused or omitted to comply with such request for a period of sixty (60) days after such written request shall have been received by, and said tender of indemnity shall have been made to, the Trustee. Such notification, request, tender of indemnity and refusal or omission are hereby declared, in every case, to be conditions precedent to the exercise by any Owner of Bonds and Parity Bonds of any remedy hereunder; it being understood and intended that no one or more Owners of Bonds and Parity Bonds shall have any right in any manner whatever by their action to enforce any right under this Indenture, except in the manner herein provided, and that all proceedings at law or in equity to enforce any provision of this Indenture shall be instituted, had and maintained in the manner herein provided and for the equal benefit of all Owners of the Outstanding Bonds and Parity Bonds. 45 4868-7058-8510v7/022497-0019 The right of any Owner of any Bond and Parity Bond to receive payment of the principal of and interest and premium (if any) on such Bond and Parity Bond as herein provided or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the written consent of such Owner, notwithstanding the foregoing provisions of this Section or any other provision of this Indenture. Section 8.8. Termination of Proceedings. In case the Trustee shall have proceeded to enforce any right under this Indenture by the appointment of a receiver or otherwise, and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely, then and in every such case, the District, the Trustee and the Owners shall be restored to their former positions and rights hereunder, respectively, with regard to the property subject to this Indenture, and all rights, remedies and powers of the Trustee shall continue as if no such proceedings had been taken. ARTICLE IX DEFEASANCE AND PARITY BONDS Section 9.1. Defeasance. If the District shall pay or cause to be paid, or there shall otherwise be paid, to the Owner of an Outstanding Bond or Parity Bond the interest due thereon and the principal thereof, at the times and in the manner stipulated in this Indenture or any Supplemental Indenture, then the Owner of such Bond or Parity Bond shall cease to be entitled to the pledge of Net Taxes, and, other than as set forth below, all covenants, agreements and other obligations of the District to the Owner of such Bond or Parity Bond under this Indenture and any Supplemental Indenture relating to such Parity Bond shall thereupon cease, terminate and become void and be discharged and satisfied. In the event of a defeasance of all Outstanding Bonds and Parity Bonds pursuant to this Section, the Trustee shall execute and deliver to the District all such instruments as may be desirable to evidence such discharge and satisfaction, and the Trustee shall pay over or deliver to the District’s general fund all money or securities held by it pursuant to this Indenture which are not required for the payment of the principal of, premium, if any, and interest due on such Bonds and Parity Bonds. Any Outstanding Bond or Parity Bond shall be deemed to have been paid within the meaning expressed in the first paragraph of this Section if such Bond or Parity Bond is paid in any one or more of the following ways: (a) by paying or causing to be paid the principal of, premium, if any, and interest on such Bond or Parity Bond, as and when the same become due and payable; (b) by depositing with the Trustee, in trust, at or before maturity, money which, together with the amounts then on deposit in the Special Tax Fund (exclusive of the Administrative Expenses Account) and available for such purpose, is fully sufficient to pay the principal of, premium, if any, and interest on such Bond or Parity Bond, as and when the same shall become due and payable; or (c) by depositing with the Trustee or another escrow bank appointed by the District, in trust, Federal Securities, in which the District may lawfully invest its money, in such amount as will be sufficient, together with the interest to accrue thereon and moneys then on deposit in the Special Tax Fund (exclusive of the Administrative Expenses Account) and available for such purpose, 46 4868-7058-8510v7/022497-0019 together with the interest to accrue thereon, to pay and discharge the principal of, premium, if any, and interest on such Bond or Parity Bond, as and when the same shall become due and payable. If paid as provided above, then, at the election of the District, and notwithstanding that any Outstanding Bonds and Parity Bonds shall not have been surrendered for payment, all obligations of the District under this Indenture and any Supplemental Indenture with respect to such Bond or Parity Bond shall cease and terminate, except for the obligation of the Trustee to pay or cause to be paid to the Owners of any such Bond or Parity Bond not so surrendered and paid, all sums due thereon and except for the covenants of the District contained in Section 5.2(f) or any covenants in a Supplemental Indenture relating to compliance with the Code. Notice of such election shall be filed with the Trustee not less than ten days prior to the proposed defeasance date, or such shorter period of time as may be acceptable to the Trustee. In connection with a defeasance under clauses (b) or (c) above, there shall be provided to the District a verification report from an independent nationally recognized certified public accountant stating its opinion as to the sufficiency of the moneys or securities deposited with the Trustee or the escrow bank to pay and discharge the principal of, premium, if any, and interest on all Outstanding Bonds and Parity Bonds to be defeased in accordance with this Section, as and when the same shall become due and payable, and an opinion of Bond Counsel (which may rely upon the opinion of the certified public accountant) to the effect that the Bonds or Parity Bonds being defeased have been legally defeased in accordance with this Indenture and any applicable Supplemental Indenture. Upon a defeasance, the Trustee, upon request of the District, shall release the rights of the Owners of such Bonds and Parity Bonds that have been defeased under this Indenture and any Supplemental Indenture and execute and deliver to the District all such instruments as may be desirable to evidence such release, discharge and satisfaction. In the case of a defeasance hereunder of all Outstanding Bonds and Parity Bonds, the Trustee shall pay over or deliver to the District any funds held by the Trustee at the time of a defeasance that are not required for the purpose of paying and discharging the principal of or interest on the Bonds and Parity Bonds when due. The Trustee shall, at the written direction of the District, mail, first class, postage prepaid, a notice to the Bondowners whose Bonds or Parity Bonds have been defeased, in the form directed by the District, stating that the defeasance has occurred. Section 9.2. [CONFIRM] Conditions for the Issuance of Parity Bonds and Other Additional Indebtedness. The District may at any time after the issuance and delivery of the Bonds hereunder issue Parity Bonds payable from the Net Taxes and other amounts deposited in the Special Tax Fund (other than in the Administrative Expenses Account therein) and secured by a lien and charge upon such amounts equal to the lien and charge securing the Outstanding Bonds and any other Parity Bonds theretofore issued hereunder or under any Supplemental Indenture, solely for the purpose of refunding Bonds or other Parity Bonds. Parity Bonds may be issued subject to the following additional specific conditions, which are hereby made conditions precedent to the issuance of any such Parity Bonds: (a) The District shall be in compliance with all covenants set forth in this Indenture and any Supplemental Indenture then in effect, and a certificate of the District to that effect shall have been filed with the Trustee; provided, however, that Parity Bonds may be issued notwithstanding the fact that the District is not in compliance with all such covenants so long as immediately following the issuance of such Parity Bonds the District will be in compliance with all such covenants. 47 4868-7058-8510v7/022497-0019 (b) The issuance of such Parity Bonds shall have been duly authorized pursuant to the Act and all applicable laws, and the issuance of such Parity Bonds shall have been provided for by a Supplemental Indenture duly adopted by the District which shall specify the following: (1) the authorized principal amount of such Parity Bonds; (2) the date and the maturity date or dates of such Parity Bonds; provided that: (i) each maturity date shall fall on a September 1; (ii) all such Parity Bonds of like maturity shall be identical in all respects, except as to number; and (iii) fixed serial maturities or Sinking Fund Payments, or any combination thereof, shall be established to provide for the retirement of all such Parity Bonds on or before their respective maturity dates; (3) the description of the Parity Bonds, the place of payment thereof and the procedure for execution and authentication; (4) the denominations and method of numbering of such Parity Bonds; (5) the amount and due date of each mandatory Sinking Fund Payment, if any, for such Parity Bonds; (6) the amount, if any, to be deposited from the proceeds of such Parity Bonds in the Reserve Account of the Special Tax Fund to increase the amount therein to the Reserve Requirement; (7) the form of such Parity Bonds; and (8) such other provisions as are necessary or appropriate and not inconsistent with this Indenture. (c) The Trustee shall have received the following documents or money or securities, all of such documents dated or certified, as the case may be, as of the Delivery Date of such Parity Bonds by the Trustee (unless the Trustee shall accept any of such documents bearing a prior date): (1) a certified copy of the Supplemental Indenture authorizing the issuance of such Parity Bonds; (2) a written request of the District as to the delivery of such Parity Bonds; (3) an opinion of Bond Counsel to the effect that: (i) the District has the right and power under the Act to adopt this Indenture and the Supplemental Indentures relating to such Parity Bonds, and this Indenture and all such Supplemental Indentures have been duly and lawfully adopted by the District, are in full force and effect and are valid and binding upon the District and enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization and other similar laws relating to the enforcement of creditors’ rights); (ii) this Indenture creates the valid pledge which it purports to create of the Net Taxes and other amounts as provided in this Indenture, subject to the application thereof to the purposes and on the conditions permitted by this Indenture; and (iii) such Parity Bonds are valid and binding limited obligations of the District, enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization and other similar laws relating to the enforcement of creditors’ rights) and the terms of this Indenture and all Supplemental Indentures thereto and entitled 48 4868-7058-8510v7/022497-0019 to the benefits of this Indenture and all such Supplemental Indentures, and such Parity Bonds have been duly and validly authorized and issued in accordance with the Act (or other applicable laws) and this Indenture and all such Supplemental Indentures; and a further opinion of Bond Counsel to the effect that, assuming compliance by the District with certain tax covenants, the issuance of the Parity Bonds will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds and any Parity Bonds theretofore issued on a tax-exempt basis, or the exemption from State of California personal income taxation of interest on any Outstanding Bonds and Parity Bonds theretofore issued; (4) a certificate of the District containing such statements as may be reasonably necessary to show compliance with the requirements of this Indenture; (5) a certificate of an Independent Financial Consultant or Participating Underwriter (as such term is defined in the Continuing Disclosure Certificate related to such Parity Bonds, or, if none, in the Continuing Disclosure Certificate related to the Bonds) certifying that in each Bond Year the Annual Debt Service on the Bonds and Parity Bonds to remain Outstanding following the issuance of the Parity Bonds proposed to be issued is less than the Annual Debt Service on the Bonds and Parity Bonds Outstanding prior to the issuance of such Parity Bonds; and (6) such further documents, money and securities as are required by the provisions of this Indenture and the Supplemental Indenture providing for the issuance of such Parity Bonds. ARTICLE X MISCELLANEOUS Section 10.1. Cancellation of Bonds and Parity Bonds. All Bonds and Parity Bonds surrendered to the Trustee for payment upon maturity or for redemption shall be upon payment therefor, and any Bond or Parity Bond purchased by the District as authorized herein and delivered to the Trustee for such purpose shall be, cancelled forthwith and shall not be reissued. The Trustee shall destroy such Bonds and Parity Bonds, as provided by law, and, upon request of the District, furnish to the District a certificate of such destruction. Section 10.2. Execution of Documents and Proof of Ownership. Any request, direction, consent, revocation of consent, or other instrument in writing required or permitted by this Indenture to be signed or executed by Bondowners may be in any number of concurrent instruments of similar tenor and may be signed or executed by such Owners in person or by their attorneys appointed by an instrument in writing for that purpose, or by the bank, trust company or other depository for such Bonds. Proof of the execution of any such instrument, or of any instrument appointing any such attorney, and of the ownership of Bonds or Parity Bonds shall be sufficient for the purposes of this Indenture (except as otherwise herein provided), if made in the following manner: (a) The fact and date of the execution by any Owner or his or her attorney of any such instrument and of any instrument appointing any such attorney, may be proved by a signature guarantee of any bank or trust company located within the United States of America. Where any such instrument is executed by an officer of a corporation or association or a member of a partnership on behalf of such corporation, association or partnership, such signature guarantee shall also constitute sufficient proof of his authority. 49 4868-7058-8510v7/022497-0019 (b) As to any Bond or Parity Bond, the person in whose name the same shall be registered in the Bond Register shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of or on account of the principal of any such Bond or Parity Bond, and the interest thereon, shall be made only to or upon the order of the registered Owner thereof or his or her legal representative. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond or Parity Bond and the interest thereon to the extent of the sum or sums to be paid. Neither the District nor the Trustee shall be affected by any notice to the contrary. Nothing contained in this Indenture shall be construed as limiting the Trustee or the District to such proof, it being intended that the Trustee or the District may accept any other evidence of the matters herein stated which the Trustee or the District may deem sufficient. Any request or consent of the Owner of any Bond or Parity Bond shall bind every future Owner of the same Bond or Parity Bond in respect of anything done or suffered to be done by the Trustee or the District in pursuance of such request or consent. Section 10.3. Unclaimed Moneys. Anything in this Indenture to the contrary notwithstanding, any money held by the Trustee in trust for the payment and discharge of any of the Outstanding Bonds and Parity Bonds that remains unclaimed for two years after the date when such Outstanding Bonds or Parity Bonds have become due and payable, if such money was held by the Trustee at such date, or for two years after the date of deposit of such money if deposited with the Trustee after the date when such Outstanding Bonds or Parity Bonds become due and payable, shall be repaid by the Trustee (without liability for interest) to the District, as its absolute property free from trust, and the Trustee shall thereupon be released and discharged with respect thereto and the Owners shall look only to the District for the payment of such Outstanding Bonds or Parity Bonds; provided, however, that, before being required to make any such payment to the District, the Trustee, at the expense of the District, shall cause to be mailed by first-class mail, postage prepaid, to the registered Owners of such Outstanding Bonds or Parity Bonds at their addresses as they appear on the registration books of the Trustee a notice that said money remains unclaimed and that, after a date named in said notice, which date shall not be less than 30 days after the date of the mailing of such notice, the balance of such money then unclaimed will be returned to the District. Section 10.4. Provisions Constitute Contract. The provisions of this Indenture shall constitute a contract between the District and the Bondowners and the provisions hereof shall be construed in accordance with the laws of the State of California. In case any suit, action or proceeding to enforce any right or exercise any remedy shall be brought or taken and, should said suit, action or proceeding be abandoned, or be determined adversely to the Bondowners or the Trustee, then the District, the Trustee and the Bondowners shall be restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken. After the issuance and delivery of the Bonds, this Indenture shall be irrepealable, but shall be subject to modifications to the extent and in the manner provided in this Indenture, but to no greater extent and in no other manner. Section 10.5. Future Contracts. Nothing herein contained shall be deemed to restrict or prohibit the District from making contracts or creating bonded or other indebtedness payable from a pledge of the Net Taxes which is subordinate to the pledge hereunder, or which is payable from the 50 4868-7058-8510v7/022497-0019 general fund of the District or from taxes or any source other than the Net Taxes and other amounts pledged hereunder. Section 10.6. Further Assurances. The District will adopt, make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Indenture, and for the better assuring and confirming unto the Owners of the Bonds or any Parity Bonds the rights and benefits provided in this Indenture. Section 10.7. Severability. If any covenant, agreement or provision, or any portion thereof, contained in this Indenture, or the application thereof to any person or circumstance, is held to be unconstitutional, invalid or unenforceable, the remainder of this Indenture and the application of any such covenant, agreement or provision, or portion thereof, to other persons or circumstances, shall be deemed severable and shall not be affected thereby, and this Indenture, the Bonds and any Parity Bonds issued pursuant hereto shall remain valid and the Bondowners shall retain all valid rights and benefits accorded to them under the laws of the State of California. Section 10.8. Notices. Any notices required to be given to the District with respect to the Bonds or this Indenture shall be mailed, first class, postage prepaid, or personally delivered to the Chief Financial Officer of the Water District, 31111 Greenspot Road, Highland, California 92346, and all notices to the Trustee in its capacity as Trustee shall be mailed, first class, postage prepaid, or personally delivered to U.S. Bank Trust Company, National Association, 633 West Fifth Street, 24th Floor, Los Angeles, California 90071, Attention: Global Corporate Trust. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.] S-1 4868-7058-8510v7/022497-0019 IN WITNESS WHEREOF, the District has caused this Indenture to be signed by the President of the Board, acting as the legislative body of the District and attested thereto by the Clerk of the Board, and the Trustee, in token of its acceptance of the trust created hereunder, has caused this Indenture to be signed in its corporate name by its officer identified below, all as of the day and year first above written. COMMUNITY FACILITIES DISTRICT NO. 2021-1 (MEDITERRA) OF EAST VALLEY WATER DISTRICT By: President of the Board of Directors of East Valley Water District, acting as the legislative body of Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District ATTEST: Clerk of the Board of Directors of East Valley Water District, acting as the legislative body of Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, as Trustee By: Authorized Officer A-1 4868-7058-8510v7/022497-0019 EXHIBIT A FORM OF 2023 SPECIAL TAX BOND R-1 $__________ UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AS SUCH TERM IS DEFINED IN THE INDENTURE) TO THE BOND REGISTRAR FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY BOND ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. UNITED STATES OF AMERICA STATE OF CALIFORNIA COUNTY OF SAN BERNARDINO COMMUNITY FACILITIES DISTRICT NO. 2021-1 (MEDITERRA) OF EAST VALLEY WATER DISTRICT 2023 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 1) INTEREST RATE MATURITY DATE DATED DATE CUSIP _____%September 1, 20__August __, 2023 ________ REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: ___________ DOLLARS AND NO/100 DOLLARS COMMUNITY FACILITIES DISTRICT NO. 2021-1 (MEDITERRA) OF EAST VALLEY WATER DISTRICT (the “District”) which was formed by the Board of Directors of East Valley Water District and is situated in the County of San Bernardino, State of California, FOR VALUE RECEIVED, hereby promises to pay, solely from certain amounts held under the Indenture (as such term is defined herein), to the Registered Owner named above, or registered assigns, on the Maturity Date set forth above, unless redeemed prior thereto as hereinafter provided, the Principal Amount set forth above, and to pay interest on such Principal Amount from the Interest Payment Date (as such term is defined herein) next preceding the date of authentication hereof, unless: (i) the date of A-2 4868-7058-8510v7/022497-0019 authentication is an Interest Payment Date, in which event interest shall be payable from such date of authentication; (ii) the date of authentication is after a Record Date (as such term is defined herein) but prior to the immediately succeeding Interest Payment Date, in which event interest shall be payable from the Interest Payment Date immediately succeeding the date of authentication; or (iii) the date of authentication is prior to the close of business on the first Record Date in which event interest shall be payable from the Dated Date set forth above. Notwithstanding the foregoing, if at the time of authentication of this Bond interest is in default, interest on this Bond shall be payable from the last Interest Payment Date to which the interest has been paid or made available for payment or, if no interest has been paid or made available for payment, interest on this Bond shall be payable from the Dated Date set forth above. Interest will be paid semiannually on March 1 and September 1 of each year, commencing March 1, 20__ (each, an “Interest Payment Date”) at the Interest Rate set forth above, until the Principal Amount hereof is paid or made available for payment. The principal of and premium, if any, on this Bond are payable to the Registered Owner hereof in lawful money of the United States of America upon presentation and surrender of this Bond at the Principal Office of the Trustee, initially U.S. Bank Trust Company, National Association. (the “Trustee”). Interest on this Bond shall be paid on each Interest Payment Date by check of the Trustee mailed by first class mail, postage prepaid, or in certain circumstances described in the Indenture by wire transfer to an account within the United States of America, to the Registered Owner hereof appearing on the registration books maintained by the Trustee as of the close of business on the fifteenth day of the month preceding the month in which the Interest Payment Date occurs (the “Record Date”) at such Registered Owner’s address as it appears on the registration books maintained by the Trustee. Capitalized terms used herein and not defined shall have the meanings given them in the Indenture. This Bond is one of a duly authorized issue of “Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District 2023 Special Tax Bonds (Improvement Area No. 1)” (the “Bonds”) issued in the aggregate principal amount of $_______ pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, being Sections 53311, et seq., of the California Government Code (the “Act”) for the purpose of financing the cost of acquisition of certain public facilities and improvements within Improvement Area No. 1 of the District, funding a reserve account and paying certain costs related to the issuance of the Bonds. The issuance of the Bonds and the terms and conditions thereof are provided for by a resolution adopted by the Board of Directors of East Valley Water District, acting in its capacity as the legislative body of the District (the “Legislative Body”) on [July 12, 2023] and a Bond Indenture dated as of August 1, 2023, by and between the District and the Trustee executed in connection therewith (the “Indenture”), and this reference incorporates the Indenture herein, and by acceptance hereof the Registered Owner of this Bond assents to said terms and conditions. The Indenture is executed under and this Bond is issued under, and both are to be construed in accordance with, the laws of the State of California. Pursuant to the Act and the Indenture, the principal of, premium, if any, and interest on this Bond are payable solely from the portion of the annual special taxes authorized under the Act to be levied and collected within Improvement Area No. 1 of the District (the “Special Taxes”) and certain other amounts pledged to the repayment of the Bonds as set forth in the Indenture. Any amounts for the payment hereof shall be limited to the Special Taxes pledged and collected or foreclosure A-3 4868-7058-8510v7/022497-0019 proceeds received following a default in payment of the Special Taxes and other amounts deposited to the Special Tax Fund (other than the Administrative Expenses Account therein) established under the Indenture, except to the extent that other provision for payment has been made by the Legislative Body, as may be permitted by law. The District has covenanted for the benefit of the owners of the Bonds that under certain circumstances described in the Indenture it will commence and diligently pursue to completion foreclosure proceedings in the event of delinquencies of Special Tax installments levied for payment of principal and interest on the Bonds. The Bonds are subject to redemption prior to their stated maturity dates at the option of the District on September 1, 20__ or any Interest Payment Date thereafter, from such maturities as selected by the District (and by lot within any one maturity), in integral multiples of $5,000, from moneys derived by the District from any source, at a redemption price (expressed as a percentage of the principal amount of the Bonds to be redeemed), together with accrued interest to the date of redemption, as follows: Redemption Date Redemption Price September 1, 20__ and March 1, 20__% September 1, 20__ and March 1, 20__ September 1, 20__ and March 1, 20__ September 1, 20__ and any Interest Payment Date thereafter In the event that the District elects to redeem Bonds as provided above, the District shall, at least 45 days prior to the redemption date, give written notice to the Trustee of its election to so redeem, the redemption date and the principal amount of the Bonds, among maturities, to be redeemed. In the event of optional or extraordinary redemption pursuant to the Indenture, the District shall provide the Trustee with a revised sinking fund schedule giving effect to the redemption so completed. The Term Bonds maturing on September 1, 20__ (the “Term Bonds”) shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account, on September 1, 20__, and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows: Redemption Date (September 1)Principal Amount 20__$ 20__ 20__* _____________ * Maturity. If, during the Fiscal Year immediately preceding one of the redemption dates specified above, the District purchases Bonds, at least 45 days prior to the redemption date the District shall notify the Trustee as to the principal amount purchased and the amount of Bonds so purchased shall A-4 4868-7058-8510v7/022497-0019 be credited at the time of purchase, to the extent of the full principal amount thereof, to reduce such upcoming Sinking Fund Payment for the Bonds so purchased. All Bonds purchased pursuant to the Indenture will shall be cancelled pursuant to the Indenture. In the event of a partial optional redemption or extraordinary redemption of the Bonds, each of the remaining Sinking Fund Payments for such Bonds, as described above, will be reduced, as nearly as practicable, on a pro rata basis, in integral multiples of $5,000, as directed by the District. The Bonds are subject to extraordinary redemption as a whole, or in part by lot, on any Interest Payment Date, and shall be redeemed by the Trustee, from Prepayments deposited to the Redemption Account pursuant to the Indenture, plus amounts transferred from the Reserve Account pursuant to the Indenture, among maturities as directed in writing by the District, at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the redemption date: Redemption Date Redemption Price Any Interest Payment Date from (and including) March 1, 20__ through (and including) March 1, 20__ % September 1, 20__ and March 1, 20__ September 1, 20__ and March 1, 20__ September 1, 20__ and any Interest Payment Date thereafter The District shall notify the Trustee of any extraordinary prepayment at least 45 days prior to the Interest Payment Date on which such prepayment shall occur. Notice of redemption with respect to the Bonds to be redeemed shall be mailed to the registered owners thereof not less than 20 nor more than 60 days prior to the redemption date by first class mail, postage prepaid, to the addresses set forth in the registration books. Neither a failure of the Registered Owner hereof to receive such notice nor any defect therein will affect the validity of the proceedings for redemption. All Bonds or portions thereof so called for redemption will cease to accrue interest on the specified redemption date, provided that funds for the redemption are on deposit with the Trustee on the redemption date. Thereafter, the registered owners of such Bonds shall have no rights except to receive payment of the redemption price upon the surrender of the Bonds. This Bond shall be registered in the name of the Registered Owner hereof, as to both principal and interest, and the District and the Trustee may treat the Registered Owner hereof as the absolute owner for all purposes and shall not be affected by any notice to the contrary. The Bonds are issuable only in fully registered form in the denomination of $5,000 or any integral multiple thereof and may be exchanged for a like aggregate principal amount of Bonds of other authorized denominations of the same issue and maturity, all as more fully set forth in the Indenture. This Bond is transferable by the Registered Owner hereof, in person or by his attorney duly authorized in writing, at the Principal Office of the Trustee, but only in the manner, subject to the limitations and upon payment of the charges provided in the Indenture, upon surrender and cancellation of this Bond. Upon such transfer, a new registered Bond of authorized denomination or denominations for the same aggregate principal amount of the same issue and maturity will be issued to the transferee in exchange therefor. Notwithstanding the foregoing, an Owner may only transfer A-5 4868-7058-8510v7/022497-0019 the Bonds so long as all Outstanding Bonds are transferred together to a new Owner who has delivered an Investor Letter to the District. The Trustee shall not be required to register transfers or make exchanges of: (i) any Bonds for a period of 15 days next preceding any selection of the Bonds to be redeemed; or (ii) any Bonds chosen for redemption. The rights and obligations of the District and of the registered owners of the Bonds may be amended at any time, and in certain cases without notice to or the consent of the registered owners, to the extent and upon the terms provided in the Indenture. THE BONDS DO NOT CONSTITUTE OBLIGATIONS OF EAST VALLEY WATER DISTRICT OR OF THE DISTRICT FOR WHICH EAST VALLEY WATER DISTRICT OR THE DISTRICT IS OBLIGATED TO LEVY OR PLEDGE, OR HAS LEVIED OR PLEDGED, GENERAL OR SPECIAL TAXES, OTHER THAN THE SPECIAL TAXES REFERENCED HEREIN. THE BONDS ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE FROM THE PORTION OF THE SPECIAL TAXES AND OTHER AMOUNTS PLEDGED UNDER THE INDENTURE BUT ARE NOT A DEBT OF EAST VALLEY WATER DISTRICT, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY LIMITATION OR RESTRICTION. This Bond shall not become valid or obligatory for any purpose until the certificate of authentication and registration hereon endorsed shall have been dated and signed by the Trustee. IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required by law to exist, happen and be performed precedent to and in the issuance of this Bond do exist, have happened and have been performed in due time, form and manner as required by law, and that the amount of this Bond, together with all other indebtedness of the District, does not exceed any debt limit prescribed by the laws or Constitution of the State of California. IN WITNESS WHEREOF, the District has caused this Bond to be dated as of the Dated Date, to be signed on behalf of the District by the President of the Board by his facsimile signature and attested by the facsimile signature of the Clerk of the Board. President of the Board of Directors of East Valley Water District, acting as the legislative body of Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District ATTEST: Clerk of the Board of Directors of East Valley Water District, acting in its capacity as the A-6 4868-7058-8510v7/022497-0019 legislative body of Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District A-7 4868-7058-8510v7/022497-0019 [FORM OF TRUSTEE’S CERTIFICATE OF AUTHENTICATION AND REGISTRATION] This is one of the Bonds described in the within-defined Indenture. Dated: August __, 2023 U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, as Trustee By: Authorized Signatory [FORM OF LEGAL OPINION] The following is a true copy of the opinion rendered by Stradling Yocca Carlson & Rauth, a Professional Corporation, in connection with the issuance of, and dated as of the date of the original delivery of, the Bonds. A signed copy is on file in my office. Clerk of the Board of Directors of East Valley Water District, acting in its capacity as the legislative body of Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District A-8 4868-7058-8510v7/022497-0019 [FORM OF ASSIGNMENT] For value received the undersigned hereby sells, assigns and transfers unto (Name, Address, and Tax Identification or Social Security Number of Assignee) the within-mentioned Bond and hereby irrevocably constitute(s) and appoint(s) _________________________________________________________________________ attorney, to transfer the same on the Registration Books of the Trustee with full power of substitution in the premises. Dated: Signature Guaranteed: Note: Signature(s) must be guaranteed by an eligible guarantor institution. Note: The signature(s) on this Assignment must correspond with the name(s) as written on the face of the within Bond in every particular without alteration or enlargement or any change whatsoever. B-1 4868-7058-8510v7/022497-0019 EXHIBIT B FORM OF PROJECT FUND REQUISITION $__________ COMMUNITY FACILITIES DISTRICT NO. 2021-1 (MEDITERRA) OF EAST VALLEY WATER DISTRICT 2023 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 1) U.S. Bank Trust Company, National Association (the “Trustee”), is hereby requested to pay from the Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District 2023 Special Tax Bonds (Improvement Area No. 1) Project Fund (the “Project Fund”), established by the Bond Indenture, dated as of August 1, 2023, by and between the Trustee and Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District (the “District”), the amount specified to the payee named below for payment of the Project Costs set forth below. Payee: Address: Purpose: Amount: $ The amount is due and payable under a purchase order, invoice, contract or other authorization and has not formed the basis of any prior request for payment. The conditions for the release of this amount from the Project Fund, including those conditions in Section 3.10 of the Indenture have been satisfied. There has not been filed with nor served upon the District notice of any lien, right to lien or attachment upon, or stop notice or claim affecting the right to receive payment of the amount specified above which has not been released or will not be released simultaneously with the payment of such amount, other than materialmen’s or mechanic’s liens accruing by mere operation of law. Dated: COMMUNITY FACILITIES DISTRICT NO. 2021-1 (MEDITERRA) OF EAST VALLEY WATER DISTRICT By: Name: Title: EAST VALLEY WATER DISTRICT Administrative Policies & Programs Policy Title: Debt Management Policy Original Approval Date: August 10, 2010 Last Revised: June 28, 2023 Policy No: 7.3 Page 1 of 13 Purpose The purpose of this Debt Management Policy is to establish guidelines for the issuance and management of debt of the District, each Community Facilities District established by the District and the East Valley Water District Financing Authority (each, a “related entity”), and to provide guidance for decision makers with respect to options available for financing infrastructure, and other capital projects, so that the most prudent, equitable, and cost effective financing can be chosen. This policy documents the objectives to be achieved by staff both prior to, and subsequent to, issuance of debt, and is designed to promote objectivity in the decision making process, and to facilitate the financing process by establishing important policy decisions in advance. Goals It is a goal of the District to provide for the infrastructure and capital project needs of its ratepayers, financing those capital project needs from a combination of current revenues, available reserves, and prudently issued debt. Debt is an equitable means of financing projects and represents an important means of providing for the infrastructure and project needs of the District's customers. Debt will be used to finance projects if: • Debt is issued and managed prudently; • Debt enables the District or related entity to maintain a sound fiscal position; • Issuing the debt will not negatively impact the District’s or any related entity’s credit rating; • The District's goal of equitable treatment of all customers, both current and future, would be met; • It is the most cost-effective means available to District or related entity; and • It is fiscally responsible under the prevailing economic conditions. EAST VALLEY WATER DISTRICT Administrative Policies & Programs Policy Title: Debt Management Policy Original Approval Date: August 10, 2010 Last Revised: June 28, 2023 Policy No: 7.3 Page 2 of 13 Budget Integration Issuance of debt may only be utilized to finance a capital project(s). Debt proceeds are not to be used to fund operating expenses. The decision to incur new indebtedness should be integrated with the Board-adopted annual Operating Budget and Capital Improvement Program (CIP) Budget. Issuance of debt for a capital project will not be considered unless such project has been incorporated into the District’s CIP, or is otherwise approved by the Board of Directors (Board). Annual debt service payments shall be included in the Operating Budget. Standards for Use of Debt Financing When appropriate, the District and each related entity will use long-term debt financing to: • Achieve an equitable allocation of capital costs / charges between current and future system users; • Provide more manageable rates in the near and medium term; and • Minimize rate volatility. For growth-related projects, debt financing will be utilized, as needed, to better match the cost of anticipated facility needs with timing of expected new connections to the system and spread the costs evenly over time. Capacity / Connection Fees will be maintained at a level sufficient to finance a portion of growth-related capital costs and cover related annual debt service requirements. The District and each related entity shall not construct or acquire a facility if it is unable to adequately provide for the subsequent annual operation and maintenance costs of the facility throughout its expected life. Capital projects financed through debt issuance will not be financed for a term longer than the expected useful life of the project. EAST VALLEY WATER DISTRICT Administrative Policies & Programs Policy Title: Debt Management Policy Original Approval Date: August 10, 2010 Last Revised: June 28, 2023 Policy No: 7.3 Page 3 of 13 Methods of Financing The Finance Department will investigate all possible project financing alternatives including, but not limited to, annual operating revenue, reserves, bonds, loans, and grants. When applicable, capacity fees collected from developers will be used to pay for increased capital costs resulting from new development. The District and, if applicable, each related entity, may legally issue both short term and long- term financing using the debt instruments described below. 1. Cash Funding – The District and each Community Facilities District may fund capital improvements on a pay-as-you-go basis. Sources for pay-as-you-go may include appropriations from annual operating revenue, reserves, and grants. 2. Inter-fund Borrowing - The District may borrow internally from other funds with temporarily surplus cash to meet short term needs in lieu of issuing debt. Purposes for such could include short term cash flow imbalances due to grant terms (i.e., the need to incur costs prior to reimbursement) and interim financing pending the issuance of long-term debt. The District funds from which the money is borrowed shall be repaid with interest, accruing quarterly based upon the apportionment rate set by the State of California Local Agency Investment Fund (LAIF). To the extent any inter-fund borrowing is undertaken in anticipation of long-term financing, the District shall adopt a Resolution of its intention to repay such funds out of tax-exempt debt proceeds so as to meet the requirement of federal tax law for such borrowing. 3. Special Tax Bonds – Each Community Facilities District may issue bonds under the provisions of the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the Government Code of the State of California). Special tax bonds shall be issued in accordance with the District’s Goals and Policies for Community Facilities Districts dated January 9, 2020, which are incorporated herein. 4. Line of Credit – The District and each related entity may consider a line of credit as a short-term borrowing option. The Chief Financial Officer (CFO) shall determine when it is prudent to recommend that the District or a related entity enter into an agreement with a commercial bank or other financial institution, for the purpose of acquiring a line of letter of credit. EAST VALLEY WATER DISTRICT Administrative Policies & Programs Policy Title: Debt Management Policy Original Approval Date: August 10, 2010 Last Revised: June 28, 2023 Policy No: 7.3 Page 4 of 13 5. Capital Lease Debt – A lease purchase obligation placed with a lender without the issuance of securities may be used to finance certain equipment purchases if the aggregate cost of the equipment exceeds $50,000 and the terms of financing are cost- effective. The term of a capital lease must be at least five years, and shall not exceed the useful life of the equipment or ten years, whichever is shorter. 6. State Revolving Fund Loans - The State Revolving Fund (SRF) is a low or zero interest loan program generally for the construction of water and wastewater infrastructure projects. The SRF loan interest rate is typically calculated by taking half of the True Interest Cost (TIC) of the most recent State of California General Obligation Bonds sale. The repayment term of the loans ranges from 20 to 30 years. 7. Certificates of Participation – The District may issue Certificates of Participation (COP) which provide financing through a lease, installment sale agreement, or contract of indebtedness and typically do not require voter approval. Board action is legally sufficient to authorize a COP issue, and District revenues are pledged for repayment of COPs under terms specified in the indenture. 8. JPA Revenue Bonds – The District may obtain financing through the issuance of debt under a joint exercise of powers agreement (East Valley Water District Financing Authority) with such debt payable from amounts paid by the District under a lease, installment sale agreement, or contract of indebtedness. 9. Refunding Revenue Bonds – The District and each related entity may issue refunding revenue bonds to refund District indebtedness pursuant to the State of California local agency refunding revenue bond law (Articles 9, 10 and 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code). Financing Team – Roles and Responsibilities The primary responsibility for developing debt financing recommendations rests with the CFO. In developing such recommendations, the CFO shall consider the need for debt financing and assess progress on the current capital improvement program (CIP). The CFO will present all proposed debt financings to the Board, which has sole authority to approve the issuance of debt. EAST VALLEY WATER DISTRICT Administrative Policies & Programs Policy Title: Debt Management Policy Original Approval Date: August 10, 2010 Last Revised: June 28, 2023 Policy No: 7.3 Page 5 of 13 1. Bond Counsel - The District and each related entity will retain external bond counsel for all debt issues. Bond counsel will prepare the necessary authorizing resolutions, agreements and other documents necessary to execute the financing. All debt issued by the District and its related entities will include a written opinion by bond counsel affirming that the District or related entity is authorized to issue the debt, stating that the District or related entity has met all state constitutional and statutory requirements necessary for issuance, and determining the debt's federal income tax status. 2. Financial Advisors - The District and each related entity will utilize the services of independent financial advisors when deemed prudent by the CFO. Services and compensation caps shall be defined by contract. The primary responsibilities of the financial advisor are to advise and assist on bond document negotiations, transaction structuring including advising on call provision options and timing of issuance, running debt service cash flow analysis’, assistance in obtaining ratings on the proposed issuance, and generally acting as an independent financial consultant and economic market expert. 3. Underwriters - For negotiated sales, the District and each related entity will generally select or pre-qualify underwriters through a competitive process. This process may include a request for proposal or qualifications to firms considered appropriate for the underwriting of a particular issue or type of bonds. The Chief Financial Officer, with the concurrence of the General Manager/CEO, will determine the appropriate method to evaluate the underwriter submittals and then select or qualify firms on that basis. The District and its related entities will not be bound by the terms and conditions of any underwriting agreements; oral or written, to which it was not a party. Structure and Term 1. Term of Debt – Debt will be structured for the shortest period possible, consistent with a fair allocation of costs to current and future users. The standard term of long- term debt borrowing is 10 to 30 years. Consistent with its philosophy of keeping capital facilities and infrastructure systems in good condition and maximizing a capital assets useful life, the District will budget to set aside operating revenue to finance ongoing maintenance and to provide reserves for rehabilitation and replacement. No debt will be issued for periods exceeding the useful life of projects to be financed. EAST VALLEY WATER DISTRICT Administrative Policies & Programs Policy Title: Debt Management Policy Original Approval Date: August 10, 2010 Last Revised: June 28, 2023 Policy No: 7.3 Page 6 of 13 2. Debt Repayment – In structuring a bond issue, the District and each related entity will manage the amortization of the debt and, to the extent possible, match its cash flow to the anticipated debt service payments. In addition, the District and each related entity will seek to structure debt with aggregate level debt service payment over the life of the debt. A non-level debt service structure will be considered if it is beneficial to the District’s or related entity’s overall debt payment schedule, or if such structuring will allow debt service to more closely match project revenues during the early years of a project’s operation. 3. Interest Rate Structure – The District and each related entity currently issues long- term debt on a fixed interest rate basis only. Fixed rate securities ensure budget certainty through the life of the issue and avoid the volatility of variable rates. 4. Credit Enhancement - The District and each related entity will consider the use of credit enhancement on a case-by-case basis. Types of credit enhancement include letters of credit, bond insurance, and surety policies. Only when clearly demonstrable savings can be realized shall credit enhancement be utilized. 5. Debt Service Reserve Funds – Debt service reserve funds are held by the Trustee to make principal and interest payments to bondholders in the event that pledged revenues are insufficient to do so. The District and each related entity will fund debt service reserve funds when it is in the District’s or such related entity’s overall best financial interest. In lieu of holding a cash funded reserve, the District and each related entity may substitute a surety bond or other credit instrument in its place. Additionally, the District and its related entities may decide not to utilize a reserve fund if the financing team determines there would be no adverse impact to the District or related entity credit rating or interest rates. 6. Call Provisions - In general, the District's and its related entities’ securities should include optional call provisions. The District and its related entities will avoid the sale of non-callable, long-term fixed rate bonds, absent careful evaluation of the value of the call option. EAST VALLEY WATER DISTRICT Administrative Policies & Programs Policy Title: Debt Management Policy Original Approval Date: August 10, 2010 Last Revised: June 28, 2023 Policy No: 7.3 Page 7 of 13 7. Debt Limits - There is no specific provision within the California Government Code that limits the amount of debt that may be issued by the District or its related entities. The District’s and its related entities’ borrowing capability is limited by the additional bonds test and debt coverage ratio required by the existing bond covenants. The District and its related entities will be mindful of its overall debt burden in the context of its revenues, expenses, reserves, and overall financial health. 8. Refunding - Current and advance refunding are important debt management tools for the District and its related entities. They are commonly used to achieve debt service (interest cost) savings, remove or change bond covenants, or restructure debt service obligations. With consideration of the Federal Tax Law, careful planning and timing must be used when reviewing an advance refunding. To the extent that debt having fixed interest rates originally structured with a long- term amortization structure (ten years or greater) is refunded with fixed rate debt, the District and its related entities will not generally issue refunding debt which extends beyond the final maturity of the refinanced debt. Extending the final maturity may occur when warranted, such as restructuring of debt to match debt amortization with the useful life of the financed assets. Method of Issuance and Sale The District and its related entities will select the method of sale, which best fits the type of bonds being sold, market conditions, and the desire to structure bond maturities to enhance the overall performance of the entire debt portfolio. Three general methods exist for the sale of municipal bonds: 1. Competitive Sale - Bonds will be marketed to a wide audience of investment banking (underwriting) firms. The underwriter is selected based on its best bid for its securities. The District and its related entities will award the sale of the competitively sold bonds on a true interest cost (TIC) basis. Pursuant to this policy, the General Manager/CEO, is hereby authorized to sign the bid form on behalf of the District and its related entities, fixing the interest rates on bonds sold on a competitive basis. 2. Negotiated Sale – In a negotiated sale, the underwriter or underwriting syndicate is selected through a Request for Proposal (RFP) process. The interest rate and the EAST VALLEY WATER DISTRICT Administrative Policies & Programs Policy Title: Debt Management Policy Original Approval Date: August 10, 2010 Last Revised: June 28, 2023 Policy No: 7.3 Page 8 of 13 underwriter’s fee are negotiated prior to the sale, based on market conditions. The underwriter will actively assist the District and its related entities in structuring the financing and marketing of bonds including providing assistance in preparing the bond offering circular. 3. Private Placement - The District and its related entities may elect to issue debt on a private placement basis. Such method may be considered if it is demonstrated to result in cost savings or provide other advantages relative to other methods of debt issuance, or if it is determined that access to the public market is unavailable and timing considerations require that financing be completed. Creditworthiness Objectives Ratings are a reflection of the fiscal soundness of the District and its related entities and the capabilities of its management. Typically, the higher the credit ratings are, the lower the interest cost on the District’s and its related entities’ debt issues. To enhance creditworthiness, the District and its related entities are committed to prudent financial management, systematic capital planning, and long-term financial planning. The District and its related entities recognize that external economic, natural, and other events may affect the creditworthiness of its debt. The District’s most recent bond issues have been assessed by the nationally recognized rating agencies S&P Global Ratings and Fitch Ratings. When issuing a credit rating, rating agencies consider various factors including but not limited to: • District’s or related entities’ fiscal status; • District management capabilities; • Economic conditions that may impact the stability and reliability of debt repayment sources; • District or related entity reserve levels; • District or related entity debt history and current debt structure; and • Projects being financed. EAST VALLEY WATER DISTRICT Administrative Policies & Programs Policy Title: Debt Management Policy Original Approval Date: August 10, 2010 Last Revised: June 28, 2023 Policy No: 7.3 Page 9 of 13 Post Issuance Administration / Internal Control 1. Investment of Proceeds - The proceeds of bond sales will be invested until used for the intended project(s) in order to maximize utilization of the public funds. The investments will be made to obtain the highest level of 1) safety, 2) liquidity, and 3) yield, and may be held as cash. The District’s investment guidelines and bond indentures will govern objectives and criteria for investment of bond proceeds. The Finance Department will oversee the investment of bond proceeds in a manner to avoid, if possible, and minimize any potential negative arbitrage over the life of the bond issuance, while complying with arbitrage and tax provisions. 2. Use of Proceeds - Bond proceeds will be deposited and recorded in separate accounts to ensure funds are not comingled with other District or related entity funds. The applicable Trustee will administer the disbursement of bond proceeds pursuant to each certain Indenture of Trust or Fiscal Agent Agreement, respectively. To ensure proceeds from bond sales are used in accordance with legal and tax requirements, invoices are submitted by the Engineering Department and approved by the Finance Department and General Manager/CEO for payment. Requisition for the disbursement of bond funds will be approved by the District’s CFO. The Finance Department will be tasked with monitoring the expenditure of bond proceeds to ensure they are used only for the purpose and authority for which the bonds were issued and exercising best efforts to spend bond proceeds in such a manner that the District and its related entities will meet one of the spend-down exemptions from arbitrage rebate. Tax-exempt bonds will not be issued unless it can be demonstrated that 85% of the proceeds can reasonably be expected to be expended within the three-year temporary period. 3. Arbitrage Compliance - The use of bond proceeds and their investments must be monitored to ensure compliance with all Internal Revenue Code Arbitrage Rebate Requirements. The CFO shall ensure that all bond proceeds and investments are tracked in a manner which facilitates accurate calculation; and, if a rebate payment is due, such payment is made in a timely manner. EAST VALLEY WATER DISTRICT Administrative Policies & Programs Policy Title: Debt Management Policy Original Approval Date: August 10, 2010 Last Revised: June 28, 2023 Policy No: 7.3 Page 10 of 13 4. Compliance with Bond Covenants – The District is responsible for verifying compliance with all undertakings, covenants, and agreements of each debt issue on an ongoing basis. This typically includes ensuring: • Annual appropriations of revenues to meet debt service payments; • Timely transfer of debt service payments to the Trustee; • Compliance with insurance requirements; and • Compliance with rate covenants. The District and its related entities shall comply with all covenants and conditions contained in the governing law and any legal documents entered into at the time of the bond offering or signing of agreements. The CFO or designee will coordinate verification and monitoring of covenant compliance. 5. Rating Agency Communication - The CFO shall be responsible for maintaining the District's relationships with S&P Global Ratings, Fitch Ratings and/or Moody's Investment Service. In addition to general communication, the CFO shall meet with credit analysts prior to each competitive sale and offer conference calls with the District financing team in connection with the planned sale. 6. Board Communication - The CFO will report to the Board of Directors any feedback from rating agencies and/or investors regarding the District's or related entities’ financial strengths and weaknesses and recommendations for addressing any weaknesses. 7. Continuing Disclosure - The District and its related entities shall remain in compliance with Rule 15c2-12 by filing its annual financial statements and other financial and operating data for the benefit of its bondholders by December 31st of each year. The CFO will ensure the District's and its related entities’ timely filing with each Nationally Recognized Municipal Securities Information Repository. The CFO and/or the District’s general counsel, with the assistance of Bond Counsel, will provide written notice to the Board of any receipt by the District of any default, EAST VALLEY WATER DISTRICT Administrative Policies & Programs Policy Title: Debt Management Policy Original Approval Date: August 10, 2010 Last Revised: June 28, 2023 Policy No: 7.3 Page 11 of 13 event of acceleration, termination event, modification of terms (only if material or may reflect financial difficulties), or other similar events (collectively, a “Potentially Reportable Event”) under any agreement or obligation to which the District or a related entity is a party and which may be a “financial obligation” as discussed below. Such written notice should be provided by the CFO and/or the District’s general counsel to the Board as soon as the CFO is placed on written notice by District staff, consultants, or external parties of such event or receives written notice of such event. The CFO, with the assistance of bond and disclosure counsel, will determine and notify the Board whether notice of such Potentially Reportable Event is required to be filed on EMMA pursuant to the disclosure requirements of SEC Rule 15c2-12 (the “Rule”). If filing on EMMA is required, the filing is due within 10 business days of such Potentially Reportable Event to comply with the continuing disclosure undertaking for the various debt obligations of the District and its related entities. The CFO and/or the District’s general counsel, with the assistance of Bond Counsel, will report to the Board regarding the execution by the District and its related entities of any agreement or other obligation which might constitute a “financial obligation” for purposes of Rule 15c2-12. Amendments to existing District or related entity agreements or obligations with “financial obligation” which relate to covenants, events of default, remedies, priority rights, or other similar terms should be reported to the Board as well as soon as the CFO is placed on written notice by District staff, consultants, or external parties of such event or receives a written notice of such amendment requests. The CFO will determine, with the assistance of bond and disclosure counsel, whether such agreement or other obligation constitutes a material “financial obligation” for purposes of Rule 15c2-12. If such agreement or other obligation is determined to be a material “financial obligation” or a material amendment to a “financial obligation” described above, notice thereof would be required to be filed on EMMA within 10 business days of execution or incurrence. The types of agreements or other obligations which could constitute “financial obligations”, and which could need to be reported on EMMA include: 1. Bank loans or other obligations which are privately placed; 2. State or federal loans; EAST VALLEY WATER DISTRICT Administrative Policies & Programs Policy Title: Debt Management Policy Original Approval Date: August 10, 2010 Last Revised: June 28, 2023 Policy No: 7.3 Page 12 of 13 3. Commercial paper or other short-term indebtedness for which no offering document has been filed on EMMA; 4. Letters of credit, surety policies or other credit enhancement with respect to the District’s or related entity’s publicly offered debt; 5. Letters of credit, including letters of credit which are provided to third parties to secure the District’s or related entity’s obligation to pay or perform (an example of this is a standby letter of credit delivered to secure the District’s or related entity’s obligations for performance under a mitigation agreement); 6. Capital leases for property, facilities, fleet or equipment; 7. Agreements which guarantee the payment or performance obligations of a third party (regardless of whether the agreements constitute guarantees under California law); and 8. License agreements. Types of agreements which could be a “financial obligation” under the Rule include: 1. Payment agreements which obligate the District or a related entity to pay a share of another public agency’s debt service (for example, an agreement with a joint powers agency whereby the District or a related entity agrees to pay a share of the joint powers agency’s bonds, notes or other obligations); and 2. Service contracts with a public agency or a private party pursuant to which the District or a related entity is obligated to pay a share of such public agency or private party’s debt service obligation (for example, certain types of P3 arrangements). Types of agreements which may be a “financial obligation” subject to the Rule include: • Any agreement the payments under which are not characterized as an operation and maintenance expenses for accounting purposes if such agreement could be characterized as the borrowing of money. EAST VALLEY WATER DISTRICT Administrative Policies & Programs Policy Title: Debt Management Policy Original Approval Date: August 10, 2010 Last Revised: June 28, 2023 Policy No: 7.3 Page 13 of 13 The CFO will continue to work with bond and disclosure counsel to refine the definition of financial obligation going forward based on future SEC guidance. 8.Record Retention - A copy of all debt-related records shall be retained at the District's offices. At minimum, these records shall include all official statements, bid documents, bond documents / transcripts, resolutions, trustee statements, leases, and title reports for each District financing (to the extent available). Electronic copies - preferably in pdf or CD-ROM format – shall also be retained. 9.State Reporting Requirements - Pursuant to Government Code section 8855(k), the District and its related entities will submit annual debt transparency reports for any debt for which it has submitted a report of final sale on or after January 21, 2017 every year until the later date on which the debt is no longer outstanding and the proceeds have been fully spent. The District and its related entities shall also comply with Government Code Section 5852.1 by disclosing specified good faith estimates in a public meeting prior to the authorization of the issuance of debt. Board Discretion This policy was drafted with the intent of providing East Valley Water District’s Board- approved guidelines to management and staff for decisions and recommendations related to capital financing by the District and its related entities, and to support the District’s and its related entities’ debt obligations to present and future generations of ratepayers. This policy is ultimately intended to serve as a guide and it in no way restricts the ability of the East Valley Water District Board to review proposed rate actions, debt issuances, or other actions of substance to the District and its related entities. The Board maintains authorization to waive elements of the policy in connection with individual financings at its discretion. This policy shall be reviewed during the third quarter of each odd fiscal year. Revised: March 8, 2017 August 26, 2020 30539.00007\41347746.3 $_________ COMMUNITY FACILITIES DISTRICT NO. 2021-1 (MEDITERRA) OF EAST VALLEY WATER DISTRICT 2023 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 1) BOND PURCHASE AGREEMENT _________, 2023 Community Facilities District No. 2021-1 (Mediterra) of the East Valley Water District Highland, California Ladies and Gentlemen: Hilltop Securities Inc. (the “Underwriter”), acting not as a fiduciary or agent for you, but on behalf of itself, hereby offers to enter into this Bond Purchase Agreement (the “Purchase Agreement”) with Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District (the “CFD”) which, upon acceptance, will be binding upon the CFD and upon the Underwriter. This offer is made subject to acceptance of it by the CFD on the date hereof, and if not accepted will be subject to withdrawal by the Underwriter upon notice delivered to the CFD at any time prior to the acceptance hereof by the CFD. The CFD acknowledges and agrees that: (i) the primary role of the Underwriter is to purchase the Bonds (as such term is defined below) for resale to investors in an arm’s length transaction between the CFD and the Underwriter; (ii) the Underwriter has financial and other interests that differ from those of the CFD; (iii) the Underwriter is not acting as a municipal advisor, financial advisor or fiduciary to the CFD and has not assumed any advisory or fiduciary responsibility to the CFD with respect to the transaction contemplated hereby and the discussions, undertakings and procedures leading thereto (irrespective of whether the Underwriter has provided or is currently providing other services to the CFD on other matters); (iv) the only obligations the Underwriter has to the CFD with respect to the transaction contemplated hereby expressly are set forth in this Purchase Agreement; and (v) the CFD has consulted its own financial, municipal, legal, accounting, tax and/or other advisors, as applicable, to the extent it deems appropriate. The CFD hereby acknowledges that the Underwriter has provided to the CFD prior disclosures regarding its role as underwriter. The CFD has a municipal advisor in this transaction that has legal fiduciary duties to the CFD. The Underwriter has provided to the CFD prior disclosures under Rule G-17 of the Municipal Securities Rulemaking Board (the “MSRB”), which have been received by the CFD. 1. Purchase, Sale and Delivery of the Bonds; Establishment of Issue Price. (a) Subject to the terms and conditions and in reliance upon the representations, warranties and agreements set forth herein, the Underwriter agrees to purchase from the CFD, and the CFD agrees to sell to the Underwriter, all (but not less than all) of the Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District 2023 Special Tax Bonds (Improvement Area No. 1) (the “Bonds”) in the aggregate principal amount specified in Exhibit A 30539.00007\41347746.3 2 hereto. The Bonds shall be dated the Closing Date (as defined herein), and bear interest from said date (payable semiannually on March 1 and September 1 in each year, commencing [March 1, 2024]) at the rates per annum and maturing on the dates and in the amounts set forth in Exhibit A hereto. The purchase price for the Bonds shall be the amount specified as such in Exhibit A hereto. The Underwriter agrees to assist the CFD in establishing the issue price of the Bonds and shall execute and deliver to the CFD at Closing (as defined herein) an “issue price” or similar certificate, together with the supporting pricing wires or equivalent communications, substantially in the form attached hereto as Exhibit D, with such modifications as may be appropriate or necessary, in the reasonable judgment of the Underwriter, the CFD and Bond Counsel, to accurately reflect, as applicable, the sales price or prices or the initial offering price or prices to the public of the Bonds. All actions to be taken by the CFD under this section to establish the issue price of the Bonds may be taken on behalf of the CFD by the CFD’s municipal advisor identified herein and any notice or report to be provided to the CFD may be provided to the CFD’s municipal advisor. Except as otherwise set forth in Exhibit A attached hereto, the CFD will treat the first price at which 10% of each maturity of the Bonds (the “10% test”) is sold to the public as the issue price of that maturity (if different interest rates apply within a maturity, each separate CUSIP number within that maturity will be subject to the 10% test). At or promptly after the execution of this Purchase Agreement, the Underwriter shall report to the CFD the price or prices at which it has sold to the public each maturity of the Bonds. If at that time the 10% test has not been satisfied as to any maturity of the Bonds, the Underwriter agrees to promptly report to the CFD the prices at which it sells the unsold Bonds of that maturity to the public. That reporting obligation shall continue, whether or not the Closing Date has occurred, until the 10% test has been satisfied as to the Bonds of that maturity or until all Bonds of that maturity have been sold to the public. The Underwriter confirms that it has offered the Bonds to the public on or before the date of this Purchase Agreement at the offering price or prices (the “initial offering price”), or at the corresponding yield or yields, set forth in Exhibit A attached hereto, except as otherwise set forth therein. Exhibit A also sets forth, as of the date of this Purchase Agreement, the maturities, if any, of the Bonds for which the 10% test has not been satisfied and for which the CFD and the Underwriter agree that the restrictions set forth in the next sentence shall apply, which will allow the CFD to treat the initial offering price to the public of each such maturity as of the sale date as the issue price of that maturity (the “hold-the-offering-price rule”). So long as the hold-the- offering-price rule remains applicable to any maturity of the Bonds, the Underwriter will neither offer nor sell unsold Bonds of that maturity to any person at a price that is higher than the initial offering price to the public during the period starting on the sale date and ending on the earlier of the following: (1) the close of the fifth (5th) business day after the sale date; or (2) the date on which the Underwriter has sold at least 10% of that maturity of the Bonds to the public at a price that is no higher than the initial offering price to the public. The Underwriter shall promptly advise the CFD when it has sold 10% of that maturity of the Bonds to the public at a price that is no higher than the initial offering price to the public, if that occurs prior to the close of the fifth (5th) business day after the sale date. 30539.00007\41347746.3 3 The Underwriter confirms that any selling group agreement and any retail distribution agreement relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer who is a member of the selling group and each broker-dealer that is a party to such retail distribution agreement, as applicable, to (1) report the prices at which it sells to the public the unsold Bonds of each maturity allotted to it until it is notified by the Underwriter that either the 10% test has been satisfied as to the Bonds of that maturity or all Bonds of that maturity have been sold to the public and (2) comply with the hold-the-offering-price rule, if applicable, in each case if and for so long as directed by the Underwriter. The CFD acknowledges that, in making the representation set forth in this subsection, the Underwriter will rely on (i) in the event a selling group has been created in connection with the initial sale of the Bonds to the public, the agreement of each dealer who is a member of the selling group to comply with the hold-the-offering-price rule, if applicable, as set forth in a selling group agreement and the related pricing wires, and (ii) in the event that a retail distribution agreement was employed in connection with the initial sale of the Bonds to the public, the agreement of each broker-dealer that is a party to such agreement to comply with the hold-the- offering-price rule, if applicable, as set forth in the retail distribution agreement and the related pricing wires. The CFD further acknowledges that the Underwriter shall not be liable for the failure of any dealer who is a member of a selling group, or of any broker-dealer that is a party to a retail distribution agreement, to comply with its corresponding agreement regarding the hold- the-offering-price rule as applicable to the Bonds. The Underwriter acknowledges that sales of any Bonds to any person that is a related party to the Underwriter shall not constitute sales to the public for purposes of this section. Further, for purposes of this section: (1) “public” means any person other than an underwriter or a related party, (2) “underwriter” means (A) any person that agrees pursuant to a written contract with the CFD (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the public and (B) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (A) to participate in the initial sale of the Bonds to the public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Bonds to the public), (3) a purchaser of any of the Bonds is a “related party” to an underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (i) at least 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (ii) more than 50% common ownership of their capital interests or profits interests, if both entities are partnerships (including direct ownership by one partnership of another), or (iii) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other), and (4) “sale date” means the date of execution of this Purchase Agreement by all parties. 30539.00007\41347746.3 4 (b) The Bonds shall be substantially in the form described in, shall be issued and secured under the provisions of, and shall be payable and subject to redemption as provided in, the Bond Indenture, dated as of August 1, 2023, (the “Indenture”), by and between the CFD and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”), approved by Resolution No. _______ adopted by the Board of Directors of the East Valley Water District (the “Water District”), acting as the legislative body of the CFD (the “Board of Directors”), on [July 12] 2023 (the “Resolution of Issuance”). The Bonds and interest thereon will be payable from a special tax (the “Special Tax”) levied and collected on the taxable land within Improvement Area No. 1 of the CFD (the “Improvement Area”) in accordance with Resolution No. 2021.24 adopted by the Board of Directors on December 8, 2021 (the “Resolution of Formation”), less amounts set aside to pay administrative expenses of the CFD (the “Net Taxes”), as provided in the Indenture. Proceeds of the sale of the Bonds will be used in accordance with the Indenture and the Mello- Roos Community Facilities Act of 1982, as amended (Sections 53311 et seq. of the Government Code of the State of California) (the “Law”), to acquire certain public improvements described in the Resolution of Formation. Pursuant to the authorization of the CFD, the CFD caused to be prepared a preliminary official statement dated [July] 2023 relating to the Bonds, which, together with the cover page, inside cover page and appendices thereto is herein called the “Preliminary Official Statement.” In connection therewith the CFD has caused to be delivered to the Underwriter a Rule 15c2-12 Certificate, dated as of the date of the Preliminary Official Statement (the “CFD Certificate”), in substantially the form attached hereto as Exhibit B, with only such changes therein as shall have been accepted by the Underwriter, deeming the Preliminary Official Statement final. (c) Subsequent to its receipt of the CFD Certificate, the Underwriter has distributed copies of the Preliminary Official Statement, and the Preliminary Official Statement has been made available to investors electronically. The CFD hereby ratifies the use by the Underwriter of the Preliminary Official Statement and authorizes the Underwriter to use and distribute (i) the final Official Statement in the form of the Preliminary Official Statement as amended to conform to the terms of this Purchase Agreement, and with such changes and amendments as are mutually agreed to by the CFD and the Underwriter, including the cover page, inside cover page and all appendices thereto, and including all information previously permitted to have been omitted by Rule 15c2-12, and any supplements and amendments thereto as have been approved by the CFD as evidenced by the execution and delivery of such document by an officer of the CFD, herein referred to as the “Official Statement,” (ii) the Indenture, (iii) the continuing disclosure certificate of the CFD (the “Continuing Disclosure Certificate”), (iv) this Purchase Agreement, (v) any other documents or contracts to which the CFD is a party, and (vi) all information contained therein, and all other documents, certificates and statements furnished by the CFD to the Underwriter in connection with the transactions contemplated by this Purchase Agreement, in connection with the offer and sale of the Bonds by the Underwriter. The Underwriter hereby agrees to deliver a copy of the Official Statement to the Municipal Securities Rulemaking Board (the “MSRB”) through the Electronic Municipal Marketplace Access website of the MSRB on or before the Closing Date and otherwise to comply with all applicable statutes and regulations in connection with the offering and sale of the Bonds, including, without limitation, MSRB Rule G-32 and Rule 15c2-12. (d) At 8:00 A.M., Pacific Time, on [August ___], 2023, or at such earlier time or date as shall be agreed upon by the Underwriter and the CFD (such time and date being herein referred to as the “Closing Date”), the CFD will deliver (i) through the facilities of the Depository Trust Company, the Bonds in definitive form (all Bonds being in book-entry form registered in the name of Cede & Co. 30539.00007\41347746.3 5 and having the CUSIP numbers assigned to them printed thereon), duly executed by the officers of the CFD, as provided in the Indenture, and (ii) to the Underwriter, at the Newport Beach, California offices of Stradling Yocca Carlson & Rauth, a Professional Corporation (the “Bond Counsel”), or at such other place as shall be mutually agreed upon by the CFD and the Underwriter, the other documents herein mentioned; and the Underwriter shall accept such delivery and pay the purchase price of the Bonds in immediately available funds (such delivery and payment being herein referred to as the “Closing”). Notwithstanding the foregoing, the Underwriter may, in its discretion, accept delivery of the Bonds in temporary form upon making arrangements with the CFD which are satisfactory to the Underwriter relating to the delivery of the Bonds in definitive form. (e) Except as otherwise disclosed and agreed to by the CFD, the Underwriter agrees to make a bona fide public offering of the Bonds at their initial public offering price or prices set forth on the inside cover page of the Official Statement and in Exhibit A hereto; provided, however, the Underwriter reserves the right to change such initial public offering prices as the Underwriter deems necessary or desirable, in its sole discretion, in connection with the marketing of the Bonds, and to sell the Bonds to certain dealers (including dealers depositing the Bonds into investment trusts) and others at prices lower than the initial offering prices for the Bonds set forth in the Official Statement. A “bona fide public offering” shall include an offering to institutional investors or registered investment companies, regardless of the number of such investors to which the Bonds are sold. The Underwriter shall provide to the CFD on the Closing Date a certificate stating that the Underwriter made a bona fide public offering of the Bonds at their initial public offering price or prices set forth on the inside cover page of the Official Statement and in Exhibit A. 2. Representations, Warranties and Agreements of the CFD. The CFD represents, warrants and covenants to and agrees with the Underwriter that: (a) The CFD is duly organized and validly existing as a community facilities district under the laws of the State of California. The Water District has duly authorized the formation of the CFD pursuant to certain resolutions, including the Resolution of Formation (the “CFD Formation Resolutions”) and the Law. The Board of Directors of the Water District, as the legislative body of the CFD, has duly adopted the CFD Formation Resolutions, and has caused to be recorded in the real property records of the County of San Bernardino on December 16, 2021, a Notice of Special Tax Lien, as Document No. 2021-0563498 (the “Notice of Special Tax Lien”). Additionally, the Board of Directors of the Water District adopted Ordinance No. __ on _________, 2021 authorizing the levy of the Special Taxes within the CFD (the “Ordinance”). The CFD Formation Resolutions and the Resolution of Issuance are collectively referred to herein as the “CFD Resolutions.” The CFD Formation Resolutions, the Notice of Special Tax Lien and the Ordinance are collectively herein referred to as the “Formation Documents.” Each of the Formation Documents and the Resolution of Issuance remains in full force and effect as of the date hereof and has not been amended. The CFD has, and at the Closing Date will have, as the case may be, full legal right, power and authority (i) to execute, deliver and perform its obligations under this Purchase Agreement and the Continuing Disclosure Certificate, and to carry out all transactions contemplated by each of such agreements, (ii) to issue, sell and deliver the Bonds to the Underwriter pursuant to the Resolution of Issuance and the Indenture as provided herein, and (iii) to carry out, give effect to and consummate the transactions contemplated by the Formation Documents and by the Indenture, this Purchase Agreement, and the Continuing Disclosure Certificate (collectively, the “CFD Documents”) and the Official Statement; 30539.00007\41347746.3 6 (b) The CFD has complied, and will at the Closing Date be in compliance, in all material respects, with the Formation Documents, the Resolution of Issuance and the CFD Documents, and any immaterial compliance by the CFD, if any, will not impair the ability of the CFD to carry out, give effect to or consummate the transactions contemplated by the foregoing. From and after the date of issuance of the Bonds, the CFD will continue to comply with the covenants of the CFD contained in the CFD Documents; (c) The Board of Directors of the Water District has duly and validly: (i) adopted the CFD Resolutions, (ii) called, held and conducted in accordance with all requirements of the Law an election within the CFD to approve the levy of the Special Tax within the CFD and the issuance of the Bonds and recorded the Notice of Special Tax Lien which established a continuing lien on the land within the CFD securing the Special Tax, (iii) authorized and approved the execution, delivery and due performance of the Bonds and the CFD Documents, (iv) authorized the preparation, delivery and distribution of the Preliminary Official Statement and the Official Statement, and (v) authorized and approved the performance by the CFD of its obligations contained in, and the taking of any and all action as may be necessary to carry out, give effect to and consummate the transactions contemplated by, each of the CFD Documents (including, without limitation, the collection of the Special Tax), the Bonds and the Official Statement and at the Closing Date, the Formation Documents and the Resolution of Issuance will be in full force and effect and the CFD Documents and the Bonds will constitute the valid, legal and binding obligations of the CFD and (assuming due authorization, execution and delivery by other parties thereto, where necessary) will be enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws affecting the enforcement of creditors’ rights in the State of California and to the application of equitable principles if equitable remedies are sought; (d) To the best of the CFD’s knowledge, the CFD is not in breach of or default under any applicable law or administrative rule or regulation of the State of California (the “State”) or the United States, or of any department, division, agency or instrumentality thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, fiscal agent agreement, indenture, contract, agreement or other instrument to which the CFD is a party or is otherwise subject or bound, a consequence of which could be to materially and adversely affect the performance by the CFD of its obligations under the Bonds, the Formation Documents, the Resolution of Issuance, or the CFD Documents, and compliance with the provisions of each thereof will not conflict with or constitute a breach of or default, in any material respect, under any applicable law or administrative rule or regulation of the State or the United States, or of any department, division, agency or instrumentality thereof, or under any applicable court or administrative decree or order, or a material breach of or default, in any material respect, under any loan agreement, note, resolution, trust agreement, contract, agreement or other instrument to which the CFD, as the case may be, is a party or is otherwise subject or bound; (e) Except for compliance with the blue sky or other states securities law filings, as to which the CFD makes no representations, warranties, covenants, and agreements, all approvals, consents, authorizations, elections and orders of or filings or registrations with any State governmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to, or the absence of which would materially adversely affect, the performance by the CFD of its obligations hereunder, or under the Formation Documents, the Resolution of Issuance, or the CFD Documents, have been obtained and are in full force and effect; 30539.00007\41347746.3 7 (f) The Special Tax constituting the security for the Bonds has been duly and lawfully authorized and may be levied under the Law, the State Constitution and the applicable laws of the State, and such Special Tax, when levied, will constitute a valid and legally binding continuing lien on the properties on which it has been levied; (g) The CFD shall not supplement or amend the Official Statement or cause the Official Statement to be supplemented or amended without the prior written consent of the Underwriter, which consent shall not be unreasonably withheld. Until the date which is twenty-five (25) days after the “end of the underwriting period” (as defined herein), if any event shall occur of which the CFD is aware, as a result of which it may be necessary to supplement the Official Statement in order to make the statements in the Official Statement, in light of the circumstances existing at such time, not misleading, the CFD shall forthwith notify the Underwriter of any such event of which it has knowledge and shall cooperate fully in furnishing any information available to it for any supplement to the Official Statement necessary, in the Underwriter’s reasonable opinion, so that the statements therein as so supplemented will not be misleading in light of the circumstances existing at such time and the CFD shall promptly furnish to the Underwriter a reasonable number of copies of such supplement. As used herein, the term “end of the underwriting period” means the later of such time as (i) the CFD delivers the Bonds to the Underwriter, or (ii) the Underwriter does not retain, directly or as a member of an underwriting syndicate, an unsold balance of the Bonds for sale to the public. Unless the Underwriter gives notice to the contrary, the “end of the underwriting period” shall be deemed to be the Closing Date. Any notice delivered pursuant to this provision shall be written notice delivered to the CFD at or prior to the Closing Date, and shall specify a date (other than the Closing Date) to be deemed the “end of the underwriting period”; (h) The Indenture creates a valid pledge of the Net Taxes and the moneys in the Special Tax Fund (exclusive of the Administrative Expenses Account) therein established pursuant to the Indenture, including the investments thereof, subject in all cases to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth therein. Until such time as moneys have been set aside in an amount sufficient to pay all then outstanding Bonds at maturity or to the date of redemption if redeemed prior to maturity, plus unpaid interest thereon to maturity or to the date of redemption if redeemed prior to maturity, and premium, if any, the CFD will faithfully perform and abide by all of the covenants, undertakings and provisions contained in the Indenture; (i) Except as disclosed in the Official Statement, no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body is pending with proper service of process on the CFD having been accomplished or, to the best knowledge of the CFD, threatened (i) which would materially adversely affect the ability of the CFD to perform its obligations under the Bonds, the Formation Documents, the Resolution of Issuance, or the CFD Documents, or (ii) seeking to restrain or to enjoin the issuance, sale or delivery of the Bonds, the application of the proceeds thereof in accordance with the Indenture, or the collection or application of the Special Tax pledged or to be pledged to pay the principal of and interest on the Bonds, or the pledge thereof, or in any way contesting the validity or enforceability of the Bonds, the Formation Documents, the Resolution of Issuance, the CFD Documents, or any action contemplated by any of said documents, or (iii) in any way contesting the completeness or accuracy of the Preliminary Official Statement or the powers or authority of the CFD with respect to the Bonds, the Formation Documents, the Resolution of Issuance, the CFD Documents, or any action of the CFD contemplated by any of said documents; nor is there 30539.00007\41347746.3 8 any action pending with proper service of process on the CFD having been accomplished or, to the best knowledge of the CFD, threatened against the CFD which alleges that interest on the Bonds is not excludable from gross income for federal income tax purposes or is not exempt from California personal income taxation; (j) The CFD will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request in order for the Underwriter to qualify the Bonds for offer and sale under the “Blue Sky” or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate; provided, however, the CFD shall not be required to register as a dealer or a broker of securities or to consent to service of process in connection with any blue sky filing; (k) Any certificate signed by any official of the CFD authorized to do so shall be deemed a representation and warranty to the Underwriter as to the statements made therein; (l) The CFD will apply the proceeds of the Bonds in accordance with the Indenture and as described in the Official Statement; (m) The information contained in the Preliminary Official Statement was as of the date thereof, and the information contained in the Official Statement as of its date and on the Closing Date, shall be, true and correct in all material respects and such information does not and shall not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (n) The Preliminary Official Statement heretofore delivered to the Underwriter has been deemed final by the CFD as of its date, except for the omission of such information as is permitted to be omitted in accordance with paragraph (b)(1) of Rule 15c2-12. The CFD hereby covenants and agrees that, within seven (7) business days from the date hereof, the CFD shall cause a final electronic and/or printed form of the Official Statement to be delivered to the Underwriter in a quantity mutually agreed upon by the Underwriter and the CFD so that the Underwriter may comply with paragraph (b)(4) of Rule 15c2-12 and Rules G-12, G-15, G-32 and G-36 of the MSRB (o) Except as otherwise disclosed in the Preliminary Official Statement, the CFD is, and has always been, in material compliance with respect to all reporting obligations in the last five years that it has undertaken under Rule 15c2-12 for all indebtedness issued by the CFD; (p) Except as otherwise disclosed in the Preliminary Official Statement, the Formation Documents have not been amended, terminated, rescinded or modified; (q) The CFD shall not voluntarily undertake any course of action inconsistent with satisfaction of the requirements applicable to the CFD as set forth in this Purchase Agreement; and (r) The CFD shall not knowingly take or omit to take any action that, under existing law, may adversely affect the exemption from state income taxation or the exclusion from gross income for federal income tax purposes of the interest on the Bonds. 30539.00007\41347746.3 9 3. Representations and Warranties of the Underwriter. The Underwriter hereby agrees with, and makes the following representations and warranties to, the CFD, as of the date hereof and as of the Closing Date, which representations and warranties shall survive the Closing: (a) The Underwriter is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization; (b) This Purchase Agreement has been duly authorized, executed and delivered by the Underwriter and, assuming the due authorization, execution and delivery by the CFD, is the legal, valid and binding obligation of the Underwriter enforceable in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, moratorium or other laws affecting enforcement of creditors’ rights or by the application of equitable principles if equitable remedies are sought; and (c) The Underwriter represents that it is licensed by and registered with the Financial Industry Regulatory Authority as a broker-dealer and the MSRB as a municipal securities dealer. 4. Conditions to the Obligations of the Underwriter. The obligations of the Underwriter to accept delivery of and pay for the Bonds on the Closing Date shall be subject, at the option of the Underwriter, to the accuracy in all material respects of the representations and warranties on the part of the CFD contained herein, as of the date hereof and as of the Closing Date, to the accuracy in all material respects of the statements of the officers and other officials of the CFD made in any certificates or other documents furnished pursuant to the provisions hereof, to the performance by the CFD of its obligations to be performed hereunder at or prior to the Closing Date and to the following additional conditions: (a) At the Closing Date, the Formation Documents, the Resolution of Issuance and the CFD Documents shall be in full force and effect, and shall not have been amended, modified or supplemented, except as may have been agreed to in writing by the Underwriter, and there shall have been taken in connection therewith, with the issuance of the Bonds and with the transactions contemplated thereby and by this Purchase Agreement, all such actions as, in the opinion of Bond Counsel for the CFD, and Best Best & Krieger LLP, counsel to the Underwriter, shall be necessary and appropriate; (b) The information contained in the Official Statement will, as of the Closing Date and as of the date of any supplement or amendment thereto pursuant to Section 2(g) hereof, be true, correct and complete in all material respects and will not, as of the Closing Date or as of the date of any supplement or amendment thereto pursuant to Section 2(g) hereof, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (c) Between the date hereof and the Closing Date, the market price or marketability of the Bonds at their initial offering prices set forth in the Official Statement shall not have been materially adversely affected, in the judgment of the Underwriter (evidenced by a written notice to the CFD terminating the obligation of the Underwriter to accept delivery of and pay for the Bonds), by reason of any of the following: 30539.00007\41347746.3 10 (1) legislation introduced in or enacted (or resolution passed) by the Congress of the United States of America or recommended to the Congress by the President of the United States, the Department of the Treasury, the Internal Revenue Service, or any member of Congress, or favorably reported for passage to either House of Congress by any committee of such House to which such legislation had been referred for consideration or a decision rendered by a court established under Article III of the Constitution of the United States of America or by the Tax Court of the United States of America, or an order, ruling, regulation (final, temporary or proposed), press release or other form of notice issued or made by or on behalf of the Treasury Department or the Internal Revenue Service of the United States of America, with the purpose or effect, directly or indirectly, of imposing federal income taxation upon the interest that would be received by the holders of the Bonds beyond the extent to which such interest is subject to taxation as of the date hereof; (2) legislation introduced in or enacted (or resolution passed) by the Congress of the United States of America, or an order, decree or injunction issued by any court of competent jurisdiction, or an order, ruling, regulation (final, temporary or proposed), press release or other form of notice issued or made by or on behalf of the Securities and Exchange Commission (the “SEC”), or any other governmental agency having jurisdiction of the subject matter, to the effect that obligations of the general character of the Bonds, or the Bonds, including any or all underlying arrangements, are not exempt from registration under or other requirements of the Securities Act of 1933, as amended, or that the Indenture is not exempt from qualification under or other requirements of the Trust Indenture Act of 1939, as amended, or that the issuance, offering or sale of obligations of the general character of the Bonds, or of the Bonds, including any or all underwriting arrangements, as contemplated hereby or by the Official Statement or otherwise is or would be in violation of the federal securities laws, rules or regulations as amended and then in effect; (3) any amendment to the federal or California Constitution or action by any federal or California court, legislative body, regulatory body or other authority materially adversely affecting the tax status of the CFD, its property, income, securities (or interest thereon), the validity or enforceability of the Special Tax or the ability of the CFD to construct or acquire the improvements as contemplated by the Formation Documents, the CFD Documents or the Official Statement; (4) any event occurring, or information becoming known, which, in the judgment of the Underwriter, makes untrue in any material respect any statement or information contained in the Preliminary Official Statement or the Official Statement, or results in the Preliminary Official Statement or the Official Statement containing any untrue statement of a material fact or omitting to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (5) the declaration of war or the escalation of, or engagement in, military hostilities by the United States or the occurrence of any other national or international emergency or calamity relating to the effective operation of the government of, or the financial community in, the United States which, in the judgment of the Underwriter, makes it impracticable or inadvisable to proceed with the offering or the delivery of the Bonds on the terms and in the manner contemplated in the Preliminary Official Statement or the Official Statement; 30539.00007\41347746.3 11 (6) the declaration of a general banking moratorium by federal, State of New York or State of California authorities, or the general suspension of trading on any national securities exchange or minimum or maximum prices for trading shall have been fixed and be in force, or maximum ranges for prices for securities shall have been required and be in force on the New York Stock Exchange or other national securities exchange, whether by virtue of determination by that exchange or by order of the SEC or any other governmental authority having jurisdiction that, in the Underwriter’s reasonable judgment, makes it impracticable for the Underwriter to market the Bonds or enforce contracts for the sale of the Bonds; (7) the imposition by the New York Stock Exchange or other national securities exchange, or any governmental authority, of any material restrictions not now in force with respect to the Bonds or obligations of the general character of the Bonds or securities generally, or the material increase of any such restrictions now in force, including those relating to the extension of credit by, or the charge to the net capital requirements of, the Underwriter; (8) the entry of an order by a court of competent jurisdiction which enjoins or restrains the Water District, or any other governmental entity, agency, or instrumentality from issuing permits, licenses or entitlements within the CFD or which order, in the reasonable opinion of the Underwriter, otherwise materially and adversely affects proposed development of property within the CFD; (9) a material disruption in securities settlement, payment or clearance services affecting the Bonds shall have occurred; (10) there shall have been any material adverse change in the affairs of the CFD that in the Underwriter’s reasonable judgment will materially adversely affect the market for the Bonds or the ability of the Underwriter to enforce contracts for the sale of the Bonds; (11) there shall be established any new restriction on transactions in securities materially affecting the free market for securities (including the imposition of any limitation on interest rates) or the extension of credit by, or a change to the net capital requirements of, underwriters established by the New York Stock Exchange, the SEC, any other federal or State agency or the Congress of the United States, or by Executive Order; (12) a stop order, release, regulation, or no-action letter by or on behalf of the SEC or any other governmental agency having jurisdiction of the subject matter shall have been issued or made to the effect that the issuance, offering, or sale of the Bonds, including all the underlying obligations as contemplated hereby or by the Official Statement, or any document relating to the issuance, offering or sale of the Bonds is or would be in violation of any provision of the federal securities laws at the Closing Date, including the Securities Act, the Exchange Act, and the Trust Indenture Act of 1939, as amended. (d) On the Closing Date, the Underwriter shall have received counterpart originals or certified copies of the following documents, in each case satisfactory in form and substance to the Underwriter: (1) The Formation Documents, the Resolution of Issuance and the CFD Documents, together with a certificate dated as of the Closing Date of the Secretary of the Water 30539.00007\41347746.3 12 District to the effect that each Formation Document and the Resolution of Issuance is a true, correct and complete copy of the one duly adopted by the Board of Directors; (2) The Official Statement; (3) An unqualified approving opinion for the Bonds, dated the Closing Date and addressed to the CFD, of Bond Counsel for the CFD, in the form attached to the Preliminary Official Statement as Appendix E, and an unqualified letter or letters of such counsel, dated the Closing Date and addressed to the Underwriter and the Trustee, to the effect that such approving opinions addressed to the CFD may be relied upon by the Underwriter and the Trustee to the same extent as if such opinions were addressed to it; (4) A supplemental opinion, dated the Closing Date and addressed to the Underwriter, of Bond Counsel for the CFD, to the effect that (i) the Purchase Agreement has been duly executed and delivered by, and is a valid and binding agreement of, the CFD; (ii) the Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Indenture is exempt from qualification pursuant to the Trust Indenture Act of 1939, as amended; and (iii) the statements contained in the Official Statement and under the captions “INTRODUCTION,” “THE BONDS” (other than the captions “Debt Service Schedule” and “Book-Entry Only System”), “SOURCES OF PAYMENT FOR THE BONDS,” “TAX EXEMPTION” AND “LEGAL MATTERS” and in Appendices C and E to the Official Statement, in each case with respect to the Indenture and the Bonds and excluding any material that may be treated as included under such captions by cross-reference or reference to other documents or sources, insofar as such statements expressly summarize certain provisions of the Indenture and the form and content of such counsel’s approving opinion, are accurate in all material respects; (5) An opinion, dated the Closing Date and addressed to the Underwriter, of Best Best & Krieger LLP, as counsel to the Underwriter (“Underwriter’s Counsel”), dated the date of Closing and addressed to the Underwriter in form and substance acceptable to the Underwriter. (6) A certificate or certificates, dated the Closing Date and signed by an authorized officer of the CFD, ratifying the use and distribution by the Underwriter of the Preliminary Official Statement and the Official Statement in connection with the offering and sale of the Bonds; and certifying that (i) the representations and warranties of the CFD contained in Section 2 hereof are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date; (ii) to the best of his or her knowledge, no event has occurred since the date of the Official Statement affecting the matters contained therein which should be disclosed in the Official Statement for the purposes for which it is to be used in order to make the statements and information contained in the Official Statement not misleading in any material respect, and the Bonds, the Formation Documents and the CFD Documents conform as to form and tenor to the descriptions thereof contained in the Official Statement; and (iii) the CFD has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied under the Formation Documents, the Resolution of Issuance, the CFD Documents and the Official Statement at or prior to the Closing Date. (7) An opinion, dated the Closing Date and addressed to the Underwriter, of the General Counsel to the Water District, to the effect that (i) the CFD is a community facilities district duly organized and validly existing pursuant to the Act; (ii) the Resolution of Issuance was 30539.00007\41347746.3 13 duly adopted at a meeting of the Board of Directors of the Water District, which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout and the CFD Documents constitute valid and binding obligations of the CFD, assuming due execution and delivery by the other parties thereto as applicable; (iii) to counsel’s knowledge, the execution and delivery of the CFD Documents and compliance by the CFD with the provisions thereof, under the circumstances contemplated thereby, do not and will not in any material respect conflict with or constitute on the part of the CFD a breach of or default under any agreement or other instrument applicable to or binding upon the CFD, or any existing law, regulation, court order, or consent decree to which the CFD is subject; and (iv) except as stated in the Official Statement, there is no action, suit, proceeding, inquiry, or investigation before or by any court, public board, or body pending with respect to which the Water District or the CFD has been properly served with process or, to my knowledge, threatened against them: (a) which challenges the creation, organization, existence, or powers of the Water District or the CFD, or the titles of their respective officers or the Board of Director members to their respective offices; (b) seeking to enjoin or restrain the issuance, sale, and delivery of the Bonds, the lien, the levy, and the collection of the Special Tax, or the pledge thereof; (c) which questions any of the rights, powers, duties, or obligations of the CFD with respect to the Special Tax or the moneys and assets pledged or to be pledged to pay the principal of, premium, if any, or interest on the Bonds; (d) which questions any authority for the issuance of the Bonds, the validity or enforceability of the Bonds, or the CFD Documents; or (e) which questions the transactions contemplated by the CFD Documents or the Official Statement; (8) A letter, dated the date of the Closing and addressed to the Underwriter and the CFD, of Stradling Yocca Carlson & Rauth, a Professional Corporation, disclosure counsel (the “Disclosure Counsel”), to the effect that, without having undertaken to determine independently the accuracy or completeness of the statements contained in the Preliminary Official Statement or the Official Statement, but on the basis of their participation in conferences with representatives of the CFD, the Special Tax Consultant (defined below) and others, and their examination of certain documents, nothing has come to their attention which has led them to believe that the Preliminary Official Statement as of its date and as of the date of the pricing or the Official Statement as of its date or as of the date of closing contained or contains any untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (except that no opinion or belief need be expressed as to any financial statements or other financial, statistical or engineering data or forecasts, numbers, charts, estimates, projections, assumptions, or expressions of opinion, any information about valuation, appraisals, absorption, archeological or environmental matters, or any information about The Depository Trust Company or the book-entry-only system); (9) One or more certificates dated the Closing Date from Koppel & Gruber Public Finance (the “Special Tax Consultant”) addressed to the CFD and the Underwriter to the effect that (i) the Special Tax if collected in the maximum amounts permitted pursuant to the Rate and Method of Apportionment of Special Taxes of the Improvement Area as of the Closing Date would generate at least 110% of the annual debt service payable with respect to the related issue of Bonds plus budgeted administrative expenses in each year, based on such assumptions and qualifications as shall be acceptable to the Underwriter; and (ii) the description of the Rate and Method of Apportionment of Special Taxes of the Improvement Area that is set forth in the Official 30539.00007\41347746.3 14 Statement and the statements in the Official Statement provided by the Special Tax Consultant concerning Special Taxes in the Improvement Area and all information supplied by it for use in the Official Statement were as of the date of the Official Statement and are as of the Closing Date true and correct, and do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; (10) A certificate of the CFD dated the Closing Date, in a form acceptable to Bond Counsel, that the Bonds are not arbitrage bonds within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended and an Information Return for Tax-Exempt Bond Issues (Internal Revenue Service Form 8038-G), in a form satisfactory to Bond Counsel for filing, executed by a duly authorized officer of the CFD; (11) A certificate of the Trustee and an opinion of counsel to the Trustee dated the Closing Date and addressed to the CFD and the Underwriter to the effect that the Trustee has authorized the execution and delivery of the Indenture and that the Indenture is a valid and binding obligation of the Trustee enforceable in accordance with its terms; (12) A Letter of Representations of [D.R. Horton Los Angeles Holding Company, Inc.] (the “Property Owner”) in connection with the printing of the Preliminary Official Statement dated the date of the Preliminary Official Statement, substantially in the form attached as part of Exhibit C hereto or as such Letter of Representations may be modified with the approval of the Underwriter, Underwriter’s Counsel, Disclosure Counsel, and Bond Counsel, and a Closing Certificate of Property Owner dated the Closing Date, substantially in the form attached as part of Exhibit C hereto; (13) An opinion letter from counsel to the Property Owner addressed to the Underwriter and the CFD in form and substance acceptable to the Underwriter; (14) A letter dated the Closing Date from Integra Realty Resources, Inc. (the “Appraiser”) addressed to the Underwriter and the CFD to the effect that it has prepared the appraisal report (the “Appraisal”) with respect to the property located within the Improvement Area of the CFD, and that (a) the Appraisal, set forth in Appendix G to the Official Statement, may be included in the Preliminary Official Statement and the Official Statement, (b) the Appraisal in Appendix G and the information in the Official Statement referring to the Appraisal do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, and (c) nothing has come to the attention of the Appraiser that would lead the Appraiser to believe that the value of the property in the Improvement Area of the CFD is less than the minimum value of such property reported in the Appraisal; (15) Developer Continuing Disclosure Certificate substantially in the form attached as Appendix D-2 of the Official Statement; (16) A copy of the Letter of Credit/Cash Deposit Agreement regarding the Bonds by and between the CFD and the Property Owner; and (17) Such additional legal opinions, certificates, instruments and other documents as the Underwriter may reasonably request to evidence the truth and accuracy, as of 30539.00007\41347746.3 15 the date hereof and as of the Closing Date, of the statements and information contained in the Preliminary Official Statement and the Official Statement, of the CFD’s representations and warranties contained herein and the due performance or satisfaction by the CFD at or prior to the Closing of all agreements then to be performed and all conditions then to be satisfied by the CFD and the CFD in connection with the transactions contemplated hereby and by the Official Statement. If the CFD shall be unable to satisfy the conditions to the obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds contained in this Purchase Agreement, or if the obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds shall be terminated for any reason permitted by this Purchase Agreement, this Purchase Agreement shall terminate and neither the Underwriter nor the CFD shall be under any further obligation hereunder, except that the respective obligations of the CFD and the Underwriter set forth in Section 6, Section 7 and Section 9 hereof shall continue in full force and effect. 5. Conditions of the CFD’s Obligations. The CFD’s obligations hereunder are subject to the Underwriter’s performance of its obligations hereunder, and are also subject to the following conditions: (a) As of the Closing Date, no litigation shall be pending with proper service of process on the CFD having been accomplished or, to the knowledge of the duly authorized officer of the CFD executing the certificate referred to in Section 4(d)(6) hereof, threatened, to restrain or enjoin the issuance or sale of the Bonds or in any way affecting any authority for or the validity of the Bonds, the Formation Documents, the CFD Documents or the existence or powers of the CFD; and (b) As of the Closing Date, the CFD shall receive the approving opinions of Bond Counsel referred to in Section 4(d)(3) and (4) hereof, dated as of the Closing Date. 6. Expenses. (a) The Underwriter shall be under no obligation to pay, and the CFD shall pay or cause to be paid (solely from proceeds of the Bonds) all expenses incident to the performance of the CFD’s obligations hereunder, including, but not limited to, the cost of printing, engraving and delivering the Bonds to the Underwriter, the cost of preparation, printing, distribution and delivery of the Indenture, the Preliminary Official Statement and the Official Statement, and all other agreements and documents contemplated hereby (and drafts of any thereof) in such reasonable quantities as requested by the Underwriter; and the fees and disbursements of the Trustee for the Bonds, Bond Counsel, Municipal Advisor, Special Tax Consultant, and any accountants, engineers or any other experts or consultants the CFD has retained in connection with the Bonds; and (b) The CFD shall be under no obligation to pay, and the Underwriter shall pay, any fees of the California Debt and Investment Advisory Commission, the cost of preparation of any “blue sky” or legal investment memoranda and this Purchase Agreement; expenses to qualify the Bonds for sale under any “blue sky” or other state securities laws; and all other expenses incurred by the Underwriter in connection with its public offering and distribution of the Bonds (except those specifically enumerated in paragraph (a) of this section), including underwriter’s counsel, CUSIP® and MSRB fees, and any advertising expenses. 30539.00007\41347746.3 16 The CFD acknowledges that the Underwriter will pay from the underwriter’s expense allocation of the underwriting discount certain fees, including the applicable per bond assessment charged by the California Debt and Investment Advisory Commission. 7. Notices. Any notice or other communication to be given to the CFD under this Purchase Agreement may be given by delivering the same in writing to the CFD at 31111 Greenspot Road, Highland, CA 92346, Attention: General Manager; and any notice or other communication to be given to the Underwriter under this Purchase Agreement may be given by delivering the same in writing to Hilltop Securities Inc., 717 N. Harwood, St., Suite 3400, Dallas, TX, 75201, Attention: Public Finance. 8. Parties in Interest. This Purchase Agreement is made solely for the benefit of the CFD and the Underwriter (including their successors or assigns), and no other person shall acquire or have any right hereunder or by virtue hereof. 9. Survival of Representations and Warranties. The representations and warranties of the CFD set forth in or made pursuant to this Purchase Agreement shall not be deemed to have been discharged, satisfied or otherwise rendered void by reason of the Closing or termination of this Purchase Agreement and regardless of any investigations made by or on behalf of the Underwriter (or statements as to the results of such investigations) concerning such representations and statements of the CFD and regardless of delivery of and payment for the Bonds. 10. Effective. This Purchase Agreement shall become effective and binding upon the respective parties hereto upon the execution of the acceptance hereof by the CFD and shall be valid and enforceable as of the time of such acceptance. 11. No Prior Agreements. This Purchase Agreement supersedes and replaces all prior negotiations, agreements and understandings between the parties hereto in relation to the sale of Bonds for the CFD. 12. Governing Law. This Purchase Agreement shall be governed by the laws of the State of California. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 30539.00007\41347746.3 S-1 13. Counterparts. This Purchase Agreement may be executed simultaneously in several counterparts, each of which shall be an original and all of which shall constitute one and the same instrument. Very truly yours, HILLTOP SECURITIES INC. By: Authorized Signatory ACCEPTED: COMMUNITY FACILITIES DISTRICT NO. 2021-1 (MEDITERRA) OF EAST VALLEY WATER DISTRICT By: Authorized Signatory Time of Execution: __________________ Signature Page of Bond Purchase Agreement relating to Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District 2023 Special Tax Bonds (Improvement Area No. 1) 30539.00007\41347746.3 A-1 EXHIBIT A MATURITY SCHEDULE COMMUNITY FACILITIES DISTRICT NO. 2021-1 (MEDITERRA) OF EAST VALLEY WATER DISTRICT 2023 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 1) Maturity Date (September 1) Principal Amount Interest Rate Yield Price ______________ * Term Bond. ** Yield to call date of __________ at par. The purchase price of the Bonds shall be $________, which is the principal amount thereof ($_________) plus net original issue premium of $__________ and less Underwriter’s discount of $__________. 30539.00007\41347746.3 A-2 Maturity Date (September 1) 10% Test Satisfied 10% Test Not Satisfied Subject to Hold-The- Offering-Price Rule 30539.00007\41347746.3 B-1 EXHIBIT B COMMUNITY FACILITIES DISTRICT NO. 2021-1 (MEDITERRA) OF EAST VALLEY WATER DISTRICT, 2023 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 1) RULE 15c2-12 CERTIFICATE The undersigned hereby certifies and represents that he is the General Manager of East Valley Water District and a duly authorized representative of the Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District (the “CFD”), and, as such, is duly authorized to execute and deliver this certificate and further hereby certifies that: (1) this certificate is being delivered in connection with the sale and issuance of the above-captioned bonds (the “Bonds”) in order to enable the underwriter of the Bonds to comply with Rule 15c2-12 promulgated under the Securities and Exchange Act of 1934, as amended (the “Rule”); (2) in connection with the sale and issuance of the Bonds, there has been prepared a Preliminary Official Statement dated _________, 2023 setting forth information concerning the Bonds and the CFD (the “Preliminary Official Statement”); and (3) except for the Permitted Omissions, the Preliminary Official Statement is deemed final within the meaning of the Rule. As used herein, the term “Permitted Omissions” refers to the offering price(s), interest rates(s), selling compensation, aggregate principal amount, principal amount per maturity, delivery dates, ratings and other terms of the Bonds depending on such matters, all as set forth in the Rule. IN WITNESS WHEREOF, I have hereunto set my hand as of ________, 2023. COMMUNITY FACILITIES DISTRICT NO. 2021-1 (MEDITERRA) OF EAST VALLEY WATER DISTRICT By: Michael Moore, General Manager 30539.00007\41347746.3 C-1 EXHIBIT C COMMUNITY FACILITIES DISTRICT NO. 2021-1 (MEDITERRA) OF EAST VALLEY WATER DISTRICT 2023 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 1) LETTER OF REPRESENTATIONS OF [D.R. HORTON LOS ANGELES HOLDING COMPANY, INC.] ________, 2023 East Valley Water District Highland, California Community Facilities District No. 2021-1 (Mediterra) of the East Valley Water District Highland, California Hilltop Securities Inc. Dallas, Texas Ladies and Gentlemen: This Letter of Representations of [D.R. HORTON LOS ANGELES HOLDING COMPANY, INC.] (the “Property Owner”) (the “Letter of Representations”) is delivered pursuant to Section 4(d)(12) of the Bond Purchase Agreement, dated as of ______, 2023 (the “Purchase Agreement”), by and between Hilltop Securities Inc. (the “Underwriter”) and Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District (the “CFD”), to be entered into in connection with the issuance, sale, and delivery by the CFD of its 2023 Special Tax Bonds (Improvement Area No. 1) (the “Improvement Area”) (the “Bonds”). Capitalized terms used herein and not otherwise defined have the meanings ascribed to them in the Purchase Agreement. The undersigned certifies that he is familiar with the facts herein certified and is authorized and qualified to certify the same as an authorized officer or representative of the Property Owner, and the undersigned, on behalf of the Property Owner, further certifies as follows: 1. The Property Owner is duly organized, validly existing, and in good standing under the laws of the State of California and has all requisite corporate right, power, and authority (i) to execute and deliver this Letter of Representations and the Developer Continuing Disclosure Certificate substantially in the form attached as Appendix D-2 to the Preliminary Official Statement (the “Continuing Disclosure Certificate”), (ii) to complete the development (i.e., construction of homes) on its property 30539.00007\41347746.3 C-2 in the CFD as described in the Preliminary Official Statement, and (iii) to perform its obligations under the Continuing Disclosure Certificate. 2. As set forth in the Preliminary Official Statement, title to a certain portion of the property within Improvement Area No. 1 of the CFD is held in the name of the Property Owner (such portion of the property hereinafter referred to as the “Property”). The undersigned, on behalf of the Property Owner, makes the representations herein with respect to all such Property. Except as described in the Preliminary Official Statement, the Property Owners current expectation is that it will remain the party responsible for development of the Property and it has not entered into any agreement to the contrary. 3. Except as set forth in the Preliminary Official Statement, no action, suit, proceeding, inquiry or investigation at law or in equity, before or by any court, regulatory agency, public board or body is pending against the Property Owner (with proper service of process to the Property Owner having been accomplished) or, to the Actual Knowledge of the Undersigned1, is pending against any current Affiliate2 (with proper service of process to such Affiliate having been accomplished) or to the Actual Knowledge of the Undersigned is threatened in writing against the Property Owner or any such Affiliate (a) to restrain or enjoin the collection of the special tax (“Special Tax”) or other sums pledged or to be pledged to pay the principal of and interest on the Bonds (e.g., the Reserve Account established under the Indenture), (b) to restrain or enjoin the development of the Property as described in the Preliminary Official Statement, (c) in any way contesting or affecting the validity of the Special Tax, or (d) which is reasonably likely to materially and adversely affect the Property Owner’s ability to complete the development and sale of the Property as described in the Preliminary Official Statement, to pay the Special Tax due at any time with respect to the Property then owned by the Property Owner (to the extent the responsibility of the Property Owner) prior to delinquency, or the ability of the Property Owner to perform its obligations under the Continuing Disclosure Certificate. 1 Actual Knowledge of the Undersigned” means, as of the date of this letter, the knowledge that the individual signing on behalf of the Property Owner currently has or has obtained through: (i) interviews with such current officers and responsible employees of the Property Owner and its Affiliates (defined below) as such individual has determined are reasonably likely, in the ordinary course of their respective duties, to have knowledge of the matters set forth in this letter; and/or (ii) review of documents that were reasonably available to such individual and which such individual has reasonably deemed necessary for such individual to sign this letter. Such individual has not conducted any extraordinary inspection or inquiry other than such inspections or inquiries as are prudent and customary in connection with the ordinary course of the Property Owner’s current business and operations. The Undersigned has not contacted any individuals who are no longer employed by or associated with the Property Owner or its Affiliates. 2 “Affiliate” means, with respect to the Property, any other Person (defined below): (i) who directly, or indirectly through one or more intermediaries, is currently controlling, controlled by or under common control with the Property Owner; and (ii) for whom information, including financial information or operating data, concerning such Person is material to potential investors in their evaluation of the Improvement Area and investment decision regarding the Bonds (i.e., information regarding such Person’s assets or funds that would materially affect the Property Owner’s ability to develop the Property as described in this Official Statement or to pay its Special Taxes on the portion of the property then-owned by the Property Owner (to the extent the responsibility of the Property Owner) prior to delinquency). “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof. For purposes hereof, the term “control” (including the terms “controlling,” “controlled by” or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. 30539.00007\41347746.3 C-3 4. The Property Owner agrees to execute at the closing of the Bonds the Continuing Disclosure Certificate substantially in the form attached as Appendix D-2 to the Preliminary Official Statement, with such additional changes as may be agreed upon by the Property Owner. Except as disclosed in the Preliminary Official Statement, to the Actual Knowledge of the Undersigned, the Property Owner is not aware of any material failures by it to comply in all material respects with previous continuing disclosure undertakings in a written certificate or agreement executed by it to provide periodic continuing disclosure reports or notices of material events respecting bond offerings in California within the past five years. 5. The Property Owner agrees to provide a letter of credit (“Letter of Credit”) and enter into a cash deposit agreement (“Deposit Agreement’) regarding the Bonds, by and between the Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District (the “CFD”) and the Property Owner, 6. As of the date of the Preliminary Official Statement, the information contained therein solely with respect to the Property Owner, its Affiliates, the proposed development of the Property, ownership of the Property, the Property Owner’s development plan, the Property Owner’s financing plan, the Property Owner’s lenders, if any, and contractual arrangements of the Property Owner or any Affiliates (including, if material to the Property Owner’s development plan or the Property Owner’s financing plan, other loans of such Affiliates) is true and correct in all material respects and did not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. 7. Except as described in the Preliminary Official Statement, there are no material loans outstanding and unpaid and no material lines of credit of the Property Owner or its Affiliates, that are secured by an interest in the Property. To the Actual Knowledge of the Undersigned, neither the Property Owner nor any of its Affiliates is currently in material default on any loans, lines of credit or other obligation related to the development of the Property or any other project which default is reasonably likely to materially and adversely affect the Property Owner’s ability to develop the Property as described in the Preliminary Official Statement, to pay the Special Tax due with respect to the Property then owned by the Property Owner (to the extent the responsibility of the Property Owner) prior to delinquency, or the ability of the Property Owner to perform its obligations under the Continuing Disclosure Certificate. 8. To the Actual Knowledge of the Undersigned, the Property Owner is not aware that any of the Property has a current liability with respect to the presence of a substance presently classified as hazardous under the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 or applicable California law or is adversely affected by the presence of endangered or threatened species or habitat for endangered or threatened species. 9. The Property Owner covenants that, while the Bonds or any refunding obligations related thereto are outstanding, the Property Owner and its Affiliates which it 30539.00007\41347746.3 C-4 controls will not bring any action, suit, proceeding, inquiry or investigation at law or in equity, before any court, regulatory agency, public board or body, that in any way seeks to challenge or overturn the formation of the CFD, to challenge the adoption of the CFD Resolutions of the CFD, to invalidate the CFD or any of the Bonds or any refunding bonds related thereto, or to invalidate the special tax liens imposed under Section 3115.5 of the Streets and Highways Code based on recordation of the notices of special tax lien relating thereto. The foregoing covenant shall not prevent the Property Owner in any way from bringing any other action, suit, proceeding, inquiry or investigation at law or in equity, before any court, regulatory agency, public board or body including, without limitation, (a) an action or suit contending that the Special Tax has not been levied in accordance with the methodologies contained in the Rate and Method of Apportionment of Special Tax, pursuant to which the Special Tax is levied, (b) an action or suit with respect to the application or use of the Special Tax levied and collected or (c) an action or suit to enforce the obligations of the Water District and/or the CFD under the CFD Resolutions, the Indenture, or any other agreements among the Property Owner, the Water District and/or the CFD or to which the Property Owner is a party or beneficiary. 10. The Property Owner consents to the issuance of the Bonds. The Property Owner acknowledges and agrees that the proceeds of the Bonds will be used as described in the Preliminary Official Statement. 11. The Property Owner intends to comply with the provision of the Mello- Roos Community Facilities District Act of 1982, as amended relating to the Notice of Special Tax described in Government Code Section 53341.5 in connection with the sale of the Property, or portions thereof. 12. To the Actual Knowledge of the Undersigned, the Property Owner is able to pay its bills as they become due and no legal proceedings are pending against the Property Owner (with proper service of process having been accomplished) or, to the Actual Knowledge of the Undersigned, threatened in writing in which the Property Owner may be adjudicated as bankrupt or discharged from any and all of its debts or obligations, or granted an extension of time to pay its debts or obligations, or be allowed to reorganize or readjust its debts, or be subject to control or supervision of the Federal Deposit Insurance Corporation. 13. To the Actual Knowledge of the Undersigned, Affiliates of the Property Owner are able to pay their bills as they become due and no legal proceedings are pending against any Affiliate of the Property Owner (with proper service of process having been accomplished) or to the Actual Knowledge of the Undersigned, threatened in writing in which the Affiliates of the Property Owner may be adjudicated as bankrupt or discharged from any or all of their debts or obligations, or granted an extension of time to pay their debt or obligations, or be allowed to reorganize or readjust their debts or obligations, or be subject to control or supervision of the Federal Deposit Insurance Corporation, in any case which is reasonably likely to materially and adversely affect the development of the Property as described in the Preliminary Official Statement, the payment of the Special Tax due at any time with respect to the Property then owned by the Property Owner (to the 30539.00007\41347746.3 C-5 extent the responsibility of the Property Owner) prior to delinquency, or the ability of the Property Owner to perform its obligations under the Continuing Disclosure Certificate. 14. However, to the Actual Knowledge of the Undersigned, during the last five years, neither the Property Owner nor any Affiliate (during their period of ownership) has been delinquent to any material extent in the payment of any ad valorem property tax, special assessment or special tax on property in California owned by the Property Owner or by any such Affiliate (during the period of their ownership) included within the boundaries of a community facilities district or an assessment district that (a) would have caused a draw on a reserve fund relating to such assessment district or community facilities district financing or (b) resulted in a foreclosure action being filed in a court of law against the delinquent Property Owner or its Affiliate. 15. The Property Owner has not filed for the reassessment of the assessed value of portions of the Property, other than in connection with the sale of homes to individual homebuyers. 16. Except as disclosed in the Preliminary Official Statement, to the Actual Knowledge of the Undersigned, there are no claims, disputes, suits, actions or contingent liabilities by and among the Property Owner, its Affiliates or any contractors working on the development of the Property which is reasonably likely to materially and adversely affect the development of the Property as described in the Preliminary Official Statement, the payment of the Special Tax due at any time with respect to the Property then owned by the Property Owner (to the extent the responsibility of the Property Owner) prior to delinquency, or the ability of the Property Owner to perform its obligations under the Continuing Disclosure Certificate. 17. Based upon the current development plans, including, without limitation, the current budget and subject to economic conditions and risks generally inherent in the development of real property, including, but not limited to, the risks described in the Preliminary Official Statement under the section entitled “SPECIAL RISK FACTORS,” to the Actual Knowledge of the Undersigned, the Property Owner presently anticipates that it will have sufficient funds to complete the development of the Property as described in the Preliminary Official Statement and to pay the Special Tax levied against the Property then owned by the Property Owner (to the extent the responsibility of the Property Owner) prior to delinquency and does not anticipate that it will be required to draw upon the Letter of Credit or that the CFD will be required to resort to a draw on the Reserve Account for payment of principal of or interest on the Bonds due to the Property Owner’s nonpayment of the Special Tax. The Property Owner reserves the right to change its respective development plan and financing plan for the Property at any time without notice, and there is no recourse against the Property Owner for the failure to pay the Special Tax other than the filing of a foreclosure action. 18. Solely as to the limited information described in the sections of the Preliminary Official Statement indicated in Paragraph 5 herein, the Property Owner agrees to indemnify and hold harmless, to the extent permitted by law, the Water District, the CFD, the Underwriter and their officials and employees, and each Person, if any, who 30539.00007\41347746.3 C-6 controls any of the foregoing within the meaning of Section 15 of the Securities Act of 1933, as amended, or of Section 20 of the Securities Exchange Act of 1934, as amended (each, an “Indemnified Party” and, collectively, the “Indemnified Parties”), against any and all losses, claims, damages or liabilities, joint or several, to which such Indemnified Party may become subject under any statute or at law or in equity and shall reimburse any such Indemnified Party for any reasonable legal or other expense incurred by it in connection with investigating any such claim against it and defending any such action, insofar as and solely to the extent such losses, claims, damages, liabilities or actions, or legal or other expenses, arise out of or are based upon any untrue statement or alleged untrue statement of a material fact or the omission or alleged omission of a material fact by the Property Owner in the above-referenced information in the Preliminary Official Statement, as of its date, necessary to make the statements made by the Property Owner contained therein, in light of the circumstances under which they were made not misleading. This indemnity provision shall not be construed as a limitation on any other liability which the Property Owner may otherwise have to any Indemnified Party, provided that in no event shall the Property Owner be obligated for double indemnification, or for the negligence or willful misconduct of an Indemnified Party. If any suit, action, proceeding (including any governmental or regulatory investigation), claim, or demand shall be brought or asserted against any Indemnified Party in respect of which indemnification may be sought pursuant to the above paragraph, such Indemnified Party shall promptly notify the Property Owner in writing; provided that the failure to notify the Property Owner shall not relieve it from any liability that it may have hereunder except to the extent that it has been materially prejudiced by such failure; and provided, further, that the failure to notify the Property Owner shall not relieve it from any liability that it may have to an Indemnified Party otherwise than under the above paragraph unless such liability was also conditioned upon such notice. If any such proceeding shall be brought or asserted against an Indemnified Party and it shall have notified the Property Owner thereof, the Property Owner shall retain counsel reasonably satisfactory to the Indemnified Party to represent the Indemnified Party in such proceeding and shall pay the fees and expenses of such counsel related to such proceeding, as incurred. In any such proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Property Owner and the Indemnified Party shall have mutually agreed to the contrary; (ii) the Property Owner has failed within a reasonable time to retain counsel reasonably satisfactory to the Indemnified Party; (iii) the Indemnified Party shall have reasonably concluded that there may be legal defenses available to it that are different from or in addition to those available to the Property Owner such that a material conflict of interest exists for such counsel; or (iv) the named parties in any such proceeding (including any impleaded parties) include both the Property Owner and the Indemnified Party and representation of both parties by the same counsel would be inappropriate due to actual differing interest between them. It is understood and agreed that the Property Owner shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for any given Indemnified Party, and that all such fees and expenses, to the extent reasonable, shall be paid or reimbursed as they are incurred. Any such separate firm shall be designated in writing by the Indemnified Party or Indemnified Parties which it 30539.00007\41347746.3 C-7 represents. The Property Owner shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Property Owner agrees to indemnify each Indemnified Party from and against any loss or liability by reason of such settlement or judgment. The Property Owner shall not, without the written consent of the Indemnified Party, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Party is a party and indemnification could have been sought hereunder by such Indemnified Party, unless such settlement (x) includes an unconditional release of such Indemnified Party, in form and substance reasonably satisfactory to such Indemnified Party, from all liability on claims that are the subject matter of such proceeding and (y) does not include any statement as to or any admission of fault, culpability or a failure to act by or on behalf of any Indemnified Party. 19. If between the date hereof and the Closing Date any event relating to or affecting the Property Owner, its Affiliates, the proposed development of the Property, ownership of the Property, the Property Owner’s development plan, the Property Owner’s financing plan, the Property Owner’s lenders, if any, and contractual arrangements of the Property Owner or any Affiliates (including, if material to the Property Owner’s development plan or the Property Owner’s financing plan, other loans of such Affiliates) shall occur of which the Property Owner has actual knowledge which would cause the information under the sections of the Preliminary Official Statement indicated in Paragraph 5 hereof to contain an untrue statement of a material fact or to omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Property Owner shall notify the Water District, the CFD and the Underwriter and if in the opinion of counsel to the Water District or the Underwriter such event requires the preparation and publication of a supplement or amendment to the Preliminary Official Statement, the Property Owner shall reasonably cooperate with the Water District and the CFD in the preparation of an amendment or supplement to the Preliminary Official Statement in form and substance satisfactory to counsel to the Water District, the CFD and to the Underwriter. 20. The Property Owner agrees to deliver the Closing Certificate of [D.R. HORTON LOS ANGELES HOLDING COMPANY, INC.] (the “Closing Certificate”) dated the date of issuance of the Bonds at the time of issuance of the Bonds in substantially the form attached as Exhibit A. If any event related to or affecting the Property Owner, its Affiliates, or the ownership, development or sale of the Property occurs, as a result of which it is necessary to modify the Closing Certificate, the Property Owner agrees to deliver a new Closing Certificate revised to reflect such event. 21. To the Actual Knowledge of the Undersigned, all information that was submitted by the Property Owner for inclusion in the Appraisal Report dated _____, 2023, prepared by Integra Realty Resources, Inc. with respect to the Property was true and correct in all material respects as of the Date of Value described therein. 22. On behalf of the Property Owner, I have reviewed the contents of this Letter of Representations and have met with counsel to the Property Owner for the purpose of discussing the meaning of the contents of this Letter of Representations. The Property 30539.00007\41347746.3 C-8 Owner acknowledges and understands that a variety of state and federal securities laws, including, but not limited to the Securities Act of 1933, as amended, and Rule 10b-5 promulgated under the Securities Exchange Act of 1934, as amended, may apply to the Property Owner and that under some circumstances, certification as to the matters set forth in this Letter of Representations, without additional disclosures or other action, may not fully discharge all duties and obligations of the Property Owner under such securities laws. [Remainder of Page Intentionally Left Blank] 30539.00007\41347746.3 C-9 The undersigned has executed this Letter of Representations solely in his or her capacity as an authorized officer or representative of the Property Owner and he will have no personal liability arising from or relating to this Letter of Representations. Any liability arising from or relating to this Letter of Representations may only be asserted against the Property Owner. [D.R. HORTON LOS ANGELES HOLDING COMPANY, INC., a California corporation] By: _________________________ Name: __________________________ Title: ___________________________ 30539.00007\41347746.3 C-10 EXHIBIT A $_________ COMMUNITY FACILITIES DISTRICT NO. 2021-1 (MEDITERRA) OF EAST VALLEY WATER DISTRICT, 2023 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 1) CLOSING CERTIFICATE OF [D.R. HORTON LOS ANGELES HOLDING COMPANY, INC.] [Closing Date] East Valley Water District Highland, California Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District Highland, California Hilltop Securities Inc. Dallas, Texas Ladies and Gentlemen: Reference is made to above-captioned bonds (collectively, the “Bonds”), and to the Bond Purchase Agreement, dated _________, 2023 (the “Purchase Agreement”), entered into in connection therewith. This Closing Certificate of [D.R. Horton Los Angeles Holding Company, Inc.] (the “Property Owner”) (the “Closing Certificate”) is delivered pursuant to Section 4(d)(12) of the Purchase Agreement. Capitalized terms used herein and not otherwise defined have the meanings ascribed to them in the Letter of Representations of the Property Owner (the “Letter of Representations”), dated ________, 2023, delivered by the Property Owner. The undersigned certifies that he or she is familiar with the facts herein certified and is authorized and qualified to certify the same as an authorized officer or representative of the Property Owner, and the undersigned, on behalf of the Property Owner, further certifies as follows: 1. The Property Owner has received the final Official Statement dated ________, 2023 relating to the Bonds (the “Official Statement”). To the Actual Knowledge of the Undersigned, each statement, representation and warranty made in the Letter of Representations is true and correct in all material respects on and as of the date hereof with the same effect as if made on the date hereof, except that all references therein to the Preliminary Official Statement shall be deemed to be references to the final Official Statement. 2. The Property Owner has executed the Continuing Disclosure Certificate and delivered the letter of credit, pursuant to the cash deposit agreement regarding the Bonds, by and between the Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District 30539.00007\41347746.3 C-11 (the “CFD”) and the Property Owner, and the Property Owner is duly authorized to perform its respective obligations thereunder. 3. To the Actual Knowledge of the Undersigned, no event has occurred since the date of the Preliminary Official Statement affecting the statements and information described in the sections of the Official Statement referenced in Paragraph 5 of the Letter of Representations (and subject to the limitations and exclusions contained in Paragraph 5 of the Letter of Representations) relating to the Property Owner, its Affiliates, the proposed development of the Property, ownership of the Property, the Property Owner’s development plan, the Property Owner’s financing plan, the Property Owner’s lenders, if any, and contractual arrangements of the Property Owner or any Affiliates (including, if material to the Property Owner’s development plan or the Property Owner’s financing plan, other loans of such Affiliates), which should be disclosed in the Official Statement for the purposes for which it is to be used in order to make such statements and information contained in the Official Statement not misleading in any material respect. 4. For the period through 25 days after the “end of the underwriting period” as defined in the Purchase Agreement to mean the date hereof, if any event relating to or affecting the Property Owner, its Affiliates, the proposed development of the Property, ownership of the Property, the Property Owner’s development plan, the Property Owner’s financing plan, the Property Owner’s lenders, if any, and contractual arrangements of the Property Owner or any Affiliates (including, if material to the Property Owner’s development plan or the Property Owner’s financing plan, other loans of such Affiliates) shall occur as a result of which it is necessary, in the opinion of the Underwriter or counsel to the Water District or the CFD, to amend or supplement the Official Statement in order to make the Official Statement not misleading in the light of the circumstances existing at the time it was delivered to a purchaser, the Property Owner shall reasonably cooperate with the Water District and the Underwriter in the preparation and publication of a supplement or amendment to the information described in the sections of the Official Statement referenced in Paragraph 5 of the Letter of Representations, in form and substance satisfactory to the Underwriter and counsel to the Water District and the CFD which will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time the Official Statement is delivered to a purchaser, not misleading. [Remainder of Page Intentionally Left Blank] 30539.00007\41347746.3 C-12 The undersigned has executed this Closing Certificate solely in his capacity as an authorized officer or representative of the Property Owner and he will have no personal liability arising from or relating to this Closing Certificate. Any liability arising from or relating to this Closing Certificate may only be asserted against the Property Owner. [D.R. HORTON LOS ANGELES HOLDING COMPANY, INC., a California corporation] By:_____________________________ Name: __________________________ Title: ___________________________ 30539.00007\41347746.3 D-1 EXHIBIT D FORM OF ISSUE PRICE CERTIFICATE $_________ COMMUNITY FACILITIES DISTRICT NO. 2021-1 (MEDITERRA) OF EAST VALLEY WATER DISTRICT 2023 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 1) The undersigned, on behalf of Hilltop Securities Inc. (the “Underwriter”) hereby certifies as set forth below with respect to the sale and issuance of the above-captioned obligations (the “Bonds”). 1.Sale of the Bonds. As of the date of this certificate, for each Maturity of the Bonds, the first price at which at least 10% of such Maturity of the Bonds was sold to the Public is the respective price listed in Schedule A. 2.Initial Offering Price of the Hold-the-Offering-Price Maturities. (a) Underwriter offered the Hold-the-Offering-Price Maturity to the Public for purchase at the respective initial offering price listed in Schedule A (the “Initial Offering Price”) on or before the Sale Date. (b) As set forth in the Bond Purchase Agreement, dated _________, 2023, by and between the Issuer (defined below) and Underwriter, Underwriter has agreed in writing that, (i) for the Hold-the-Offering-Price Maturity, it would neither offer nor sell any of the Bonds of such Maturity to any person at a price that is higher than the Initial Offering Price for such Maturity during the holding period for such Maturity (the “hold-the-offering-price rule”), and (ii) any selling group agreement shall contain the agreement of each dealer who is a member of the selling group, and any retail distribution agreement shall contain the agreement of each broker-dealer who is a party to the retail distribution agreement, to comply with the hold-the-offering-price rule. Pursuant to such agreement, no Underwriter (as defined below) will offer or sell any Hold-the-Offering- Price Maturity at a price that is higher than the respective Initial Offering Price for that Maturity of the Bonds during the holding period. 3. The aggregate of the sale prices of the Bonds is $___________ (the “Issue Price”). 4. Based upon our experience in marketing and maintaining a market for obligations having terms and credit arrangements similar to those underlying the Bonds, the Reserve Requirement contemplated under the Bond Indenture, dated as of _______ 1, 2023, by and between the Issuer and U.S. Bank Trust Company, National Association, pursuant to which the Bonds are being issued, was a vital and necessary factor in marketing the Bonds to the public and is both reasonably required and necessary to the maintenance of an orderly market for the Bonds. 5. The weighted average maturity of the Bonds is _____ years. 30539.00007\41347746.3 D-2 6. The Yield on the Bonds is _____________%, being the discount rate which, when used in computing the present worth of all payments of principal and interest to be paid on the Bonds, computed on the basis of a 360-day year and semi-annual compounding produces an amount equal to the Issue Price of the Bonds. 7.Defined Terms. (a) “Issuer” means Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District. (b) “Maturity” means Bonds with the same credit and payment terms. Bonds with different maturity dates, or Bonds with the same maturity date but different stated interest rates, are treated as separate Maturities. (c) “Public” means any person (including an individual, trust, estate, partnership, association, company, or corporation) other than an Underwriter or a related party to an Underwriter. The term “related party” for purposes of this certificate generally means any two or more persons who have greater than 50 percent common ownership, directly or indirectly. (d) “Underwriter” means (i) any person that agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Bonds to the Public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Bonds to the Public). Other capitalized terms used but not defined herein shall have the respective meanings ascribed to such terms in the Certificate Regarding Compliance with Certain Tax Matters (the “Tax Certificate”) executed by the Issuer and the East Valley Water District (the “Water District”) with respect to the Bonds. The representations set forth in this certificate are limited to factual matters only. Nothing in this certificate represents the Underwriter’s interpretation of any laws, including specifically Sections 103 and 148 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder. The undersigned understands that the foregoing information will be relied upon by the Issuer and the Water District with respect to certain of the representations set forth in the Tax Certificate relating to the Bonds and with respect to compliance with the federal income tax rules affecting the Bonds, and by Bond Counsel in connection with rendering its opinion that the interest on the Bonds is excluded from gross income for federal income tax purposes, the preparation of the Internal Revenue Service Form 8038-G, and other federal income tax advice that it may give to the Issuer and the Water District from time to time relating to the Bonds. 30539.00007\41347746.3 D-3 HILLTOP SECURITIES INC. By:_______________________________________ Name:_____________________________________ Dated: ___________, 2023 Stradling Yocca Carlson & Rauth Draft of 6/28/23 1 4857-0577-9565v1/022497-0019 CONTINUING DISCLOSURE CERTIFICATE This Continuing Disclosure Certificate, dated August __, 2023 (the “Disclosure Agreement”) is executed and delivered by Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District (the “Issuer”) in connection with the issuance of the Issuer’s $_____ 2023 Special Tax Bonds (Improvement Area No. 1) (the “Bonds”). The Bonds are being issued pursuant to a Bond Indenture, dated as of August 1, 2023 (the “Bond Indenture”), by and between the Issuer and U.S. Bank Trust Company, National Association. The Issuer covenants as follows: SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the Issuer for the benefit of the Owners and Beneficial Owners of the Bonds and in order to assist the Underwriter in complying with the Rule. SECTION 2. Definitions. In addition to the definitions set forth in the Bond Indenture, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: “Annual Report” means any annual report provided by the Issuer pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. “Beneficial Owner” means any person which: (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries); or (b) is treated as the owner of any Bonds for federal income tax purposes. “Disclosure Representative” means the General Manager of the District, the Chief Financial Officer of the District, or the designee thereof, or such other officer or employee as the Issuer shall designate in writing from time to time. “Dissemination Agent” means, initially, the Issuer, or any successor Dissemination Agent designated in writing by the Issuer and which has filed with the Issuer a written acceptance of such designation. “District” means East Valley Water District. “Financial Obligation” means: (a) a debt obligation; (b) a derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (c) guarantee of (a) or (b). The term “Financial Obligation” does not include municipal securities as to which a final official statement has been provided to the MSRB consistent with the Rule and the issuer thereof has entered into a continuing disclosure undertaking for such municipal securities. “Fiscal Year” means the period from July 1 to June 30, or any other period selected by the Issuer as its fiscal year. “Improvement Area” means Improvement Area No. 1 of the Issuer. “Listed Events” means any of the events listed in Section 5(a) and (b) of this Disclosure Agreement. 2 4857-0577-9565v1/022497-0019 “MSRB” means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other repository of disclosure information that may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future. “Official Statement” means the Official Statement relating to the Bonds, dated July __, 2023. “RMA” means the Rate and Method of Apportionment of Special Tax approved by the qualified electors of the Improvement Area. “Rule” means Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. “State” means the State of California. “Underwriter” means the original underwriters of the Bonds that are required to comply with the Rule in connection with the offering of the Bonds. SECTION 3. Provision of Annual Reports. (a) The Issuer shall, or, upon delivery of the Annual Report to the Dissemination Agent (if other than the Issuer), shall cause the Dissemination Agent to, not later than April 1 of each year, commencing April 1, 2024, provide to the MSRB an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Agreement. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Agreement; provided that the audited financial statements of the Issuer may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date. If the Issuer’s Fiscal Year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(a). (b) Not later than fifteen (15) business days prior to each April 1, the Issuer shall provide the Annual Report to the Dissemination Agent (if other than the Issuer). If the Issuer is unable to provide to the MSRB an Annual Report by the date required in subsection (a), the Issuer shall send a notice to the MSRB in a timely manner in substantially the form attached as Exhibit A. (c) The Dissemination Agent shall: (i) determine each year prior to April 1 the then- applicable rules and electronic format prescribed by the MSRB for the filing of annual continuing disclosure reports; and (ii) if the Dissemination Agent is other than the Issuer, certify to the Issuer that the Annual Report has been filed with the MSRB pursuant to this Disclosure Agreement, and stating, to the extent that it can confirm such filing of the Annual Report, the date that it was filed. 3 4857-0577-9565v1/022497-0019 SECTION 4. Content of Annual Reports. The Issuer’s Annual Report shall contain or include by reference the following: (a) The audited financial statements of the Issuer, if any have been prepared, for the most recent Fiscal Year of the Issuer then ended. If the audited financial statements are being prepared and are not available by the time that the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain any available unaudited financial statements, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. Audited financial statements, if any, of the Issuer shall be audited by such auditor as shall then be required or permitted by State law or the Bond Indenture. Audited financial statements, if prepared by the Issuer, shall be prepared in accordance with generally accepted accounting principles as prescribed for governmental units by the Governmental Accounting Standards Board; provided, however, that the Issuer may from time to time, if required by federal or state legal requirements, modify the basis upon which its financial statements are prepared. In the event that the Issuer shall modify the basis upon which its financial statements are prepared, the Issuer shall provide a notice of such modification to EMMA, including a reference to the specific federal or state law or regulation specifically describing the legal requirements for the change in accounting basis. The financial statements of the District shall be filed to the extent that the Issuer does not prepare audited financial statements, but the financial statements of the District shall not be deemed to be the financial statements of the Issuer unless such audited financial statements contain specific information as to the Issuer, its revenues, expenses and account balances. If the District’s audited financial statements contain specific information as to the Issuer, its revenues, expenses and account balances, the Issuer’s Annual Report shall contain or incorporate by reference the District’s audited financial statements. If the District’s audited financial statements contain specific information as to the Issuer, its revenues, expenses and account balances, but are not available at the time required for filing, unaudited financial statements of the District that contain specific information as to the Issuer, its revenues, expenses and account balances shall be submitted with the Annual Report and the District’s audited financial statements shall be submitted once available. (b) To the extent not contained in the audited financial statements filed pursuant to subsection (a): (i) The total dollar amount of delinquencies in the Improvement Area as of each October 1 preceding to the April 1 Annual Report due date and, in the event that the total delinquencies within the Improvement Area as of such October 1 in any year exceed 5% of the Special Tax for the previous year, delinquency information for each parcel, including the amounts of delinquencies, length of delinquency and status of any foreclosure of each such parcel. (ii) The amount of prepayments of the Special Tax with respect to the Improvement Area for the prior Fiscal Year. (iii) A land ownership summary listing property owners responsible for more than 5% of the annual Special Tax levy, as shown 4 4857-0577-9565v1/022497-0019 on the San Bernardino County Assessor’s last equalized tax roll prior to each September preceding the April 1 Annual Report due date. (iv) The principal amount of the Bonds outstanding and the balance in the Reserve Account (along with a statement of the Reserve Requirement) as of each September 30 preceding the April 1 Annual Report due date. (v) The total assessed value (per the San Bernardino County Assessor’s records) of all parcels currently subject to the Special Tax within the Improvement Area, showing the total assessed valuation for all parcels within the Improvement Area and with separate columns showing the assessed value of improved and unimproved parcels. Parcels are considered improved if there is an assessed value for the improvements in the San Bernardino County Assessor’s records. (vi) An updated table in substantially the form of Table 6 in the Official Statement entitled “Estimated Value-to-Lien Ratios Allocated by Property Ownership” based upon the most recent information available, provided that assessed values shown on the San Bernardino County Assessor’s most recent equalized tax roll prior to each September preceding the April 1 Annual Report due date may be substituted for appraised values. (vii) Any changes to the RMA since the filing of the prior Annual Report. (viii) A copy of the annual information required to be filed by the Water District with the California Debt and Investment Advisory Commission pursuant to the Mello-Roos Community Facilities Act of 1982, as amended and relating generally to outstanding Issuer bond amounts, fund balances, assessed values, special tax delinquencies and foreclosure information. (ix) In addition to any of the information expressly required to be provided under paragraphs (i) through (viii) of this Section, the Issuer shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. Any or all of the items listed above may be included by specific reference to other documents, including official statements for debt issues of the Issuer or related public entities, which have been submitted to the MSRB or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB. The Issuer shall clearly identify each such other document so included by reference. 5 4857-0577-9565v1/022497-0019 SECTION 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5, the Issuer shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds in a timely manner not more than ten (10) Business Days after the event: (i) Principal and interest payment delinquencies. (ii) Unscheduled draws on debt service reserves reflecting financial difficulties. (iii) Unscheduled draws on credit enhancements reflecting financial difficulties. (iv) Substitution of credit or liquidity providers, or their failure to perform. (v) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability or Notices of Proposed Issue (IRS Form 5701 TEB). (vi) Tender offers. (vii) Defeasances. (viii) Rating changes. (ix) Default, event of acceleration, termination event, modification of terms or other similar events under the terms of a Financial Obligation of the Issuer, any of which reflect financial difficulties.* (x) Bankruptcy, insolvency, receivership or similar proceedings. Note: For the purposes of the event identified in subparagraph (x), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person. (b) Pursuant to the provisions of this Section 5, the Issuer shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material, in a timely manner not more than ten (10) Business Days after occurrence: * The Issuer shall interpret the events identified in Section 5(a)(ix) in accordance with Release No. 14-83885 adopted by the Securities and Exchange Commission on August 20, 2018 and or any future guidance or releases provided by the Securities and Exchange Commission. 6 4857-0577-9565v1/022497-0019 (i) Unless described in Section 5(a)(v), other notices or determinations by the Internal Revenue Service with respect to the tax status of the Bonds or other events affecting the tax status of the Bonds. (ii) Modifications to the rights of Bondholders. (iii) Bond calls. (iv) Release, substitution or sale of property securing repayment of the Bonds. (v) Non-payment related defaults. (vi) The consummation of a merger, consolidation or acquisition involving the Issuer or the sale of all or substantially all of the assets of the Issuer, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms. (vii) Appointment of a successor or additional trustee or the change of the name of a trustee. (viii) Incurrence of a Financial Obligation of the Issuer or agreement to covenants, events of default, remedies, priority rights or other similar terms of a Financial Obligation of the Issuer, any of which affect security holders.* (c) If the Issuer determines that knowledge of the occurrence of a Listed Event under subsection (b) would be material under applicable federal securities laws, and if the Dissemination Agent is other than the Issuer, the Issuer shall promptly notify the Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent to file a notice of such occurrence with the MSRB in an electronic format as prescribed by the MSRB in a timely manner not more than ten (10) Business Days after the event. Notwithstanding the foregoing, notice of Listed Events described in subsection (b)(iii) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to Owners of affected Bonds pursuant to the Bond Indenture. (d) If the Issuer determines that a Listed Event under subsection (b) would not be material under applicable federal securities laws and if the Dissemination Agent is other than the Issuer, the Issuer shall so notify the Dissemination Agent in writing and instruct the Dissemination Agent not to report the occurrence. (e) The Issuer hereby agrees that the undertaking set forth in this Disclosure Agreement is the responsibility of the Issuer and, if the Dissemination Agent is other than the Issuer, the Dissemination Agent shall not be responsible for determining whether the Issuer’s instructions to the Dissemination Agent under this Section 5 comply with the requirements of the Rule. * The Issuer shall interpret the events identified in Section 5(b)(viii) in accordance with Release No. 14-83885 adopted by the Securities and Exchange Commission on August 20, 2018 and or any future guidance or releases provided by the Securities and Exchange Commission. 7 4857-0577-9565v1/022497-0019 SECTION 6. Termination of Reporting Obligation. The Issuer’s obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the Issuer shall give notice of such termination in the same manner as for a Listed Event under Section 5(a). SECTION 7. Dissemination Agent. The Issuer may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the form or content of any notice or report prepared by the Issuer pursuant to this Disclosure Agreement. The Dissemination Agent may resign by providing thirty days’ written notice to the Issuer and the Trustee. The Dissemination Agent shall have no duty to review any information provided to it by the Issuer. The Dissemination Agent shall have no duty to prepare any information report, nor shall the Dissemination Agent be responsible for filing any report not provided to it by the Issuer in a timely manner and in a form suitable for filing. SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Issuer may amend this Disclosure Agreement, and any provision of this Disclosure Agreement may be waived, provided that, in the opinion of nationally recognized bond counsel, such amendment or waiver is permitted by the Rule (taking into account any subsequent change in or official interpretation of the Rule), and provided further that the Dissemination Agent shall have first consented to any amendment that modifies or increases its duties or obligations hereunder. In the event of any amendment or waiver of a provision of this Disclosure Agreement, the Issuer shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the Issuer. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements: (a) notice of such change shall be given in the same manner as for a Listed Event under Section 5(a); and (b) the Annual Report for the year in which the change is made shall present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. SECTION 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the Issuer chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the Issuer shall have no obligation under this Disclosure Agreement to update such information or to include it in any future Annual Report or notice of occurrence of a Listed Event. SECTION 10. Default. In the event of a failure by the Issuer to comply with any provision of this Disclosure Agreement, any Owner or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Issuer to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Bond Indenture, and the sole 8 4857-0577-9565v1/022497-0019 remedy under this Disclosure Agreement in the event of any failure of the Issuer or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance. No Owner or Beneficial Owner may institute such action, suit or proceeding to compel performance unless they shall have first delivered to the Issuer satisfactory written evidence of their status as such, and a written notice of and request to cure such failure, and the Issuer shall have refused to comply therewith within a reasonable time. SECTION 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the Issuer agrees, to the extent permitted by law, to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorney’s fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. The Dissemination Agent shall be paid compensation by the Issuer for its services provided hereunder in accordance with its schedule of fees as amended from time to time and all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. In performing its duties hereunder, the Dissemination Agent shall not be deemed to be acting in any fiduciary capacity for the Issuer, the Owners, or any other party. The obligations of the Issuer under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. SECTION 12. Notices. Any notices or communications to or among any of the parties to this Disclosure Agreement may be given to the Dissemination Agent (if other than the Issuer) at such address provided by the Dissemination to the Issuer, and to the Issuer as follows: Disclosure Representative: East Valley Water District 31111 Greenspot Road Highland, California 92346 Attention: Chief Financial Officer SECTION 13. Beneficiaries. This Disclosure Agreement inures solely to the benefit of the Issuer, the Dissemination Agent, the Underwriter and the Owners and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. SECTION 14. Signature. This Disclosure Agreement has been executed by the undersigned on the date hereof, and such signature binds the Issuer to the undertaking herein provided. COMMUNITY FACILITIES DISTRICT NO. 2021-1 (MEDITERRA) OF EAST VALLEY WATER DISTRICT By: Its: General Manager of East Valley Water District Stradling Yocca Carlson & Rauth Draft of 6/28/23 A-1 4857-0577-9565v1/022497-0019 EXHIBIT A NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District Name of Issue: 2023 Special Tax Bonds (Improvement Area No. 1) Date of Issuance: August __, 2023 NOTICE IS HEREBY GIVEN that the Issuer has not provided an Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Certificate executed by the Issuer on the date of issuance of the Bonds. The Issuer anticipates that the Annual Report will be filed by _____________. Dated: Dissemination Agent By: Stradling Yocca Carlson & Rauth Draft of 6/28/23 4873-5460-7710v6/022497-0019 Th i s P r e l i m i n a r y O f f i c i a l S t a t e m e n t a n d t h e i n f o r m a t i o n c o n t a i n e d h e r e i n a r e s u b j e c t t o c o m p l e t i o n o r a m e n d m e n t . T h e s e s e c u r i t i e s m a y n o t b e s o l d , n o r m a y o f f e r s t o b u y t h e m b e a c c e p t e d , p r i o r t o th e t i m e t h e O f f i c i a l S t a t e m e n t i s d e l i v e r e d i n f i n a l f o r m . U n d e r n o c i r c u m s t a n c e s s h a l l t h i s P r e l i m i n a r y O f f i c i a l S t a t e m e n t c o n s t i t u t e a n o f f e r t o s e l l o r t h e s o l i c i t a t i o n o f a n o f f e r t o b u y , n o r s h a l l t h e r e be a n y s a l e o f , t h e s e s e c u r i t i e s i n a n y j u r i s d i c t i o n i n w h i c h s u c h o f f e r , s o l i c i t a t i o n o r s a l e w o u l d b e u n l a w f u l . PRELIMINARY OFFICIAL STATEMENT DATED JULY __, 2023 NEW ISSUE - BOOK-ENTRY ONLY UNRATED In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described in this Official Statement, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals. In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California personal income tax. See the caption “TAX EXEMPTION” with respect to tax consequences relating to the Bonds, including with respect to the alternative minimum tax imposed on certain large corporations for tax years beginning after December 31, 2022. County of San Bernardino State of California $_____* COMMUNITY FACILITIES DISTRICT NO. 2021-1 (MEDITERRA) OF EAST VALLEY WATER DISTRICT 2023 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 1) Dated: Date of Delivery Due: September 1, as shown on the inside front cover page The Community Facilities District No. 2021-1 (Mediterra) of the East Valley Water District 2023 Special Tax Bonds (Improvement Area No. 1) are being issued: (i) to finance the acquisition of certain public facilities and improvements authorized to be financed by Improvement Area No. 1 of the District; (ii) to fund a deposit to the Reserve Account; (iii) to capitalize interest on the Bonds through and including March 1, 2024; (iv) to fund a deposit to the Administrative Expenses Account in the amount of $20,000; and (v) to pay the costs of issuance of the Bonds. Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District has been formed by East Valley Water District and is located in Highland, California. The Bonds are authorized to be issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the Government Code of the State of California), and pursuant to a Bond Indenture, dated as of August 1, 2023, by and between the District and U.S. Bank Trust Company, National Association, as trustee. The Bonds are special obligations of the District and are payable solely from revenues derived from certain annual Special Taxes to be levied on and collected from the owners of certain taxable land within Improvement Area No. 1 of the District and from certain other funds pledged under the Indenture, all as further described in this Official Statement. The Special Taxes are to be levied according to the rate and method of apportionment approved by the legislative body of the District and the qualified electors within Improvement Area No. 1 of the District. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Special Taxes.” The Board of Directors of the Water District is the legislative body of the District. The Bonds are issuable in fully registered form and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York. Individual purchases may be made in integral multiples of $5,000 and will be in book-entry form only. Purchasers of the Bonds will not receive certificates representing their beneficial ownership in the Bonds but will receive credit balances on the books of their respective nominees. The Bonds will not be transferable or exchangeable except for transfer to another nominee of DTC or as otherwise described in this Official Statement. Interest on the Bonds will be payable on March 1 and September 1 of each year, commencing March 1, 2024. Principal of and interest on the Bonds will be paid by the Trustee to DTC for subsequent disbursement to DTC Participants, who are obligated to remit such payments to the Beneficial Owners of the Bonds. See the captions “THE BONDS—General Provisions” and “THE BONDS—Book-Entry Only System.” Neither the faith and credit nor the taxing power of East Valley Water District, the County of San Bernardino, the State of California or any political subdivision of the State other than the District is pledged to the payment of the Bonds. Except for the Net Taxes, no other taxes are pledged to the payment of the Bonds. The Bonds are limited obligations of the District payable solely from Net Taxes and certain other amounts held under the Indenture, as more fully described in this Official Statement. The Bonds are subject to optional redemption, mandatory sinking fund redemption and extraordinary redemption from Special Tax Prepayments prior to maturity. See the caption “THE BONDS—Redemption.” CERTAIN EVENTS COULD AFFECT THE ABILITY OF THE DISTRICT TO PAY THE PRINCIPAL OF AND INTEREST ON THE BONDS WHEN DUE. THE PURCHASE OF THE BONDS INVOLVES SIGNIFICANT INVESTMENT RISKS, AND THE BONDS ARE NOT SUITABLE INVESTMENTS FOR MANY INVESTORS. SEE THE CAPTION “SPECIAL RISK FACTORS” FOR A DISCUSSION OF CERTAIN RISK FACTORS THAT SHOULD BE CONSIDERED, IN ADDITION TO THE OTHER MATTERS SET FORTH IN THIS OFFICIAL STATEMENT, IN EVALUATING THE INVESTMENT QUALITY OF THE BONDS. This cover page contains certain information for general reference only. It is not intended to be a summary of the security or terms of this issue. Investors are advised to read the entire Official Statement to obtain information essential to the making of an informed investment decision. ____________________ MATURITY SCHEDULE (See Inside Cover Page) ____________________ The Bonds are offered when, as and if issued and accepted by the Underwriter, subject to approval as to their legality by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel, and subject to certain other conditions. Stradling Yocca Carlson & Rauth, a Professional Corporation, is serving as Disclosure Counsel with respect to the Bonds. Certain legal matters will be passed on for the Water District and the District by the JC Law Firm, Chino Hills, California, as General Counsel to the District, for the Underwriter by Best Best & Krieger LLP, Riverside, California, and for the Trustee by its counsel. It is anticipated that the Bonds in book-entry form will be available for delivery in book-entry form through the facilities of DTC on or about August __, 2023. * Preliminary; subject to change. 4873-5460-7710v6/022497-0019 Dated: July __, 2023 4873-5460-7710v6/022497-0019 $_____* COMMUNITY FACILITIES DISTRICT NO. 2021-1 (MEDITERRA) OF EAST VALLEY WATER DISTRICT 2023 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 1) MATURITY SCHEDULE Base CUSIP† ______ Maturity Date (September 1)* Principal Amount Interest Rate Yield Price CUSIP† 2024 $%% 2025 2026 2027 2028 2029 2030 2031 2032 $_____ _____% Term Bond Due September 1, 2038*, Yield: _____%, Price: _____, CUSIP† _____ $_____ _____% Term Bond Due September 1, 2043*, Yield: _____%, Price: _____, CUSIP† _____ $_____ _____% Term Bond Due September 1, 2048*, Yield: _____%, Price: _____, CUSIP† _____ $_____ _____% Term Bond Due September 1, 2053*, Yield: _____%, Price: _____, CUSIP† _____ * Preliminary; subject to change. † CUSIP® is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American Bankers Association by FactSet Research Systems Inc. Copyright© CUSIP Global Services. All rights reserved. CUSIP® data herein is provided by CUSIP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP® numbers are provided for convenience of reference only. None of the District, the Underwriter nor their agents or counsel assume responsibility for the accuracy of such numbers. 4873-5460-7710v6/022497-0019 EAST VALLEY WATER DISTRICT BOARD OF DIRECTORS Phillip R. Goodrich, Chair James Morales, Jr., Vice Chair Chris Carrillo Ronald L. Coats David E. Smith DISTRICT STAFF Michael Moore, General Manager/Chief Executive Officer Brian W. Tompkins, Chief Financial Officer Jeff Noelte, Director of Engineering and Operations SERVICES General Counsel JC Law Firm Chino Hills, California Bond Counsel and Disclosure Counsel Stradling Yocca Carlson & Rauth, a Professional Corporation Newport Beach, California Municipal Advisor Fieldman, Rolapp & Associates, Inc. Irvine, California Trustee U.S. Bank Trust Company, National Association Los Angeles, California Special Tax Consultant Koppel & Gruber Public Finance San Marcos, California Appraiser Integra Realty Resources, Inc. Rocklin, California 4873-5460-7710v6/022497-0019 Except where otherwise indicated, all information contained in this Official Statement has been provided by the District and the Water District. No dealer, broker, salesperson or other person has been authorized by the District or the Water District to give any information or to make any representations in connection with the offer or sale of the Bonds other than those contained in this Official Statement and, if given or made, such other information or representations must not be relied upon as having been authorized by the District or the Water District. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. The information contained in this Official Statement has been obtained from sources that are believed to be reliable, but this information is not guaranteed as to accuracy or completeness. The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of this information. Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as “plan,” “expect,” “estimate,” “project,” “budget,” “believe,” “anticipate” or other similar words. Such forward-looking statements include, but are not limited to, certain statements contained in the information under the caption “IMPROVEMENT AREA NO. 1.” The achievement of certain results or other expectations contained in such forward-looking statements involves known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements described in this Official Statement to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The District does not plan to issue any updates or revisions to the forward-looking statements set forth in this Official Statement. In evaluating such statements, potential investors should specifically consider the various factors that could cause actual events or results to differ materially from those indicated by such forward-looking statements. In connection with the offering of the Bonds, the Underwriter may overallot or effect transactions that stabilize or maintain the market price of the Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The Underwriter may offer and sell the Bonds to certain dealers and dealer banks and banks acting as agent and others at prices lower than the public offering prices stated on the inside cover page of this Official Statement, and the Underwriter may change those public offering prices from time to time. The Bonds have not been registered under the Securities Act of 1933, as amended, in reliance upon an exemption contained in such act, and have not been registered or qualified under the securities laws of any state. The Water District maintains a website and certain social media accounts. However, the information presented on such website and social media accounts is not a part of this Official Statement and should not be relied upon in making an investment decision with respect to the Bonds. TABLE OF CONTENTS i 4873-5460-7710v6/022497-0019 INTRODUCTION......................................................1 General....................................................................1 The District.............................................................1 Appraisal.................................................................3 Sources of Payment for the Bonds..........................3 Description of the Bonds........................................5 Tax Matters.............................................................6 Professionals Involved in the Offering...................6 Continuing Disclosure............................................6 Bond Owners’ Risks...............................................7 Other Information...................................................7 THE PROJECT..........................................................7 General....................................................................7 Estimated Sources and Uses of Funds....................8 THE BONDS..............................................................8 General Provisions..................................................8 Book-Entry Only System........................................9 Authority for Issuance ............................................9 Redemption...........................................................10 Registration, Transfer and Exchange....................12 Debt Service Schedule..........................................13 SOURCES OF PAYMENT FOR THE BONDS .....13 Limited Obligations..............................................13 Special Taxes........................................................14 Reserve Account of the Special Tax Fund ...........19 Issuance of Parity Bonds Solely for Refunding Purposes................................................................20 No Acceleration....................................................21 Developer Letter of Credit....................................21 IMPROVEMENT AREA NO. 1..............................22 General Description..............................................22 Status of Development..........................................22 Summary of Development....................................26 Description of Authorized Facilities.....................27 The Developer ......................................................27 Estimated Direct and Overlapping Indebtedness..30 Expected Tax Burden ...........................................31 Estimated Value-to-Lien Ratio.............................33 Appraised Property Values...................................35 Delinquency History.............................................36 Debt Service Coverage.........................................36 SPECIAL RISK FACTORS.....................................37 Concentration of Ownership.................................38 Limited Obligations..............................................38 Insufficiency of Special Taxes..............................39 Split Roll Initiative ...............................................40 Risks of Real Estate Secured Investments Generally...............................................................40 Failure to Develop Properties...............................41 Endangered Species..............................................41 Natural Disasters...................................................42 Hazardous Substances ..........................................42 Shapiro Decision...................................................43 Parity Taxes and Special Assessments.................43 Disclosures to Future Purchasers..........................44 Special Tax Delinquencies ...................................44 Non-Cash Payments of Special Taxes..................45 Payment of the Special Tax is Not a Personal Obligation of the Owners......................................45 Land Values..........................................................45 Billing of Special Taxes........................................46 Value-to-Lien Ratios ............................................46 IRS Audit of Tax-Exempt Bond Issues................47 FDIC/Federal Government Interests in Properties47 Bankruptcy and Foreclosure.................................48 No Acceleration Provision....................................50 Loss of Tax Exemption.........................................50 Limitations on Remedies......................................50 Limited Secondary Market...................................50 California Constitution Article XIIIC and Article XIIID ........................................................50 Ballot Initiatives....................................................51 Tax Cuts and Jobs Act..........................................52 Potential Early Redemption of Bonds from Prepayments or Other Sources..............................52 COVID-19 Outbreak ............................................52 Cybersecurity........................................................53 Climate Change ....................................................53 CONTINUING DISCLOSURE...............................54 District..................................................................54 Developer..............................................................54 LEGAL MATTERS.................................................55 TAX EXEMPTION..................................................55 NO LITIGATION....................................................57 NO RATING............................................................57 UNDERWRITING...................................................57 MUNICIPAL ADVISOR.........................................57 FINANCIAL INTERESTS......................................57 PENDING LEGISLATION.....................................58 ADDITIONAL INFORMATION............................58 APPENDIX A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX................................A-1 APPENDIX B SUPPLEMENTAL INFORMATION CONCERNING THE EAST VALLEY WATER DISTRICT AND THE COUNTY OF SAN BERNARDINO................B-1 APPENDIX C SUMMARY OF INDENTURE.......C-1 APPENDIX D-1 FORM OF DISTRICT CONTINUING DISCLOSURE CERTIFICATE ............................D-1-1 APPENDIX D-2 FORM OF DEVELOPER CONTINUING DISCLOSURE CERTIFICATE ............................D-2-1 APPENDIX E FORM OF OPINION OF BOND COUNSEL.......................................E-1 APPENDIX F BOOK-ENTRY ONLY SYSTEM...F-1 ii 4873-5460-7710v6/022497-0019 APPENDIX G APPRAISAL ...................................G-1 4873-5460-7710v6/022497-0019 [MAP, [FOLLOWED BY AERIAL PHOTO]] 1 4873-5460-7710v6/022497-0019 $_____* COMMUNITY FACILITIES DISTRICT NO. 2021-1 (MEDITERRA) OF EAST VALLEY WATER DISTRICT 2023 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 1) INTRODUCTION General The purpose of this Official Statement, which includes the front cover page, the inside front cover page, the table of contents and the attached appendices (collectively, the “Official Statement”), is to provide certain information concerning the issuance of the Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District 2023 Special Tax Bonds (Improvement Area No. 1) (the “Bonds”). The proceeds of the Bonds will be used: (i) to finance the acquisition of certain public facilities and improvements authorized to be financed by Improvement Area No. 1 of the District (the “Project”); (ii) to fund a deposit to the Reserve Account; (iii) to capitalize interest on the Bonds through and including March 1, 2024; (iv) to fund a deposit to the Administrative Expenses Account in the amount of $20,000; and (v) to pay the costs of issuance of the Bonds. See the captions “THE PROJECT,” “ESTIMATED SOURCES AND USES OF FUNDS” and “SOURCES OF PAYMENT FOR THE BONDS—Reserve Account of the Special Tax Fund.” This introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement, including the appendices, and the documents summarized or described in this Official Statement. A full review should be made of the entire Official Statement. The sale and delivery of Bonds to potential investors is made only by means of the entire Official Statement. All capitalized terms which are used in this Official Statement and not defined have the meanings set forth in Appendix C. The Bonds are authorized to be issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the Government Code of the State of California) (the “Act”), and a Bond Indenture dated as of August 1, 2023 (the “Indenture”) by and between Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District (the “District”) and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”). The Bonds are secured under the Indenture by a pledge of and lien upon certain Net Taxes (as such term is defined in this Official Statement) and all moneys in the Special Tax Fund (other than the Administrative Expenses Account) as described under the Indenture. The District Formation Proceedings. The District was formed by East Valley Water District (the “Water District”) pursuant to the Act. The Act was enacted by the State of California (the “State”) Legislature to provide an alternative method of financing certain public capital facilities and services, especially in developing areas of the State. Any “local agency” (as such term is defined in the Act) may establish a community facilities district to provide for and finance the cost of eligible public facilities and services. Generally, the legislative body of the local agency that forms a community facilities district acts on behalf of such community facilities district as its legislative body. Subject to approval by two-thirds of the votes cast at an election and compliance with the other provisions of the Act, a legislative body of a local agency may issue bonds for a community facilities * Preliminary; subject to change. 2 4873-5460-7710v6/022497-0019 district and may levy and collect a special tax within such community facilities district to repay such indebtedness. Pursuant to the Act, the Board of Directors of the Water District adopted the necessary resolutions stating its intent to establish the District, to authorize the levy of Special Taxes (as such term is defined in this Official Statement) on taxable property within the boundaries of the District, and to have the District incur bonded indebtedness. Following public hearings conducted pursuant to the provisions of the Act, the Board of Directors of the Water District adopted resolutions establishing the District and calling special elections to submit the authorization of the levy of the Special Taxes and the incurring of bonded indebtedness to the qualified voters of the District, including: (i) Resolution No. 2021.24 adopted by the Board of Directors of the Water District on December 8, 2021, pursuant to which the Water District formed the District and designated Improvement Area No. 1 (the “Resolution of Formation”); and (ii) CFD 2021-1 Ordinance No. 1 adopted by the legislative body of the District on December 8, 2021, providing for the levying of the Special Taxes (the “Ordinance”). On December 8, 2021, at an election held pursuant to the Act, the landowners who comprised the qualified voters of Improvement Area No. 1 of the District authorized the District to incur bonded indebtedness in an aggregate principal amount not to exceed $8,000,000 and approved the rate and method of apportionment of the Special Taxes (the “Rate and Method”) for Improvement Area No. 1 of the District to pay the principal of and interest on the bonds of the District. See the caption “THE BONDS—Authority for Issuance.” The Board of Directors of the Water District acts as the legislative body of the District. Description of the Water District, the District and Improvement Area No. 1. The Water District was formed in 1954 and has broad general powers over the use of water and wastewater collection and treatment within its boundaries. Encompassing an area of approximately 30 square miles, the Water District is located in southwestern San Bernardino County (the “County”) in a largely urbanized service area which includes all of the City of Highland and portions of the City of San Bernardino. Approximately 15% of the Water District’s service area is located in unincorporated areas of the County. The service area has a population of approximately 102,000. The Water District supplies potable water to approximately 22,000 single family residential, multi- family residential, commercial (including industrial and governmental) and irrigation and fire line connections. The Water District has three sources of water: (i) groundwater extracted from the Bunker Hill Groundwater Basin; (ii) Santa Ana River flows; and (iii) State Water Project water purchased from San Bernardino Valley Municipal Water District. The Water District provides wastewater service to approximately 20,000 single family residential, multi-family residential connections and non-residential connections within the Water District’s service area. The Water District operates a wastewater collection and transmission system and owns and operates a wastewater treatment plant called the Sterling Natural Resource Center. See Appendix B for general information relating to the Water District and the County. No funds of the Water District or the County are available for payment of the Bonds. The District, which is located entirely within the Water District, consists of Improvement Area Nos. 1 and 2. Special taxes or other moneys derived from Improvement Area No. 2 are not available for payment of debt service on the Bonds. Improvement Area No. 1 of the District consists of approximately 25.24 net taxable acres of residentially zoned land in two zones (Zones A (16.94 net taxable acres) and B (8.30 net taxable acres)). The development plan for Improvement Area No. 1 includes 98 single family residential units in Zone A and 51 single family residential units in Zone B. Improvement Area No. 1 is located directly across Greenspot Road 3 4873-5460-7710v6/022497-0019 from the Water District’s administrative headquarters at the intersection of Campania Road, east of State Route 210 and north of Interstate 10 in the eastern portion of the City of Highland. As of May 15, 2023 (the “Date of Value”), the date of value of the Appraisal (as described under the caption “—Appraisal”), the developer of Improvement Area No. 1, D.R. Horton Los Angeles Holding Company, Inc. (the “Developer”), had completed approximately 72 single family residences, 57 of which were constructed, sold and closed and 3 of which were completed model homes, with 25 homes under construction and 52 partially improved lots in various stages of development, of which 11 were under contract as of the Date of Value. As of July 1, 2023: (i) a total of [__] single family residences were constructed, sold and closed; (ii) [__] single family residences were under construction with building permits received (all of which were under contract); and (iii) [__] parcels (none of which were under contract) were in a finished lot condition with construction yet to begin. The property owners within Improvement Area No. 1, including the Developer, are referred to in this Official Statement as the “Property Owners.” See the caption “IMPROVEMENT AREA NO. 1—General Description.” Appraisal An appraisal (the “Appraisal”) of the parcels within Improvement Area No. 1 dated _____ __, 2023 was prepared by Integra Realty Resources, Inc. in connection with issuance of the Bonds. The purpose of the Appraisal was to estimate the fee simple market value of the parcels in Improvement Area No. 1 by ownership and the aggregate value of all taxable property as of the Date of Value, May 15, 2023, which represents the date of inspection. The values are subject to a hypothetical condition that the Bonds have sold and such values represent not-less-than estimates. According to the Appraisal, the value of the parcels within Improvement Area No. 1 is as follows: Owner Description Appraised Value Individual Homeowners 57 Completed Homes $36,554,000 Vista Verde – Highland, L.P.(1)[40] Partially Improved Lots [4,941,000 Developer 3 Completed Model Homes, 12 Completed Production Homes, 25 Homes Under Construction and [25] Partially Improved Lots 18,522,000] TOTAL $60,017,000 _____________ (1) This entity is an affiliate of the Developer and serves as its land bank. As the Developer commences construction of homes in Improvement Area No. 1, lots are expected to be assigned from Vista Verde – Highland, L.P. to the Developer. See the caption “IMPROVEMENT AREA NO. 1—Status of Development.” See the caption “IMPROVEMENT AREA NO. 1—Appraised Property Value” and Appendix G. None of the District, the Water District or the Underwriter makes any representation as to the accuracy or completeness of the Appraisal. Sources of Payment for the Bonds Special Taxes. As used in this Official Statement, the term “Special Taxes” means the taxes authorized to be levied by the District on property within Improvement Area No. 1 in accordance with the Ordinance, the Resolution of Formation, the Act and the voter approval obtained at the December 8, 2021 election in Improvement Area No. 1, including any scheduled payments and any Prepayments (as such term is defined in the Indenture) of Special Taxes, and the net proceeds of the redemption or sale of property sold as a 4 4873-5460-7710v6/022497-0019 result of foreclosure of the lien of the Special Taxes to the amount of said lien and penalties and interest on such Special Taxes. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Special Taxes” and Appendix A. Under the Indenture, the District has pledged to repay the Bonds from: (i) the “Net Taxes,” which consist of the Special Taxes less amounts set aside to pay Administrative Expenses not to exceed an initial amount of $20,000, escalated by 2% per annum commencing July 1, 2024 (the “Administrative Expenses Cap”); and (ii) amounts in the Special Tax Fund (other than the Administrative Expenses Account) established under the Indenture. The Net Taxes are the primary security for the repayment of the Bonds. In the event that the Special Taxes are not paid when due, the only sources of funds available to pay the debt service on the Bonds are amounts held by the Trustee in the Special Tax Fund, including amounts held in the Reserve Account. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Reserve Account of the Special Tax Fund.” Foreclosure Proceedings. Pursuant to Section 53356.1 of the Act, the District has covenanted in the Indenture with and for the benefit of the Owners that, on or about July 15 of each Fiscal Year (or as reasonably practicable thereafter as Fiscal Year-end collection information is available from the County), the District will review or cause to be reviewed, the public records of the County in connection with the Special Tax of the District levied in the Fiscal Year ending on the July 1 prior to such July 15 in order to determine the amount of Special Taxes actually collected in such Fiscal Year. (1) Individual Delinquencies. If the District determines that any single parcel which is subject to the Special Tax is delinquent in the payment of all or a portion of four semi-annual installments of Special Taxes (regardless of the amount of such delinquency), the District shall, not later than 45 days after such determination, send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to the property owner. If a delinquency remains uncured, the District shall cause judicial foreclosure proceedings to be commenced and filed in the Superior Court of the County not later than 120 days after such determination against any parcel for which a notice of delinquency was given pursuant to the Indenture and for which such Special Taxes remain delinquent, to the extent permissible under applicable law, and cause such proceedings to be diligently pursued until such delinquency is paid. (2) Aggregate Delinquencies. With respect to aggregate delinquencies throughout the District, if the District determines: (i) that the total amount of delinquent Special Taxes for the prior Fiscal Year, including the total of individual delinquencies in described in the paragraph above, exceeds 5% of the total Special Taxes due and payable for the prior Fiscal Year; and (ii) amounts (or the stated amount of a reserve fund surety policy or similar instrument) in the Reserve Account (as such term is defined in the Indenture) are (or, after applying amounts in the Reserve Account to cover such delinquencies, will be) less than the Reserve Requirement (as such term is defined in the Indenture), then the District will, not later than 45 days after such determination, send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to the owner of each delinquent parcel (regardless of the amount of such delinquency). See the caption “SOURCES OF PAYMENT FOR THE BONDS—Reserve Account of the Special Tax Fund.” The District will cause judicial foreclosure proceedings to be commenced and filed in the Superior Court of the County not later than 120 days after such determination against any parcel for which a notice of delinquency was given pursuant to this provision and for which such Special Taxes remain delinquent, and cause such proceedings to be diligently pursued until such delinquency is paid. Notwithstanding the foregoing, in certain instances the amount of a Special Tax delinquency on a particular parcel in relation to the cost of appropriate foreclosure proceedings may be such that the costs do not warrant the foreclosure proceedings costs. In such cases, foreclosure proceedings may, in the District’s discretion, be delayed by the District until there are sufficient Special Tax delinquencies accruing to such parcel (including interest and penalties thereon) to warrant the foreclosure proceeding’s cost. The District will notify the Trustee on or about 5 4873-5460-7710v6/022497-0019 75 days after the determinations of delinquencies as set forth in the Indenture of any delinquency potentially requiring the commencement of a foreclosure action pursuant thereto. (3) Limiting Provisions. Notwithstanding the foregoing, however, the District shall not be required to order, or take action upon, the commencement of foreclosure proceedings described in the paragraph above with respect to individual delinquencies or aggregate delinquencies, if such delinquencies, if not remedied, will not result in a draw on the Reserve Account such that the amount therein will fall below the Reserve Requirement, and no draw has been made on the Reserve Account which has not been restored, such that the Reserve Account will be funded to at least the Reserve Requirement. The foregoing sentence will not affect the requirement(s) for notices of delinquencies as provided for above with respect to individual delinquencies. The District reserves the right to elect to accept payment from a property owner of at least the enrolled amount of the Special Taxes for a parcel(s) but less than the full amount of the penalties, interest, costs and attorneys’ fees related to the Special Tax delinquency for such parcel(s). The District is expressly authorized to include costs and attorneys’ fees related to foreclosure of delinquent Special Taxes as Administrative Expenses (as such term is defined in the Indenture) pursuant to the Indenture. [DISCUSS] Issuance of Parity Bonds Solely for Refunding Purposes. The District may, without the consent of the Owners of the Bonds, issue additional indebtedness secured by the Net Taxes on a parity with the Bonds (“Parity Bonds”), provided that: (i) such Parity Bonds may be issued solely to refund the Bonds or other Parity Bonds for debt service savings; and (ii) the total aggregate principal amount of the Bonds and all Parity Bonds may not exceed $8,000,000 (the amount authorized by the Property Owners under the Rate and Method) at any time. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Issuance of Parity Bonds Solely for Refunding Purposes.” Other taxes and/or special assessments with liens that are equal in priority to the continuing lien of the Special Taxes have been levied as described under the captions “IMPROVEMENT AREA NO. 1—Estimated Direct and Overlapping Indebtedness” and “IMPROVEMENT AREA NO. 1—Expected Tax Burden.” Additional other taxes and/or special assessments may also be levied in the future on the property within Improvement Area No. 1, which could adversely affect the willingness of the Property Owners to pay the Special Taxes when due. See the caption “SPECIAL RISK FACTORS—Parity Taxes and Special Assessments.” No Teeter Plan. To date, there are no current or prior delinquencies in Special Tax payments. Special Taxes were levied for the first time in Fiscal Year 2022-23. Because the County’s “Teeter Plan” (which is the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds, as provided for in Section 4701 et seq. of the Revenue and Taxation Code of the State of California) is not available for community facilities districts such as the District, collections of Special Taxes will reflect actual delinquencies. Neither the Water District, the Underwriter nor the District can predict the willingness or ability of the Property Owners to pay the Special Taxes. Description of the Bonds The Bonds will be issued and delivered as fully registered Bonds, registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”), and will be available to actual purchasers of the Bonds (the “Beneficial Owners”) in the integral multiples of $5,000, under the book- entry system maintained by DTC, only through brokers and dealers who are or act through DTC Participants as described in this Official Statement. Beneficial Owners will not be entitled to receive physical delivery of the Bonds. In the event that the book-entry only system which is described in this Official Statement is no longer 6 4873-5460-7710v6/022497-0019 used with respect to the Bonds, the Bonds will be registered and transferred in accordance with the Indenture. See Appendix C. Principal of, premium, if any, and interest on the Bonds is payable by the Trustee to DTC. Disbursement of such payments to DTC Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Owners is the responsibility of DTC Participants. In the event that the book-entry only system is no longer used with respect to the Bonds, the Beneficial Owners will become the registered owners of the Bonds and will be paid principal and interest by the Trustee, all as described in this Official Statement. See Appendix F. The Bonds are subject to optional redemption, mandatory sinking fund redemption and extraordinary redemption from Special Tax Prepayments as described under the caption “THE BONDS—Redemption.” For a more complete description of the Bonds and the basic documentation pursuant to which they are being sold and delivered, see the caption “THE BONDS” and Appendix C. Tax Matters In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California (“Bond Counsel”), under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described in this Official Statement, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals. In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California personal income tax. See the caption “TAX EXEMPTION” with respect to tax consequences relating to the Bonds, including with respect to the alternative minimum tax imposed on certain large corporations for tax years beginning after December 31, 2022. Professionals Involved in the Offering U.S. Bank Trust Company, National Association will act as Trustee under the Indenture. Koppel & Gruber Public Finance (the “Special Tax Consultant”) has acted as Special Tax consultant to the District. Integra Realty Resources, Inc. (the “Appraiser”), has undertaken the Appraisal of the parcels within Improvement Area No. 1. See Appendix G. Hilltop Securities Inc. is the Underwriter of the Bonds. Certain proceedings in connection with the issuance and delivery of the Bonds are subject to the approval of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, as Bond Counsel and Disclosure Counsel to the District. Certain legal matters will be passed on for the Water District and the District by the JC Law Firm, as General Counsel, for the Underwriter by Best Best & Krieger LLP, Riverside, and for the Trustee by its counsel. For information concerning the extent to which certain of the above-mentioned professionals, advisors, counsel and agents may have a financial or other interest in the offering of the Bonds, see the caption “FINANCIAL INTERESTS.” Continuing Disclosure The District has agreed to provide, or cause to be provided, to the Municipal Securities Rulemaking Board certain annual financial information and operating data and notice of certain enumerated events. The District’s covenants have been made in order to assist the Underwriter in complying with the Securities and Exchange Commission’s Rule 15c2-12 (“Rule 15c2-12”). In addition, although not an obligated party under Rule 15c2-12, the Developer has agreed to provide, or cause to be provided, to the Municipal Securities Rulemaking Board certain annual information and notice of certain enumerated events. See the caption 7 4873-5460-7710v6/022497-0019 “CONTINUING DISCLOSURE” and Appendices D-1 and D-2 for a description of the specific nature of the annual reports and notices of enumerated events to be filed by the District and the Developer. Bond Owners’ Risks Certain events could affect the timely repayment of the principal of and interest on the Bonds when due. See the caption “SPECIAL RISK FACTORS” for a discussion of certain factors that should be considered, in addition to other matters set forth in this Official Statement, in evaluating an investment in the Bonds. The purchase of the Bonds involves significant investment risks, and the Bonds are not suitable investments for many investors. Other Information This Official Statement speaks only as of its date, and the information contained in this Official Statement is subject to change. Brief descriptions of the Bonds and the Indenture are included in this Official Statement. Such descriptions and information do not purport to be comprehensive or definitive. All references to the Indenture, the Bonds and the Constitution and laws of the State as well as the proceedings of the Board of Directors of the Water District, acting as the legislative body of the District, are qualified in their entirety by references to such documents, laws and proceedings, and with respect to the Bonds, by reference to the Indenture. Copies of the Indenture, the District Disclosure Certificate, the Developer Disclosure Certificate and other documents and information that are referred to in this Official Statement are available for inspection and (upon request and payment to the Water District of a charge for copying, mailing and handling) for delivery from the Water District at 31111 Greenspot Road, Highland, California 92346, Attention: Chief Financial Officer. THE PROJECT General A portion of the Bond proceeds will be used by the District to design, construct and/or acquire certain authorized Water District facilities (collectively, the “Project”). The Project components authorized to be financed from Bond proceeds consist of water and sewer improvements that are required to serve the development of Improvement Area No. 1 and are constructed by, or on behalf of the Developer, including, without limitation, in-tract and master-planned water and sewer transmission pipelines, lift station, pump stations, water reservoirs and all appurtenant improvements and soft costs, as well as capacity charges and other incidental expenses related to the planning, design and completion of such facilities. With the exception of [__], such backbone infrastructure has been completed and a portion of the proceeds of the Bonds will be used to reimburse the Developer for a portion of the costs thereof. 8 4873-5460-7710v6/022497-0019 Estimated Sources and Uses of Funds The following table sets forth the expected sources and uses of Bond proceeds: Sources of Funds(1) Principal Amount of Bonds $ Special Taxes on Hand(2) Plus/Less Net Original Issue Premium/Discount Total Sources of Funds $ Uses of Funds(1) Deposit in Project Fund $ Deposit in Administrative Expenses Account Deposit in Capitalized Interest Account(3) Deposit in Reserve Account Costs of Issuance(3) Total Uses of Funds $ (1)Amounts rounded to the nearest dollar. Totals may not add. (2)Reflects Special Tax revenues collected from Fiscal Year 2022-23 levy. (3)Amounts deposited in the Capitalized Interest Account will be applied to pay interest on the Bonds through and including March 1, 2024. (4)Includes fees of the Trustee, the Special Tax Consultant, the Appraiser, legal fees, printing costs, Underwriter’s discount and other costs of issuance. THE BONDS General Provisions The Bonds will be dated their date of delivery and will bear interest at the rates per annum set forth on the inside front cover page of this Official Statement, payable semiannually on March 1 and September 1 of each year, commencing March 1, 2024 (each, an “Interest Payment Date”), and will mature in the amounts and on the dates set forth on the inside cover page of this Official Statement. The Bonds will be issued in fully registered form in integral multiples of $5,000. Interest will be calculated on the basis of a 360-day year comprised of twelve 30-day months. Interest on any Bond will be payable from the Interest Payment Date next preceding the date of authentication of such Bond, unless: (i) such date of authentication is an Interest Payment Date, in which event interest will be payable from such date of authentication; (ii) the date of authentication is after a Record Date but prior to the immediately succeeding Interest Payment Date, in which event interest will be payable from the Interest Payment Date immediately succeeding the date of authentication; or (iii) the date of authentication is prior to the close of business on the first Record Date, in which event interest will be payable from the dated date of the Bonds; provided, however, that if at the time of authentication of a Bond, interest is in default, interest on such Bond will be payable from the last Interest Payment Date to which the interest has been paid or made available for payment or, if no interest has been paid or made available for payment on such Bond, interest on such Bond will be payable from its dated date. The term “Record Date” is defined to mean the fifteenth day of the month preceding an Interest Payment Date, regardless of whether such day is a Business Day. Interest on any Bond will be paid to the person whose name appears as its owner in the registration books held by the Trustee on the close of business on the Record Date. Interest will be paid by check of the Trustee mailed by first class mail, postage prepaid, to the Owner at its address on the registration books. Pursuant to a written request prior to the Record Date of an Owner of at least $1,000,000 in aggregate principal amount of Bonds, payment will be made by wire transfer in immediately available funds to a designated account in the United States. 9 4873-5460-7710v6/022497-0019 Principal of the Bonds and any premium due upon redemption is payable upon presentation and surrender of the Bonds at the principal corporate trust office of the Trustee in Los Angeles, California. Book-Entry Only System The Bonds are issued as fully registered bonds and will be registered in the name of Cede & Co., as nominee of DTC. DTC will act as securities depository of the Bonds. Ownership interests in the Bonds may be purchased in book-entry form only in integral multiples of $5,000. The Trustee will make payments due with respect to the Bonds to DTC but assumes no responsibility for DTC’s disbursement of funds to its principals. See Appendix F. Authority for Issuance The Bonds are issued pursuant to the Act and the Indenture. As required by the Act, the Board of Directors of the Water District has taken the following actions with respect to establishing the District (including Improvement Area No. 1) and the Bonds: Resolutions of Intention. On October 13, 2021, the Board of Directors of the Water District adopted Resolution No. 2021.15 stating its intention to establish the District, including Improvement Area No. 1, and to authorize the levy of a special tax in the District, including Improvement Area No. 1. On October 13, 2021, the Board of Directors of the Water District adopted Resolution No. 2021.16 stating its intention to incur bonded indebtedness in the District, including an amount not to exceed $8,000,000 in Improvement Area No. 1. Resolution of Formation. Following a noticed public hearing on December 8, 2021, the Board of Directors of the Water District, acting as legislative body of the District, adopted the Resolution of Formation, which established the District, including Improvement Area No. 1, and authorized the levy of a special tax within the District. Resolution of Necessity. On December 8, 2021, the Board of Directors of the Water District adopted Resolution No. 2021.01, declaring the necessity to incur bonded indebtedness in an aggregate amount not to exceed $8,000,000 within Improvement Area No. 1. Landowner Election and Declaration of Results. On December 8, 2021, an election was held within each improvement area of the District in which the then-qualified electors within Improvement Area No. 1 approved a ballot proposition: (i) authorizing Improvement Area No. 1 to incur bonded indebtedness in an amount not to exceed $8,000,000 to finance the acquisition and construction of various public capital improvements; (ii) approving the levy of a special tax; and (iii) establishing an appropriations limit for Improvement Area No. 1. On December 8, 2021, the Board of Directors of the Water District adopted Resolution No. 2021.02 pursuant to which the Board of Directors of the Water District, acting as the legislative body of the District, approved the canvass of the votes and declared Improvement Area No. 1 to be fully formed with the authority to levy Special Taxes, to incur bonded indebtedness and to maintain an appropriations limit. Ordinance Levying Special Taxes. On December 8, 2021, the Board of Directors of the Water District, acting as legislative body of the District, adopted the Ordinance levying the Special Tax within Improvement Area No. 1 in accordance with the Rate and Method. The District first levied Special Taxes within Improvement Area No. 1 in Fiscal Year 2022-23. Such Special Taxes were levied in the amount of $142,649.04 on 67 parcels on which building permits had been obtained as of May 1, 2022. Special Tax Lien and Levy. A Notice of Special Tax Lien encumbering the property within Improvement Area No. 1 was filed with the County Recorder on December 16, 2021 as Document No. 2021- 0563498. 10 4873-5460-7710v6/022497-0019 No Prior Bond Issuances. The District has not previously issued bonds secured by Special Taxes levied within Improvement Area No. 1. Resolution of Issuance. On [July 12], 2023, the Board of Directors of the Water District, acting as legislative body of the District, adopted a resolution authorizing the issuance of the Bonds for the purpose of financing the Project. Redemption Optional Redemption. The Bonds are subject to redemption prior to their stated maturity dates at the option of the District on _____ 1, 20__ or any Interest Payment Date thereafter, from such maturities as selected by the District (and by lot within any one maturity), in integral multiples of $5,000, from moneys derived by the District from any source, at a redemption price (expressed as a percentage of the principal amount of the Bonds to be redeemed), together with accrued interest to the date of redemption, as follows: Redemption Date Redemption Price September 1, 20__ and March 1, 20__103% September 1, 20__ and March 1, 20__102 September 1, 20 and March 1, 20__101 September 1, 20__ and any Interest Payment Date thereafter 100 Mandatory Sinking Fund Redemption. The Term Bonds maturing on September 1, 20__ (the “20__ Term Bonds”) will be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account, on September 1, 20__, and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The 20__ Term Bonds so called for redemption will be selected by the Trustee by lot and will be redeemed at a redemption price for each redeemed 20__ Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows: TERM BONDS MATURING SEPTEMBER 1, 20__ Redemption Date (September 1)Principal Amount 20__$ 20__ 20__* _____________ * Maturity. If, during the Fiscal Year immediately preceding one of the redemption dates specified above, the District purchases Bonds, at least 45 days prior to the redemption date the District will notify the Trustee as to the principal amount purchased and the amount of Bonds so purchased will be credited at the time of purchase, to the extent of the full principal amount thereof, to reduce such upcoming Sinking Fund Payment for the Bonds so purchased. All Bonds purchased pursuant to the foregoing sentence will be cancelled pursuant to the Indenture. In the event of a partial optional redemption or extraordinary redemption of the Bonds, each of the remaining Sinking Fund Payments for such Bonds, as described above, will be reduced, as nearly as practicable, on a pro rata basis, in integral multiples of $5,000, as directed by the District. Extraordinary Redemption. The Bonds are subject to extraordinary redemption as a whole, or in part by lot, on any Interest Payment Date, and will be redeemed by the Trustee, from amounts paid by the District to the Trustee and designated by the District as a prepayment of Special Taxes for one or more parcels in 11 4873-5460-7710v6/022497-0019 Improvement Area No. 1 made in accordance with the Rate and Method (“Prepayments”) deposited to the Redemption Account, plus amounts transferred from the Reserve Account, among maturities as directed in writing by the District, at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the redemption date: Redemption Date Redemption Price Any Interest Payment Date from (and including) March 1, 20__ through (and including) March 1, 20__ 103% September 1, 20__ and March 1, 20__102 September 1, 20__ and March 1, 20__101 September 1, 20__ and any Interest Payment Date thereafter 100 Such Special Tax Prepayments could be made by any of the owners of any of the property within Improvement Area No. 1, including the Developer or any individual owner, and they could also be made from the proceeds of bonds issued by or on behalf of an overlapping special assessment district or community facilities district. The resulting extraordinary redemption of Bonds that were purchased at a price greater than the applicable redemption price could reduce the otherwise expected yield on such Bonds. See the caption “SPECIAL RISK FACTORS— Potential Early Redemption of Bonds from Prepayments or Other Sources.” Notice of Redemption. So long as the Bonds are held in book-entry form, notice of redemption will be mailed by the Trustee to DTC and not to the Beneficial Owners of the Bonds under the DTC book-entry only system. Neither the District nor the Trustee is responsible for notifying the Beneficial Owners, who are to be notified in accordance with the procedures in effect for the DTC book-entry system. See Appendix F. The Trustee will give notice, in the name of the District, of the redemption of Bonds; provided, however, that a notice of a redemption to be made from other than from Sinking Fund Payments will be conditioned on there being on deposit on the redemption date sufficient money to pay the redemption price of the Bonds to be redeemed. Such notice of redemption will: (a) specify the CUSIP numbers (if any), the bond numbers and the maturity date or dates of the Bonds selected for redemption, except that where all of the Bonds are subject to redemption, or all of the Bonds of one maturity are to be redeemed, the bond numbers of such issue need not be specified; (b) state the date fixed for redemption and surrender of the Bonds to be redeemed; (c) state the redemption price; (d) state the place or places where the Bonds are to be redeemed; (e) in the case of Bonds to be redeemed only in part, state the portion of such Bond that is to be redeemed; (f) state the date of issue of the Bonds as originally issued; (g) state the rate of interest borne by each Bond being redeemed; and (h) state any other descriptive information needed to identify accurately the Bonds being redeemed as specified by the Trustee. Such notice will further state that on the date fixed for redemption, there will become due and payable on each Bond or portion thereof called for redemption, the principal thereof, together with any premium, and interest accrued to the redemption date, and that from and after such date, interest thereon will cease to accrue and be payable. At least 20 days but no more than 60 days prior to the redemption date, the Trustee will mail a copy of such notice, by first class mail, postage prepaid, to the respective Owners thereof at their addresses appearing on the Bond Register. The actual receipt by the Owner of any Bond or the original purchaser of any Bond of notice of such redemption is not a condition precedent to redemption, and neither the failure to receive nor any defect in such notice will affect the validity of the proceedings for the redemption of such Bonds, or the cessation of interest on the redemption date. A certificate by the Trustee that notice of such redemption has been given as provided in the Indenture will be conclusive as against all parties, and the Owner will not be entitled to show that he or she failed to receive notice of such redemption. In addition to the foregoing notice, further notice will be given by the Trustee as set out below, but no defect in said further notice nor any failure to give all or any portion of such further notice will in any manner defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed. In addition to providing any notice of redemption to the Owners, if the Bonds are held in book-entry form, each further notice of redemption will be sent not later than the date that notice of redemption is mailed to the Owners by 12 4873-5460-7710v6/022497-0019 registered or certified mail or overnight delivery service to the Depository and by electronic notice to the Municipal Securities Rulemaking Board. Upon the payment of the redemption price of any Bonds being redeemed, each check or other transfer of funds issued for such purpose will to the extent practicable bear the CUSIP number (if any) identifying, by issue and maturity, the Bonds being redeemed with the proceeds of such check or other transfer. With respect to any notice of optional redemption or extraordinary redemption of Bonds, such notice will state that such redemption will be conditional upon the receipt by the Trustee on or prior to the date fixed for such redemption of moneys sufficient to pay the principal of, premium, if any, and interest on such Bonds to be redeemed and that, if such moneys have not been so received, said notice will be of no force and effect and the Trustee will not be required to redeem such Bonds. In the event that such notice of redemption contains such a condition and such moneys are not so received, the redemption will not be made, and the Trustee will within a reasonable time thereafter give notice, in the manner in which the notice of redemption was given, that such moneys were not so received. Registration, Transfer and Exchange Registration. The Trustee will keep sufficient books for the registration and transfer of the Bonds. The ownership of the Bonds will be established by the Bond registration books held by the Trustee. Transfer or Exchange. The registration of any Bond may, in accordance with its terms, be transferred upon the Bond registration books by the person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such Bond for cancellation at the Principal Office of the Trustee, accompanied by delivery of a written instrument of transfer in a form acceptable to the Trustee and duly executed by the Owner or his or her duly authorized attorney. Prior to any transfer of the Bonds outside the book-entry system (including, but not limited to, the initial transfer outside the book-entry system) the transferor will provide or cause to be provided to the Trustee all information necessary to allow the Trustee to comply with any applicable tax reporting obligations, including without limitation any cost basis reporting obligations under Internal Revenue Code Section 6045, as amended. The Trustee will conclusively rely on the information provided to it and has no responsibility to verify or ensure the accuracy of such information. Bonds may be exchanged at the Principal Office of the Trustee for a like aggregate principal amount of Bonds for other authorized denominations of the same maturity and issue. The Trustee will not collect from the Owner any charge for any new Bond issued upon any exchange or transfer, but will require the Owner requesting such exchange or transfer to pay any tax or other governmental charge required to be paid with respect to such exchange or transfer. Whenever any Bonds are surrendered for registration of transfer or exchange, the District will execute and the Trustee will authenticate and deliver a new Bond or Bonds, as applicable, of the same issue and maturity, for a like aggregate principal amount; provided that the Trustee is not required to register transfers or make exchanges of: (a) Bonds for a period of 15 days next preceding any selection of the Bonds to be redeemed; or (b) any Bonds chosen for redemption. 13 4873-5460-7710v6/022497-0019 Debt Service Schedule The following table presents the annual debt service on the Bonds (including sinking fund redemptions), assuming that there are no early redemptions. See the caption “—Redemption.” Date (September 1)Principal Interest Total 2023(1)$ $ $ 2024(1) 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 2051 2052 2053 TOTAL $$$ (1)Interest paid from amounts deposited in Capitalized Interest Account. Source: Underwriter. SOURCES OF PAYMENT FOR THE BONDS Limited Obligations The Bonds are special, limited obligations of the District payable only from amounts pledged under the Indenture and from no other sources. The Net Taxes are the primary security for the repayment of the Bonds. Under the Indenture, the District has pledged to repay the Bonds and any Parity Bonds from the Net Taxes (which are Special Taxes less amounts set aside to pay Administrative Expenses not to exceed the Administrative Expenses Cap (as such 14 4873-5460-7710v6/022497-0019 term is defined under the caption “INTRODUCTION—Sources of Payment for the Bonds—Special Taxes”)). Special Tax revenues include the proceeds of the taxes authorized to be levied by the District on property within Improvement Area No. 1 in accordance with the Ordinance, the Resolution of Formation, the Act and the voter approval obtained at the December 8, 2021 election in Improvement Area No. 1, including any scheduled payments and any Prepayments of Special Taxes, and the net proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes to the amount of said lien and penalties and interest on such Special Taxes. In the event that the Special Tax revenues are not received when due, the only sources of funds available to pay the debt service on the Bonds and any Parity Bonds are amounts held by the Trustee in the Special Tax Fund (other than the Administrative Expenses Account), including amounts held in the Reserve Account, for the exclusive benefit of the Owners of the Bonds and any Parity Bonds. Neither the faith and credit nor the taxing power of the Water District, the State or any political subdivision of the State other than the District is pledged to the payment of the Bonds or any Parity Bonds. Except for the Net Taxes, no other taxes are pledged to the payment of the Bonds or any Parity Bonds. The Bonds and any Parity Bonds are neither general or special obligations of the Water District nor general obligations of the District, but are limited obligations of the District payable solely from certain amounts deposited by the District in the Special Tax Fund (exclusive of the Administrative Expenses Account), as more fully described in this Official Statement. Special Taxes Authorization and Pledge. In accordance with the provisions of the Act, the Board of Directors of the Water District established the District on December 8, 2021 for the purpose of financing the acquisition, construction and installation of various public improvements required in connection with the proposed development within the District. At a special election held on December 8, 2021, the owners of the property within Improvement Area No. 1 authorized the District to incur indebtedness in an amount not to exceed $8,000,000 for Improvement Area No. 1, and approved the Rate and Method, which authorized the Special Tax to be levied to repay District indebtedness, including the Bonds. The District has covenanted in the Indenture that, beginning in Fiscal Year 2022-23 and continuing so long as any Bonds or Parity Bonds issued under the Indenture are Outstanding, the legislative body of the District will levy the Special Tax in an amount sufficient, together with other amounts on deposit in the Special Tax Fund and available for such purpose, to pay: (i) the principal of and interest on the Bonds and any Parity Bonds when due; (ii) the Administrative Expenses; and (iii) any amounts required to replenish the Reserve Account of the Special Tax Fund to the Reserve Requirement. The District has further covenanted in the Indenture that it will take no actions that would discontinue or cause the discontinuance of the Special Tax levy or the District’s authority to levy the Special Tax for so long as the Bonds and any Parity Bonds are Outstanding. See the caption “—Special Taxes—Collection and Application of Special Taxes.” The Special Taxes levied in any fiscal year may not exceed the maximum rates authorized pursuant to the Rate and Method. See Appendix A. There is no assurance that the Net Taxes will, in all circumstances, be sufficient to pay the principal of and interest on the Bonds and any Parity Bonds when due. See the caption “SPECIAL RISK FACTORS—Insufficiency of Special Taxes.” Rate and Method of Apportionment of Special Taxes. The Special Taxes will be levied in accordance with the terms of the Rate and Method, the text of which is set forth in Appendix A. All capitalized terms used in this section will have the meaning set forth in Appendix A. This section provides only a summary of the Rate and Method, and is qualified by more complete and detailed information contained in the entire Rate and Method. 15 4873-5460-7710v6/022497-0019 Classification of Assessor’s Parcels. Each Fiscal Year, each Assessor’s Parcel within Improvement Area No. 1 will be classified as Zone A or Zone B and will be further classified as Taxable Property or Exempt Property. In addition, all Taxable Property within Improvement Area No. 1 will be classified as Developed Property, Undeveloped Property or Provisional Undeveloped Property, and all such Taxable Property will be subject to the levy of Special Taxes in accordance with the Rate and Method. Furthermore, each Assessor’s Parcel of Developed Property which is a Residential Unit will be classified to a Land Use Class based on its Building Square Footage. “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 as provided for in Section 8 of the Rate and Method. See Appendix A. “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 of the Rate and Method, 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 of the Rate and Method. See Appendix A. “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. “Taxable Property” means all of the Assessor’s Parcels within the boundaries of Improvement Area No. 1 which are not exempt from the levy of the Special Tax pursuant to law or Section 8 of the Rate and Method. See Appendix A. “Undeveloped Property” means, for each Fiscal Year, all Taxable Property within the boundaries of Improvement Area No. 1 not classified as Developed Property or Provisional Undeveloped Property. Maximum Special Tax – Zone A. As described in Section 3.A of the Rate and Method, the Maximum Special Tax applicable to an Assessor’s Parcel classified as Developed Property in Improvement Area No. 1 Zone A will be the greater of: (i) the Assigned Special Tax determined pursuant to the table below; or (ii) the amount derived by application of the Backup Special Tax. See Appendix A, Section 3.A.i, for a description of the Backup Special Tax. The Assigned Special Tax for Fiscal Year 2023-24 for Developed Property in Zone A is set forth below. Each July 1, the Assigned Special Tax for Developed Property will be increased by 2% of the amount in effect in the prior Fiscal Year. Land Use Class Building Square Footage Rate 1 Less than 2,300 $2,126.58 per Residential Unit 2 2,300 to 2,499 $2,195.24 per Residential Unit 3 2,500 to 2,699 $2,210.84 per Residential Unit 4 2,700 to 2,899 $2,226.46 per Residential Unit 5 Greater than 2,899 $2,242.06 per Residential Unit The Assigned Special Tax for Undeveloped Property and Provisional Undeveloped Property for Fiscal Year 2023-24 will be $12,821.89 per Acre or portion thereof for Zone A. Each July 1, the Assigned Special Tax for Provisional Undeveloped Property will be increased by 2% of the amount in effect in the prior Fiscal Year. 16 4873-5460-7710v6/022497-0019 Maximum Special Tax – Zone B. As described in Section 3.B of the Rate and Method, the Maximum Special Tax applicable to an Assessor’s Parcel classified as Developed Property in Improvement Area No. 1 Zone B will be the greater of: (i) the Assigned Special Tax determined pursuant to the table below; or (ii) the amount derived by application of the Backup Special Tax. See Appendix A, Section 3.B.i, for a description of the Backup Special Tax. The Assigned Special Tax for Fiscal Year 2023-24 for Developed Property in Zone B is set forth below. Each July 1, the Assigned Special Tax for Developed Property will be increased by 2% of the amount in effect in the prior Fiscal Year. Land Use Class Building Square Footage Rate 1 Less than 2,100 $2,110.97 per Residential Unit 2 2,100 to 2,299 $2,126.58 per Residential Unit 3 Greater than 2,299 $2,142.18 per Residential Unit The Assigned Special Tax for Undeveloped Property and Provisional Undeveloped Property for Fiscal Year 2023-24 will be $13,061.18 per Acre or portion thereof for Zone B. Each July 1, the Assigned Special Tax for Provisional Undeveloped Property will be increased by 2% of the amount in effect in the prior Fiscal Year. Method of Apportionment of the Special Tax. For each Fiscal Year, the CFD Administrator will calculate the Annual Special Tax on all Taxable Property in accordance with the following steps: Step 1: The Special Tax will be levied Proportionately on each Assessor’s Parcel of Developed Property up to 100% of the applicable Assigned Special Tax in Zone A and B as necessary 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 will be levied Proportionately on each Assessor’s Parcel of Undeveloped Property up to 100% of the Maximum Special Tax for Undeveloped Property. Step 3: If additional monies are needed to satisfy the Special Tax Requirement after the first two 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 Backup Special Tax will be increased Proportionately from the Assigned Special Tax up to 100% of the Maximum Special Tax for each such Assessor’s Parcel. Step 4: If additional monies are needed to satisfy the Special Tax Requirement after the first three 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 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 Improvement Area No. 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 Improvement Area No. 1. Exemptions. The CFD Administrator will 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 17 4873-5460-7710v6/022497-0019 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 Improvement Area No. 1 to less than 16.94 Acres in Zone A and 8.30 Acres in Zone B. Assessor’s Parcels which cannot be classified as Exempt Property because such classification would reduce the sum of all Taxable Property in Improvement Area No. 1 to less than 16.94 Acres in Zone A and 8.30 Acres in Zone B will be classified as Provisional Undeveloped Property, and will continue to be subject to the Special Tax accordingly. Tax exempt status for this purpose will be assigned by the CFD Administrator in the chronological order in which property becomes eligible for classification as Exempt Property. 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 foregoing paragraph that would make such Assessor’s Parcel eligible to be classified as Exempt Property, such Assessor’s Parcel will cease to be classified as Exempt Property and will be deemed to be Taxable Property. Prepayment of Special Taxes. 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 conditions set forth in Section 6 of the Rate and Method. See Appendix A. Collection and Application of Special Taxes. The Special Taxes are levied and collected by the Treasurer-Tax Collector of the County in the same manner and at the same time as ad valorem property taxes. The District may, however, collect the Special Taxes at a different time or in a different manner if necessary to meet its financial obligations. The District has made certain covenants in the Indenture for the purpose of ensuring that the current Maximum Special Tax rates and method of collection of the Special Taxes are not altered in a manner that would impair the District’s ability to collect sufficient Special Taxes to pay debt service on the Bonds, any Parity Bonds and Administrative Expenses when due. In particular, the District has covenanted that it will not initiate proceedings to reduce the maximum Special Tax rates for Improvement Area No. 1. See the captions “SPECIAL RISK FACTORS—Proposition 218” and “SPECIAL RISK FACTORS— Non-Cash Payments of Special Taxes.” Although the Special Taxes constitute liens on taxable parcels within Improvement Area No. 1, they do not constitute a personal indebtedness of the owners of property within Improvement Area No. 1. Moreover, other liens for taxes and assessments already exist on the property located within Improvement Area No. 1 and others could come into existence in the future in certain situations without the consent or knowledge of the Water District, the District or the Property Owners. See the captions “SPECIAL RISK FACTORS—Parity Taxes and Special Assessments.” Under the terms of the Indenture, all Special Tax revenues received by the District on behalf of Improvement Area No. 1 are to be deposited in the Special Tax Fund. Special Tax revenues deposited in the Special Tax Fund each Fiscal Year are to be applied by the Trustee under the Indenture in the following order of priority: (i) to deposit an amount up to the Administrative Expenses Cap in the Administrative Expense Fund to pay Administrative Expenses (although a greater amount may be deposited in the Administrative Expense Fund if necessary to collect Delinquent Special Taxes); (ii) to pay the interest on, the principal of and redemption premium on the Bonds and any Parity Bonds when due; (iii) to replenish the Reserve Account to the Reserve Requirement; (iv) to make any required transfers to the Rebate Fund; (v) to pay Administrative Expenses of the District above the Administrative Expenses Cap referenced in clause (i) above; and (vi) for any other lawful purpose of the District, including the acquisition and construction of authorized facilities. See Appendix C. 18 4873-5460-7710v6/022497-0019 Pursuant to Section 53321(d) of the Act, the Special Tax levied against any parcel for which an occupancy permit for private residential use has been issued may not be increased as a consequence of delinquency or default by the owner of any other parcel within Improvement Area No. 1 by more than 10% above the amount that would have been levied in such Fiscal Year had there never been any such delinquencies or defaults. Consequently, although the maximum Special Tax prescribed by the Rate and Method could be materially higher than the expected Special Tax levy in a given year, the Special Tax levy cannot be increased for residential property by more than 10% in such year. Debt Service Coverage from Net Taxes. See the caption “IMPROVEMENT AREA NO. 1—Debt Service Coverage” for projected debt service coverage on the Bonds from Net Taxes. Debt service coverage is expected to be at least 110% through the scheduled maturity of the Bonds. See the caption “THE BONDS— Debt Service Schedule” for scheduled debt service on the Bonds. Covenant to Foreclose; Proceeds of Foreclosure Sales. The net proceeds received following a judicial foreclosure sale of land within the District resulting from a Property Owner’s failure to pay the Special Taxes when due are included within the Net Taxes pledged to the payment of principal of and interest on the Bonds under the Indenture. Pursuant to Section 53356.1 of the Act, the District has covenanted in the Indenture with and for the benefit of the Owners that, on or about July 15 of each Fiscal Year (or as reasonably practicable thereafter as Fiscal Year-end collection information is available from the County), the District will review or cause to be reviewed, the public records of the County in connection with the Special Tax of the District levied in the Fiscal Year ending on the July 1 prior to such July 15 in order to determine the amount of Special Taxes actually collected in such Fiscal Year. (1) Individual Delinquencies. If the District determines that any single parcel which is subject to the Special Tax is delinquent in the payment of all or a portion of four semi-annual installments of Special Taxes (regardless of the amount of such delinquency), the District shall, not later than 45 days after such determination, send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to the property owner. If a delinquency remains uncured, the District shall cause judicial foreclosure proceedings to be commenced and filed in the Superior Court of the County not later than 120 days after such determination against any parcel for which a notice of delinquency was given pursuant to the Indenture and for which such Special Taxes remain delinquent, to the extent permissible under applicable law, and cause such proceedings to be diligently pursued until such delinquency is paid. (2) Aggregate Delinquencies. With respect to aggregate delinquencies throughout the District, if the District determines: (i) that the total amount of delinquent Special Taxes for the prior Fiscal Year, including the total of individual delinquencies in described in the paragraph above, exceeds 5% of the total Special Taxes due and payable for the prior Fiscal Year; and (ii) amounts (or the stated amount of a reserve fund surety policy or similar instrument) in the Reserve Account (as such term is defined in the Indenture) are (or, after applying amounts in the Reserve Account to cover such delinquencies, will be) less than the Reserve Requirement (as such term is defined in the Indenture), then the District will, not later than 45 days after such determination, send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to the owner of each delinquent parcel (regardless of the amount of such delinquency). See the caption “— Reserve Account of the Special Tax Fund.” The District will cause judicial foreclosure proceedings to be commenced and filed in the Superior Court of the County not later than 120 days after such determination against any parcel for which a notice of delinquency was given pursuant to this provision and for which such Special Taxes remain delinquent, and cause such proceedings to be diligently pursued until such delinquency is paid. Notwithstanding the foregoing, in certain instances the amount of a Special Tax delinquency on a particular parcel in relation to the cost of appropriate foreclosure proceedings may be such that the costs do not warrant the foreclosure proceedings costs. In such cases, foreclosure proceedings may, in the District’s discretion, be delayed by the 19 4873-5460-7710v6/022497-0019 District until there are sufficient Special Tax delinquencies accruing to such parcel (including interest and penalties thereon) to warrant the foreclosure proceeding’s cost. The District will notify the Trustee on or about 75 days after the determinations of delinquencies as set forth in the Indenture of any delinquency potentially requiring the commencement of a foreclosure action pursuant thereto. (3) Limiting Provisions. Notwithstanding the foregoing, however, the District shall not be required to order, or take action upon, the commencement of foreclosure proceedings described in the paragraph above with respect to individual delinquencies or aggregate delinquencies, if such delinquencies, if not remedied, will not result in a draw on the Reserve Account such that the amount therein will fall below the Reserve Requirement, and no draw has been made on the Reserve Account which has not been restored, such that the Reserve Account will be funded to at least the Reserve Requirement. The foregoing sentence will not affect the requirement(s) for notices of delinquencies as provided for above with respect to individual delinquencies. The District reserves the right to elect to accept payment from a property owner of at least the enrolled amount of the Special Taxes for a parcel(s) but less than the full amount of the penalties, interest, costs and attorneys’ fees related to the Special Tax delinquency for such parcel(s). The District is expressly authorized to include costs and attorneys’ fees related to foreclosure of delinquent Special Taxes as Administrative Expenses (as such term is defined in the Indenture) pursuant to the Indenture. Reserve Account of the Special Tax Fund In order to secure further the payment of principal of and interest on the Bonds and any Parity Bonds, the District will maintain in the Reserve Account an amount equal to the least of: (a) Maximum Annual Debt Service (as such term is defined in Appendix C) on the Bonds and any Parity Bonds; (b) 125% of average Annual Debt Service (as such term is defined in Appendix C) on the then-Outstanding Bonds and any Parity Bonds; or (c) 10% of the initial outstanding principal amount of the Bonds and any Parity Bonds (the “Reserve Requirement”). The initial Reserve Requirement is $_____. Moneys in the Reserve Account will be used solely for the purpose of paying the principal of, including Sinking Fund Payments, and interest on the Bonds and any Parity Bonds when due in the event that the moneys in the Interest Account and the Principal Account of the Special Tax Fund are insufficient or moneys in the Redemption Account of the Special Tax Fund are insufficient to make a Sinking Fund Payment when due, and for the purpose of making any required transfer to the Rebate Fund pursuant to the Indenture upon written direction from the District. If the amounts in the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund are insufficient to pay the principal of, including Sinking Fund Payments, or interest on any Bonds and Parity Bonds when due, or amounts in the Special Tax Fund are insufficient to make transfers to the Rebate Fund when required, the Trustee will withdraw from the Reserve Account for deposit in the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund or the Rebate Fund, as applicable, moneys necessary for such purposes. Whenever moneys are withdrawn from the Reserve Account, after making the required transfers to the Administrative Expenses Account, the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund, the Trustee will transfer to the Reserve Account from available moneys in the Special Tax Fund, or from any other legally available funds that the District elects to apply to such purpose, the amount needed to restore the amount of such Reserve Account to the Reserve Requirement. Moneys in the Special Tax Fund will be deemed available for transfer to the Reserve Account only if the Trustee determines that such amounts will not be needed to make the deposits required to be made to the Administrative Expenses Account, the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund on or before the next September 1. If amounts in the Special Tax Fund, together with any other amounts transferred to replenish the Reserve Account, are inadequate to restore the Reserve Account to the Reserve 20 4873-5460-7710v6/022497-0019 Requirement, then the District will include the amount necessary fully to restore the Reserve Account to the Reserve Requirement in the next annual Special Tax levy to the extent of the maximum permitted Special Tax rates. In connection with an optional redemption of Bonds or Parity Bonds, an extraordinary redemption of Bonds or Parity Bonds from Prepayments or a partial defeasance of Bonds or Parity Bonds, amounts in the Reserve Account may be applied to such redemption or partial defeasance so long as the amount on deposit in the Reserve Account following such redemption or partial defeasance equals the Reserve Requirement. The District will set forth in a Certificate of an Authorized Representative the amount in the Reserve Account to be transferred to the Redemption Account on a redemption date or to be transferred to partially defease Bonds, and the Trustee will make such transfer on the applicable redemption or defeasance date, subject to the limitation in the preceding sentence. To the extent that the Reserve Account is at the Reserve Requirement as of the first day of the final Bond Year for the Bonds or an issue of Parity Bonds, amounts in the Reserve Account may be applied to pay the principal of and interest due on the Bonds and Parity Bonds, as applicable, in the final Bond Year for such issue. Moneys in the Reserve Account in excess of the Reserve Requirement that are not transferred in accordance with the preceding provisions will be withdrawn from the Reserve Account on the Business Day before each March 1 and September 1 and transferred to the Interest Account of the Special Tax Fund. The Reserve Requirement may be initially satisfied in whole or part by the deposit of a reserve fund surety policy or similar instrument therein. The District will have no obligation to replace such a policy or similar instrument or to fund the Reserve Account with cash if, at any time that the Bonds are Outstanding, any rating assigned to the provider of the policy or similar instrument is downgraded, suspended or withdrawn, or amounts are not available under such policy or similar instrument other than as a result of a draw thereon. Issuance of Parity Bonds Solely for Refunding Purposes The District may at any time after the issuance and delivery of the Bonds under the Indenture issue Parity Bonds payable from the Net Taxes and other amounts deposited in the Special Tax Fund (other than in the Administrative Expenses Account therein) and secured by a lien and charge upon such amounts equal to the lien and charge securing the Outstanding Bonds and any other Parity Bonds theretofore issued hereunder or under any Supplemental Indenture solely for the purpose of refunding Bonds or other Parity Bonds. Parity Bonds may be issued subject to the following additional specific conditions, which are conditions precedent to the issuance of any such Parity Bonds: (a) The District is in compliance with all covenants set forth in the Indenture and any Supplemental Indenture then in effect, and a certificate of the District to that effect has been filed with the Trustee; provided, however, that Parity Bonds may be issued notwithstanding the fact that the District is not in compliance with all such covenants so long as immediately following the issuance of such Parity Bonds the District will be in compliance with all such covenants. (b) The issuance of such Parity Bonds has been duly authorized pursuant to the Act and all applicable laws, and the issuance of such Parity Bonds has been provided for by a Supplemental Indenture duly adopted by the District which specifies the following: (1) the authorized principal amount of such Parity Bonds; (2) the date and the maturity date or dates of such Parity Bonds; provided that: (i) each maturity date falls on a September 1; (ii) all such Parity Bonds of like maturity are identical in all respects, except as to number; and (iii) fixed serial maturities or Sinking Fund Payments, or any combination thereof, are established to provide for the retirement of all such Parity Bonds on or before their respective maturity dates; 21 4873-5460-7710v6/022497-0019 (3) the description of the Parity Bonds, the place of payment thereof and the procedure for execution and authentication; (4) the denominations and method of numbering of such Parity Bonds; (5) the amount and due date of each mandatory Sinking Fund Payment, if any, for such Parity Bonds; (6) the amount, if any, to be deposited from the proceeds of such Parity Bonds in the Reserve Account of the Special Tax Fund to increase the amount therein to the Reserve Requirement; (7) the form of such Parity Bonds; and (8) such other provisions as are necessary or appropriate and not inconsistent with the Indenture. In addition, the District must provide a certificate of an Independent Financial Consultant or Participating Underwriter (as such term is defined in the Continuing Disclosure Certificate related to such Parity Bonds, or, if none, in the Continuing Disclosure Certificate related to the Bonds) certifying that in each Bond Year the Annual Debt Service on the Bonds and Parity Bonds to remain Outstanding following the issuance of the Parity Bonds proposed to be issued is less than the Annual Debt Service on the Bonds and Parity Bonds Outstanding prior to the issuance of such Parity Bonds. The maximum amount of bonded indebtedness that has been approved by the Property Owners within Improvement Area No. 1 is $8,000,000. No Acceleration The principal of and interest on the Bonds are not subject to acceleration under the Indenture in the event of a default relating to the Bonds. See Appendix C under the caption “EVENTS OF DEFAULT— Remedies of Owners” for a description of remedies that are available to the Bond Owner if the District defaults under the Indenture. Developer Letter of Credit The Developer has provided an irrevocable letter of credit (the “Letter of Credit”) to secure payment of Special Taxes levied on the parcels in Improvement Area No. 1 which are owned by the Developer, which identifies the Trustee as beneficiary. The amount available to be drawn under the Letter of Credit (the “Stated Amount”) is equal to the Developer’s share of one year of the Special Taxes requirement to be levied on all parcels in Improvement Area No. 1 which are then owned by the Developer. The initial Stated Amount of the Letter of Credit will be $201,749.34. The initial term of the Letter of Credit is one year from its date of issuance, and the Developer will maintain and cause the issuing bank to renew the Letter of Credit each year prior to the expiration date thereof until the parcels that are then owned by the Developer are responsible for less than 30% of the Special Taxes to be levied in Improvement Area No. 1 in the then current Fiscal Year. Notwithstanding the foregoing, the District may elect to waive the requirement for the Developer to maintain the Letter of Credit or may release the Letter of Credit at any time without the consent of the Owners or Beneficial Owners of the Bonds. The Letter of Credit is not pledged to the repayment of debt service on the Bonds. 22 4873-5460-7710v6/022497-0019 IMPROVEMENT AREA NO. 1 General Description The District, which is located entirely within the Water District in the eastern part of the City of Highland, consists of Improvement Area Nos. 1 and 2. Special taxes or other moneys derived from the Water District or Improvement Area No. 2 are not available for payment of debt service on the Bonds. Improvement Area No. 1 consists of approximately 25.24 net taxable acres of residentially zoned land in two zones (Zones A (16.94 net taxable acres) and B (8.30 net taxable acres)) that were previously undeveloped. The development plan for Improvement Area No. 1, which is called “Vista Verde at Mediterra,” includes 98 single family residential units in Zone A and 51 single family residential units in Zone B, all of which will be subject to the Special Taxes under the Rate and Method. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Special Taxes—Rate and Method of Apportionment of Special Taxes” and Appendix A. Improvement Area No. 1 is located directly across Greenspot Road from the Water District’s administrative headquarters at the intersection of Campania Road, east of State Route 210 and north of Interstate 10 in the eastern portion of the City of Highland. The backbone infrastructure necessary to undertake residential development within the District, including streets, curbs, gutters, sidewalks, streetlights and storm drains, is complete. As of the Date of Value, the Developer had completed approximately 72 single family residences, 57 of which were constructed, sold and closed and 3 of which were completed model homes, with 25 homes under construction and 52 partially improved lots in various stages of development, of which 11 were under contract as of the Date of Value. As of July 1, 2023: (i) a total of [__] single family residences were constructed, sold and closed; (ii) [__] single family residences were under construction with building permits received (all of which were under contract); and (iii) [__] parcels (none of which were under contract) were in a finished lot condition with construction yet to begin. Improvement Area No. 1 is part of a development known as Mediterra, which was approved by the City of Highland in 2021 for, among other uses, single-family homes, 2.22 acres for a community park and swimming pool site, a 3.14 acre water quality basin and associated infrastructure. Mediterra is generally located in the eastern portion of the City of Highland north of Greenspot Road at the intersection of Campania Road. [With the exception of certain infrastructure improvements], the development of Mediterra is complete. Status of Development As of the Date of Value: (a) individual homeowners owned 57 homes; and (b) the Developer (or its land bank entity) owned: (i) 3 completed model homes; (ii) 25 homes under construction; and (iii) 52 partially improved lots, of which 35 had received building permits (30 of which are considered Developed Property for purposes of the levy of Special Taxes in Fiscal Year 2023-24). See the caption “SOURCES OF PAYMENT FOR THE BONDS—Special Taxes—Rate and Method of Apportionment of Special Taxes.” Of the homes that are completed or under construction, 11 were under contract for sale to individual homeowners as of the Date of Value. The Developer acquired the property in Improvement Area No. 1 in 2020 and 2021. The Developer subsequently assigned its interest in 115 of the lots in Improvement Area No. 1 to Vista Verde – Highland, L.P., a Delaware limited partnership, which serves as the Developer’s land bank. The Developer has re- acquired all but 27 of the lots that were assigned to Vista Verde – Highland, L.P., with 13 lots re-acquired on June 20, 2023 (after the Date of Value) and the remaining lots scheduled to be re-acquired by the Developer as follows: (i) 18 lots on August 20, 2023; and (ii) the final 9 lots on October 20, 2023. All lots have been graded. 23 4873-5460-7710v6/022497-0019 As of July 1, 2023: (i) a total of [__] single family residences were constructed, sold and closed; (ii) [__] single family residences were under construction with building permits received ([__] of which were under contract); and (iii) [__] parcels (none of which were under contract) were in a finished lot condition with construction yet to begin. The Developer has received building permits for [__] lots and anticipates that the final home closing will occur in or about [____ 202__]. Model homes for the development are located within Improvement Area No. 1. Notwithstanding the Developer’s current expectations with respect to home construction and sales to individual homeowners, inflation, recession, geopolitical concerns, supply chain difficulties, a resurgence of the COVID-19 pandemic or other factors could adversely impact the timing of the development described above. See the caption “SPECIAL RISK FACTORS.” [As of the date of this Official Statement, the Developer has not experienced any material increases in costs, delays in home construction resulting from decisions to reduce financing for Improvement Area No. 1, work stoppages, reduced attendance of workers, delays in the delivery of building materials, delays in obtaining inspections and approvals or reductions in operating revenues that would require the Developer to draw upon credit or liquidity facilities that are available to it. See the caption “SPECIAL RISK FACTORS.”] The Developer’s on-site sales office for Improvement Area No. 1 is open. The Developer currently reports robust interest from prospective homebuyers, but any changes in the Developer’s sales operations could make it more difficult to sell completed homes. The development within Improvement Area No. 1 consists of a single product line of detached single family homes being marketed by the Developer as “Mediterra” on lots ranging in size from 1,898 square feet to 2,929 square feet. A summary of the product line is set forth below. TABLE 1 COMMUNITY FACILITIES DISTRICT NO. 2021-1 (MEDITERRA) OF EAST VALLEY WATER DISTRICT IMPROVEMENT AREA NO. 1 SUMMARY OF PRODUCT LINES Plan Living Area (square feet)Stories Bedrooms/ Bathrooms Garage Size (Cars) Expected Number of Units(1) Estimated Base Home Sale Price(2) Zone A 2239 2,239 1 4/3 2 1 Not yet available 2319 2,319 1 4/3 2 30 $702,000 2537 2,537 2 5/3 2 21 700,000 2722 2,722 2 4/3 2 22 Not yet available 2929 2,929 2 5/4 3 24 Not yet available Zone B 1898 1,898 1 4/3 2 16 $595,000 2239 2,239 2 4/3 2 17 Not yet available 2435 2,435 2 4/3.5 2 18 660,000 (1)As May 15, 2023. Subject to change based upon market conditions. (2)As of May 15, 2023. Subject to change based upon market conditions. Excludes any lot premiums, options, upgrades, incentives and any selling concessions or price reductions which may be offered. Source: Developer. 24 4873-5460-7710v6/022497-0019 Final maps for the Mediterra development, including the 149 residential lots in Improvement Area No. 1, were recorded at the office of the County Recorder on August 31, 2021. The Developer has obtained building permits for 90 lots as of the May 1 prior to the Date of Value. Accordingly, these 90 lots will be classified as Developed Property by the May 1 deadline set forth in the Rate and Method for purposes of the Fiscal Year 2023-24 Special Tax levy. See Appendix A. 25 4873-5460-7710v6/022497-0019 TABLE 2 COMMUNITY FACILITIES DISTRICT NO. 2021-1 (MEDITERRA) OF EAST VALLEY WATER DISTRICT IMPROVEMENT AREA NO. 1 ASSIGNED SPECIAL TAXES Land Use Class Residential Floor Area (square feet) Assigned Special Tax Rates Estimated Fiscal Year 2023-24 Special Tax Rates(1) Number of Units Aggregate Estimated Fiscal Year 2023-24 Special Tax Levy(1) Percent of Total(1) Zone A 1(2)< 2,300 $ 2,126.58 $2,126.58 1 $ 2,126.58 1.09% 2 2,300-2,499 2,195.24 2,195.24 15 32,928.60 16.85 3 2,500-2,699 2,210.84 2,210.84 10 22,108.40 11.31 4 2,700-2,899 2,226.46 2,226.46 10 22,264.60 11.39 5 > 2,899 2,242.06 2,242.06 10 22,420.60 11.47 Total Developed 46 $101,848.78 52.12% Undeveloped/Provisional Undeveloped Per Acre $12,821.89 $ 0.00 9.3794 0.00 0.00 Total Zone A $101,848.78 52.12% Zone B 1 < 2,100 $ 2,110.97 $2,110.97 15 $ 31,664.40 16.20% 2 2,100-2,299 2,126.58 2,126.58 14 29,772.12 15.24 3 > 2,299 2,142.18 2,142.18 15 32,132.70 16.44 Total Developed 44 $ 93,569.22 47.88% Undeveloped/Provisional Undeveloped Per Acre $13,061.18 $ 0.00 1.1987 0.00 0.00 Total Zone B $ 93,569.22 47.88% Grand Total $195,418.00 100.00% (1)Assumes that all units with a permit issued prior to May 1, 2023 will be levied as Developed Property under the Rate and Method for Fiscal Year 2023-24. (2)This unit (Assessor’s Parcel Number 0297-321-34-0000) is a model home which is located in Zone A but which represents a planned unit from the Zone B development. Source: Koppel & Gruber Public Finance. 26 4873-5460-7710v6/022497-0019 Summary of Development The following table presents a summary of the status of development within Improvement Area No. 1 as of the Date of Value. TABLE 3 COMMUNITY FACILITIES DISTRICT NO. 2021-1 (MEDITERRA) OF EAST VALLEY WATER DISTRICT IMPROVEMENT AREA NO. 1 SUMMARY OF DEVELOPMENT AS OF DATE OF VALUE(1) Land Use Class Expected Number of Homes at Buildout Estimated Square Footage(2) Closed to Individual Homeowners(3) Completed Homes Owned by the Developer(3)(4) Homes Under Construction Owned by the Developer(3) Finished Lots Owned by the Developer(3) Estimated Base Home Sale Price(3) Zone A 1(5)1 2,239 - 1 - - $605,000 2 30 2,319 8 5 2 15 646,000 3 21 2,537 5 3 2 11 660,000 4 22 2,722 7 2 1 12 672,000 5 24 2,929 9 1 - 14 710,000 Total Developed 98 29 12 5 52 Total Undeveloped 0 - - - - - N/A Total Zone A 98 - 29 12 5 52 Zone B 1 16 1,898 9 3 4 - $583,000 2 17 2,239 9 - 8 - 605,000 3 18 2,435 10 - 8 - 630,000 Total Developed 51 28 3 20 - Total Undeveloped 0 - - - - - N/A Total Zone B 51 31 - 20 - Grand Total 149 57 15 25 52 (1)Although not shown in the table, as of July 1, 2023: (i) a total of [__] single family residences were constructed, sold and closed; (ii) [__] single family residences were under construction with building permits received (of which [__] were under contract); and (iii) [__] parcels (none of which were under contract) were in a finished lot condition with construction yet to begin. (2)See Table 1 under the caption “—General Description” for a description of the features of each plan. (3)Based on values set forth in the Appraisal and provided by the Appraiser as of the Date of Value (May 15, 2023). See the caption “—Appraised Property Values.” (4)Includes model homes. (5)This unit (Assessor’s Parcel Number 0297-321-34-0000) is a model home which is located in Zone A but which represents a planned unit from the Zone B development.. Sources: Developer; Koppel & Gruber Public Finance. 27 4873-5460-7710v6/022497-0019 Description of Authorized Facilities The facilities authorized to be financed from Bond proceeds consist of in-tract and master-planned water and sewer transmission pipelines, lift station, pump stations, water reservoirs and all appurtenant improvements and soft costs, as well as capacity charges and other incidental expenses related to the planning, design and completion of such facilities. With the exception of [__], such backbone infrastructure has been completed and proceeds of the Bonds will be used to reimburse the Developer for a portion of the costs thereof. The Developer The information about the Developer contained in this Official Statement has been provided by representatives of the Developer and has not been independently confirmed or verified by the Underwriter, the Water District or the District. None of the Underwriter, the Water District or the District makes any representation as to the accuracy or adequacy of the information contained in this section. There may be material adverse changes to this information after the date of this Official Statement. No assurance can be given that the proposed development within Improvement Area No. 1 will occur as described below. As the proposed development progresses and homes are sold, it is expected that the ownership of the land within Improvement Area No. 1 will become more diversified. No assurance can be given that development within Improvement Area No. 1 will occur in a timely manner or in the configuration described herein, or that any Property Owner described herein will obtain or retain ownership of any of the land within Improvement Area No. 1. The Bonds and the Special Taxes are not personal obligations of any Property Owners, including the Developer, and, in the event that a Property Owner defaults in the payment of the Special Taxes, the District may proceed with judicial foreclosure against the delinquent property but has no direct recourse to the assets of any Property Owner. As a result, other than as provided herein, no financial statements or information is, or will be, provided about the Developer or any other Property Owner. The Bonds are secured solely by the Net Taxes and other amounts pledged under the Indenture. See the caption “SOURCES OF PAYMENT FOR THE BONDS.” The information under this caption includes forward-looking statements. See the cautionary information regarding forward-looking statements in this Official Statement on the page immediately preceding the Table of Contents. As previously discussed, such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by such statements. Readers are cautioned not to place undue reliance on such forward-looking statements, which only speak as of the date of this Official Statement. General. The Developer, D.R. Horton Los Angeles Holding Company, Inc., a California corporation, is engaged in the design, construction and sale of single-family homes throughout southern California. The Developer is a wholly owned subsidiary of D.R. Horton, Inc. a Delaware corporation that is headquartered in Fort Worth, Texas (the “Parent”). The Parent was founded in 1978 is engaged in the design, construction and sale of master planned communities throughout the United States, including approximately 110 markets in 33 states, under the names of D.R. Horton, America’s Builder, Emerald Homes, Express Homes and Freedom Homes. The Parent is a publicly traded company listed on the New York Stock Exchange under the ticker symbol “DHI.” The Parent is subject to the informational requirements of the Securities Exchange Act of 1934, and in accordance therewith is obligated to file reports, proxy statements, and other information, including financial statements, with the Securities and Exchange Commission (the “SEC”). Such filings set forth, among other things, certain data relative to the consolidated results of operations and financial position of the Parent and its subsidiaries. The SEC maintains an Internet website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC, 28 4873-5460-7710v6/022497-0019 including the Parent. The address of such Internet web site is www.sec.gov. All documents subsequently filed by the Parent pursuant to the requirements of the Securities Exchange Act of 1934 after the date of this Official Statement will be available for inspection in such manner as the SEC prescribes. The foregoing Internet addresses and references to filings with the SEC are included for reference only, and the information on these Internet sites and on file with the SEC are not a part of this Official Statement and are not incorporated by reference into this Official Statement. No representation is made in this Official Statement as to the accuracy or adequacy of the information contained on these Internet sites. Representations. In connection with the issuance of the Bonds, an authorized representative or officer of the Developer will execute a certificate (the “Developer Letter of Representations”) containing the following representations (among others) as of its date: (1) Except as set forth in this Official Statement, no action, suit, proceeding, inquiry or investigation at law or in equity, before or by any court, regulatory agency, or public board or body is pending against the Developer (with proper service of process to the Developer having been accomplished) or, to the Actual Knowledge of the Developer,* is pending against any current Affiliate† (with proper service of process to such Affiliate having been accomplished) or to the Actual Knowledge of the Developer is threatened in writing against the Developer or any such Affiliate: (a) to restrain or enjoin the collection of Special Taxes levied on the property within the Improvement Area that is held in the name of the Developer (the “Property”) by the District or other sums pledged or to be pledged to pay the principal of and interest on the Bonds (e.g., the Reserve Account of the Special Tax Fund established under the Indenture); (b) to restrain or enjoin the development of the Property as described in this Official Statement; (c) in any way contesting or affecting the validity of the Special Taxes; or (d) which, if successful, is reasonably likely to materially and adversely affect the Developer’s ability to complete the development and sale of the Property as described in this Official Statement or to pay the Special Taxes due at any time with respect to the Property then-owned by the Developer (to the extent the responsibility of the Developer) prior to delinquency or the ability of the Developer to perform its obligations under the Developer Disclosure Certificate (as such term is defined under the caption “CONTINUING DISCLOSURE—Developer”). (2) Except as described in this Official Statement, there are no material loans outstanding and unpaid and no material lines of credit of the Developer or its Affiliates, that are secured by an interest in the Property. To the Actual Knowledge of the Developer, neither the Developer nor any of its Affiliates is currently in material default on any loans, lines of credit or other obligation related to the development of the Property or any other project which default is reasonably likely to materially and adversely affect the Developer’s ability to develop the Property as described in this Official Statement or to pay the Special Taxes * “Actual Knowledge of the Developer” means, as of the date of signing the Developer Letter of Representations, the knowledge that the individual signing on behalf of the Developer currently has or has obtained through: (i) interviews with such current officers and responsible employees of the Developer and its Affiliates as such individual has determined are reasonably likely, in the ordinary course of their respective duties, to have knowledge of the matters set forth in the Developer Letter of Representations; and/or (ii) review of documents that were reasonably available to such individual and which such individual has reasonably deemed necessary for such individual to sign the Developer Letter of Representations. Such individual has not conducted any extraordinary inspection or inquiry other than such inspections or inquiries as are prudent and customary in connection with the ordinary course of the Developer’s current business and operations. The individual signing the Developer Letter of Representations has not contacted any individuals who are no longer employed by or associated with the Developer or its Affiliates. † “Affiliate” means, with respect to the Developer, any other Person: (i) who directly, or indirectly through one or more intermediaries, is currently controlling, controlled by or under common control with the Developer; and (ii) for whom information, including financial information or operating data, concerning such Person is material to potential investors in their evaluation of the Improvement Area and investment decision regarding the Bonds (i.e., information regarding such Person’s assets or funds that would materially affect the Developer’s ability to develop the Property as described in this Official Statement or to pay its Special Taxes on the portion of the property then-owned by the Developer (to the extent the responsibility of the Developer) prior to delinquency). “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof. For purposes hereof, the term “control” (including the terms “controlling,” “controlled by” or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. 29 4873-5460-7710v6/022497-0019 due with respect to the Property prior to delinquency or to perform its obligations under the Developer Disclosure Certificate. (3) To the Actual Knowledge of the Developer, the Developer is able to pay its bills as they become due and no legal proceedings are pending against the Developer (with proper service of process having been accomplished) or, to the Actual Knowledge of the Developer, threatened in writing in which the Developer may be adjudicated as bankrupt or discharged from any and all of its debts or obligations, or granted an extension of time to pay its debts or obligations, or be allowed to reorganize or readjust its debts, or be subject to control or supervision of the Federal Deposit Insurance Corporation. (4) To the Actual Knowledge of the Developer, during the last five years, neither the Developer nor any current Affiliate (during their period of ownership) has been delinquent to any material extent in the payment of any ad valorem property tax, special assessment or special tax on property in California owned by the Developer or any such Affiliate (during the period of their ownership) included within the boundaries of a community facilities district or an assessment district in California that: (a) caused a draw on a reserve fund relating to such assessment district or community facilities district financing; or (b) resulted in a foreclosure action being commenced against the delinquent Developer or Affiliate by a court filing. (5) Except as disclosed in this Official Statement, to the Actual Knowledge of the Developer, there are no claims, disputes, suits, actions or contingent liabilities by and among the Developer, its Affiliates or any contractors working on the development of the Property which are reasonably likely to materially and adversely affect the Developer’s ability to develop the Property as described in this Official Statement, the payment of the Special Tax due at any time with respect to the Property then owned by the Developer (to the extent the responsibility of the Developer) prior to delinquency, or the ability of the Property Owner to perform its obligations under the Developer Disclosure Certificate. (6) Based upon the current development plans, including, without limitation, the current budget and subject to economic conditions and risks generally inherent in the development of real property, including, but not limited to, the risks described under the caption “SPECIAL RISK FACTORS,” to the Actual Knowledge of the Developer, the Developer presently anticipates that it will have sufficient funds to complete the development of the Property as described in this Official Statement and to pay the Special Taxes levied against the portion of the Property then-owned by the Developer (to the extent the responsibility of the Developer) prior to delinquency and does not anticipate that it will be required to draw upon the Letter of Credit or that the District will be required to resort to a draw on the Reserve Account of the Special Tax Fund for payment of principal of or interest on the Bonds due to the Developer’s nonpayment of Special Taxes. The Developer reserves the right to change its respective development plan and financing plan for the Property at any time without notice, and there is no recourse against the Developer for the failure to pay the Special Taxes other than the filing of a foreclosure action. Financing Plan. As of ______ __, 2023, the Developer has expended approximately $[__] million in land acquisition, infrastructure work, site development costs, home construction costs and other development, marketing and sales costs (exclusive of internal financing payment, corporate overhead allocation and other carrying costs) related to its property in Improvement Area No. 1. The Developer estimates that it will require approximately an additional $[__] million to complete the development, sale and conveyance to individual homebuyers of the remaining residences that the Developer plans to construct on its remaining property in Improvement Area No. 1. The Developer plans to finance its development activities within Improvement Area No. 1 with a combination of internal sources and home sales proceeds. The Developer has used, or intends to use, some or all of these sources of funds to finance the development costs required as a condition of development and the construction, marketing and carrying costs of residential home construction, including property taxes and the Special Taxes, while it owns property in Improvement Area No. 1. [The Developer has not drawn upon and 30 4873-5460-7710v6/022497-0019 does not intend to draw upon any third party financing in order to complete the development of Improvement Area No. 1.] Notwithstanding the Developer’s belief that it will have sufficient funds to complete its planned development in Improvement Area No. 1, no assurance can be given that sources of financing available to the Developer will be sufficient to complete the property development and home construction as currently anticipated. While the Developer has made such internal financing available in the past, there can be no assurance whatsoever of its willingness or ability to do so in the future. Neither the Developer nor any of its affiliates has any legal obligation of any kind to make any such funds available or to obtain loans. Other than pointing out the willingness of the Developer to provide internal financing in the past, the Developer has not represented in any way that it will do so in the future. If and to the extent that internal financing, Bond proceeds and home sales revenues are inadequate to pay the costs that are required to complete the Developer’s planned development in Improvement Area No. 1 and other financing by the Developer is not put into place, there could be a shortfall in the funds required to complete the proposed development by the Developer and portions of the project may not be developed. The development and financing plans that are discussed above are solely projections as of the dates indicated in this Official Statement. Such plans are subject to change. No assurance can be given that such plans will remain in their current state or that the plans will ultimately be carried out according to the discussions set forth above. Estimated Direct and Overlapping Indebtedness Within the boundaries of Improvement Area No. 1 are other overlapping local agencies providing public services. The approximate amount of the direct and overlapping debt on the parcels within Improvement Area No. 1 as of May 1, 2023 is shown in the table below. TABLE 4 COMMUNITY FACILITIES DISTRICT NO. 2021-1 (MEDITERRA) OF EAST VALLEY WATER DISTRICT IMPROVEMENT AREA NO. 1 DIRECT AND OVERLAPPING DEBT Appraised Value as of May 15, 2023(1) $60,017,000 DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT:% Applicable Debt as of May 1, 2023 San Bernardino Valley Joint Community College District General Obligation Bonds 0.016%$ 113,456 Redlands Unified School District General Obligation Bonds 0.069 37,560 Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District*(2)100.000 5,565,000 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT*$5,716,016 OVERLAPPING GENERAL FUND DEBT: San Bernardino County General Fund Obligations 0.005%$ 8,202 San Bernardino County Pension Obligation Bonds 0.005 3,210 San Bernardino County Flood Control District General Fund Obligations 0.005 2,094 TOTAL OVERLAPPING GENERAL FUND DEBT $ 13,506 TOTAL COMBINED DEBT*$5,729,522 (1)Based on values set forth in the Appraisal and provided by the Appraiser as of the Date of Value (May 15, 2023). See the caption “—Appraised Property Values.” (2)Reflects the Bonds to be sold. Source: California Municipal Statistics, Inc. * Preliminary; subject to change. 31 4873-5460-7710v6/022497-0019 Expected Tax Burden Based on the appraised values within Improvement Area No. 1 set forth in the Appraisal and the projected debt service on the Bonds, the District expects that, in Fiscal Year 2023-24, the projected effective tax rates levied on taxable property in Improvement Area No. 1 will range from approximately 1.88% to 1.91% of the average appraised value of homes within each Land Use Type (as such term is defined in the Rate and Method). Subject to the limitations established by the Rate and Method and the provisions of the Act, the District will covenant in the Indenture to levy Special Taxes on parcels of taxable property in Improvement Area No. 1 in each Fiscal Year in an amount sufficient to pay debt service on the outstanding Bonds. The table below describes the estimated Fiscal Year 2023-24 effective tax burden for sample units of Developed Property within Improvement Area No. 1, assuming that Special Taxes levied in Fiscal Year 2023-24 are levied at the Assigned Special Tax (as such term is defined in the Rate and Method) rate and Fiscal Year 2022-23 actual levies for all other overlapping taxing jurisdictions. The estimated tax rates and amounts presented in this Official Statement are based on currently available information. The actual amounts charged may vary and may increase in future years depending on the amount of Bonds and Parity Bonds outstanding, and the number of delinquencies in Improvement Area No. 1, among other factors. 32 4873-5460-7710v6/022497-0019 TABLE 5 COMMUNITY FACILITIES DISTRICT NO. 2021-1 (MEDITERRA) OF EAST VALLEY WATER DISTRICT IMPROVEMENT AREA NO. 1 PROJECTED FISCAL YEAR 2023-24 EFFECTIVE TAX RATES FOR SAMPLE DEVELOPED UNITS Zone A Zone B CFD Tax Class 1 2 3 4 5 1 2 3 Building Square Footage Classification <2,300 2,300-2,499 2,500-2,699 2,700-2,899 >2,899 <2,100 2,100-2,299 >2,299 Average Square Footage(1)2,239 2,319 2,537 2,722 2,929 1,898 2,239 2,435 Estimated Value Average Close of Escrow Valuation(2)$605,000.00 $646,000.00 $660,000.00 $672,000.00 $710,000.00 $583,000.00 $605,000.00 $630,000.00 Homeowner’s Exemption (7,000.00)(7,000.00)(7,000.00)(7,000.00)(7,000.00)(7,000.00)(7,000.00)(7,000.00) Estimated Net Value $598,000.00 $639,000.00 $653,000.00 $665,000.00 $703,000.00 $576,000.00 $598,000.00 $623,000.00 Ad Valorem Property Taxes Tax Rate Basic Levy 1.00000%$ 5,980.00 $ 6,390.00 $ 6,530.00 $ 6,650.00 $ 7,030.00 $ 5,760.00 $ 5,980.00 $ 6,230.00 Redlands Unified Bond 0.02790 166.83 178.27 182.17 185.52 196.12 160.69 166.83 173.80 San Bernardino Community College Bond 0.04500 269.08 287.53 293.83 299.23 316.33 259.18 269.08 280.33 San Bernardino Valley Municipal Water District Debt Service(3)0.13000 777.40 830.70 848.90 864.50 913.90 748.80 777.40 809.90 Subtotal Ad Valorem Property Taxes 1.20289%$ 7,193.31 $ 7,686.49 $ 7,854.90 $ 7,999.25 $ 8,456.35 $ 6,928.67 $ 7,193.31 $ 7,494.03 Assessments, Special Taxes and Parcel Charges EVWD Mediterra CFD 2021-1(4)Varies $ 2,126.58 $ 2,195.24 $ 2,210.84 $ 2,226.46 $ 2,242.06 $ 2,110.97 $ 2,126.58 $ 2,142.18 Redlands USD CFD 2021-1 $ 0.66 1,468.09 1,520.55 1,663.49 1,784.79 1,920.52 1,244.50 1,468.09 1,596.61 Highland CFD 2022-1(5)569.00 569.00 569.00 569.00 569.00 569.00 569.00 569.00 569.00 Highland Landscape & Lighting(6)23.74 23.74 23.74 23.74 23.74 23.74 23.74 23.74 23.74 Highland Paramedic Tax 19.30 19.30 19.30 19.30 19.30 19.30 19.30 19.30 19.30 Highland Vector Control 1.30 1.30 1.30 1.30 1.30 1.30 1.30 1.30 1.30 Subtotal Assessments, Charges and Special Taxes $ 4,208.01 $ 4,329.13 $ 4,487.67 $ 4,624.59 $ 4,775.92 $ 3,968.80 $ 4,208.01 $ 4,352.13 Total Estimated Property Taxes $ 11,401.32 $ 12,015.62 $ 12,342.57 $ 12,623.84 $ 13,232.27 $ 10,897.47 $ 11,401.32 $ 11,846.16 Estimated Effective Tax Rate 1.91%1.88%1.89%1.90%1.88%1.89%1.91%1.90% (1)Source: Koppel & Gruber Public Finance. (2)Sales values as provided by the Appraiser as of the Date of Value (May 15, 2023). (3)Rate will vary year to year but has remained at or below the estimated amount. (4)Assumes Special Tax levy at maximum rates. (5)Charge will become effective for Fiscal Year 2023-24. Excludes dormant taxes ‘C’ and ‘D.’ (6)Rate will vary year to year but will be approximately in this amount. Source: San Bernardino County Auditor-Controller Tax Rate Book for Fiscal Year 2022-23. 33 4873-5460-7710v6/022497-0019 Estimated Value-to-Lien Ratio The appraised value of the property within Improvement Area No. 1 as of the Date of Value is $60,017,000. Dividing the appraised value by the principal amount of the Bonds ($5,565,000)* results in a value-to-lien ratio of 10.78-to-1* for Improvement Area No. 1. Dividing the appraised value by $5,716,016,* which is the sum of the principal amount of the Bonds plus all overlapping general obligation debt, results in an estimated appraised value-to-lien ratio of 10.50-to-1* for Improvement Area No. 1. Additional land-secured special tax or assessment debt could be applicable to the parcels within Improvement Area No. 1 in the future. See the captions “—Description of Authorized Facilities” and “—Estimated Direct and Overlapping Indebtedness.” The table below shows the estimated appraised value-to-lien ratios within Improvement Area No. 1 allocated by property ownership and based on the estimated Fiscal Year 2023-24 tax levy. * Preliminary; subject to change. 34 4873-5460-7710v6/022497-0019 TABLE 6 COMMUNITY FACILITIES DISTRICT NO. 2021-1 (MEDITERRA) OF EAST VALLEY WATER DISTRICT IMPROVEMENT AREA NO. 1 ESTIMATED VALUE-TO-LIEN RATIOS ALLOCATED BY DEVELOPMENT STATUS Development Status(1) Number of Parcels Appraised Property Value(2) Percentage of Appraised Property Value Maximum Special Tax Percentage of Assigned Special Tax Estimated Fiscal Year 2023-24 Special Tax Levy Percentage of Estimated Fiscal Year 2023-24 Levy Allocable Principal Amount of Bonds(3)* Direct Debt Value-to- Lien Ratio(4)* Completed Home 72 $ 46,186,000 76.95%$ 174,425 49.72%$ 156,703 80.19%$ 4,462,488 10.35:1 Partially Improved Lot (Permit Issued)25 4,315,000 7.19 56,069 15.98 38,715 19.81 1,102,512 3.91:1 Partially Improved Lot (No Permit Issued) 52 9,516,000 15.86 120,291 34.29 0 0.00 0 N/A Total(5)149 $ 60,017,000 100.00%$ 350,785 100.00%$ 195,418 100.00%$ 5,565,000 10.78:1 (1)As of the Date of Value. (2)Based on Appraisal as of the Date of Value (May 15, 2023). (3)Allocated based on the projected Fiscal Year 2023-24 Special Tax levy. (4)Appraised Property Value divided by Allocable Debt Service on Bonds. (5)Totals may not add due to rounding. Source: Koppel & Gruber Public Finance. Because the Developer has obtained building permits for 90 lots in Improvement Area No. 1 as of the May 1 prior to the Date of Value, such 90 lots will be classified as Developed Property by the May 1 deadline set forth in the Rate and Method for purposes of the Fiscal Year 2023-24 Special Tax levy. As of the Date of Value, the 72 completed homes within Improvement Area No. 1 had an aggregate value-to-lien ratio of approximately 10.35:1* based on an estimated Fiscal Year 2023-24 Special Tax levy on completed homes of approximately $156,703, an appraised value of approximately $46,186,000 and aggregate debt service on the Bonds of approximately $4,462,488.* * Preliminary; subject to change. 35 4873-5460-7710v6/022497-0019 Appraised Property Values The following is a summary of certain provisions of the Appraisal, which should be read in conjunction with the full text of the Appraisal set forth in Appendix G. None of the Water District, the District or the Underwriter makes any representation as to the accuracy or completeness of the Appraisal. Appraisal. An Appraisal of all parcels within Improvement Area No. 1 that will be subject to the Special Taxes dated _____ __, 2023 was prepared by the Appraiser in connection with issuance of the Bonds. The purpose of the Appraisal was to estimate the fee simple market value of the parcels in Improvement Area No. 1 by ownership and the aggregate value of all taxable property as of the Date of Value, May 15, 2023, which represents the date of inspection. The values are subject to a hypothetical condition that the Bonds have sold and such values represent not less-than estimates. The Appraisal was based on certain assumptions and limiting conditions as described in detail in the Appraisal under the caption “Standard Assumptions and Limiting Conditions,” as well as an assumption that no hazardous materials exist on the property. See Appendix G. The Appraisal does not cover certain land within Improvement Area No. 1 (such as public or quasi-public land) that will not be subject to the Special Taxes. Valuation Methods. The Appraisal determined the market value of the completed homes within Improvement Area No. 1 using the sales comparison approach, under which market value is estimated by comparing properties that are similar to the subject which have recently been sold, are listed for sale or are under contract for sale. Adjustments are made to account for differences between the subject and comparable properties. Sales are compared on a per-square foot basis. The valuation of the underlying land was estimated by utilizing both a land residual analysis (a discounted cash flow analysis that considers home prices and costs, leading to an estimate of residual land value) and a sales comparison approach to estimate the value of finished lots for each lot size category. Costs associated with home construction were taken into consideration as part of the land residual analysis and determination of financial feasibility. In the sales comparison approach, adjustments were applied to the prices of comparable bulk lot transactions, and a market value was concluded. The two approaches were then reconciled into an opinion of market value per improved (finished) lot. Value Estimate. Subject to the various conditions and assumptions set forth in the Appraisal, the Appraiser estimated that, as of May 15, 2023, the Date of Value, the fee simple interest in the parcels within Improvement Area No. 1 had the following value: Owner Description Appraised Value Individual Homeowners 57 Completed Homes $36,554,000 Vista Verde – Highland, L.P.(1)[40] Partially Improved Lots [4,941,000 Developer 3 Completed Model Homes, 12 Completed Production Homes, 25 Homes Under Construction and [25] Partially Improved Lots 18,522,000] TOTAL $60,017,000 (1)This entity is an affiliate of the Developer and serves as its land bank. As the Developer commences construction of homes in Improvement Area No. 1, lots are expected to be assigned from Vista Verde – Highland, L.P. to the Developer. See the caption “—Status of Development.” The Appraisal reflects the Appraiser’s estimate of the value of the underlying land and the value of completed homes only; the valuation gives no consideration to partially completed homes. The actual value of the property within Improvement Area No. 1 would likely be higher than shown in the Appraisal if the value of partially completed homes were included. 36 4873-5460-7710v6/022497-0019 The Appraisal is set forth in full in Appendix G. Delinquency History Under the provisions of the Act, the Special Taxes, from which funds necessary for the payment of principal of, and interest on, the Bonds are derived, will be billed to the Property Owners on their regular property tax bills. Such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do regular property tax installments. Special Tax installment payments cannot generally be made separately from property tax payments. Therefore, the unwillingness or inability of a property owner to pay regular property tax bills as evidenced by property tax delinquencies may also indicate an unwillingness or inability to make regular property tax payments and Special Tax installment payments in the future. See the caption “SPECIAL RISK FACTORS—Special Tax Delinquencies.” To date, there are no current or prior delinquencies in Special Taxes. Special Taxes were levied for the first time in Fiscal Year 2022-23. Because the County’s “Teeter Plan” (which is the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds, as provided for in Section 4701 et seq. of the Revenue and Taxation Code of the State of California) is not available for community facilities districts such as the District, collections of Special Taxes will reflect actual delinquencies. None of the Water District, the Underwriter or the District can predict the willingness or ability of the Property Owners to pay the Special Taxes. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Special Taxes—Covenant to Foreclose; Proceeds of Foreclosure Sales” for a discussion of the provisions that apply, and procedures that the District is obligated to follow, in the event of delinquency in the payment of Special Tax installments. Debt Service Coverage The table below shows estimated debt service coverage on the Bonds. The information in the table assumes that no Special Taxes are prepaid. See the caption “THE BONDS—Debt Service Schedule” for scheduled principal and interest payments on the Bonds. 37 4873-5460-7710v6/022497-0019 TABLE 7 COMMUNITY FACILITIES DISTRICT NO. 2021-1 (MEDITERRA) OF EAST VALLEY WATER DISTRICT ESTIMATED DEBT SERVICE COVERAGE Bond Year Ending September 1 Assigned Special Tax Revenues(1) Annual Administrative Expenses(2) Assigned Net Special Tax Revenues Bond Debt Service* Debt Service Coverage(3)* 2023 $195,418.10 $20,000.00 $175,418.10 $ 0.00 N/A 2024(4)332,202.66 20,400.00 311,802.66 424,891.67 73%(5) 2025 338,846.71 20,808.00 318,038.71 287,000.00 111 2026 345,623.65 21,224.16 324,399.49 291,250.00 111 2027 352,536.12 21,648.64 330,887.48 300,250.00 110 2028 359,586.84 22,081.62 337,505.23 303,750.00 111 2029 366,778.58 22,523.25 344,255.33 312,000.00 110 2030 374,114.15 22,973.71 351,140.44 314,750.00 112 2031 381,596.43 23,433.19 358,163.25 322,250.00 111 2032 389,228.36 23,901.85 365,326.51 329,250.00 111 2033 397,012.93 24,379.89 372,633.04 335,750.00 111 2034 404,953.19 24,867.49 380,085.70 341,750.00 111 2035 413,052.25 25,364.84 387,687.42 347,250.00 112 2036 421,313.30 25,872.13 395,441.17 357,250.00 111 2037 429,739.56 26,389.58 403,349.99 366,500.00 110 2038 438,334.35 26,917.37 411,416.99 370,000.00 111 2039 447,101.04 27,455.71 419,645.33 378,000.00 111 2040 456,043.06 28,004.83 428,038.23 385,250.00 111 2041 465,163.92 28,564.92 436,599.00 391,750.00 111 2042 474,467.20 29,136.22 445,330.98 402,500.00 111 2043 483,956.55 29,718.95 454,237.60 412,250.00 110 2044 493,635.68 30,313.33 463,322.35 421,000.00 110 2045 503,508.39 30,919.59 472,588.80 428,750.00 110 2046 513,578.56 31,537.99 482,040.57 435,500.00 111 2047 523,850.13 32,168.74 491,681.39 446,250.00 110 2048 534,327.13 32,812.12 501,515.01 455,750.00 110 2049 545,013.68 33,468.36 511,545.31 464,000.00 110 2050 555,913.95 34,137.73 521,776.22 471,000.00 111 2051 567,032.23 34,820.48 532,211.74 481,750.00 110 2052 578,372.87 35,516.89 542,855.98 491,000.00 111 2053 589,940.33 36,227.23 553,713.10 498,750.00 111 (1)Represents Assigned Special Tax on all property within Improvement Area No. 1 that is classified as Taxable Property, as such term is defined in the Rate and Method. As described in Section 3 of the Rate and Method, the Maximum Special Tax could be higher than the Assigned Special Tax shown if the Backup Special Tax is applied for each Assessor’s Parcel of Single Family Property. See Section 3 of Appendix A for a description of the Backup Special Tax. (2)Based on the Administrative Expenses Cap of $20,000, escalated by 2% per annum. (3)Assigned Net Special Tax Revenues divided by Bond Debt Service. (4)Assumes full development of remaining parcels, with all remaining permits issued before May 1, 2024. (5)$155,133.33 in Capitalized Interest is projected to be issued to cover the discrepancy of coverage. Source: Koppel & Gruber Public Finance. SPECIAL RISK FACTORS The following is a discussion of certain risk factors that should be considered, in addition to other matters set forth in this Official Statement, in evaluating the investment quality of the Bonds. This discussion * Preliminary; subject to change. 38 4873-5460-7710v6/022497-0019 does not purport to be comprehensive or definitive. In addition, the order in which the following information is presented is not intended to reflect the relative importance of any such risks. The occurrence of one or more events discussed below could adversely affect the value of the property in Improvement Area No. 1. Moreover, the occurrence of one or more of the events discussed below could adversely affect the ability or willingness of property owners in Improvement Area No. 1 to pay their Special Taxes when due. Such a failure to pay Special Taxes could result in the inability of the District to make full and punctual payments on the Bonds. Concentration of Ownership Improvement Area No. 1 has a significant concentration of ownership. As of July 1, 2023, [__] of the 149 parcels in Improvement Area No. 1 are owned by the Developer, although this number is expected to be reduced as the Developer sells completed homes to individual homeowners. [__] of the [__] parcels that were owned by the Developer as of July 1, 2023 were under contract, with sales expected to close at the end of an escrow period or, if applicable, upon completion of construction. See the caption “IMPROVEMENT AREA NO. 1.” Failure of the Property Owners, or any successor, to pay the annual Special Taxes when due could result in a default in payments of the principal of, and interest on, the Bonds, when due. None of the Property Owners is obligated in any manner to continue to own, or (in the case of the Developer) to develop, any of such property. The Special Taxes are not a personal obligation of the owners of the property on which such Special Taxes are levied, and no assurances can be given that the current Property Owners within Improvement Area No. 1 will be financially able to pay the Special Taxes levied on such property or that they will choose to pay even if financially able to do so. See the caption “—Payment of the Special Tax is Not a Personal Obligation of the Owners.” Such risk is greater and its consequence more severe when ownership is concentrated and may be expected to decrease when ownership is diversified. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Developer Letter of Credit” for a description of the letter of credit to be provided by the Developer to secure the payment of Special Taxes levied on the property in Improvement Area No. 1 which is owned by the Developer. Limited Obligations The Bonds are revenue bonds, payable exclusively from Net Taxes and other funds provided in the Indenture. The Bonds are not payable from the general fund or other moneys of the Water District or moneys derived from Improvement Area No. 2 of the District. Except with respect to the Net Taxes from Improvement Area No. 1, neither the credit nor the taxing power of the District or the Water District is pledged for the payment of the Bonds or the interest on the Bonds, and, except as provided in the Indenture, no Owner of the Bonds may compel the exercise of any taxing power by the Water District or the District or force the forfeiture of any Water District or District property. The principal of, premium, if any, and interest on the Bonds are not a debt of the Water District or a legal or equitable pledge, charge, lien or encumbrance upon any of the Water District’s or the District’s property or upon any of the Water District’s or the District’s income, receipts or revenues, except the Net Taxes and other amounts pledged under the Indenture. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Limited Obligations.” The amount of annual installments of Special Taxes that are collected could be insufficient to pay principal of and interest on the Bonds due to non-payment of such Special Taxes levied or due to insufficient proceeds received from a judicial foreclosure sale of land within the District following delinquency. The District’s legal obligations with respect to any delinquent Special Taxes are limited to: (1) payments from the Reserve Account to the extent of funds and instruments on deposit therein; and (2) the institution of judicial foreclosure proceedings under certain circumstances with respect to any parcels for which Special Taxes are delinquent. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Special Taxes—Covenant to Foreclose; Proceeds of Foreclosure Sales.” The Bonds cannot be accelerated in the event of any default. 39 4873-5460-7710v6/022497-0019 The obligation to pay Special Taxes does not constitute a personal obligation of the current or subsequent owners of the respective parcels which are subject to such liens. Enforcement of Special Tax payment obligations by the District is limited to judicial foreclosure in the Superior Court of California, County of San Bernardino. There is no assurance that any current or subsequent owner of a parcel that is subject to a Special Tax lien will be able to pay the amounts due or that such owner will choose to pay such amounts even though financially able to do so. Insufficiency of Special Taxes Based on current projections, the maximum Special Taxes that may be levied within Improvement Area No. 1 exceed Maximum Annual Debt Service on the Bonds plus the Administrative Expenses Cap. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Special Taxes—Debt Service Coverage from Net Special Taxes.” Notwithstanding the fact that the maximum Special Taxes that may be levied in Improvement Area No. 1 exceed debt service on the Bonds, the Special Taxes that are actually collected could be inadequate to make timely payment of debt service either because of nonpayment or, as described under the caption “SOURCES OF PAYMENT FOR THE BONDS—Special Taxes—Rate and Method of Apportionment of Special Taxes,” because property becomes exempt from taxation under the Rate and Method. The Special Taxes will be billed to the properties within the District on the ad valorem property tax bills sent to owners of such properties. The Act provides that such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do ad valorem property tax installments. Significant delinquencies in the payment of Special Tax installments, or delays in the prosecution of foreclosure proceedings to collect such Special Taxes, could result in depletion of the Reserve Account and a default in the payment of the Bonds. See the caption “SOURCES OF PAYMENT FOR THE BONDS— Special Taxes—Covenant to Foreclose; Proceeds of Foreclosure Sales” for a discussion of the provisions that apply, and the procedures that the District has covenanted to follow, in the event of delinquencies in the payment of Special Taxes. See the captions “—FDIC/Federal Government Interests in Properties” and “— Bankruptcy and Foreclosure” for a discussion of the policy of the Federal Deposit Insurance Corporation (the “FDIC”) regarding the payment of special taxes and assessments and limitations on the District’s ability to foreclose on the lien of the Special Taxes in certain circumstances. The annual levy of the Special Tax is subject to the maximum tax rates authorized. The levy cannot be made at a higher rate even if the failure to do so means that the estimated proceeds of the levy and collection of the Special Tax, together with other available funds, will not be sufficient to pay debt service on the Bonds. Other funds that might be available include moneys and reserve fund surety policies or similar instruments deposited in the Reserve Account, funds derived from the payment of penalties on delinquent Special Taxes and funds derived from the tax sale or foreclosure and sale of parcels on which levies of the Special Tax are delinquent. In addition, the District may not be able to levy the Special Tax up to the maximum authorized rates. Pursuant to Section 53321(d) of the Act, the Special Tax levied against any parcel for which an occupancy permit for private residential use has been issued may not be increased as a consequence of delinquency or default by the owner of any other parcel within Improvement Area No. 1 by more than 10% above the amount that would have been levied in such Fiscal Year had there never been any such delinquencies or defaults. Consequently, although the maximum Special Tax prescribed by the Rate and Method could be materially higher than the expected Special Tax levy in a given year, the Special Tax levy cannot be increased for residential property by more than 10% in such year. The levy of the Special Tax will rarely, if ever, result in a uniform relationship between the value of particular property and the amount of the levy of the Special Tax against such property. Thus, there will rarely, if ever, be a uniform relationship between the value of such property and the proportionate share of debt service on the Bonds, and certainly not a direct relationship. 40 4873-5460-7710v6/022497-0019 Certain parcels, including those that are owned by public entities, religious organizations and homeowners’ associations, are exempt from Special Taxes. The Act provides that if any property within Improvement Area No. 1 that is not otherwise exempt from the Special Tax is acquired by a public entity through a negotiated transaction, or by gift or devise, the Special Taxes will continue to be levied on and enforceable against the public entity that acquired the property. In addition, the Act provides that if property that is subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to such property is to be treated as if it were a special assessment and paid from the eminent domain award. The constitutionality and operative effect of these provisions have not been tested in the courts. If for any reason property subject to the Special Tax becomes exempt from taxation by reason of ownership by a nontaxable entity such as the federal government, or another public agency that asserts immunity from the Special Tax, subject to the limitation of the maximum Special Tax rates, the Special Taxes will be reallocated to the remaining properties within Improvement Area No. 1. This would result in the owners of such properties paying a greater amount of the Special Tax and could have an adverse effect on the timely payment of the Special Tax. Due to the problems associated with collecting taxes from public agencies, if a substantial portion of land within Improvement Area No. 1 were to become owned by public agencies, collection of the Special Tax might become more difficult and could result in collections of the Special Tax which might not be sufficient to pay principal of and interest on the Bonds when due, and a default could occur with respect to the payment of such principal and interest. Split Roll Initiative An initiative measure (the “Split Roll Initiative”) to amend Article XIIIA of the State Constitution qualified for the State’s November 2020 ballot, but was not adopted by State voters. The Split Roll Initiative would have based property taxes for commercial and industrial properties on periodic analyses of market values beginning in tax year 2020-21. Although the Split Roll Initiative was not adopted, there can be no assurance that the initiative, or similar initiatives which seek to change the property tax formula for residential properties such as those within Improvement Area No. 1, will not be placed on the ballot in the future. The District is unable to predict how amendments to Article XIIIA of the State Constitution would affect the purchase of homes within Improvement Area No. 1, the local economy or the Water District’s financial condition. Risks of Real Estate Secured Investments Generally The Special Taxes, which are the source of repayment for the Bonds, are ultimately secured by real property in Improvement Area No. 1. Bondowners are therefore subject to the risks generally incident to an investment secured by real estate, including, without limitation: (i) adverse changes in local market conditions, such as changes in the market value of real property in the vicinity of the District, the supply of or demand for competitive properties in such area and the market value of comparable residential property in the event of sale or foreclosure; (ii) changes in real estate tax rates and other operating expenses, governmental rules (including, without limitation, zoning laws and laws relating to threatened and endangered species and hazardous materials) and fiscal policies; and (iii) natural disasters (including, without limitation, earthquakes, tsunamis, fires, high winds, landslides and floods), which may result in uninsured losses. Because assessed values do not necessarily indicate fair market values, decreases in fair market values may be even greater than decreases in assessed valuations. No assurance can be given that individual homeowners will pay Special Taxes in the future or that they will be able to pay such Special Taxes on a timely basis. See the caption “—Bankruptcy and Foreclosure Delays” for a discussion of certain limitations on the District’s ability to pursue judicial foreclosure proceedings with respect to delinquent parcels. 41 4873-5460-7710v6/022497-0019 Failure to Develop Properties As of July 1, 2023, [__] of the 149 parcels within Improvement Area No. 1 had completed structures on them, with an additional [__] parcels under construction. The remaining [__] parcels are in a finished lot condition awaiting the commencement of construction. Unimproved or partially improved land is inherently less valuable than land with improvements on it, especially if there are restrictions on development, and provides less security to the Owners should it be necessary for the District to foreclose on the property due to the nonpayment of Special Taxes. Any delays in developing unimproved property, or the decision not to construct improvements on such property, may affect the willingness and ability of the owners of property within Improvement Area No. 1 to pay the Special Taxes when due. Land development is subject to comprehensive federal, State and local regulations. Approval is required from various agencies in connection with the layout and design of developments, the nature and extent of improvements, construction activity, land use, zoning, school and health requirements, as well as numerous other matters. There is always the possibility that such approvals will not be obtained or, if obtained, will not be obtained on a timely basis. Failure to obtain any such agency approval or to satisfy such governmental requirements could adversely affect planned land development. In addition, there is a risk that future governmental restrictions, including, but not limited to, governmental policies restricting or controlling development within Improvement Area No. 1, will be enacted, and a risk that future voter approved land use initiatives could add more restrictions and requirements on development within Improvement Area No. 1. Moreover, at the onset of the COVID-19 pandemic, certain Northern California counties (not including the County) ordered a shutdown of most construction activities, and there can be no assurance that such a shutdown will not be imposed in the County in the future should a surge in COVID-19 infections and deaths, or another pandemic, occur. See the caption “—COVID-19 Outbreak.” There can also be no assurance that the means and incentive to conduct land development operations within Improvement Area No. 1 will not be adversely affected by a deterioration of the real estate market and economic conditions or future local, State and federal governmental policies relating to real estate development, the income tax treatment of real property ownership or the national economy. The Developer may need continued financing to complete the development of the property within Improvement Area No. 1. No assurance can be given that the required funding will be secured or that the proposed development will be partially or fully completed, and it is possible that cost overruns will be incurred that will require additional funding beyond what the Developer has projected, which may or may not be available. See the caption “IMPROVEMENT AREA NO. 1—The Developer—Financing Plan” for a discussion of the Developer’s available cash and access to additional capital. Owners of the Bonds should assume that any event which significantly impacts the ability to complete the development of the land in Improvement Area No. 1 would cause the property values within Improvement Area No. 1 to decrease substantially and could affect the willingness and ability of the Property Owners to pay the Special Taxes when due. Endangered Species In recent years, there has been an increase in activity at the State and federal level related to the possible listing of certain plant and animal species found in the State as endangered or threatened species. An increase in the number of endangered or threatened species is expected to curtail development in a number of areas. [CONFIRM] At present, none of the unimproved property within Improvement Area No. 1 is known to be inhabited by any plant or animal species that any State or federal agency has listed or has proposed for listing on the endangered or threatened species lists. The Water District is not aware of the current existence 42 4873-5460-7710v6/022497-0019 of any endangered species within Improvement Area No. 1. Notwithstanding this fact, new species are proposed to be added to the State and federal protected lists on a regular basis. Any action by the State or federal government to protect species located on or adjacent to the property within Improvement Area No. 1 could have an adverse effect on the ability of the owners of unimproved property to construct improvements on such property. Any such action could reduce the likelihood of timely payment of the Special Taxes which might be levied upon such property and would likely reduce the market value of such property and, therefore, the potential revenues available at foreclosure sales for delinquent Special Tax installments. See the caption “—Land Values.” Natural Disasters The District, like all California communities, may be subject to unpredictable seismic activity, drought, wildfires, high winds, landslides, floods, unseasonable rainfall or other natural disasters. Southern California is a seismically active area and the San Jacinto Fault runs near the District. In addition, there are likely to be unmapped faults in or near the District. Seismically induced ground shaking has affected the Water District’s service area in the past and is expected to affect the service area in the future. Seismic activity represents a potential risk for damage to buildings, roads, bridges and property within Improvement Area No. 1. In addition, land susceptible to seismic activity may be subject to liquefaction during the occurrence of such event. [CONFIRM] Portions of the Water District’s service area are located within floodways as defined by the Federal Emergency Management Agency, although, according to the Appraisal, Improvement Area No. 1 has not been determined to be inside 100-year and 500-year floodplains. See Appendix G.] The State is periodically subject to wildfires, particularly in areas of wildland-urban interface (zones of transition between unoccupied land and human development) and mountainous or hilly terrain. Improvement Area No. 1 is located is on level terrain but was previously undeveloped and is near undeveloped areas which could be at risk of wildfires, including the San Bernardino National Forest. In the event of a natural disaster, there may be significant damage to both property and infrastructure in Improvement Area No. 1. As a result, a substantial portion of the Property Owners may be unable or unwilling to pay the Special Taxes when due. In addition, the value of land in Improvement Area No. 1 could be diminished in the aftermath of such a natural disaster, reducing the resulting proceeds of foreclosure sales in the event of delinquencies in the payment of the Special Taxes. Hazardous Substances The presence of hazardous substances on a parcel may result in a reduction in the value of a parcel. In general, the owners and operators of a parcel may be required by law to remedy conditions of the parcel relating to releases or threatened releases of hazardous substances. The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as “CERCLA” or the “Superfund Act,” is the most well-known and widely applicable of these laws, but State laws with regard to hazardous substances are also stringent and similar. Under many of these laws, the owner or operator is obligated to remedy a hazardous substance condition of property whether or not the owner or operator had anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the taxed parcels be affected by a hazardous substance, is to reduce the marketability and value of the parcel by the costs of remedying the condition, because the purchaser, upon becoming owner, will become obligated to remedy the condition just as is the seller. It is possible that liabilities may arise in the future with respect to any of the parcels within Improvement Area No. 1 resulting from the existence, currently, on the parcel of a substance that is presently classified as hazardous but which has not been released or the release of which is not presently threatened, or may arise in the future resulting from the existence, currently, on the parcel of a substance that is not presently 43 4873-5460-7710v6/022497-0019 classified as hazardous but which may in the future be so classified. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling it. Any of these possibilities could significantly affect the willingness or ability of the owner of any parcel to pay the Special Taxes or the value of a parcel that is realizable upon a delinquency. As described under the caption “IMPROVEMENT AREA NO. 1—Appraised Property Values,” the Appraisal assumes that no hazardous materials exist on the property. Accordingly, the Appraisal does not take into account the possible reduction in marketability and value of any of the parcels within Improvement Area No. 1 by reason of the possible liability of the owner or operator for hazardous materials on such parcels. Shapiro Decision On August 1, 2014, the California Court of Appeal, Fourth Appellate District, Division One (the “Court”), issued its opinion in City of San Diego v. Melvin Shapiro, et al. (D063997). The case involved a Convention Center Facilities District (the “CCFD”) established by the City of San Diego. The CCFD was a financing district established under the City of San Diego’s charter (the “Charter”) and was intended to function much like a community facilities district established under the provisions of the Act. The CCFD was comprised of all of the real property in the entire City of San Diego. However, the special tax to be levied within the CCFD was to be levied only on properties improved with a hotel located within the CCFD. At the election to authorize such special tax, the Charter proceeding limited the electorate to owners of hotel properties and lessees of real property owned by a governmental entity on which a hotel is located. Thus, the election was limited to owners and lessees of properties on which the special tax would be levied, and not a registered voter election. Such approach to determining who would constitute the qualified electors of the CCFD was based on Section 53326(c) of the Act, which generally provides that, if a special tax will not be apportioned in any tax year on residential property, the legislative body may provide that the vote will be by the landowners of the proposed district whose property would be subject to the special tax. The Court held that the CCFD special tax election did not comply with applicable requirements of Article XIIIA, Section 4, and Article XIIIC, Section 2, of the State Constitution, or with applicable provisions of the Charter, because the electors in such an election were not the registered voters residing within the district. In the case of the CCFD, at the time of the election there were several hundred thousand registered voters within the CCFD (viz., all of the registered voters in the City of San Diego). In the case of Improvement Area No. 1, there were no registered voters within Improvement Area No. 1 at the time of the elections to authorize the special tax levy for Improvement Area No. 1. In City of San Diego, the Court expressly stated that it was not addressing the validity of landowner voting to impose special taxes pursuant to the Act in situations where there are fewer than 12 registered voters. Thus, by its terms, the Court’s holding does not apply to the special tax election in Improvement Area No. 1. Moreover, Section 53341 of the Act provides that any “action or proceeding to attack, review, set aside, void or annul the levy of a special tax … shall be commenced within 30 days after the special tax is approved by the voters.” Similarly, Section 53359 of the Act provides that any action to determine the validity of bonds issued pursuant to the Act or the levy of special taxes authorized pursuant to the Act be brought within 30 days of the voters approving the issuance of such bonds or the special tax. Voters approved the Special Tax and the issuance of bonds for Improvement Area No. 1 in compliance with all applicable requirements of the Act at the time of formation of the District in 2021. Therefore, under the provisions of Sections 53341 and 53359 of the Act, the statute of limitations period to challenge the validity of the Special Tax for Improvement Area No. 1 has expired. Parity Taxes and Special Assessments Property within Improvement Area No. 1 is subject to taxes and assessments imposed by other public agencies that have jurisdiction over the land within Improvement Area No. 1. See the caption “IMPROVEMENT AREA NO. 1—Estimated Direct and Overlapping Indebtedness.” 44 4873-5460-7710v6/022497-0019 The Special Taxes and any penalties thereon constitute a lien against the lots and parcels of land on which they have been levied. Such lien is on a parity with all special taxes and special assessments levied by the Water District and other agencies and is co-equal to and independent of the lien for general property taxes, regardless of when they are imposed upon the same property. The Special Taxes have priority over all existing and future private liens imposed on the property except, possibly, for liens or security interests held by the FDIC and other federal government entities. See the captions “—Bankruptcy and Foreclosure” and “— FDIC/Federal Government Interests in Properties” below. Neither the Water District nor the District has control over the ability of other entities and districts to issue indebtedness secured by special taxes, ad valorem taxes or assessments that are payable from all or a portion of the property within Improvement Area No. 1. In addition, the Property Owners within the District may, without the consent or knowledge of the Water District or the District, petition other public agencies to issue public indebtedness secured by special taxes, ad valorem taxes or assessments. Any such special taxes, ad valorem taxes or assessments may have a lien on such property on a parity with the Special Taxes and could reduce the estimated value-to-lien ratios for property within Improvement Area No. 1 or the willingness of Property Owners to pay the Special Tax. Disclosures to Future Purchasers The willingness or ability of an owner of a parcel to pay the Special Tax even if the value of the parcel is sufficient may be affected by whether or not the owner was given due notice of the Special Tax authorization when the owner purchased the parcel, was informed of the amount of the Special Tax on the parcel should the Special Tax be levied at the maximum rate and the risk of such a levy, and, at the time of such a levy, has the ability to pay it as well as pay other expenses and obligations. The District has caused a notice of the Special Tax lien to be recorded in the Office of the Recorder for the County against each parcel. While title companies normally refer to such notices in title reports, there can be no guarantee that such reference will be made or, if made, that a prospective purchaser or lender will consider such Special Tax obligation in the purchase of a property within Improvement Area No. 1 or lending of money secured by such property. The Act requires the subdivider (or its agent or representative) of a subdivision to notify a prospective purchaser or long-term lessor of any lot, parcel, or unit that is subject to a Mello-Roos special tax of the existence and maximum amount of such special tax using a statutorily prescribed form. California Civil Code § 1102.6b requires that in the case of transfers other than those covered by the above requirement, the seller must at least make a good faith effort to notify the prospective purchaser of the special tax lien in a format prescribed by statute. Failure by an owner of the property to comply with the above requirements, or failure by a purchaser or lessor to consider or understand the nature and existence of the Special Tax, could adversely affect the willingness and ability of the purchaser or lessor to pay the Special Tax when due. Special Tax Delinquencies Under provisions of the Act, the Special Taxes, from which funds necessary for the payment of principal of and interest on the Bonds and any Parity Bonds are derived, are customarily billed to the properties within Improvement Area No. 1 on the ad valorem property tax bills sent to owners of such properties. The Act currently provides that such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do ad valorem property tax installments. Significant delinquencies in the payment of annual Special Tax installments, or delays in the prosecution of foreclosure proceedings to collect such Special Taxes, could result in depletion of the Reserve Account and default in payment of debt service on the Bonds. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Special Taxes—Covenant to Foreclose; Proceeds of Foreclosure Sales” for a discussion of the provisions that apply, and the procedures that the District is obligated to follow under the Indenture, in the event of delinquencies in the payment of Special Taxes. See the captions “—FDIC/Federal Government 45 4873-5460-7710v6/022497-0019 Interests in Properties” and “—Bankruptcy and Foreclosure” for a discussion of the policy of the FDIC and the rights of federal government entities regarding the payment of special taxes and assessment and limitations on the District’s ability to foreclosure on the lien of the Special Taxes in certain circumstances. The Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (known as the Teeter Plan), as provided for in Section 4701 et seq. of the State Revenue and Taxation Code, is not available for community facilities districts such as the District. The collection of Special Taxes is therefore subject to the risk of delinquency, while the District is also generally entitled to collect penalties and interest on delinquent Special Taxes. Non-Cash Payments of Special Taxes Under the Act, the Board of Directors of the Water District, as the legislative body of the District, may reserve to itself the right and authority to allow the owner of any taxable parcel to tender a Bond or Parity Bond in full or partial payment of any installment of the Special Taxes or the interest or penalties thereon. A Bond or Parity Bond so tendered is to be accepted at par and credit is to be given for any interest accrued thereon to the date of the tender. Thus, if Bonds or Parity Bonds can be purchased in the secondary market at a discount, it may be to the advantage of an owner of a taxable parcel to pay the Special Taxes applicable thereto by tendering a Bond or Parity Bond. Such a practice would decrease the cash flow available to the District to make payments with respect to other Bonds or Parity Bonds then outstanding; and, unless the practice was limited by the District, the Special Taxes paid in cash could be insufficient to pay the debt service due with respect to such other Bonds or Parity Bonds. In order to provide some protection against the potential adverse impact on cash flows that might be caused by the tender of Bonds or Parity Bonds in payment of Special Taxes, the Indenture includes a covenant pursuant to which the District will not adopt any policy pursuant to Section 53341.1 of the Act permitting the tender of Bonds or Parity Bonds in full payment or partial payment of any Special Taxes unless the District has first received a certificate from an Independent Financial Consultant that the acceptance of such a tender will not result in the District having insufficient Special Tax revenues to pay the principal of and interest on the Bonds and Parity Bonds when due. Payment of the Special Tax is Not a Personal Obligation of the Owners The obligation to pay Special Taxes levied within Improvement Area No. 1 does not constitute a personal obligation of the current or subsequent owners of the property in Improvement Area No. 1. Enforcement of Special Tax payment obligations by the District is limited to judicial foreclosure in the County Superior Court. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Special Taxes—Covenant to Foreclose; Proceeds of Foreclosure Sales.” There is no assurance that any current or subsequent owner of a parcel that is subject to Special Taxes will be able to pay the Special Taxes, or that such owner will choose to pay such installments even though it is financially able to do so. Land Values General. The value of the property within Improvement Area No. 1 is a critical factor in determining the investment quality of the Bonds. If a property owner is delinquent in the payment of Special Taxes, the District’s only remedy is to commence foreclosure proceedings against the delinquent parcel in an attempt to obtain funds to pay the Special Taxes. Reductions in property values due to a downturn in the economy, natural disasters, stricter land use regulations, delays in development or other events could adversely impact the security underlying the Special Taxes. See the caption “IMPROVEMENT AREA NO. 1—Estimated Value-to-Lien Ratio.” Appraised Values. The Appraisal set forth in Appendix G estimates the aggregate value overall and the market value by ownership of the parcels within Improvement Area No. 1. This market value is merely the 46 4873-5460-7710v6/022497-0019 present opinion of the Appraiser and is subject to the assumptions and limiting conditions (and hypothetical conditions) that are stated in the Appraisal. The District has not sought the present opinion of any other appraiser of the value of the taxed parcels. A different present opinion of value might be rendered by a different appraiser. The opinion of value that is set forth in the Appraisal relates to sale by a willing seller to a willing buyer, each having similar information and neither being forced by other circumstances to sell or to buy. Consequently, the opinion is of limited use in predicting the selling price at a foreclosure sale, because the sale is forced and the buyer may not have the benefit of full information. In addition, the opinion is a present opinion, based upon present facts and circumstances. Differing facts and circumstances may lead to differing opinions of value. The appraised value is not evidence of future value because future facts and circumstances may differ significantly from those that are in existence as of the date of the Appraisal. No assurance can be given that any of the parcels in Improvement Area No. 1 could be sold for the estimated market value that is contained in the Appraisal, or even for an amount that is sufficient to pay the Special Taxes levied on such parcel, if such parcel should become delinquent in the payment of Special Taxes and be foreclosed upon. The actual market value of property is subject to future events such as a downturn in the economy, occurrences of natural disasters and the decisions of various governmental agencies as to land use, all of which could adversely impact the value of the land in the District, which is the security for the Bonds. Billing of Special Taxes A special tax formula can result in a substantially heavier property tax burden being imposed upon properties within a community facilities district than elsewhere in a city or county, and this in turn can lead to problems in the collection of the special tax. In some community facilities districts (although not in the District), taxpayers have refused to pay the special tax and have commenced litigation challenging the special tax, the community facilities district and bonds issued by the community facilities district. Under provisions of the Act, the Special Taxes are to be billed to the properties within Improvement Area No. 1 that were entered on the Assessment Roll of the County Assessor by January 1 of the previous Fiscal Year. Such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do regular property tax installments. These Special Tax installment payments cannot be made separately from property tax payments. Therefore, the unwillingness or inability of a property owner to pay regular property tax bills may also indicate an unwillingness or inability to make regular property tax payments and installment payments of Special Taxes in the future. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Special Taxes—Covenant to Foreclose; Proceeds of Foreclosure Sales” for a discussion of the provisions that apply, and that procedures that the District is obligated to follow, in the event of delinquency in the payment of installments of Special Taxes. Value-to-Lien Ratios The estimated value-to-lien ratios that are set forth under the caption “IMPROVEMENT AREA NO. 1—Estimated Value-to-Lien Ratio” are based on the appraised values of property in Improvement Area No. 1 as of the Date of Value and the direct and overlapping debt that is currently allocable to such property as of May 1, 2023. No assurance can be given that such value-to-lien ratios will be maintained over time. As discussed herein, many factors that are beyond the control of the Water District and the District could adversely affect the property values within Improvement Area No. 1. Neither the Water District nor the District has any control over the amount of additional indebtedness that may be issued by other public agencies, the payment of which, through the levy of a tax or an assessment, is on a parity with the Special Taxes. See the captions “—Parity Taxes and Special Assessments” and “IMPROVEMENT AREA NO. 1— Estimated Direct and Overlapping Indebtedness.” A decrease in the property values in Improvement Area No. 47 4873-5460-7710v6/022497-0019 1 or an increase in the parity liens on property in Improvement Area No. 1, or both, could result in a lowering of the value-to-lien ratios of the property in Improvement Area No. 1. IRS Audit of Tax-Exempt Bond Issues The Internal Revenue Service (the “IRS”) has initiated an expanded program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the Bonds will be selected for audit by the IRS. It is also possible that the market value of the Bonds might be affected as a result of such an audit (or by an audit of similar bonds or securities). FDIC/Federal Government Interests in Properties General. The ability of the District to collect the Special Taxes and interest and penalties specified by State law, and to foreclose the lien of delinquent Special Taxes, may be limited in certain respects with regard to properties in which the FDIC, the Federal National Mortgage Association (“FNMA”), the IRS, the Drug Enforcement Administration or other similar federal governmental agencies has or obtains an interest. Federal courts have held that, based on the supremacy clause of the United States Constitution, in the absence of Congressional intent to the contrary, a state or local agency cannot foreclose to collect delinquent taxes or assessments if foreclosure would impair the federal government’s interest. This means that, unless the United States Congress has otherwise provided, if a federal government entity owns a parcel of taxable property but does not pay taxes (including Special Taxes) and assessments levied on the parcel, the applicable state and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments. Moreover, unless the United States Congress has otherwise provided, if the federal government has a mortgage interest in the parcel and the District wishes to foreclose on the parcel as a result of delinquent Special Taxes, the property cannot be sold at a foreclosure sale unless it can be sold for an amount that is sufficient to pay delinquent taxes and assessments on a parity with the Special Taxes and preserve the federal government’s mortgage interest. In Rust v. Johnson, 597 F.2d 174 (9th Cir. 1979), the United States Court of Appeal, Ninth Circuit (the “Ninth Circuit”), held that FNMA is a federal instrumentality for purposes of this doctrine, and not a private entity, and that, as a result, an exercise of state power over a mortgage interest held by FNMA constitutes an exercise of state power over property of the United States. For a discussion of risks associated with taxable parcels within the District becoming owned by the federal government, federal government entities or federal government sponsored entities, see the caption “—Insufficiency of Special Taxes.” The District has not undertaken to determine whether any federal governmental entity currently has, or is likely to acquire, any interest (including a mortgage interest) in any of the parcels subject to the Special Taxes, and therefore expresses no view concerning the likelihood that the risks described above will materialize while the Bonds are outstanding. FDIC. In the event that any financial institution making any loan which is secured by real property within the District is taken over by the FDIC, and prior thereto or thereafter the loan or loans go into default, resulting in ownership of the property by the FDIC, then the ability of the District to collect interest and penalties specified by State law and to foreclose the lien of delinquent unpaid Special Taxes may be limited. The FDIC’s policy statement regarding the payment of state and local real property taxes (the “Policy Statement”) provides that real property that is owned by the FDIC is subject to state and local real property taxes only if those taxes are assessed according to the property’s value, and that the FDIC is immune from real property taxes assessed on any basis other than property value. According to the Policy Statement, the FDIC will pay its property tax obligations when they become due and payable and will pay claims for delinquent property taxes as promptly as is consistent with sound business practice and the orderly administration of the institution’s affairs, unless abandonment of the FDIC’s interest in the property is appropriate. The FDIC will pay claims for interest on delinquent property taxes owed at the rate provided under state law, to the extent that 48 4873-5460-7710v6/022497-0019 the interest payment obligation is secured by a valid lien. The FDIC will not pay any amounts in the nature of fines or penalties and will neither pay nor recognize liens for such amounts. If any property taxes (including interest) on FDIC-owned property are secured by a valid lien (in effect before the property became owned by the FDIC), the FDIC will pay those claims. The Policy Statement further provides that no property of the FDIC is subject to levy, attachment, garnishment, foreclosure or sale without the FDIC’s consent. In addition, the FDIC will not permit a lien or security interest held by the FDIC to be eliminated by foreclosure without the FDIC’s consent. The Policy Statement states that the FDIC generally will not pay non-ad valorem taxes, including special assessments, on property in which it has a fee interest unless the amount of tax is fixed at the time that the FDIC acquires its fee interest in the property, nor will it recognize the validity of any lien to the extent that such lien purports to secure the payment of any such amounts. Special taxes imposed under the Act and a special tax formula that determines the special tax due each year are specifically identified in the Policy Statement as being imposed each year and therefore covered by the FDIC’s federal immunity. The Ninth Circuit issued a ruling on August 28, 2001 in which it determined that the FDIC, as a federal agency, is exempt from special taxes under the Act. With respect to property in the State owned by the FDIC on January 9, 1997 and that was owned by the Resolution Trust Company (the “RTC”) on December 31, 1995, or that became the property of the FDIC through foreclosure of a security interest held by the RTC on that date, the FDIC will continue the RTC’s prior practice of paying special taxes imposed pursuant to the Act if the taxes were imposed prior to the RTC’s acquisition of an interest in the property. All other special taxes may be challenged by the FDIC. The Water District and the District are unable to predict what effect the FDIC’s application of the Policy Statement would have in the event of a delinquency on a parcel within the District in which the FDIC has an interest, although prohibiting the lien of the FDIC to be foreclosed at a judicial foreclosure sale would reduce or eliminate the persons willing to purchase a parcel at a foreclosure sale. Owners of the Bonds should assume that the District will be unable to foreclose on any parcel owned by the FDIC. Such an outcome could cause a draw on the Reserve Account and perhaps, ultimately, a default in payment on the Bonds. Bankruptcy and Foreclosure The various legal opinions to be delivered concurrently with the delivery of the Bonds (including Bond Counsel’s approving legal opinion) will be qualified, as to the enforceability of the various legal instruments, by bankruptcy, reorganization, insolvency, or other similar laws affecting the rights of creditors generally. The payment of Special Taxes and the ability of the District to foreclose the lien of a delinquent Special Tax may be limited by bankruptcy, insolvency or other laws generally affecting creditors’ rights or by the laws of the State relating to judicial foreclosure. Bankruptcy, insolvency and other laws generally affecting creditors’ rights could adversely impact the interests of owners of the Bonds in at least two ways. First, the payment of property owners’ taxes and the ability of the District to foreclose the lien of delinquent unpaid Special Taxes pursuant to its covenant to pursue judicial foreclosure proceedings may be limited by bankruptcy, insolvency or other laws generally affecting creditors’ rights (such as the Soldiers’ and Sailors’ Relief Act of 1940 discussed below) or by the laws of the State relating to judicial foreclosure. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Special Taxes—Covenant to Foreclose; Proceeds of Foreclosure Sales.” In addition, the prosecution of a foreclosure could be delayed for many reasons, including crowded local court calendars or lengthy procedural delays. 49 4873-5460-7710v6/022497-0019 Second, the United States Bankruptcy Code might prevent moneys on deposit in the Special Tax Fund from being applied to pay interest on the Bonds and/or to redeem Bonds if bankruptcy proceedings were brought by or against a landowner in the District and if the court found that any of such landowners had an interest in such moneys within the meaning of Section 541(a)(1) of the United States Bankruptcy Code. Although bankruptcy proceedings would not cause the Special Taxes to become extinguished, the amount and priority of any lien on property securing the payment of delinquent Special Taxes could be reduced or modified if the value of the property were determined by the bankruptcy court to have become less than the amount of the lien, and the amount of the delinquent Special Taxes in excess of the reduced lien would then be treated as an unsecured claim by the court. Further, bankruptcy of a property owner could result in an unwillingness to pay Special Taxes, a stay or other delay in prosecuting Superior Court foreclosure proceedings. Such a delay would increase the likelihood of a delay or default in payment of the principal of, and interest on, the Bonds and the possibility of delinquent Special Tax installments not being paid in full. On July 30, 1992, the Ninth Circuit issued its opinion in a bankruptcy case entitled In re Glasply Marine Industries (“Glasply”). In that case, the court held that ad valorem property taxes levied by Snohomish County in the State of Washington after the date that the property owner filed a petition for bankruptcy were not entitled to priority over a secured creditor with a prior lien on the property. Although the court upheld the priority of unpaid taxes imposed before the bankruptcy petition, unpaid taxes imposed after the filing of the bankruptcy petition were declared to be “administrative expenses” of the bankruptcy estate, payable after all secured creditors. As a result, the secured creditor was able to foreclose on the property and retain all the proceeds of the sale except the amount of the pre-petition taxes. The Bankruptcy Reform Act of 1994 included a provision which excepts from the United States Bankruptcy Code’s automatic stay provisions, “the creation of a statutory lien for an ad valorem property tax imposed by . . . a political subdivision of a state if such tax comes due after the filing of the petition [by a debtor in bankruptcy court].” This amendment effectively makes the Glasply holding inoperative as it relates to ad valorem real property taxes. However, it is possible that the original rationale of the Glasply ruling could still result in the treatment of post-petition special taxes as “administrative expenses,” rather than as tax liens secured by real property, at least during the pendency of bankruptcy proceedings. According to the Ninth Circuit’s ruling, as administrative expenses, post-petition taxes would be paid, assuming that the debtor had sufficient assets to do so. In certain circumstances, payment of such administrative expenses may be allowed to be deferred. Once the property is transferred out of the bankruptcy estate (through foreclosure or otherwise), it would at that time become subject to current ad valorem taxes. The Act provides that the Special Taxes are secured by a continuing lien which is subject to the same lien priority in the case of delinquency as ad valorem taxes. No case law exists with respect to how a bankruptcy court would treat the lien for Special Taxes (which are not ad valorem taxes) levied after the filing of a petition in bankruptcy. Glasply is controlling precedent on bankruptcy courts in the State. If the Glasply precedent was applied to the levy of the Special Taxes, the amount of Special Taxes received from parcels whose owners declare bankruptcy could be reduced. Other laws generally affecting creditors’ rights or relating to judicial foreclosure may affect the ability to enforce payment of Special Taxes or the timing of enforcement of Special Taxes. For example, the Soldiers and Sailors Civil Relief Act of 1940 affords protections such as a stay in enforcement of the foreclosure covenant, a six-month period after termination of military service to redeem property sold to enforce the collection of a tax or assessment and a limitation on the interest rate on the delinquent tax or assessment to persons in military service if a court concludes that the ability to pay such taxes or assessments is materially affected by reason of such service. 50 4873-5460-7710v6/022497-0019 No Acceleration Provision Neither the Bonds nor the Act contain a provision allowing for the acceleration of the Bonds in the event of a payment default or other default under the Bonds or the Indenture. See Appendix C under the caption “EVENTS OF DEFAULT—Remedies of Owners” for a description of remedies that are available to the Bond Owner if the District defaults under the Indenture. Loss of Tax Exemption As discussed under the caption “TAX EXEMPTION,” the interest on the Bonds could become includable in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds as a result of a failure of the District to comply with certain provisions of the Internal Revenue Code of 1986, as amended, or certain legislative changes that occur subsequent to the issuance of the Bonds. The introduction or enactment of any such future legislative proposals or court decisions may also affect the market price for, or marketability of, the Bonds. Prospective purchasers of the Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no opinion. Should an event of taxability occur, the Bonds are not subject to early redemption and will remain outstanding to maturity or until redeemed under the redemption provisions of the Indenture. Limitations on Remedies Remedies available to the owners of the Bonds may be limited by a variety of factors and may be inadequate to assure the timely payment of principal of and interest on the Bonds or to preserve the tax-exempt status of the Bonds. Bond Counsel has limited its opinion as to the enforceability of the Bonds and of the Indenture to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium, or other similar laws affecting generally the enforcement of creditors’ rights, by equitable principles and by the exercise of judicial discretion. The lack of availability of certain remedies or the limitation of remedies may entail risks of delay, limitation or modification of the rights of the owners of the Bonds. Limited Secondary Market There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary market exists, that such Bonds can be sold for any particular price. Although the District has committed to provide certain financial and operating information on an annual basis, there can be no assurance that such information will be available to Owners of the Bonds on a timely basis. See the caption “CONTINUING DISCLOSURE.” The failure to provide the required annual financial information does not give rise to monetary damages but merely an action for specific performance. Occasionally, because of general market conditions, lack of current information, or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price. California Constitution Article XIIIC and Article XIIID On November 5, 1996, the voters of the State approved Proposition 218, the so-called “Right to Vote on Taxes Act.” Proposition 218 added Articles XIIIC and XIIID to the State Constitution, which contain, among other things, a number of provisions affecting the ability of the District to levy and collect both existing and future taxes, assessments, fees and charges. 51 4873-5460-7710v6/022497-0019 Among other things, Section 3 of Article XIIIC states that “… the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge.” The Act provides for a procedure which includes notice, hearing, protest and voting requirements to alter the rate and method of apportionment of an existing special tax. However, the Act prohibits a legislative body from adopting any resolution to reduce the rate of any special tax or terminate the levy of any special tax pledged to repay any debt incurred pursuant to the Act unless such legislative body determines that the reduction or termination of the special tax would not interfere with the timely retirement of that debt. On July 1, 1997, a bill was signed into law by the Governor of the State enacting Section 5854 of the Government Code of the State, which states that: “Section 3 of Article XIIIC of the California Constitution, as adopted at the November 5, 1996, general election, shall not be construed to mean that any owner or beneficial owner of a municipal security, purchased before or after that date, assumes the risk of, or in any way consents to, any action by initiative measure that constitutes an impairment of contractual rights protected by Section 10 of Article I of the United States Constitution.” Accordingly, although the matter is not free from doubt, it is likely that Proposition 218 has not conferred on the voters the power to repeal or reduce Special Taxes if such reduction would interfere with the timely retirement of the Bonds. The provisions of Proposition 218 relating to the exercise of the initiative power have not been interpreted by the courts and no assurance can be given as to the outcome of any such litigation. It may be possible, however, for voters or the Board of Directors of the Water District, acting as the legislative body of the District, to reduce the Special Taxes in a manner which does not interfere with the timely repayment of the Bonds, but which does reduce the maximum amount of Special Taxes that may be levied in any year below the existing levels. Furthermore, no assurance can be given with respect to the future levy of the Special Taxes in amounts greater than the amount necessary for the timely retirement of the Bonds. Therefore, no assurance can be given with respect to the levy of Special Taxes for Administrative Expenses. Nevertheless, the District has covenanted that it will not modify, alter or amend the Rate and Method in any manner that reduces the maximum Special Taxes that may be levied in each year on property within the District to an amount which is less than 110% of the principal and interest due in each corresponding future Bond Year with respect to the Bonds and Parity Bonds Outstanding as of the date of such amendment. The District has further covenanted that, in the event that an initiative is adopted which purports to reduce the maximum Special Taxes that may be levied, the District will commence and pursue legal action in order to preserve its ability to comply with the foregoing covenant. However, no assurance can be given as to the enforceability of the foregoing covenants. The interpretation and application of Proposition 218 will ultimately be determined by the courts with respect to a number of the matters discussed above, and it is not possible at the current time to predict with certainty the outcome of such determination or the timeliness of any remedy afforded by the courts. See the caption “—Limitations on Remedies.” Ballot Initiatives Proposition 218 was adopted pursuant to a measure that qualified for the ballot pursuant to the State’s Constitutional initiative process, and the State Legislature has in the past enacted legislation that has altered the spending limitation or established minimum funding provisions for particular activities. On March 6, 1995, in the case of Rossi v. Brown, the State Supreme Court held that an initiative can repeal a tax ordinance and prohibit the imposition of further such taxes and that the exemption from the referendum requirements does not apply to initiative. From time to time, other initiative measures could be adopted by State voters or legislation enacted by the State Legislature. The adoption of any such initiative or enactment of legislation might place limitations on the ability of the State, the County or local districts to increase revenues or 52 4873-5460-7710v6/022497-0019 appropriations or on the ability of a property owner to complete the development of property within the District. Tax Cuts and Jobs Act H.R. 1 of the 115th U.S. Congress, known as the “Tax Cuts and Jobs Act,” was enacted into law on December 22, 2017 (the “Tax Act”). The Tax Act makes significant changes to many aspects of the Internal Revenue Code of 1986, as amended. For example, the Tax Act reduces the amount of mortgage interest expense and state and local income tax and property tax expense that individuals may deduct from their gross income for federal income tax purposes. These changes could increase the cost of home ownership within Improvement Area No. 1 and could slow the pace of home sales by the Developer or result in reductions of sales price below the currently expected levels. However, the District cannot predict the effect that the Tax Act may have on the cost of home ownership or the price of homes in Improvement Area No. 1, the pace at which homes in Improvement Area No. 1 are sold to individual homeowners or the ability or willingness of homeowners to pay Special Taxes or property taxes. Potential Early Redemption of Bonds from Prepayments or Other Sources Property owners within Improvement Area No. 1, including the Developer and any individual property owner, are permitted to prepay their Special Taxes at any time. Such Prepayments could also be made from the proceeds of bonds issued by or on behalf of an overlapping special assessment district or community facilities district. Such Prepayments will result in an extraordinary redemption of the Bonds on the Interest Payment Date for which timely notice may be given under the Indenture following the receipt of the Prepayment. The resulting extraordinary redemption of Bonds that were purchased at a price greater than par could reduce the otherwise expected yield on such Bonds. See the caption “THE BONDS—Redemption— Extraordinary Redemption.” COVID-19 Outbreak The spread of the novel strains of coronavirus collectively called SARS-CoV-2, which cause the disease known as COVID-19 (“COVID-19”), and local, State and federal actions in response to COVID-19, impacted the Water District and the County and their operations and finances beginning in early 2020. In response to the increasing number of cases of COVID-19 infections and fatalities, health officials and experts recommended, and some governments mandated, a variety of responses ranging from travel bans and social distancing practices to complete shutdowns of certain services and facilities. The World Health Organization declared the COVID-19 outbreak to be a pandemic and, on March 4, 2020, as part of the State’s response to address the outbreak, the Governor declared a state of emergency. On March 13, 2020, then-President Trump declared a national emergency, freeing up funding for federal assistance to state and local governments. In addition, many school districts across the State temporarily closed some or all school campuses (including schools within the Water District’s boundaries) in response to local and State directives or guidance. On March 19, 2020, the Governor of California issued Executive Order N-33-20, a mandatory Statewide shelter-in-place order applicable to all non-essential services. The County also declared a state of emergency in response to the COVID-19 outbreak. A phased re-opening of various sectors began in mid-2020 in accordance with a four-stage re-opening plan that ended with a full reopening of the economy on June 15, 2021. On March 27, 2020, the President signed the $2.2 trillion Coronavirus Aid, Relief, and Economic Stabilization Act (the “CARES Act”) which delivered, among other things, $150 billion in financial aid to states and local governments to provide emergency reimbursement to those most significantly impacted by COVID-19. On March 11, 2021, the President signed the American Rescue Plan Act of 2021 (the “ARP Act”), a $1.9 trillion economic stimulus package that was designed to help the United States’ economy recover from the adverse impacts of the COVID-19 pandemic. 53 4873-5460-7710v6/022497-0019 On May 6, 2020, the Governor issued an Executive Order waiving penalties and interest on taxes on property on the secured or unsecured roll through May 6, 2021 under certain conditions, including the following: (i) the property was a residential property occupied by the taxpayer or the property was used for a small business; (ii) the taxes owed were not delinquent as of March 4, 2020; (iii) the taxpayer files for relief in a form prescribed by the tax collector; and (iv) the taxpayer demonstrates economic hardship to the satisfaction of the tax collector. The effects of the COVID-19 outbreak and governmental actions responsive to it have altered the behavior of businesses and people in a manner that has had significant negative impacts on global and local economies. In addition, financial markets have experienced significant volatility attributed to COVID-19 concerns, ensuing inflation and threats of a recession. Identified cases of COVID-19 and deaths attributable to the COVID-19 outbreak continue to occur throughout the United States, including the County. The Water District continues to actively monitor water usage, Special Tax collections, payment delinquencies, revenues and expenditures so that further impacts of the COVID-19 pandemic can be anticipated. The pandemic, or another pandemic in the future, could impact the District and the residents of the District in one or more of the following ways, among others: (i) continued extreme fluctuations in financial markets and contraction in available liquidity; (ii) extensive job losses and declines in business activity across important sectors of the economy, which could affect homeowners’ employment and ability to pay Special Taxes and thereby increase the delinquency rate in the District; (iii) declines in business and consumer confidence that negatively impact economic conditions or cause an economic recession; (iv) the failure of governmental measures to stabilize the financial sector and introduce fiscal stimulus to counteract the economic impact of the pandemic; (v) cancellations of public events; and (vi) disruption of the regional and local economy and potential declines in property values, which could affect homeowners’ willingness to pay Special Taxes and thereby increase the delinquency rate in the District. Notwithstanding the foregoing, the District has not experienced and does not at this time foresee a future negative impact on the receipt of Special Taxes as a result of the COVID-19 outbreak. Cybersecurity Municipal agencies, like other business entities, face significant risks relating to the use and application of computer software and hardware. Recently, there have been significant cyber security incidents affecting municipal agencies, including a ransomware attack targeting Los Angeles Unified School District, a freeze affecting computer systems of the City of Atlanta, an attack on the City of Baltimore’s 911 system, an attack on the Colorado Department of Transportation’s computers, an attack that resulted in the temporary closure of the Port of Los Angeles’ largest terminal and an attack on a water treatment facility in Oldsmar, Florida. [UPDATES?] The District employs a multi-level cyber protection scheme that includes firewalls, anti- virus software, anti-spam/malware software, intrusion protection and domain name system filtering software. The District also contracts with third party vendors to monitor and augment internal monitoring of the District’s computer systems. To date, the District has not experienced an attack on its computer operating systems. However, there can be no assurance can be given that the District’s security and operational control measures will be successful in guarding against all cyber threats and attacks. The results of any attack on the District’s computer systems could negatively impact the District’s operations, and the costs related to such attacks could be substantial, although the District expects such impact to be temporary. Climate Change The State has historically been susceptible to wildfires and hydrologic variability. As greenhouse gas emissions continue to accumulate in the atmosphere, climate change is expected to intensify, increasing the frequency, severity and timing of extreme weather events such as coastal storm surges, drought, wildfires, floods and heat waves, and raising sea levels. The Water District has evaluated the potential effects of climate 54 4873-5460-7710v6/022497-0019 change on the Water District in its latest Urban Water Management Plan, dating to 2020, and participates in regional planning efforts with respect thereto. The future fiscal impact of climate change on the District and the residents of the District is difficult to predict, but it could be significant and it could have a material adverse effect on the receipt of Special Taxes if property values are affected. See the captions “—Natural Disasters” and “—Land Values.” [UPDATES?] In accordance with the American Water and Infrastructure Act, the District has prepared and certified a Risk and Resiliency Assessment, which considers the impacts of climate change on District operations and potential emergencies within the District’s service area. Active preparation and mitigation measures are also identified in the District’s Hazard Mitigation Plan (which is reviewed by the California Office of Emergency Services and the Federal Emergency Management Agency) and includes efforts such as regional groundwater replenishment efforts and the development of recycled water supplies. CONTINUING DISCLOSURE District Pursuant to a Continuing Disclosure Certificate, dated the date of issuance of the Bonds (the “District Disclosure Certificate”), the District has agreed to provide, or cause to be provided, to the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access (“EMMA”) system: (a) certain annual financial information and operating data concerning the District (the “District Annual Report”); and (b) notice of certain enumerated events within ten business days after they occur. The District Annual Report is to be filed not later than April 1 of each year, beginning April 1, 2024. The District Disclosure Certificate has been entered into in order to assist the Underwriter in complying with Section (b)(5) of Rule 15c2-12. It should be noted that the District is required to file certain financial statements with the District Annual Report. This requirement has been included in the District Disclosure Certificate solely to satisfy the provisions of Rule 15c2-12. The inclusion of this information does not mean that the Bonds are secured by any resources or property of the District or the Water District other than as described in this Official Statement. See the caption “SPECIAL RISK FACTORS—Limited Obligations.” The District has not previously entered into a continuing disclosure undertaking. [DISCLOSURE RE WATER DISTRICT COMPLIANCE TO COME] Except as disclosed in this paragraph, the Water District has not failed to comply in all material respects with its continuing disclosure obligations in the past five years. In order to ensure compliance with its continuing disclosure obligations in the future, the Water District has engaged Applied Best Practices, Inc. to assist the Water District and the District with their respective continuing disclosure filings. The proposed form of the District Disclosure Certificate is set forth in Appendix D-1. Developer The Developer is not an obligated party under Rule 15c2-12. However, pursuant to a Continuing Disclosure Certificate, dated the date of issuance of the Bonds (the “Developer Disclosure Certificate”), the Developer has voluntarily agreed to provide, or cause to be provided, to the EMMA system: (a) certain information concerning the Developer and the parcels that it owns within Improvement Area No. 1 (the “Developer Annual Report”); (b) and notice of certain enumerated events. Each Developer Annual Report is to be filed not later than October 31 of each year, beginning October 31, 2023. The obligations of the Developer under the Developer Disclosure Certificate will terminate upon the earlier of: (i) legal defeasance, prior redemption or payment in full of all of the Bonds; (ii) the date on which the Developer owns fewer than 30 parcels of Taxable Property in Improvement Area No. 1; (iii) the date on 55 4873-5460-7710v6/022497-0019 which the Developer has no obligations under the Developer Disclosure Certificate with respect to any property because such obligations have been assumed by one or more Major Property Owners or Affiliates thereof pursuant to an Assumption Agreement (as such terms are defined in the Developer Disclosure Certificate); (iv) the date on which the Developer prepays in full all of the Special Taxes that are attributable to its property in Improvement Area No. 1. [DISCLOSURE RE PRIOR COMPLIANCE TO COME] The proposed form of the Developer Disclosure Certificate is set forth in Appendix D-2. LEGAL MATTERS The validity of the Bonds and certain other legal matters are subject to the approving opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel. The form of Bond Counsel’s opinion with respect to the Bonds is set forth in Appendix E. In addition to serving as Bond Counsel in connection with the issuance and sale of the Bonds, Stradling Yocca Carlson & Rauth, a Professional Corporation, is serving as Disclosure Counsel to the District. Certain legal matters will be passed on for the Water District and the District by the JC Law Firm, Chino Hills, California, as General Counsel, for the Underwriter by Best Best & Krieger LLP, Riverside, California, and for the Trustee by its counsel. TAX EXEMPTION In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals. However, it should be noted that for tax years beginning after December 31, 2022, with respect to applicable corporations as defined in Section 59(k) of the Internal Revenue Code of 1986, as amended (the “Code”), generally certain corporations with more than $1,000,000,000 of average annual adjusted financial statement income, interest (and original issue discount) on the Bonds might be taken into account in determining adjusted financial statement income for purposes of computing the alternative minimum tax imposed by Section 55 of the Code on such corporations. In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State personal income tax. In the opinion of Bond Counsel, the difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of the same series and maturity is to be sold to the public) and the stated redemption price at maturity with respect to such Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bond Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by the Bond Owner will increase the Bond Owner’s basis in the Bond. The amount by which a Bond Owner’s original basis for determining loss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable bond premium, which must be amortized under Section 171 of the Code; such amortizable bond premium reduces the Bond Owner’s basis in the applicable Bond (and the amount of tax exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Bond Owner realizing a taxable gain when a Bond is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the Owner. Purchasers of the Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable bond premium. 56 4873-5460-7710v6/022497-0019 Bond Counsel’s opinion as to the exclusion from gross income of interest (and original issue discount) on the Bonds is based upon certain representations of fact and certifications made by the District and others and is subject to the condition that the District comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds to assure that interest (and original issue discount) on the Bonds will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The District has covenanted to comply with all such requirements. The IRS has initiated an expanded program for the auditing of tax exempt bond issues, including both random and targeted audits. It is possible that the Bonds will be selected for audit by the IRS. It is also possible that the market value of the Bonds might be affected as a result of such an audit of the Bonds (or by an audit of similar municipal obligations). No assurance can be given that in the course of an audit, as a result of an audit, or otherwise, Congress or the IRS might not change the Code (or interpretation thereof) subsequent to the issuance of the Bonds to the extent that it adversely affects the exclusion from gross income of interest on the Bonds or their market value. SUBSEQUENT TO THE ISSUANCE OF THE BONDS, THERE MIGHT BE FEDERAL, STATE OR LOCAL STATUTORY CHANGES (OR JUDICIAL OR REGULATORY CHANGES TO OR INTERPRETATIONS OF FEDERAL, STATE OR LOCAL LAW) THAT AFFECT THE FEDERAL, STATE OR LOCAL TAX TREATMENT OF THE BONDS, INCLUDING THE IMPOSITION OF ADDITIONAL FEDERAL INCOME OR STATE TAXES ON OWNERS OF TAX-EXEMPT STATE OR LOCAL OBLIGATIONS, SUCH AS THE BONDS. THESE CHANGES COULD ADVERSELY AFFECT THE MARKET VALUE OR LIQUIDITY OF THE BONDS. NO ASSURANCE CAN BE GIVEN THAT SUBSEQUENT TO THE ISSUANCE OF THE BONDS STATUTORY CHANGES WILL NOT BE INTRODUCED OR ENACTED OR JUDICIAL OR REGULATORY INTERPRETATIONS WILL NOT OCCUR HAVING THE EFFECTS DESCRIBED ABOVE. BEFORE PURCHASING ANY OF THE BONDS, ALL POTENTIAL PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING POSSIBLE STATUTORY CHANGES OR JUDICIAL OR REGULATORY CHANGES OR INTERPRETATIONS, AND THEIR COLLATERAL TAX CONSEQUENCES RELATING TO THE BONDS. Bond Counsel’s opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Bond Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. Bond Counsel’s engagement with respect to the Bonds terminates upon their issuance and Bond Counsel disclaims any obligation to update the matters set forth in its opinion. The Indenture and the Tax Certificate relating to the Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with respect thereto. Bond Counsel expresses no opinion as to the effect on the exclusion from gross income of interest (and original issue discount) on the Bonds for federal income tax purposes with respect to any Bond if any such action is taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation. Although Bond Counsel has rendered an opinion that interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes provided that the District continue to comply with certain requirements of the Code, the ownership of the Bonds and the accrual or receipt of interest (and original issue discount) on the Bonds may otherwise affect the tax liability of certain persons. Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any of the Bonds, all potential purchasers should consult their tax advisors with respect to collateral tax consequences relating to the Bonds. 57 4873-5460-7710v6/022497-0019 Should interest (and original issue discount) on the Bonds become includable in gross income for federal income tax purposes, the Bonds are not subject to early redemption or an increase in interest rates and will remain outstanding until maturity or until redeemed in accordance with the Indenture. A copy of the proposed form of opinion of Bond Counsel for the Bonds is set forth in Appendix E. NO LITIGATION At the time of delivery of and payment for the Bonds, the District will certify substantially to the effect that there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body, pending or, to the knowledge of the District, threatened against the District affecting the existence of the District or the titles of its directors or officers to their respective offices or seeking to restrain or to enjoin the sale or delivery of the Bonds, the application of the proceeds thereof in accordance with the Indenture, or in any way contesting or affecting the validity or enforceability of the Bonds, the Indenture, or any action of the District contemplated by any of said documents, or in any way contesting the completeness or accuracy of this Official Statement or any amendment or supplement thereto, or contesting the powers of the District or its authority with respect to the Bonds or any action of the District contemplated by any of said documents, nor to the knowledge of the District, is there any basis therefor. NO RATING The Bonds have not been rated by any credit rating agency. UNDERWRITING The Bonds are being purchased by Hilltop Securities Inc. (the “Underwriter”). The Underwriter has agreed to purchase the Bonds at a price of $_____ (being $_____ aggregate principal amount of the Bonds, less Underwriter’s discount of $_____ and plus/less a net original issue premium/discount of $____). The purchase agreement relating to the Bonds provides that the Underwriter will purchase all of the Bonds if any are purchased. The obligation to make such purchase is subject to certain terms and conditions set forth in such purchase agreement, the approval of certain legal matters by counsel and certain other conditions. The initial offering prices stated on the inside front cover page of this Official Statement may be changed from time to time by the Underwriter. The Underwriter may offer and sell the Bonds to certain dealers (including dealers depositing Bonds into investment trusts), dealer banks, banks acting as agent and others at prices lower than said public offering prices. MUNICIPAL ADVISOR Fieldman, Rolapp & Associates, Inc., Irvine, California (the “Municipal Advisor”), served as municipal advisor with respect to the sale of the Bonds. The Municipal Advisor is an independent registered municipal advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities. The Municipal Advisor will receive compensation contingent upon the sale and delivery of the Bonds. The Municipal Advisor has not undertaken to make an independent verification or to assume responsibility for the accuracy, completeness, or fairness of the information contained in this Official Statement. FINANCIAL INTERESTS The fees being paid to the Underwriter, Underwriter’s Counsel and Bond Counsel/Disclosure Counsel are contingent upon the issuance and delivery of the Bonds. From time to time, Bond Counsel represents the Underwriter on matters unrelated to the Bonds. 58 4873-5460-7710v6/022497-0019 PENDING LEGISLATION The District is not aware of any significant pending legislation that would have material adverse consequences on the Bonds or the ability of the District to pay the principal of and interest on the Bonds when due. ADDITIONAL INFORMATION The purpose of this Official Statement is to supply information to prospective buyers of the Bonds. Quotations and summaries and explanations of the Bonds and documents contained in this Official Statement do not purport to be complete, and reference is made to such documents for full and complete statements and their provisions. This Official Statement is submitted only in connection with the sale of the Bonds by the District. This Official Statement does not constitute a contract with the purchasers of the Bonds. The execution and delivery of this Official Statement by the President of the Board of Directors of the Water District has been duly authorized by the Board of Directors of the Water District, acting in its capacity as the legislative body of the District. COMMUNITY FACILITIES DISTRICT NO. 2021-1 (MEDITERRA) OF EAST VALLEY WATER DISTRICT By: President of the Board of Directors East Valley Water District A-1 4873-5460-7710v6/022497-0019 APPENDIX A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX COMMUNITY FACILITIES DISTRICT NO. 2021-1 (MEDITERRA) OF EAST VALLEY WATER DISTRICT (IMPROVEMENT AREA NO. 1) The following sets forth the Rate and Method of Apportionment for the levy and collection of Special Taxes in Improvement Area No. 1 (“IA No. 1”) of Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District (“CFD No. 2021-1”). The Special Tax will be levied on and collected in IA No. 1 each Fiscal Year, in an amount determined through the application of the Rate and Method of Apportionment described below. All of the real property within IA No. 1, unless exempted by law or by the provisions hereof, will be taxed for the purposes, 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 IA No. 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 IA No. 1; and the costs otherwise incurred in order to carry out authorized purposes of IA No. 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. “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.A (i) and 3.B (i) below. “Bonds” means any obligation of IA No. 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 A-2 4873-5460-7710v6/022497-0019 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. 2021-1 (Mediterra) of East Valley Water District” recorded in the Official Records of the County that distinguishes the boundaries of IA No. 1 from the other improvement area. “Building Permit” means a building permit for the construction of one or more Residential Units within IA No. 1 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. 2021-1” means Community Facilities District No. 2021-1 (Mediterra) of the Water District. “City” means the City of Highland, California. “County” means the County of San Bernardino, California. “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 Subdivision Map” means a subdivision of property created by recordation of a final map or parcel map, pursuant to the Subdivision Map Act (California Government Code Section 66410 et seq.) or recordation of a condominium plan pursuant to California Civil Code 4200 et seq. or lot line adjustment that creates individual lots or condominium units for which building permits may be issued without further subdivision. “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. A-3 4873-5460-7710v6/022497-0019 “Improvement Area No. 1” or “IA No. 1” means Improvement Area No. 1 of CFD No. 2021-1, as identified on the Boundary Map for CFD No. 2021-1, as in effect on the date of formation of CFD No. 2021-1, and as may thereafter be amended in accordance with the Act. “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. “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 IA No. 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 IA No. 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 A-4 4873-5460-7710v6/022497-0019 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. “Taxable Property” means all of the Assessor's Parcels within the boundaries of IA No. 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 IA No. 1 not classified as Developed 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. 2021-1, or its designee. “Zone A” means a geographic area identified as IA No. 1 Zone A consisting of Lots 1 thru 88 and 671 thru 680 of Tract Map No. 18893-1, and as identified on the Boundary Map for CFD No. 2021-1, as in effect on the date of formation of CFD No. 2021-1, and as may thereafter be amended in accordance with the Act. “Zone B” means a geographic area identified as IA No. 1 Zone B consisting of Lots 89 thru 139 of Tract Map No.18893-2 , and as identified on the Boundary Map for CFD No. 2021-1, as in effect on the date of formation of CFD No. 2021-1, and as may thereafter be amended in accordance with the Act. 2. LAND USE CLASSIFICATION Each Fiscal Year, beginning with Fiscal Year 2021/2022, each Assessor’s Parcel within the boundaries of IA No. 1 shall be classified as Zone A or Zone B and further classified as Taxable Property or Exempt Property. In addition, all Taxable Property within IA No. 1 shall be classified as Developed 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. A-5 4873-5460-7710v6/022497-0019 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 in Zone A The Maximum Special Tax applicable to an Assessor’s Parcel classified as Developed Property in IA No. 1 Zone A for Fiscal Year 2021/2022 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 IA No. 1 Zone A Assigned Special Tax Rates Fiscal Year 2021/2022 Land Use Class Building Square Footage Assigned Special Tax 1 Less than 2,300 Sq. Ft.$2,044 per Residential Unit 2 2,300 to 2,499 Sq. Ft.$2,110 per Residential Unit 3 2,500 to 2,699 Sq. Ft.$2,125 per Residential Unit 4 2,700 to 2,899 Sq. Ft.$2,140 per Residential Unit 5 Greater than 2,899 Sq. Ft.$2,155 per Residential Unit Each July 1, commencing July 1, 2022, 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. i. 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 Assessor’s Parcel of Undeveloped Property for Fiscal Year 2021/2022 shall be $12,324 per Acre or portion thereof for Zone A. Each July 1, commencing July 1, 2022, 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. ii. Provisional Undeveloped Property The Maximum Special Tax for Provisional Undeveloped Property for Fiscal Year 2021/2022 shall be $12,324 per Acre or portion thereof for Zone A. Each July 1, commencing July 1, 2022, 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. A-6 4873-5460-7710v6/022497-0019 B. Developed Property in Zone B The Maximum Special Tax applicable to an Assessor’s Parcel classified as Developed Property in IA No. 1 Zone A for Fiscal Year 2021/2022 shall be the greater of (i) the Assigned Special Tax determined pursuant to Table 2 below or (ii) the amount derived by application of the Backup Special Tax. Table 2 IA No. 1 Zone B Assigned Special Tax Rates Fiscal Year 2021/2022 Land Use Class Building Square Footage Assigned Special Tax 1 Less than 2,100 Sq. Ft.$2,029 per Residential Unit 2 2,100 to 2,299 Sq. Ft.$2,044 per Residential Unit 3 Greater than 2,299 Sq. Ft.$2,059 per Residential Unit Each July 1, commencing July 1, 2022, 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. i. 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 Assessor’s Parcel of Undeveloped Property for Fiscal Year 2021/2022 shall be $12,554 per Acre or portion thereof for Zone B. Each July 1, commencing July 1, 2022, 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. ii. Provisional Undeveloped Property The Maximum Special Tax for Provisional Undeveloped Property for Fiscal Year 2021/2022 shall be $12,554 per Acre or portion thereof for Zone B. Each July 1, commencing July 1, 2022, 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 2021/2022, 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 in Zone A and B as necessary to satisfy the Special Tax Requirement; A-7 4873-5460-7710v6/022497-0019 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 Undeveloped Property up to 100% of the Maximum Special Tax for Undeveloped Property; Step 3: If additional monies are needed to satisfy the Special Tax Requirement after the first two 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 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 4: If additional monies are needed to satisfy the Special Tax Requirement after the first three 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 IA No. 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 IA No. 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 IA No. 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 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 IA No. 1 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 A-8 4873-5460-7710v6/022497-0019 Construction Fund, and (iii) monies currently on deposit in an escrow or other earmarked fund that are expected to be available to finance IA No. 1 Public Facilities Costs. “IA No. 1 Public Facilities Costs” means $4,836,658 in 2021 dollars, which shall increase by the Construction Inflation Index (as defined above) on July 1, 2022, 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 IA No. 1, or (ii) shall be determined by the Water District concurrently with a covenant that it will not issue any more IA No. 1 Bonds (except refunding bonds) to be supported by Special Taxes. “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 IA No. 1 Bonds that have been issued prior to the date of prepayment. 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 IA No. 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): 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, A-9 4873-5460-7710v6/022497-0019 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 IA No. 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 IA No. 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. 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 IA No. 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 A-10 4873-5460-7710v6/022497-0019 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”). 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 IA No. 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. 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 A-11 4873-5460-7710v6/022497-0019 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 IA No. 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 A 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 2071/2072. 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 IA No. 1 to less than 16.94 Acres in Zone A and 8.30 Acres in Zone B. Assessor’s Parcels which cannot be classified as Exempt Property because such classification would reduce the sum of all Taxable Property in IA No. 1 to less than 16.94 Acres in Zone A and 8.30 Acres in Zone B 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. 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 A-12 4873-5460-7710v6/022497-0019 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. B-1 4873-5460-7710v6/022497-0019 APPENDIX B SUPPLEMENTAL INFORMATION CONCERNING THE EAST VALLEY WATER DISTRICT AND THE COUNTY OF SAN BERNARDINO The following information is presented as general background data. The Bonds are payable solely from Net Taxes as described in the Official Statement. The taxing power of the Water District, the County, the State of California or any political subdivision thereof is not pledged to the payment of the Bonds. The District also notes that the below information is the latest available but does not in most instances reflect the impact of the COVID-19 pandemic. See the Official Statement under the caption “SPECIAL RISK FACTORS—COVID-19 Outbreak.” Accordingly, the historical information below does not necessarily reflect present economic conditions and future information could be significantly different from the historical information below. General The Water District. The Water District was formed in 1954 and has broad general powers over the use of water and wastewater collection and treatment within its boundaries. Encompassing an area of approximately 30 square miles, the Water District is located in western San Bernardino County in a largely urbanized service area which includes all of the City of Highland and portions of the City of San Bernardino. Approximately 15% of the Water District’s service area is located in unincorporated areas of the County. The service area has a population of approximately 102,000. The Water District supplies potable water to approximately 22,000 single family residential, multi- family residential, commercial (including industrial and governmental) and irrigation and fire line connections. The Water District has three sources of water: (i) groundwater extracted from the Bunker Hill Groundwater Basin; (ii) Santa Ana River flows; and (iii) State Water Project water purchased from San Bernardino Valley Municipal Water District. The Water District provides wastewater service to approximately 20,000 single family residential, multi-family residential connections and non-residential connections within the Water District’s service area. The Water District operates a wastewater collection and transmission system and owns and operates a wastewater treatment plant called the Sterling Natural Resource Center. The District is governed by a five member Board of Directors (the “Board”). Board members are elected at large by the registered voters of the District and serve staggered four-year terms. San Bernardino County. The County was established by an act of the State Legislature on April 26, 1853. Located in the southern portion of the State, the County covers 20,105 square miles, making it the largest county in the United States. The County has a population of over 2.1 million and extends from dense suburban development in the southwest portion of the County near the Los Angeles urban area to large expanses of desert and federally owned land in the eastern portion of the County, which stretches to the Nevada border. B-2 4873-5460-7710v6/022497-0019 Population The table below summarizes population of the City of Highland, the County and the State of California for the last five calendar years. CITY OF HIGHLAND, SAN BERNARDINO COUNTY AND CALIFORNIA Population Year City of Highland San Bernardino County State of California 2019 55,168 2,419,057 39,605,361 2020 55,211 2,440,719 39,648,938 2021 56,759 2,418,727 39,286,510 2022 56,283 2,430,976 39,078,674 2023 55,984 2,439,234 38,940,231 Source: California Department of Finance, E-4 Population Estimate for Counties and the State, 2010-2020, with 2010 Census Benchmark for calendar years 2019-2020; E-4 Population Estimate for Counties and the State, 2021-2023, with 2020 Census Benchmark for calendar years 2021-2023. Employment The following table summarizes historical employment and unemployment for the City of Highland, the County, the State of California and the United States for the last five calendar years. CITY OF HIGHLAND, SAN BERNARDINO COUNTY, CALIFORNIA AND UNITED STATES Civilian Labor Force, Employment, and Unemployment (Annual Averages) Year Area Labor Force Employment Unemployment Unemployment Rate(1) 2018 City of Highland 24,4000 23,400 1,000 4.1% San Bernardino County 955,100 915,800 39,200 4.1 California 19,289,500 18,469,900 819,600 4.2 United States 162,075,000 155,761,000 6,314,000 3.9 2019 City of Highland 24,700 23,700 1,000 3.9% San Bernardino County 967,100 929,800 37,400 3.9 California 19,413,200 18,617,900 795,300 4.1 United States 163,539,000 157,538,000 6,001,000 3.7 2020 City of Highland 25,000 22,500 2,500 10.2% San Bernardino County 974,700 880,900 93,800 9.6 California 18,971,600 17,047,600 1,924,000 10.1 United States 160,742,000 147,795,000 12,947,000 8.1 2021 City of Highland 25,400 23,400 2,000 7.8% San Bernardino County 992,200 918,600 73,600 7.4 California 18,973,400 17,586,300 1,387,100 7.3 United States 161,204,000 152,581,000 8,623,000 5.3 2022 City of Highland(2)--------% San Bernardino County 1,008,500 967,200 41,300 4.1 California 19,252,000 18,440,900 811,100 4.2 United States 164,287,000 158,291,000 5,996,000 3.6 (1)The unemployment rate is computed from unrounded data; therefore, it may differ from rates computed from rounded figures available in this table. (2)Calendar year 2022 data for City of Highland not available as of May 2023. Source: California Employment Development Department, Monthly Labor Force Data for Counties, Annual Average 2018-2022, March 2022 Benchmark, and US Department of Labor. B-3 4873-5460-7710v6/022497-0019 Major Industries in the County The table below sets forth the ten largest industries by employment in San Bernardino County in Fiscal Year 2022. SAN BERNARDINO COUNTY Major Employers – Fiscal Year 2022 Employer Number of Employees % of Total County of San Bernardino 5,000-9,999 0.60-1.19% Amazon 5,000-9,999 0.60-1.19 Loma Linda University Medical Center 5,000-9,999 0.60-1.19 Stater Brothers 1,000-4,999 0.12-0.60 Burlington Distribution Corp.1,000-4,999 0.12-0.60 Environmental Systems Research 1,000-4,999 0.12-0.60 Fedex Ground 1,000-4,999 0.12-0.60 Inland Empire Health Plan 1,000-4,999 0.12-0.60 San Antonio Community Hospital 1,000-4,999 0.12-0.60 San Manuel Resort & Casino 1,000-4,999 0.12-0.60 Source: San Bernardino County Annual Comprehensive Financial Report, Fiscal Year Ended June 30, 2022. Construction Activity The following tables reflect building permit valuations for the City of Highland for the five most recent calendar years for which information is available. CITY OF HIGHLAND Building Permits and Valuation (Dollars in Thousands) 2018 2019 2020 2021 2022 Permit Valuation: New Single-family $ 19,107 $ 2,183 $ 2,596 $ 9,551 $ 29,394 New Multi-family 0 0 0 0 24,420 Res. Alterations/Additions 2,230 1,141 1,295 1,979 1,978 Total Residential 21,337 3,324 3,891 11,530 55,792 Total Nonresidential 7,073 5,188 5,938 6,949 28,893 Total All Building $ 28,410 $ 5,512 $ 9,829 $ 18,479 $ 84,685 New Dwelling Units: Single Family 58 10 9 36 106 Multiple Family 0 0 0 0 196 Total 58 10 9 36 302 Note: Columns may not sum to totals due to independent rounding. Source: Construction Industry Research Board: “Building Permit Summary.” B-4 4873-5460-7710v6/022497-0019 The following tables reflect building permit valuations for the County for the five most recent calendar years for which information is available. SAN BERNARDINO COUNTY Building Permits and Valuation (Dollars in Thousands) 2018 2019 2020 2021 2022 Permit Valuation: New Single-family $ 1,114,778 $ 1,078,798 $ 934,304 $ 1,086,398 $ 1,028,474 New Multi-family 268,565 232,079 143,366 310,255 345,434 Res. Alterations/Additions 71,938 139,761 61,789 88,244 89,903 Total Residential 1,455,281 1,450,638 1,139,459 1,484,898 1,463,811 Total Nonresidential 1,080,130 1,377,100 1,064,696 1,165,646 2,083,951 Total All Building $ 2,535,410 $ 2,827,738 $ 2,204,155 $ 2,650,544 $ 3,547,763 New Dwelling Units: Single Family 3,311 4,096 3,631 4,376 3,701 Multiple Family 1,775 1,884 910 2,636 2,852 Total 5,086 5,980 4,541 7,012 6,553 Note: Columns may not sum to totals due to independent rounding. Source: Construction Industry Research Board: “Building Permit Summary.” Personal Income Personal Income is the income that is received by all persons from all sources. It is calculated as the sum of wage and salary disbursements, supplements to wages and salaries, proprietors’ income with inventory valuation and capital consumption adjustments, rental income of persons with capital consumption adjustment, personal dividend income, personal interest income, and personal current transfer receipts, less contributions for government social insurance. The personal income of an area is the income that is received by, or on behalf of, all the individuals who live in the area; therefore, the estimates of personal income are presented by the place of residence of the income recipients. B-5 4873-5460-7710v6/022497-0019 Total personal income in the City of Highland increased by 30.8% between 2013 and 2022. The following tables summarize personal income for the City of Highland for 2013 through 2022. PERSONAL INCOME City of Highland 2013-2022 (Dollars in Thousands) Year City of Highland Annual Percent Change 2013 $1,187,127 N/A 2014 1,173,489 (1.2)% 2015 1,121,794 (4.6) 2016 1,165,867 3.8 2017 1,170,411 3.9 2018 1,215,505 3.7 2019 1,278,521 4.9 2020 1,353,800 5.6 2021 1,471,700 8.0 2022 1,552,565 5.2 Source: City of Highland Annual Comprehensive Financial Report for Fiscal Year Ended June 30, 2022. Total personal income in San Bernardino County increased by 71.4% between 2011 and 2021. The following tables summarize personal income for San Bernardino County for 2011 through 2021. PERSONAL INCOME San Bernardino County 2011-2021 (Dollars in Thousands) Year San Bernardino County Annual Percent Change 2011 $63,359,399 N/A 2012 64,930,594 2.5% 2013 66,581,008 2.5 2014 70,425,945 5.8 2015 74,773,589 6.2 2016 77,868,801 4.1 2017 80,514,585 3.4 2018 83,915,091 4.2 2019 89,559,909 6.7 2020 99,313,293 10.9 2021 108,623,799 9.4 Source: U.S. Department of Commerce, Bureau of Economic Analysis. The following table summarizes per capita personal income for the City of Highland, the County, California and the United States for 2011-2022. This measure of income is calculated as the personal income of the residents of the area divided by the resident population of the area. B-6 4873-5460-7710v6/022497-0019 PER CAPITA PERSONAL INCOME 2011 through 2022 City of Highland, San Bernardino County, State of California and United States Year City of Highland San Bernardino County State of California United States 2011 $20,896 $30,760 $45,557 $42,747 2012 21,925 31,343 48,121 44,548 2013 22,014 32,011 48,502 44,798 2014 21,718 33,608 51,266 46,887 2015 21,031 35,423 54,546 48,725 2016 21,733 36,618 56,560 49,613 2017 21,524 37,537 58,804 51,550 2018 22,196 38,849 61,508 53,786 2019 22,921 41,253 64,919 56,250 2020 24,470 45,499 70,643 59,763 2021 26,729 49,493 76,800 64,117 2022 27,426 --77,339 65,423 Note: Per capita personal income was computed using Census Bureau midyear population estimates. San Bernardino County per capita personal income not available for 2022 as of May 2023. Source: U.S. Department of Commerce, Bureau of Economic Analysis; City of Highland Annual Comprehensive Financial Report for Fiscal Year Ended June 30, 2022 C-1 4873-5460-7710v6/022497-0019 APPENDIX C SUMMARY OF BOND INDENTURE The following is a summary of certain provisions of the Indenture that are not described elsewhere. This summary does not purport to be comprehensive and reference should be made to the Indenture for a full and complete statement of the provisions thereof. [TO COME FROM BOND COUNSEL] D-1-1 4873-5460-7710v6/022497-0019 APPENDIX D-1 FORM OF DISTRICT CONTINUING DISCLOSURE CERTIFICATE Upon issuance of the Bonds, the District proposes to enter into a Continuing Disclosure Certificate in substantially the following form: This Continuing Disclosure Certificate, dated August __, 2023 (the “Disclosure Agreement”) is executed and delivered by Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District (the “Issuer”) in connection with the issuance of the Issuer’s $_____ 2023 Special Tax Bonds (Improvement Area No. 1) (the “Bonds”). The Bonds are being issued pursuant to a Bond Indenture, dated as of August 1, 2023 (the “Bond Indenture”), by and between the Issuer and U.S. Bank Trust Company, National Association. The Issuer covenants as follows: SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the Issuer for the benefit of the Owners and Beneficial Owners of the Bonds and in order to assist the Underwriter in complying with the Rule. SECTION 2. Definitions. In addition to the definitions set forth in the Bond Indenture, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: “Annual Report” means any annual report provided by the Issuer pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. “Beneficial Owner” means any person which: (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries); or (b) is treated as the owner of any Bonds for federal income tax purposes. “Disclosure Representative” means the General Manager of the District, the Chief Financial Officer of the District, or the designee thereof, or such other officer or employee as the Issuer shall designate in writing from time to time. “Dissemination Agent” means, initially, the Issuer, or any successor Dissemination Agent designated in writing by the Issuer and which has filed with the Issuer a written acceptance of such designation. “District” means East Valley Water District. “Financial Obligation” means: (a) a debt obligation; (b) a derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (c) guarantee of (a) or (b). The term “Financial Obligation” does not include municipal securities as to which a final official statement has been provided to the MSRB consistent with the Rule and the issuer thereof has entered into a continuing disclosure undertaking for such municipal securities. “Fiscal Year” means the period from July 1 to June 30, or any other period selected by the Issuer as its fiscal year. “Improvement Area” means Improvement Area No. 1 of the Issuer. “Listed Events” means any of the events listed in Section 5(a) and (b) of this Disclosure Agreement. “MSRB” means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other D-1-2 4873-5460-7710v6/022497-0019 repository of disclosure information that may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future. “Official Statement” means the Official Statement relating to the Bonds, dated July __, 2023. “RMA” means the Rate and Method of Apportionment of Special Tax approved by the qualified electors of the Improvement Area. “Rule” means Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. “State” means the State of California. “Underwriter” means the original underwriters of the Bonds that are required to comply with the Rule in connection with the offering of the Bonds. SECTION 3. Provision of Annual Reports. (a) The Issuer shall, or, upon delivery of the Annual Report to the Dissemination Agent (if other than the Issuer), shall cause the Dissemination Agent to, not later than April 1 of each year, commencing April 1, 2024, provide to the MSRB an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Agreement. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Agreement; provided that the audited financial statements of the Issuer may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date. If the Issuer’s Fiscal Year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(a). (b) Not later than fifteen (15) business days prior to each April 1, the Issuer shall provide the Annual Report to the Dissemination Agent (if other than the Issuer). If the Issuer is unable to provide to the MSRB an Annual Report by the date required in subsection (a), the Issuer shall send a notice to the MSRB in a timely manner in substantially the form attached as Exhibit A. (c) The Dissemination Agent shall: (i) determine each year prior to April 1 the then-applicable rules and electronic format prescribed by the MSRB for the filing of annual continuing disclosure reports; and (ii) if the Dissemination Agent is other than the Issuer, certify to the Issuer that the Annual Report has been filed with the MSRB pursuant to this Disclosure Agreement, and stating, to the extent that it can confirm such filing of the Annual Report, the date that it was filed. SECTION 4. Content of Annual Reports. The Issuer’s Annual Report shall contain or include by reference the following: (a) The audited financial statements of the Issuer, if any have been prepared, for the most recent Fiscal Year of the Issuer then ended. If the audited financial statements are being prepared and are not available by the time that the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain any available unaudited financial statements, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. Audited financial statements, if any, of the Issuer shall be audited by such auditor as shall then be required or permitted by State law or the Bond Indenture. Audited financial statements, if prepared by the Issuer, shall be prepared in accordance with generally accepted accounting principles as prescribed for governmental units by the Governmental Accounting Standards Board; provided, however, that the Issuer may from time to time, if required by federal or state legal requirements, modify the basis upon which its financial statements are prepared. In the event that the Issuer shall modify the basis upon which its D-1-3 4873-5460-7710v6/022497-0019 financial statements are prepared, the Issuer shall provide a notice of such modification to EMMA, including a reference to the specific federal or state law or regulation specifically describing the legal requirements for the change in accounting basis. The financial statements of the District shall be filed to the extent that the Issuer does not prepare audited financial statements, but the financial statements of the District shall not be deemed to be the financial statements of the Issuer unless such audited financial statements contain specific information as to the Issuer, its revenues, expenses and account balances. If the District’s audited financial statements contain specific information as to the Issuer, its revenues, expenses and account balances, the Issuer’s Annual Report shall contain or incorporate by reference the District’s audited financial statements. If the District’s audited financial statements contain specific information as to the Issuer, its revenues, expenses and account balances, but are not available at the time required for filing, unaudited financial statements of the District that contain specific information as to the Issuer, its revenues, expenses and account balances shall be submitted with the Annual Report and the District’s audited financial statements shall be submitted once available. (b) To the extent not contained in the audited financial statements filed pursuant to subsection (a): (i) The total dollar amount of delinquencies in the Improvement Area as of each October 1 preceding to the April 1 Annual Report due date and, in the event that the total delinquencies within the Improvement Area as of such October 1 in any year exceed 5% of the Special Tax for the previous year, delinquency information for each parcel, including the amounts of delinquencies, length of delinquency and status of any foreclosure of each such parcel. (ii) The amount of prepayments of the Special Tax with respect to the Improvement Area for the prior Fiscal Year. (iii) A land ownership summary listing property owners responsible for more than 5% of the annual Special Tax levy, as shown on the San Bernardino County Assessor’s last equalized tax roll prior to each September preceding the April 1 Annual Report due date. (iv) The principal amount of the Bonds outstanding and the balance in the Reserve Account (along with a statement of the Reserve Requirement) as of each September 30 preceding the April 1 Annual Report due date. (v) The total assessed value (per the San Bernardino County Assessor’s records) of all parcels currently subject to the Special Tax within the Improvement Area, showing the total assessed valuation for all parcels within the Improvement Area and with separate columns showing the assessed value of improved and unimproved parcels. Parcels are considered improved if there is an assessed value for the improvements in the San Bernardino County Assessor’s records. (vi) An updated table in substantially the form of Table 6 in the Official Statement entitled “Estimated Value-to-Lien Ratios Allocated by Property Ownership” based upon the most recent information available, provided that assessed values shown on the San Bernardino County Assessor’s most recent equalized tax roll prior to each September preceding the April 1 Annual Report due date may be substituted for appraised values. (vii) Any changes to the RMA since the filing of the prior Annual Report. (viii) A copy of the annual information required to be filed by the Water District with the California Debt and Investment Advisory Commission pursuant to the Mello-Roos Community Facilities Act of 1982, as amended and relating generally to outstanding Issuer bond amounts, fund balances, assessed values, special tax delinquencies and foreclosure information. (ix) In addition to any of the information expressly required to be provided under paragraphs (i) through (viii) of this Section, the Issuer shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. D-1-4 4873-5460-7710v6/022497-0019 Any or all of the items listed above may be included by specific reference to other documents, including official statements for debt issues of the Issuer or related public entities, which have been submitted to the MSRB or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB. The Issuer shall clearly identify each such other document so included by reference. SECTION 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5, the Issuer shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds in a timely manner not more than ten (10) Business Days after the event: (i) Principal and interest payment delinquencies. (ii) Unscheduled draws on debt service reserves reflecting financial difficulties. (iii) Unscheduled draws on credit enhancements reflecting financial difficulties. (iv) Substitution of credit or liquidity providers, or their failure to perform. (v) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability or Notices of Proposed Issue (IRS Form 5701 TEB). (vi) Tender offers. (vii) Defeasances. (viii) Rating changes. (ix) Default, event of acceleration, termination event, modification of terms or other similar events under the terms of a Financial Obligation of the Issuer, any of which reflect financial difficulties.* (x) Bankruptcy, insolvency, receivership or similar proceedings. Note: For the purposes of the event identified in subparagraph (x), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person. (b) Pursuant to the provisions of this Section 5, the Issuer shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material, in a timely manner not more than ten (10) Business Days after occurrence: (i) Unless described in Section 5(a)(v), other notices or determinations by the Internal Revenue Service with respect to the tax status of the Bonds or other events affecting the tax status of the Bonds. (ii) Modifications to the rights of Bondholders. * The Issuer shall interpret the events identified in Section 5(a)(ix) in accordance with Release No. 14-83885 adopted by the Securities and Exchange Commission on August 20, 2018 and or any future guidance or releases provided by the Securities and Exchange Commission. D-1-5 4873-5460-7710v6/022497-0019 (iii) Bond calls. (iv) Release, substitution or sale of property securing repayment of the Bonds. (v) Non-payment related defaults. (vi) The consummation of a merger, consolidation or acquisition involving the Issuer or the sale of all or substantially all of the assets of the Issuer, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms. (vii) Appointment of a successor or additional trustee or the change of the name of a trustee. (viii) Incurrence of a Financial Obligation of the Issuer or agreement to covenants, events of default, remedies, priority rights or other similar terms of a Financial Obligation of the Issuer, any of which affect security holders.* (c) If the Issuer determines that knowledge of the occurrence of a Listed Event under subsection (b) would be material under applicable federal securities laws, and if the Dissemination Agent is other than the Issuer, the Issuer shall promptly notify the Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent to file a notice of such occurrence with the MSRB in an electronic format as prescribed by the MSRB in a timely manner not more than ten (10) Business Days after the event. Notwithstanding the foregoing, notice of Listed Events described in subsection (b)(iii) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to Owners of affected Bonds pursuant to the Bond Indenture. (d) If the Issuer determines that a Listed Event under subsection (b) would not be material under applicable federal securities laws and if the Dissemination Agent is other than the Issuer, the Issuer shall so notify the Dissemination Agent in writing and instruct the Dissemination Agent not to report the occurrence. (e) The Issuer hereby agrees that the undertaking set forth in this Disclosure Agreement is the responsibility of the Issuer and, if the Dissemination Agent is other than the Issuer, the Dissemination Agent shall not be responsible for determining whether the Issuer’s instructions to the Dissemination Agent under this Section 5 comply with the requirements of the Rule. SECTION 6. Termination of Reporting Obligation. The Issuer’s obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the Issuer shall give notice of such termination in the same manner as for a Listed Event under Section 5(a). SECTION 7. Dissemination Agent. The Issuer may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the form or content of any notice or report prepared by the Issuer pursuant to this Disclosure Agreement. The Dissemination Agent may resign by providing thirty days’ written notice to the Issuer and the Trustee. The Dissemination Agent shall have no duty to review any information provided to it by the Issuer. The Dissemination Agent shall have no duty to prepare any information report, nor shall the Dissemination Agent be responsible for filing any report not provided to it by the Issuer in a timely manner and in a form suitable for filing. SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Issuer may amend this Disclosure Agreement, and any provision of this Disclosure Agreement may be waived, provided that, in the opinion of nationally recognized bond counsel, such amendment or waiver is * The Issuer shall interpret the events identified in Section 5(b)(viii) in accordance with Release No. 14-83885 adopted by the Securities and Exchange Commission on August 20, 2018 and or any future guidance or releases provided by the Securities and Exchange Commission. D-1-6 4873-5460-7710v6/022497-0019 permitted by the Rule (taking into account any subsequent change in or official interpretation of the Rule), and provided further that the Dissemination Agent shall have first consented to any amendment that modifies or increases its duties or obligations hereunder. In the event of any amendment or waiver of a provision of this Disclosure Agreement, the Issuer shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the Issuer. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements: (a) notice of such change shall be given in the same manner as for a Listed Event under Section 5(a); and (b) the Annual Report for the year in which the change is made shall present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. SECTION 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the Issuer chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the Issuer shall have no obligation under this Disclosure Agreement to update such information or to include it in any future Annual Report or notice of occurrence of a Listed Event. SECTION 10. Default. In the event of a failure by the Issuer to comply with any provision of this Disclosure Agreement, any Owner or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Issuer to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Bond Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the Issuer or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance. No Owner or Beneficial Owner may institute such action, suit or proceeding to compel performance unless they shall have first delivered to the Issuer satisfactory written evidence of their status as such, and a written notice of and request to cure such failure, and the Issuer shall have refused to comply therewith within a reasonable time. SECTION 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the Issuer agrees, to the extent permitted by law, to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorney’s fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. The Dissemination Agent shall be paid compensation by the Issuer for its services provided hereunder in accordance with its schedule of fees as amended from time to time and all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. In performing its duties hereunder, the Dissemination Agent shall not be deemed to be acting in any fiduciary capacity for the Issuer, the Owners, or any other party. The obligations of the Issuer under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. SECTION 12. Notices. Any notices or communications to or among any of the parties to this Disclosure Agreement may be given to the Dissemination Agent (if other than the Issuer) at such address provided by the Dissemination to the Issuer, and to the Issuer as follows: Disclosure Representative: East Valley Water District 31111 Greenspot Road Highland, California 92346 Attention: Chief Financial Officer D-1-7 4873-5460-7710v6/022497-0019 SECTION 13. Beneficiaries. This Disclosure Agreement inures solely to the benefit of the Issuer, the Dissemination Agent, the Underwriter and the Owners and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. SECTION 14. Signature. This Disclosure Agreement has been executed by the undersigned on the date hereof, and such signature binds the Issuer to the undertaking herein provided. COMMUNITY FACILITIES DISTRICT NO. 2021-1 (MEDITERRA) OF EAST VALLEY WATER DISTRICT By: Its: General Manager of East Valley Water District D-1-8 4873-5460-7710v6/022497-0019 EXHIBIT A NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District Name of Issue: 2023 Special Tax Bonds (Improvement Area No. 1) Date of Issuance: August __, 2023 NOTICE IS HEREBY GIVEN that the Issuer has not provided an Annual Report with respect to the above- named Bonds as required by the Continuing Disclosure Certificate executed by the Issuer on the date of issuance of the Bonds. The Issuer anticipates that the Annual Report will be filed by _____________. Dated: Dissemination Agent By: D-2-1 4873-5460-7710v6/022497-0019 APPENDIX D-2 FORM OF DEVELOPER CONTINUING DISCLOSURE CERTIFICATE Upon issuance of the Bonds, the Developer proposes to enter into a Continuing Disclosure Certificate in substantially the following form: $_____ COMMUNITY FACILITIES DISTRICT NO. 2021-1 (MEDITERRA) OF EAST VALLEY WATER DISTRICT 2023 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 1) This Developer Continuing Disclosure Certificate, dated August __, 2023 (the “Disclosure Certificate”), is made and entered into by D.R. Horton Los Angeles Holding Company, Inc., a California corporation (the “Property Owner”), in connection with the issuance by Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District (the “District”) of its 2023 Special Tax Bonds (Improvement Area No. 1) (the “Bonds”). The Bonds are being issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, and a Bond Indenture, dated as of August 1, 2023 (the “Indenture”), by and between the District and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”). The Property Owner covenants and agrees as follows: SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Property Owner for the benefit of the holders and beneficial owners of the Bonds. SECTION 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized terms used in this Disclosure Certificate unless otherwise defined herein, the following capitalized terms shall have the following meanings: “Affiliate” of another Person means: (a) a Person directly or indirectly owning, controlling, or holding with power to vote, 5% or more of the outstanding voting securities of such other Person; (b) any Person 5% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote, by such other Person; and (c) any Person directly or indirectly controlling, controlled by, or under common control with, such other Person. For purposes hereof, “control” means the power to exercise a controlling influence over the management or policies of a Person, unless such power is solely the result of an official position with such Person. “Annual Report” means any Annual Report provided pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. “Annual Report Date” means October 31 of each year. The first Annual Report Date shall be October 31, 2023. “Assumption Agreement” means an agreement or certificate of a Major Property Owner or an Affiliate thereof for the benefit of the holders and beneficial owners of the Bonds containing terms that are substantially similar to this Disclosure Certificate, whereby such Major Property Owner or Affiliate agrees to provide Annual Reports and notices of Listed Events with respect to the portion of the Property owned by such Major Property Owner and its Affiliates. “Bond Counsel” means an attorney or a firm of attorneys whose experience in matters relating to the issuance of obligations by the states and their political subdivisions and the tax-exempt status of the interest thereon is recognized nationally. D-2-2 4873-5460-7710v6/022497-0019 “Dissemination Agent” means the Property Owner or any other dissemination agent designated in writing by the Property Owner and which has filed with the District a written acceptance of such designation. “Improvement Area” means Improvement Area No. 1 of the District. “Listed Event” means any of the events listed in Section 5(a) of this Disclosure Certificate. “Major Property Owner” means, as of any date, an owner of 30 or more parcels in the Improvement Area which are subject to the Special Taxes in the Improvement Area. “MSRB” means the Municipal Securities Rulemaking Board. “Official Statement” means the Official Statement relating to the Bonds, dated July __, 2023. “Participating Underwriter” means Hilltop Securities Inc. “Person” means an individual, a corporation, a partnership, an association, a joint stock company, a trust, a limited liability company, any unincorporated organization or a government or political subdivision thereof. “Property” means the parcels within the boundaries of the Improvement Area that are owned by the Property Owner as of the date of this Disclosure Certificate. “Repository” means the MSRB or any other entity designated or authorized by the Securities and Exchange Commission to receive continuing disclosure annual reports in connection with municipal securities. Unless otherwise designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB are to be made through the Electronic Municipal Market Access (EMMA) website of the MSRB, currently located at http://emma.msrb.org. SECTION 3. Provision of Annual Reports. (a) Not later than each Annual Report Date, the Property Owner shall (or shall cause the Dissemination Agent to) file an Annual Report which is consistent with the requirements of Section 4 with the Repository. The Annual Report may be submitted as a single document or as separate documents comprising a package and may cross-reference other information as provided in Section 4. The Property Owner shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by the Property Owner hereunder. The Dissemination Agent may conclusively rely upon such certification of the Property Owner and shall have no duty or obligation to review such Annual Report. (b) If the Dissemination Agent, if other than the Property Owner, has not received a copy of the Annual Report by fifteen (15) calendar days prior to an Annual Report Date, the Dissemination Agent shall notify the Property Owner of such failure to receive the Annual Report. If the Dissemination Agent is unable to verify that an Annual Report has been provided to the Repository and the Participating Underwriter by the Annual Report Date, the Dissemination Agent shall send a notice to the Repository in substantially the form attached as Exhibit A. (c) The Property Owner, or the Dissemination Agent (if other than the Property Owner), shall: (i) provide each Annual Report to the Repository as provided herein; and (ii) if it has provided the applicable report pursuant to clause (i) above, file a report with the District (and the Property Owner, if the Dissemination Agent is other than the Property Owner) certifying that it provided the Annual Report pursuant to this Disclosure Certificate and stating the date when it was provided to the Repository. SECTION 4. Content of Annual Reports. Each Annual Report shall contain or incorporate by reference the information set forth in Exhibit B, any or all of which may be included by specific reference to other documents, including official statements of debt issues of the Property Owner or public entities, which have been D-2-3 4873-5460-7710v6/022497-0019 submitted to the Repository or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB. The Property Owner shall clearly identify each such other document so included by reference. In addition to any of the information that is expressly required to be provided in Exhibit B, each Annual Report shall include such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. Major Property Owners that are Affiliates of each other may file either separate Annual Reports or combined Annual Reports covering all such entities. SECTION 5. Reporting of Listed Events. (a) The Property Owner shall give, or cause to be given, notice of the occurrence of any of the following Listed Events with respect to itself or the Property it owns at the time of the report, if material: (i) bankruptcy or insolvency proceedings commenced by or against the Property Owner and, if known, any bankruptcy or insolvency proceedings commenced by or against any Affiliate of the Property Owner which are reasonably likely to have a significant impact on the Property Owner’s ability to pay Special Taxes or to sell or develop the Property; (ii) failure to pay any taxes, special taxes (including the Special Taxes) or assessments due with respect to the Property (to the extent the responsibility of the Property Owner) prior to the delinquency date; (iii) filing of a lawsuit of which the Property Owner is aware against the Property Owner or an Affiliate of the Property Owner seeking damages which is reasonably likely to have a significant impact on the Property Owner’s ability to pay Special Taxes or to sell or develop the Property; (iv) damage to or destruction of any of the improvements on the Property; and (v) any payment default or other default by the Property Owner on any loan with respect to the construction of improvements on the Property. (b) Whenever the Property Owner obtains knowledge of the occurrence of a Listed Event, the Property Owner shall as soon as possible determine if such event would be material under applicable Federal securities law. (c) If the Property Owner determines that knowledge of the occurrence of a Listed Event would be material under applicable Federal securities law, the Property Owner shall, or shall cause the Dissemination Agent to, promptly file a notice of such occurrence with the Repository, if any, with a copy to the Trustee, the Water District and the Participating Underwriter. SECTION 6. Assumption of Obligations. If a portion of the Property owned by the Property Owner, or any Affiliate of the Property Owner, is conveyed to a Person that, upon such conveyance, will be a Major Property Owner, the obligations of the Property Owner hereunder with respect to the Property owned by such Major Property Owner and its Affiliates may be assumed by such Major Property Owner or by an Affiliate thereof. In order to effect such assumption, such Major Property Owner or Affiliate shall enter into an Assumption Agreement. SECTION 7. Termination of Reporting Obligation. The Property Owner’s obligations hereunder shall terminate (except as provided in Section 12 hereof) upon the earliest to occur of: (a) the legal defeasance, prior redemption or payment in full of all the Bonds; or (b) the first date on which the Property Owner: (i) is no longer a Major Property Owner; (ii) has no obligations hereunder with respect to any property because such obligations have been assumed by one or more Major Property Owners or Affiliates thereof pursuant to an Assumption Agreement; or (iii) prepays in full all of the Special Taxes attributable to its Property in the Improvement Area. D-2-4 4873-5460-7710v6/022497-0019 Upon the occurrence of any such termination prior to the final maturity of the Bonds, the Property Owner shall, or shall cause the Dissemination Agent to, give notice of such termination in the same manner as for a Listed Event under Section 5(c). SECTION 8. Dissemination Agent. The Property Owner may, from time to time, appoint a Dissemination Agent or discharge a Dissemination Agent with or without appointing a successor Dissemination Agent. The Dissemination Agent may resign by providing thirty (30) days’ written notice to the Property Owner and the District. If at any time there is no other designated Dissemination Agent, the Property Owner shall be the Dissemination Agent. If the Dissemination Agent is an entity other than the Property Owner, the Property Owner shall be responsible for paying the fees and expenses of such Dissemination Agent for its services provided hereunder. SECTION 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, neither the Property Owner nor the Dissemination Agent, if other than the Property Owner, may amend this Disclosure Certificate without the consent of the Participating Underwriter. SECTION 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Property Owner from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Property Owner chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Property Owner shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. SECTION 11. Default. In the event of a failure of the Property Owner or the Dissemination Agent to comply with any provision of this Disclosure Certificate, the Dissemination Agent may (and, at the written request of the Participating Underwriter or the Bondowners of at least 25% of the aggregate principal amount of Outstanding Bonds, and upon being indemnified to its reasonable satisfaction against the costs, expenses and liabilities to be incurred in compliance with such request, shall), or the Participating Underwriter or any holder or beneficial owner of the Bonds may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Property Owner or the Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Certificate in the event of any failure of the Property Owner or the Dissemination Agent to comply with this Disclosure Certificate shall be an action to compel performance. SECTION 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall not have any responsibility for the content of any Annual Report or notice of a Listed Event or any duty to review any Annual Report. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the Property Owner agrees to indemnify and save the Dissemination Agent, including its officers, directors, employees and agents (each, an “Indemnified Party”), harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the reasonable costs and expenses (including attorneys’ fees) of defending against any claim of liability, but excluding losses, expenses and liabilities due to such Indemnified Party’s negligence or willful misconduct. The obligations of the Property Owner under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. The Dissemination Agent will not, without the Property Owner’s prior written consent, settle, compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding in respect of which indemnification may be sought hereunder unless such settlement, compromise or consent includes an unconditional release of the Property Owner and its Affiliates from all liability arising out of any such claim, action or proceedings. A request by the Dissemination Agent for the Property Owner’s written consent shall be answered within a reasonable amount of time to allow the Dissemination Agent to act in a timely manner. If any claim, action or proceeding is settled with the consent of the Property Owner or if there is a judgment (other than a stipulated final judgment without the approval of the Property Owner) for the plaintiff in any such claim, action or proceeding, with D-2-5 4873-5460-7710v6/022497-0019 or without the consent of the Property Owner, the Property Owner agrees to indemnify and hold harmless the Dissemination Agent to the extent described herein. SECTION 13. Notices. Any notices or communications to or among any of the parties to this Disclosure Certificate may be given by electronic mail, regular mail, or overnight mail as follows: District: Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District 31111 Greenspot Road Highland, California 92346 Property Owner: D.R. Horton 2280 Wardlow Circle, Suite 100 Corona, California 92878 Telephone: (951) 739-5494 Attention: Vicki Gullion Participating Underwriter: Hilltop Securities Inc. 6100 Fairview Road, Suite 550 Charlotte, North Carolina 28210 SECTION 14. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the Dissemination Agent, the Property Owner (and its successors and assigns), the Participating Underwriter and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity. All obligations of the Property Owner hereunder shall be assumed by any legal successor to the obligations of the Property Owner as a result of a sale, merger, consolidation or other reorganization. SECTION 15. Assignability. The Property Owner shall not assign this Disclosure Certificate or any right or obligation hereunder except to the extent permitted to do so under the provisions of Section 6 hereof. The Dissemination Agent may, with prior written notice to the Property Owner and the District, assign this Disclosure Certificate and the Dissemination Agent’s rights and obligations hereunder to a successor Dissemination Agent. SECTION 16. Merger. Any person succeeding to all or substantially all of the Dissemination Agent’s corporate trust business shall be the successor Dissemination Agent without the filing of any paper or any further act. SECTION 17. Severability. In case any one or more of the provisions contained herein shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof. SECTION 18. Governing Law. The validity, interpretation and performance of this Disclosure Certificate shall be governed by the laws of the State of California. SECTION 19. Counterparts. This Disclosure Certificate may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. D-2-6 4873-5460-7710v6/022497-0019 D.R. Horton Los Angeles Holding Company, Inc., a California corporation By: Name: Its: D-2-7 4873-5460-7710v6/022497-0019 EXHIBIT A NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO FILE ANNUAL REPORT Name of Obligated Person: D.R. Horton Los Angeles Holding Company, Inc. (the “Property Owner”) Name of Bond Issue: Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District 2023 Special Tax Bonds (Improvement Area No. 1) (the “Bonds”) Date of Issuance: August __, 2023 NOTICE IS HEREBY GIVEN that the Property Owner has not provided an Annual Report with respect to the Bonds as required by Section 3 of the Developer Continuing Disclosure Certificate dated August __, 2023. The Property Owner anticipates that the required report will be filed by _____ __, 20__. Dated: _________ __, 20__ [DISSEMINATION AGENT] cc: EAST VALLEY WATER DISTRICT D-2-8 4873-5460-7710v6/022497-0019 EXHIBIT B ANNUAL REPORT $_____ COMMUNITY FACILITIES DISTRICT NO. 2021-1 (MEDITERRA) OF EAST VALLEY WATER DISTRICT 2023 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 1) This Annual Report is hereby submitted under Section 4 of the Developer Continuing Disclosure Certificate (the “Disclosure Certificate”) dated August __, 2023 executed by the undersigned (the “Property Owner”) in connection with the issuance of the above-captioned obligations (the “Bonds”). Capitalized terms used in this Annual Report but not otherwise defined have the meanings given to them in the Disclosure Certificate. I. Property Ownership and Development The information in this section is provided as of ______ __, 20__, which date is not more than 60 days before the date of this Annual Report. A. Property currently owned by the Property Owner in the Improvement Area (the “Property”): Development name: ________________________________________________________________ Number of residential lots: ___________________________________________________________ B. Status of land development or construction activities: _________________________________________________________________________________ _________________________________________________________________________________ C. Status of building permits and any significant amendments to land use or development entitlements: _________________________________________________________________________________ _________________________________________________________________________________ D. Aggregate property sold by the Property Owner to end users or merchant builders: Since the Date of Issuance of the Bonds Since the Date of the Last Annual Report Lots _________________________________Lots _________________________________ E. Status of any land purchase contracts with regard to the Property, whether acquisition of land in the Improvement Area by the Property Owner or sales of land in the Improvement Area to other property owners, distinguishing between: (i) end users (e.g., condominiums); (ii) developers; and (iii) merchant builders. _________________________________________________________________________________ D-2-9 4873-5460-7710v6/022497-0019 _________________________________________________________________________________ II. Legal and Financial Status of Property Owner Unless such information has previously been included or incorporated by reference in an Annual Report, describe any change in the legal structure of the Property Owner or the financial condition and financing plan of the Property Owner that would materially and adversely interfere with its ability to complete its development plan described in the Official Statement, if any. _________________________________________________________________________________ _________________________________________________________________________________ III. Change in Development or Financing Plans Unless such information has previously been included or incorporated by reference in an Annual Report, describe any development plans or financing plans relating to the Property that are materially different from the proposed development plans or financing plans described in the Official Statement, if any. _________________________________________________________________________________ _________________________________________________________________________________ IV. Official Statement Updates Unless such information has previously been included or incorporated by reference in an Annual Report, describe any other significant changes in the information relating to the Property Owner or the Property contained in the Official Statement under the heading “IMPROVEMENT AREA NO. 1—The Developer” that would materially and adversely interfere with the Property Owner’s ability to develop and sell the Property as described in the Official Statement. _________________________________________________________________________________ _________________________________________________________________________________ V. Other Material Information In addition to any of the information expressly required above, provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. _________________________________________________________________________________ _________________________________________________________________________________ Certification The undersigned Property Owner hereby certifies that this Annual Report constitutes the Annual Report required to be furnished by the Property Owner under the Disclosure Certificate. ANY OTHER STATEMENTS REGARDING THE PROPERTY OWNER, THE DEVELOPMENT OF THE PROPERTY, THE PROPERTY OWNER’S FINANCING PLAN OR FINANCIAL CONDITION, OR THE BONDS, OTHER THAN STATEMENTS MADE BY THE PROPERTY OWNER IN AN OFFICIAL RELEASE, OR FILED WITH THE MUNICIPAL SECURITIES RULEMAKING BOARD OR A NATIONALLY RECOGNIZED MUNICIPAL SECURITIES INFORMATION REPOSITORY, ARE NOT AUTHORIZED BY D-2-10 4873-5460-7710v6/022497-0019 THE PROPERTY OWNER. THE PROPERTY OWNER IS NOT RESPONSIBLE FOR THE ACCURACY, COMPLETENESS OR FAIRNESS OF ANY SUCH UNAUTHORIZED STATEMENTS. THE PROPERTY OWNER HAS NO OBLIGATION TO UPDATE THIS ANNUAL REPORT OTHER THAN AS EXPRESSLY PROVIDED IN THE DISCLOSURE CERTIFICATE. Dated: ______ __, 20__ KB HOME California, LLC, a Delaware limited liability company D.R. Horton Los Angeles Holding Company, Inc., a California corporation By: Name: Title: E-1 4873-5460-7710v6/022497-0019 APPENDIX E FORM OF OPINION OF BOND COUNSEL Upon issuance of the Bonds, Stradling Yocca Carlson & Rauth, a Professional Corporation, Bond Counsel, proposes to render its final approving opinions with respect to the Bonds in substantially the following form: August __, 2023 Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District Highland, California Re: $_____ Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District 2023 Special Tax Bonds (Improvement Area No. 1) Ladies and Gentlemen: We have examined the Constitution and the laws of the State of California (the “State”), a certified record of the proceedings of East Valley Water District (the “Water District”) taken in connection with the formation of Community Facilities District No. 2021-1 (Mediterra) of East Valley Water District (the “District”) and the authorization and issuance of the District’s 2023 Special Tax Bonds (Improvement Area No. 1) in the aggregate principal amount of $_____ (the “Bonds”) and such other information and documents as we consider necessary to render this opinion. In rendering this opinion, we have relied upon certain representations of fact and certifications made by the Water District, the District, the initial purchasers of the Bonds and others. We have not undertaken to verify through independent investigation the accuracy of the representations and certifications relied upon by us. The Bonds have been issued 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), and a Bond Indenture dated as of August 1, 2023 (the “Indenture”), by and between the District and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”). All capitalized terms not defined herein have the meanings set forth in the Indenture. The Bonds are dated their date of delivery and mature on the dates and in the amounts set forth in the Indenture. The Bonds bear interest payable semiannually on March 1 and September 1 of each year, commencing March 1, 2024, at the rates per annum set forth in the Indenture. The Bonds are registered Bonds in the form set forth in the Indenture, redeemable in the amounts, at the times and in the manner provided for in the Indenture. Based upon our examination of the foregoing, and in reliance thereon and on all matters of fact as we deem relevant under the circumstances, and upon consideration of applicable laws, we are of the opinion that: (1) The Bonds have been duly and validly authorized by the District and are legal, valid and binding limited obligations of the District, enforceable in accordance with their terms and the terms of the Indenture. The Bonds are limited obligations of the District but are not a debt of the Water District, the State or any other political subdivision thereof within the meaning of any constitutional or statutory limitation, and, except for the Special Taxes, neither the faith and credit nor the taxing power of the Water District, the State or any of its political subdivisions is pledged for the payment thereof. E-2 4873-5460-7710v6/022497-0019 (2) The execution and delivery of the Indenture has been duly authorized by the District, and the Indenture is valid and binding upon the District and is enforceable in accordance with its terms, provided, however, that we express no opinion as to the enforceability of the covenant of the District contained in the Indenture to levy Special Taxes for the payment of Administrative Expenses or as to any indemnification, penalty, choice of law, choice of forum or waiver provisions contained therein. (3) The Indenture creates a valid pledge of that which the Indenture purports to pledge, subject to the provisions of the Indenture. (4) Under existing statutes, regulations, rulings and judicial decisions, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals; however, for tax years beginning after December 31, 2022, with respect to applicable corporations as defined in Section 59(k) of the Internal Revenue Code of 1986, as amended (the “Code”), interest (and original issue discount) on the Bonds might be taken into account in determining adjusted financial statement income for the purposes of computing the alternative minimum tax imposed on such corporations. (5) Interest (and original issue discount) on the Bonds is exempt from State personal income tax. (6) The difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of the same series and maturity is to be sold to the public) and the stated redemption price at maturity with respect to such Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bond Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by the Bond Owner will increase the Bond Owner’s basis in the Bond. (7) The amount by which a Bond owner’s original basis for determining loss on sale or exchange in the applicable Bond (generally the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable Bond premium which must be amortized under Section 171 of the Code; such amortizable Bond premium reduces the Bond owner’s basis in the applicable Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Bond owner realizing a taxable gain when a Bond is sold by the owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the owner. Purchasers of the Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable bond premium. The opinions that are expressed in paragraph (4) above as to the exclusion from gross income for federal income tax purposes of interest (and original issue discount) on the Bonds are based upon certain representations of fact and certifications made by the District and are subject to the condition that the District comply with certain covenants and all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds to assure that such interest (and original issue discount) will not become includable in gross income for federal income tax purposes. Failure to comply with such covenants and requirements of the Code may cause interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The District has covenanted to comply with all such requirements. Except as set forth in paragraphs (4), (5), (6) and (7) above, we express no opinion as to any tax consequences related to the Bonds. The opinions that are expressed herein are based upon our analysis and interpretation of existing laws, regulations, rulings and judicial decisions and cover certain matters not directly addressed by such authorities. We call attention to the fact that the rights and obligations of the District under the Indenture and the Bonds are subject to and may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws affecting creditors’ rights, to the application of equitable principles if equitable remedies E-3 4873-5460-7710v6/022497-0019 are sought, to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against public agencies in the State. Our opinion is limited to matters governed by the laws of the State of California and federal law. We assume no responsibility with respect to the applicability or the effect of the laws of any other jurisdiction and express no opinion as to the enforceability of the choice of law provisions contained in the Indenture. We express no opinion herein as to the accuracy, completeness or sufficiency of the Official Statement relating to the Bonds or other offering material relating to the Bonds and expressly disclaim any duty to advise the owners of the Bonds with respect to matters contained in the Official Statement. Certain requirements and procedures contained or referred to in the Indenture and Tax Certificate may be changed, and certain actions may be taken or omitted, under the circumstances and subject to the terms and conditions set forth in the Indenture and Tax Certificate relating to the Bonds, upon the advice or with the approving opinion of counsel nationally recognized in the area of tax-exempt obligations. We express no opinion as to the effect on the exclusion from gross income for federal income tax purposes of the interest (and original issue discount) on any Bonds if any such change occurs or action is taken or omitted upon the advice or approval of counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation. We call attention to the fact that the foregoing opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether such actions or events are taken (or not taken) or do occur (or do not occur). Our engagement as bond counsel to the District terminates upon the issuance of the Bonds. Respectfully submitted, F-1 4873-5460-7710v6/022497-0019 APPENDIX F BOOK-ENTRY ONLY SYSTEM The information in this Appendix concerning DTC and DTC’s book-entry only system has been obtained from sources that the District and the Underwriter believe to be reliable, but neither the District nor the Underwriter takes any responsibility for the completeness or accuracy thereof. The following description of the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment of principal, premium, if any, accreted value and interest on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered bond will be issued for each annual maturity of the Bonds, each in the aggregate principal amount of such annual maturity, and will be deposited with DTC. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual F-2 4873-5460-7710v6/022497-0019 Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Authority or the Trustee, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Trustee, or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. A Bond Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant, to the Trustee, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant’s interest in the Bonds, on DTC’s records, to the Trustee. The requirement for physical delivery of Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered Bonds to the Trustee’s DTC account. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, physical certificates are required to be printed and delivered. The Authority may decide to discontinue use of the system of book-entry only transfers through DTC (or a successor securities depository). In that event, bonds will be printed and delivered to DTC. THE TRUSTEE, AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE. G-1 4873-5460-7710v6/022497-0019 APPENDIX G APPRAISAL Agenda Item #3c July 12, 20231 Meeting Date: July 12, 2023 Agenda Item #3c Discussion Item 7 9 8 Regular Board Meeting TO: Governing Board Members FROM: Public Affairs/Conservation Manager SUBJECT: Consider approval of Amendment No. 2 - Reimbursement Agreement with the City of Highland for Law Enforcement Services RECOMMENDATION That the Board of Directors authorize the General Manager/CEO to execute Amendment No. 2 reimbursement agreement with the City of Highland for law enforcement services. BACKGROUND / ANALYSIS East Valley Water District (District) serves the needs of the community through water and wastewater services. Maintaining secure facilities is essential to achieving these objectives, resulting in the District taking an active role in emergency mitigation measures, including a variety of site safety and security measures. A contract was established with the San Bernardino County Sheriff’s Department Highland Station on January 1, 2022, remaining in-place until 2031. As part of this partnership, a deputy has been assigned to the District to provide security at various sites within the service area, conduct criminal investigations related to District property, and assist District personnel in managing customer conflicts. Moreover, the deputy supports the District during public events at the Sterling Natural Resource Center. The amount for each fiscal year covers the full annual costs for the deputy and for FY 2023-24, the amount is $304,254, a 4.6% increase from the previous year. This total cost reflects the approved salary and benefits as adopted by the San Bernardino County Board of Supervisors. Term Amount January 1, 2022 - June 30, 2022 $154,000 FY 2022-23 $290,764 FY 2023-24 $304,254 Since the City of Highland is the primary contract holder for law enforcement services with the San Bernardino County Sheriff’s Department, the District's amendment aligns with the contract to ensure there is no duplication of services. It is important to note the ultimate command and control of the deputy will remain under the discretion of the Highland Sheriff Department Command Staff. Finally, the City of Highland does not Agenda Item #3c July 12, 20232 Meeting Date: July 12, 2023 Agenda Item #3c Discussion Item 7 9 8 impose any administrative fees for facilitating this agreement. Partnerships between local agencies provide enhanced levels of service to the community, while maximizing organizational expertise. The District will continue fostering a strong working relationship with the City of Highland and San Bernardino County Sheriff’s Department to ensure the safety and security of the District’s assets. AGENCY GOALS AND OBJECTIVES I - Implement Effective Solutions Through Visionary Leadership C. Strengthen Regional, State and National Partnerships IV - Promote Planning, Maintenance and Preservation of District Resources A. Develop Projects and Programs to Ensure Safe and Reliable Services REVIEW BY OTHERS This agenda item has been reviewed by the Public Affairs and the Administration Departments. FISCAL IMPACT This item is funded in the current fiscal year budget. Recommended by: ________________ Michael Moore General Manager/CEO Respectfully submitted: ________________ William Ringland Public Affairs/Conservation Manager ATTACHMENTS Schedule A - Law Enforcement Services Contract Amendment No. 2 - Reimbursement Agreement Original Agreement between EVWD and City of Highland FY 2023-24 COST 1.00 -Deputy Sheriff Tier 2 236,805 1 1.00 -Marked Unit 19,315 2 Dispatch Services 18,649 1 1.00 -HTs (Amortization, Access & Maintenance) 1,397 1.00 -Taser Replacement (Amortized over 5-years) 336 Administrative Support 1,116 Vehicle Insurance 1,251 Personnel Liability & Bonding 19,424 Workers' Comp Experience Modification 1,561 County Administrative Cost 4,399 Cost for FY2023-24 $ 304,254 1 Monthly Payment Schedule $25,360 2nd through 12th payments due the 5th of each month:$25,354 1 2 3 4 Services and supplies will be billed to the City on a quarterly invoice. No replacement cost is included for grant funded or donated vehicles. SCHEDULE A LAW ENFORCEMENT SERVICES CONTRACT CITY OF HIGHLAND FY 2023-24 Cost of 1-Deputy Sheriff for Water Company Assignment LEVEL OF SERVICE 1st payment due July 15, 2023: Personnel costs include salary and benefits and are subject to change by Board of Supervisors’action.Changes in salary and benefit costs will be billed to the City on a quarterly invoice. Vehicle costs do not include fuel and maintenance.The City is responsible for fuel,repair and maintenance of all contract vehicles,including collision damage.All fuel,repair and maintenance costs incurred by the County will be billed to the City on a quarterly invoice. 1 AMENDMENT NO. 2 REIMBURSEMENT AGREEMENT BETWEEN THE CITY OF HIGHLAND AND EAST VALLEY WATER DISTRICT FOR LAW ENFORCEMENT SERVICES This Amendment No. 2 Reimbursement Agreement Between the City of Highland and East Valley Water District for Law Enforcement Services (“Amendment No. 2”) is made and entered into this 9th day of May 2023 by and between the CITY OF HIGHLAND, a municipal corporation (“City”) and EAST VALLEY WATER DISTRICT, a California special district (“EVWD”). The City and EVWD may be collectively referred to as “the Parties”. 1. RECITALS A. On September 28, 2021, the City and EVWD entered into a Reimbursement Agreement for law enforcement services (“Agreement”). Pursuant to the Agreement, beginning January 1, 2022, the City, through its Contract with the County, will provide one Sheriff’s deputy to patrol EVWD’s Sterling Natural Resource Center and provide law enforcement services to EVWD’s 41 sites. EVWD would then be responsible for reimbursing the City for the full cost of the Sheriff’s deputy. B. On May 10, 2022, the Parties entered into Amendment No. 1 to the Agreement to provide that the payment under the Agreement would be $285,356.00. The cost subsequently increased by $5,408.00, and the increase was paid by EVWD to the City, for a total of $290,764.00 for Fiscal Year 2022-2023. D. The Parties now seek to enter into this Amendment No. 2 to address the contract amount for Fiscal Year 2023-2024. According to the San Bernardino County Sheriff’s Department, the full cost of one (1) Deputy for Fiscal Year 2023-2024 is $304,254.00. 2. SECOND AMENDMENT A. Section 3, Payment of the Agreement is hereby amended to read as follows: “3. Payment. On or before July 1, 2023, EVWD shall pay to the City Three Hundred Four Thousand Two Hundred Fifty-Four Dollars ($304,254.00) for the full cost of the Sheriff’s deputy. The cost breakdown is attached hereto as Exhibit “B”. Thereafter, on or before July 1st of each subsequent year, EVWD shall pay to the City the full cost of the Sheriff’s deputy based on the revised schedule of payment. The parties acknowledge that the cost of the Sheriff’s deputy may change each year and that the full cost that the City pays the County for the Sheriff’s deputy shall be passed through to EVWD. Beginning in June 2022, no later than June 1st of each year, the City shall provide to EVWD a new schedule of payment for the Sheriff’s deputy that will replace Exhibit “B” hereto. Beginning in June 2022, no later than July 1st of each year, EVWD shall pay to the City the amount set forth in Exhibit “B”. The City’s Contract with the County provides that personnel costs include 2 salary and benefits are subject to change by Board of Supervisor action. The Contract further provides that changes in salary and benefit costs will be billed to the City on a quarterly basis. If the cost for the Sheriff’s deputy increases in any year after payment has been made by EVWD to the City, the City shall promptly notify EVWD of the additional cost and EVWD shall pay the City the additional cost within thirty days of receipt of the City’s notice.” B. Exhibit “B” of “Amendment No. 2” shall replace Exhibit “B” of “Amendment No. 1” dated May 9, 2023. C. All other Exhibits and provisions of the Agreement shall remain in full force and effect. 3. SEVERABILITY If any provision of “Amendment No. 2” shall be adjudged to be invalid, void, or illegal, it shall in no way affect, impair or invalidate any other provision(s) hereof, the parties hereby agreeing that they would have entered into the remaining portion of “Amendment No. 2” notwithstanding the omission of the portion or portions adjudged invalid, void, or illegal. 4. COUNTERPARTS “Amendment No. 2” may be executed in any number of counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, taken together, shall be deemed to be one and the same instrument. IN WITNESS WHEREOF, the parties hereto have executed “Amendment No. 2” on the date and year first above written. CITY OF HIGHLAND EAST VALLEY WATER DISTRICT _______________________________ _______________________________ Joseph A. Hughes, City Manager Michael Moore, General Manager/CEO ATTEST: _______________________________ City Clerk APPROVED AS TO FORM: _______________________________ City Attorney 3 Exhibit “B” Payment Schedule FY 2023-2024 (July 1, 2023 - June 30, 2024) Deputy Sheriff: $236,805 Marked Patrol Unit: $19,315 Plus, other costs such as: HT radio and taser, Dispatch Services, Administrative support, Vehicle and Personnel Liability and Insurance of approximately $48,134. Total Cost for the above deputy and equipment in FY 2023-2024 (July 1, 2023 - June 30, 2024) is $304,254.00. Agenda Item #3d July 12, 20231 Meeting Date: July 12, 2023 Agenda Item #3d Discussion Item 8 2 9 Regular Board Meeting TO: Governing Board Members FROM: General Manager/CEO SUBJECT: Consider Approval of Contract with Web Advanced for Website Redesign Services RECOMMENDATION That the Board of Directors approve an agreement with Web Advanced in the amount of $318,050. BACKGROUND / ANALYSIS The Legislative and Public Outreach Committee recommended, at their June 8, 2023 meeting, that the Board of Directors (Board) approve the agreement with Web Advanced. East Valley Water District’s website, eastvalley.org, is approaching the end of its design life cycle as it nears five years of functionality. With the increased digital focus following the COVID-19 pandemic, the current website design has become outdated and requires a redesign to effectively serve the District's ratepayers. Moreover, the content management system (CMS) used for making edits and updates to the website has encountered growing reliability issues and slower response times, limiting the ability for staff to make timely content updates. Recognizing these challenges, staff included a website redesign in the Five-Year Workplan and Budget. A Request for Proposals (RFP) was issued on February 21, 2023 and staff has completed the review of proposals. A total of nine (9) firms submitted proposals, however, two organizations did not meet the minimum qualifications to proceed in the evaluation process. Among the remaining seven companies, Web Advanced was ranked highest based upon experience, project understanding and schedule. Through the RFP review process, Web Advanced emerged as the most suitable candidate based on the following key criteria: 1. Digital Experience: Web Advanced has a twenty-year history with a track record in website design and development, demonstrating their ability to create visually appealing, functional, and user-friendly websites. They have successfully completed similar projects for public organizations, showcasing their expertise in modern web technologies and best practices. Agenda Item #3d July 12, 20232 Meeting Date: July 12, 2023 Agenda Item #3d Discussion Item 8 2 9 2. Understanding of Requirements: Web Advanced demonstrated a comprehensive understanding of the District’s goals, recognized the need to engage with ratepayers/stakeholders through the redesign process, and showcased specific functionality requirements for the website redesign. Their proposal outlined a strategic approach to address the current issues, emphasizing enhanced user experience, improved site performance, and streamlined navigation. 3. Project Management and Timeline: Web Advanced presented a well-defined project management plan, outlining clear milestones, deliverables, and timelines. Their proposed project timeline aligns with the District’s expectations, ensuring a timely completion of the website redesign over the next fiscal year. The website redesign cost is not-to-exceed $120,000 with annual CMS cost of $12,000 for three years with two optional one-year extensions. Included in the contract will be the website hosting services and maintenance. A $50,000 contingency will also be included for optional website development services, if needed. The total contract amount will be $318,050. AGENCY GOALS AND OBJECTIVES II - Maintain a Commitment to Sustainability, Transparency, and Accountability B. Utilize Effective Communication Methods III - Deliver Public Service with Purpose While Embracing Continuous Growth B. Strive to Provide World Class Customer Relations IV - Promote Planning, Maintenance and Preservation of District Resources A. Develop Projects and Programs to Ensure Safe and Reliable Services C. Dedicate Efforts Toward System Maintenance and Modernization REVIEW BY OTHERS This item has been reviewed by the Legislative & Public Outreach Committee and Administration. FISCAL IMPACT This item is funded in the current fiscal year budget. Agenda Item #3d July 12, 20233 Meeting Date: July 12, 2023 Agenda Item #3d Discussion Item 8 2 9 Recommended by: ________________ Michael Moore General Manager/CEO Respectfully submitted: ________________ William Ringland Public Affairs/Conservation Manager ATTACHMENTS Proposed Contract RFP Proposal WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE East Valley Water District 1 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE 3 MacArthur Pl, STE 430, Santa Ana, CA 92707 2 TABLE OF CONTENTS Transmittal Letter Key Personnel Proposed Staffing Personnel Experience Chart Staff Resumes Qualifications and Work Plan Company Qualifications Case Studies Work Plan References Cost *Included separately WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE 3 COVER LETTER Dear East Valley Water District Team, Thank you for the opportunity to bid on the East Valley Water District Website Design, Development and Maintenance contract. Web Advanced is an award-winning, 22-year-old digital agency headquartered in Orange County, CA. Our digital DNA is built on over 2 decades of creating immersive and complex/data-driven websites and experiences. We are a leading digital agency working with public agencies in Southern California; having worked with OCTA for over 8 years, and serving as the digital agency for Metrolink for the past 6+ years, and being the current digital agency for The Toll Roads as well. Web Advanced will leverage our broad set of experience and skills across design, internet technologies, and marketing to provide best in class solutions for EVWD. We are confident that we can execute all initiatives on time and on budget, based on our dedicated project management team and resources, and experience in delivering numerous projects very similar in scope and functionality to EVWD’s digital needs. We have an exceptional track record for delivering award winning web and mobile solutions for organizations and look forward to the opportunity of enhance EVWD’s digital presence and increase engagements with the intended target audience. Best, Victor Liu President / Co-Founder Submitting Organization: Web Advanced Authorized Person to Obligate the Organization: Victor Liu President & Co-founder T: 949.453.1805 x104 C: 949.413.2921 vliu@webadvanced.com Acknowledgements: Web Advanced acknowledges all the addenda that were issued by the EVWD as part of this RFP Proposal Validity: This proposal will be valid for 150 days from date of submission Authorized Person to Negotiate on behalf of the Organization: Victor Liu President & Co-founder T: 949.453.1805 x104 C: 949.413.2921 vliu@webadvanced.com WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE 4 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE KEY PERSONNEL WEB ADVANCED AREAS OF FOCUS Responsive website design and development Custom content management system integration Web application development Website maintenance Website animation and HTML5 design Social media and content marketing integration Web customer satisfaction survey E-commerce solutions Deep web analytics and report Mobile application and web development API development Digital design and creative capabilities Mobile-responsive emails Search engine optimization 5 Web Advanced appreciates the opportunity to bid on the EVWD’s’ website design, development and management services RFP, and looks forward to the next steps. We believe we are a great fit for this opportunity for the following reasons: 1.History and Domain Knowledge Web Advanced has over 3+ years history of working with EVWD. All the projects and tasks that we’ve worked on have come in on-time and on-budget. We are incredibly proud of all the digital properties that we have built for EVWD and look forward to continue to build and innovate in the future. 2.Hands On Approach The Web Advanced project team for EVWD have been together for many years. Our hands on approach (from principal to individual contributors) to our ability to work with EVWD onsite is extremely helpful in building strong working relationships and great final products. 3.Industry Expertise Web Advanced brings a strong portfolio of government experience to the opportunity. Web Advanced has served as the web partner for many of the large government agencies in Southern California. We incorporate modern designs with innovative technology solutions to our transit partners and have implemented multiple award winning digital solutions for our transit accounts. We look forward to building this relationship with EVWD. WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE WHY WORK WITH US? 6 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE PROPOSED STAFFING ORGANIZATION CAPACITY 1.Approximately 3-5 staff members will be working on this project. These staff members include a project manager, creative director, creative designer, back-end developer and front-end developer. Web Advanced anticipates approximately 25-30% of its workforce to be involved in the project during a portion of its cycle. EVWD can expect approximately 3-5 staff members working on this project for the duration of the project. 2.Web Advanced is more than capable of handling the demand and the work required by EVWD. Web Advanced is currently at 75% capacity, with multiple projects finishing up shortly. Our office is located near John Wayne Airport, and Web Advanced have had a physical presence in the central Orange County for over 2 decades. 3.Key personnel will be available to the extent proposed for the duration of the project. No person designated as key to the project shall be removed or replaced without the prior written concurrence to EVWD. a Delane Frear Front-end Developera Byron Silver Creative Designer (Contract) a Karie Jamison Creative Designer (Contract) a Vanessa Brown Creative Designer (Contract) a a Andrew McLendon Chief Creative OfficeraVictor Liu President a Halle Nguyen VP of Finance and Operations a Tim Affeldt Manager, Back-end Development a Anthony Young Back-end Developer a Eric Cho Back-end Developer a John Mun Front-end Developer (Contract) a Adam Bonner Chief Technology Officer TBD Project Coordinator Leslie Ayala Sr. Project Manager 7 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE KEY PERSONNEL EXPERIENCE EXPERIENCE AREA Adam Bonner Andrew McLendon Tim Affeldt Delane Frear Eric Cho Umbraco content management system experience, implementation and support ✓ ✓ ✓ ✓ ASP.NET Framework ✓ ✓ ✓ Server side code, C# with HTML ✓ ✓✓✓ Front-end: HTML5, JavaScript, JQuery ✓ ✓✓ Website Architecture - CSS, CSS3, Frameworks ✓ ✓✓✓ Responsive Website Design and Architecture ✓ ✓ Databases: MS SQL Server Database 2008 and 2005 ✓ ✓ ✓ CSS (Cascading Style Sheets), DHTML, Master Pages, Themes, Skins ✓ ✓✓ Windows Server Management and Configuration ✓ ✓ ✓ iOS and Android: design, develop, document, test and deploy ✓✓✓ ✓ API development: Facebook, Twitter, YouTube, Vimeo, Google Maps, ESRI, Bing Maps ✓ ✓✓ User Experience, User Interface Design, web photography and image compression using Adobe Creative Suite ✓ SEO strategy, analytics and reporting ✓✓ ✓ Content Strategy and High Level technical and strategic consulting ✓ ✓ Data management, including reporting, import, and export of data ✓✓✓ ✓ 8 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE PROPOSED STAFFING PROJECT MANAGEMENT EXAMPLE PROJECTS Metrolink (MetrolinkTrains.com) ●Website redesign and development ●Ongoing web maintenance Disney Entertainment & Resorts ●Web Application development ●Ongoing support & maintenance The Toll Roads ●Web and digital support ●Ongoing support & maintenance Ultimate Ears ●Web Application development ●Ongoing support & maintenance Leslie Ayala, PMP Senior Project Manager, Irvine Office 10 years at Web Advanced Leslie is 80% committed to other Web Advanced accounts, and can dedicate 20% of her time to EVWD EXPERIENCE Leslie has been a project manager at Web Advanced since 2013. She has served as primary project manager for a variety of key accounts including Metrolink, Disney, The Toll Roads, and many others. Leslie is very detail oriented and has consistently kept projects on-time and on-budget for Web Advanced. Leslie graduated from San Francisco State University with a Bachelor of Science in Business Administration with a concentration in Computer Information Systems and has a M.S. in Instructional Technology from National University. PROJECT TASKS ●Primary point of contact ●Timeline development ●Resource and budget management ●Scope management ●Risk management ●Day-to-day task coordination and sprint management 9 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE PROPOSED STAFFING CREATIVE & STRATEGIC PLANNING EXAMPLE PROJECTS Metrolink (MetrolinkTrains.com) ●Website redesign and development ●Ongoing web maintenance OCTA (OCTA.net) ●Website redesign and development ●Campaign microsites ●OC Go UX/UI The Toll Roads ●Web design and digital services ●Strategic recommendation ●Creative direction and campaign concepts Andrew McLendon Chief Creative Officer, Irvine Office 22 years at Web Advanced Andrew is 85% committed to other Web Advanced accounts, and can dedicate 15% of his time to EVWD EXPERIENCE A talented artist and accomplished web design professional, Andrew joined the Web Advanced team in 2000 as the company’s first employee. Leading Web Advanced’s design team as the company’s Chief Creative Officer, Andrew has overseen the design of more than 200 web projects over the past 20 years, including Metrolink, OCTA, Pacific Surfliner, The Toll Roads, and Rio Metro. Andrew graduated from UC Irvine with a Bachelor of Studio Arts. PROJECT TASKS ●Discovery Interviews, Analysis and Documentation ●User Experience: Sitemap Development, Wireframes, User Flows ●Creative Strategy and translate the brand to a modern web implementation ●Collaborate with Senior Art Director on look & feel, homepage, and template design 10 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE PROPOSED STAFFING DEVELOPMENT & ENGINEERING EXAMPLE PROJECTS Metrolink (metrolinktrains.com) ●Planned technology roadmap to implement entire site in 6 month time period ●Integrated Xerox/Conduent ticketing with new website ●Episerver expert and resource for internal and vendor team ●Implemented complex development goals alongside team to meet project deliverables Orange County Transportation Authority (OCTA.net) ●Technical Architecture to ensure OCTA is on forefront of technology ●Spearheaded ensuring mobile devices are 1st class citizens for OCTA Pacific Surfliner (pacificsurfliner.com) ●Developed cost effective CMS and hosting strategy for initial PS website ●Technical considerations for choosing Episerver CMS as next CMS Adam Bonner Chief Technology Officer, Minneapolis Office 22 years at Web Advanced Adam is 85% committed to other Web Advanced accounts, and can dedicate 15% of his time to EVWD EXPERIENCE Adam co-founded Web Advanced, after teaming up with Vic Liu. Since the company’s founding, Adam has led and managed the company’s well-respected development team as Web Advanced’s CTO. Adam received a Bachelor of Science degree in Information and Computer Science from UC Irvine. PROJECT TASKS ●Technology Architecture and Planning ●Translate business objectives into cost effective technology solutions ●Work with other vendors to ensure new systems integrate fully with solution ●Work with the development team to ensure highest standards in delivered work ●Ensuring the ASP.NET and C# infrastructure is up to date ●Working with development teams on frameworks for Javascript, HTML5 and CSS 11 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE PROPOSED STAFFING DEVELOPMENT & ENGINEERING EXAMPLE PROJECTS Metrolink (metrolinktrains.com) ●CMS expert and resource for internal and vendor team ●Implemented complex development goals alongside team to meet project deliverables Toll Roads ●On-going web and database development support ●Spearheaded migration from Drupal to Umbraco based system ●Leadership for extending and working with Umbraco ●Continuing consulting and support for security patches and updates for Umbraco Tim Affeldt Technology Manager, Irvine Office 3+ years at Web Advanced Tim is 85% committed to other Web Advanced accounts, and can dedicate 15% of his time to EVWD EXPERIENCE Tim has over 10 years experience in software and web development. Specifically, having worked for 9 years as senior developer for a large medical device company, building cloud-based web applications and iOS mobile sales application. Tim graduated from Cal State University, Long Beach with a Bachelor of Science degree in Computer Science. PROJECT TASKS ●Technology Architecture and Planning ●Work with the development team to ensure highest standards in delivered work ●Ensuring the ASP.NET and C# infrastructure is up to date ●Working with development teams on frameworks for Javascript, HTML5 and CSS ●Consulting on best practices for CMS implementation and extension 12 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE PROPOSED STAFFING DEVELOPMENT & ENGINEERING Delane Frear Front-end Developer | Web Advanced Irvine Office | 5+ years at Web Advanced Delane has over 8 years of experience in the design, code, test, and deployment of interactive elements for websites and mobile applications using a wide variety of industry standard technologies such as JavaScript, Angular, and HTML/CSS. He has experience with transit projects by completing work for Metrolink as well as OCTA and Rio Metro. Delane is 85% committed to other Web Advanced accounts, and can dedicate 15% of his time to EVWD Eric Cho Back-end Developer | Web Advanced Irvine Office | 5+ years at Web Advanced Eric has over 10 years of experience developing websites using middleware and database languages. Eric is proficient in .NET/MVC and SQL Server, both of which will be utilized for ongoing support and maintenance. Eric graduated from UC Irvine with a bachelor’s degree in Computer Engineering. He is an expert at C# and ASP.NET and has experience in developing with the Umbraco CMS. Eric is 85% committed to other Web Advanced accounts, and can dedicate 15% of his time to EVWD 13 QUALIFICATIONS AND WORK PLAN Qualifications, Case Studies, and Clients 1.Company Overview 2.Case Studies 3.Work Plan WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE 14 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE COMPANY OVERVIEW / BACKGROUND Web Advanced is a 22-year-old, privately held company. We are an S Class Corporation incorporated in the state of California in June 2000. We are an award-winning digital agency focusing on strategy, creative, and development. Web Advanced is in a good financial situation with strong cash flow and balance. Web Advanced has never declared bankruptcies and no plans for acquisition. EMPLOYEE BREAKDOWN Web Advanced has 12 full-time employees, 3 full-time contractors (2 designers, 1 developer), and access to another 8 contractors for copywriting, photography, videography, and other related services. 12 3 8 Full-time employees Full-time contractors Part-time Contractors REVENUE INFORMATION ●2018 Annual Sales: $2.4m, $1.80m from website design (0.6m from SaaS Product and Mobile Projects) ●2019 Annual Sales: $2.5m, $1.90m from website design (0.6m from SaaS Product and Mobile Projects): ●2020 Annual Sales: $2.0m, $1.40m from website design (0.6m from SaaS Product and Mobile Projects) - Covid-19 impacted our professional services business significantly 15 CASE STUDIES Orange County Transportation Authority | OCTA.net 91 Express Lanes | 91expresslanes.com The Toll Roads | thetollroads.com Metrolink | MetrolinkTrains.com WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE 1 2 3 4 16 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE OCTA OVERVIEW Orange County Transportation Authority has partnered with Web Advanced since 2014 to reimagine and improve octa.net. In addition to a complete overhaul of the user experience, we have provided ongoing website design, development, and support to keep OCTA’s website at the forefront of transit authorities by maximizing its appearance and performance. At present, the Web Advanced team is migrating the OCTA.net website from Ektron to Umbraco. Expected launch is April 2023. REFERENCE Ryan Armstrong Marketing and Communications Manager (0) 714.560.5834 rarmstrong@octa.net WEBSITE OCTA.net TIME PERIOD July 2014 - Current CASE STUDY April 2023 launch 17 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE ORANGE COUNTY TRANSPORTATION AUTHORITY (OCTA) REDESIGNED WITH ORANGE COUNTY RIDERS AND COMMUNITIES IN MIND The Orange County Transportation Authority (OCTA) is the county transportation planning commission, responsible for funding and implementing transit and capital projects for a balanced and sustainable transportation system. Web Advanced redesigned the entire navigation interface and created a fresh look & feel while also migrating the CMS platform from Ektron to Umbraco. After HOMEPAGE REDESIGN Before OCTA WEBSITE REDESIGN 18 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE ORANGE COUNTY TRANSPORTATION AUTHORITY (OCTA) OCTA WEBSITE REDESIGN ACCESS TO TRANSIT RIDER TOOLS OCTA’s suite of powerful rider tools is now collected for easy access at the top of the homepage. Key features include the Trip Planner, Routes & Schedules, Arrivals, Fares and Rider Alerts. DISCOVER MORE WAYS TO TRAVEL OCTA’s variety of available transit modes are showcased directly on the homepage in order to build awareness and provide quick access to how-to ride information. IMPROVED PAGE ORGANIZATION As an example, the original “Getting Around” dropdown could display up to 40 pages at one time: comprehensive yet often overwhelming. The new version is simpler to scan and efficiently guides you to transit modes and rider tools. SIMPLIFIED MOBILE NAVIGATION On mobile, the main navigation only goes one level deep - which means no getting lost in tiers of nested subdirectories. Instead many pages will contain an embedded and expandable sub-menu. 19 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE ORANGE COUNTY TRANSPORTATION AUTHORITY (OCTA) OCTA WEBSITE REDESIGN LARGER FONTS, IMPROVED CONTRAST Larger font sizes assist with readability on desktop screens and smaller mobile devices. Especially on mobile, this results in an improved experience when using the OCTA website while using transit modes and being on-the-go. ACCESSIBLE COLORS AND TEXT Colors have been selected to meet WCAG Grading AA color contrast guidelines. Using text on top of photography and images is avoided. REORGANIZED COLLECTION OF PROJECTS AND PROGRAMS In addition to public transit, OCTA continually manages a large variety of programs and projects which shape the local community. The new website makes it easier than ever to discover OCTA’s impact on freeways, streets and roads, transit and the environment. 20 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE CMS MIGRATION TO UMBRACO OCTA.net’s CMS transition from Ektron to Umbraco has resulted in the creation of a large and robust library of repurposable content components. These configurable components combine in ways that allow us to build complete sets of pages quickly and efficiently, resulting in decreased development time and a more consistent user experience between varying categories of pages. The screenshots below show examples of how we documented each component’s responsive behavior at each device size / breakpoint. ORANGE COUNTY TRANSPORTATION AUTHORITY (OCTA) OCTA WEBSITE REDESIGN 21 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE ORANGE COUNTY TRANSPORTATION AUTHORITY (OCTA) COMMUNITY OUTREACH: OC STREETCAR INFORMING THE PUBLIC DURING A MULTI-YEAR PROJECT OC Streetcar is a light rail project designed to increase transportation options and provide greater access along its 4.15-mile route between downtown Santa Ana and Garden Grove. Less traffic congestion and parking hassles means locals and visitors can easily access everything this vibrant community has to offer. Web Advanced created a highly visual microsite to introduce the project and place emphasis on business growth, community benefits, and transparency of information. Users are invited to explore each stop along the OC Streetcar route within a customized, live map. There is a page dedicated to Construction, featuring the project’s live Twitter feed, the latest Construction Notices, and the Project Schedule. The primary call-to-action is for users to Stay Connected and receive automatic construction updates. 22 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE ORANGE COUNTY TRANSPORTATION AUTHORITY (OCTA) COMMUNITY OUTREACH: OC GO PROJECTS BETTER INSIGHTS WITH A POWERFUL NEW TOOL Working with project managers at OCTA, Web Advanced designed and developed an interactive informational overview of all OC Go projects and programs, including list, map, and schedule views with filter and sort capability to increase transparency and ease of locating project information. The new tool is fully integrated within the Ektron content management system, so that non-technical users can easily update, add, and remove programs. This functionality allows for more regular and timely updates to all OC Go projects across categories. Mobile Responsive Project Schedules 23 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE 91 EXPRESS LANES REFERENCE Jacqueline Moon Digital Marketing Specialist, Senior Orange County Transportation Authority 714-560-5902 jmoon@octa.net WEBSITE 91expresslanes.com TIME PERIOD Jan 2021 - Jan 2022 OVERVIEW The 91 Express Lanes is a four-lane, 18-mile toll road built in the median of State Route 91. It is jointly managed by OCTA and the Riverside County Transportation Commission. Web Advanced redesigned and developed the public-facing marketing website within Umbraco CMS. In addition, we collaborated with the team responsible for the customer login area. Our role was to provide user experience and interface design for key pages such as the customer account dashboard, “Pay a Toll Violation” flow and Account Sign-up. CASE STUDY 24 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE 91 EXPRESS LANES WEBSITE REDESIGN: MARKETING WEBSITE MODERNIZING THE BRAND’S DIGITAL PRESENCE WITHIN A COMPREHENSIVE REDESIGN EFFORT. The 91 Express lanes project was a major redesign and development effort. KEY CHALLENGES ●Lean UX/Design: The project needed to feel fresh while utilizing existing content and assets. We modernized the brand’s digital presence by applying flat colors, large typography, and improved content hierarchy. The updated experience guides users to sign-up by increasing comprehension of the benefits and how-to’s of driving the 91 Express Lanes. We also re-formatted existing content to improve the browsing of key pages such Account Plans, Toll Schedules, Road Closures and Traffic Data. ●Project Management: Web Advanced gathered feedback from sources across the OCTA and RCTC teams and managed change requests on a tight schedule up until the time of launch. 25 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE 91 EXPRESS LANES WEBSITE REDESIGN: ACCOUNT LOGIN DESIGNING A MODERN ACCOUNT LOGIN EXPERIENCE FOR TOLL CUSTOMERS In collaboration with the technology firm hired to provide the account management platform, Web Advanced redesigned the user interface and style guide for the pages and user flows housed within the login area. As as a result of this experience and our work with The Toll Roads, we are very familiar with the complexity that users face when managing multiple vehicles and transponders within an account. We built a modern, user-friendly dashboard which assists in managing these account details along with the tracking of toll payments and toll trips. The reconciliation of violations is another important goal of the 91 Express Lanes website. We collaborated on a user flow which assists with the identification, payment, and contestation of past and current violations. We understand the importance of leveraging web user flows to complete complex business goals such as reducing call volume and supporting the user’s ability to maintain and manage their own recurring account actions. 26 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE THE TOLL ROADS REFERENCE Lori Olin Director of External & Internal Communications (0) 949-754-3419 lolin@thetollroads.com WEBSITE thetollroads.com TIME PERIOD July 2018 - Current OVERVIEW The Toll Roads make up over 20 percent of Orange County’s major thoroughfare highway system. Web Advanced has served as web vendor for The Toll Roads for the past 5 years, providing monthly maintenance, including content and layout updates, accessibility improvements, updates to maps and rates, server maintenance and more. We also have supported communication of significant changes, such as the elimination of Express Account, transition to FasTrak and the introduction of a new sticker transponder. CASE STUDY 27 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE THE TOLL ROADS EASE OF EDITING The Toll Roads staff are able to quickly and easily edit the site by logging into the Umbraco CMS Admin portal. Edits are automatically put within the overall site style and editors do not need to know HTML for most tasks that they undertake within the system. LONG-TERM SCALABILITY The Umbraco CMS is a forward thinking, .NET based CMS that positions The Toll Roads well for future updates and changes. It has an active development team that continues to fix bugs, resolve security issues, and produce new features to keep up with innovation on the web. COST EFFECTIVE WITH ENTERPRISE SUPPORT Umbraco is Open Source software, which means there are no annual license fees just to have the website up and running. At the same time, there are also support contracts available, if the Toll Roads team needs additional assistance in the future. WORKFLOWS AND REPORTING Support for both workflows and reporting on activity within the Umbraco CMS is built into the CMS and can be enabled and customized for the Toll Roads team as needed during CMS configuration. The Toll Roads website was updated in early 2022 to run on Umbraco, after migrating the entire site and all functionality from the Drupal CMS. The Web Advanced team undertook a period of discovery to ensure that the new site used Umbraco features and we broke out each page with all of the “Doc Types” (reusable components) that would be used on that page. FULLY INTEGRATED UMBRACO EXPERIENCE 28 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE THE TOLL ROADS TOLL CALCULATOR A BETTER PLANNING EXPERIENCE Web Advanced designed and developed a toll calculator so travelers can estimate charges by selecting their desired toll road, entry and exit points, and vehicle type. A full-width page layout, larger map, and clean UI allow users to easily understand their estimated charges. The new experience also encourages users to sign up for FasTrak by showing their potential savings. Expected Launch 2024 29 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE METROLINK TRAINS REFERENCE Sabrina Davis Senior Manager, Marketing & Digital Programs (0) 213-452-0324 DavisS@scrra.net WEBSITE Metrolinktrains.com TIME PERIOD Dec 2016 - Current BUDGET RANGE $200,000-$245,000 per year OVERVIEW Southern California's Metrolink is the nation's 3rd largest commuter rail system. In working on their website, we primarily focused on two audiences: daily commuters and first-time riders. After reviewing the results of online surveys, analytics, and stakeholder interviews, it was clear that all riders who visit the Metrolink website are predominantly motivated by two thoughts: "When is the next train?" and "Is my train on time?" CASE STUDY 30 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE METROLINK TRAINS RIDER TOOLS: HOW FULL IS MY TRAIN? The page lists previous train rides and their percentage capacities. Below 30% is noted as “plenty of room for social distancing.” If more than 30% of the train was full, the app indicates that there was less room for social distancing. Web Advanced provided project management, user experience, visual design, and development services. The team assisted in re-shaping a large volume of data into a visual, user-friendly format within a 1.5 week turnaround time. ENABLING SUCCESSFUL SOCIAL DISTANCING Metrolink and Web Advanced collaborated on a digital tool to share the peak occupancy rate of trains with riders. Using this feature, riders are able to choose trains based on how much room is anticipated for social distancing. 31 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE METROLINK TRAINS TRAIN SCHEDULES WEB FRIENDLY SCHEDULES Located in Southern California, Metrolink is the nation's 3rd largest commuter rail system with 2.9 million train miles per year. Train timetables are densely packed train numbers, times and stations. The sizable volume of rows and columns can present a challenge when translating to a responsive website. We collaborated with the Metrolink team on a solution that would offer users two methods of accessing train schedules. Schedules by Train Line Train line schedules are divided into three separate mobile responsive tables and stacked - one each for Weekdays, Saturdays, and Sundays. Station to Station (shown on the right) Users can use this feature to plan an itinerary between two Metrolink stations. We applied a user interface similar to the commercial airline industry - familiar to anyone who has browsed flight schedules. 32 METROLINK TRAINS LIVE TRAIN TRACKER FOR DAILY COMMUTERS REAL-TIME UPDATES FOR RIDERS User research conducted for the Metrolink website indicates that many commuters are simply wondering, “Where’s my train?” To address that question, Web Advanced created a Train Tracker which allows users to locate their trains by route, train number, or station. We worked with a third-party vendor to collect and represent data from Metrolink’s Positive Train Control system on map and list views of active trains, populated with real-time GPS information. For mobile delivery, Web Advanced leveraged client insights to streamline which data is presented and how, providing a smooth and clutter-free browsing experience. WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE 33 WORK PLAN & EXPERIENCE Milestones Client, Project & Billing Management Experience WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE 1 2 3 34 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE PROJECT MILESTONES WORK PLAN Gather Business Requirements Understanding EVWD's Needs ●What business goals and objectives is EVWD looking to achieve? ●How will EVWD define the success of this project? Stakeholder Interviews ●Community Feedback Survey / Focus Group ●Conduct Interviews of the District’s Internal Content Contributors ●Create Stakeholder report: Summary of Stakeholder type, the core functions they use the website for, and their suggestions/recommendations Develop User Profiles ●Identify User Personas ●Create User Stories Existing Content Review Page Assessment ●Create visual sitemap of eastvalley.org ●Itemize core website functions ●Work with EVWD to determine status of content and functionality: Keep / Remove / Merge Current Analytics Review ●Review Google Analytics to determine: Top pageviews, popular search terms, pages with least page views, device usage ADA Analysis ●Review website content that will need to be updated when transitioning to a new CMS. Examples may be images with text, pdfs, diagrams. Phase 1: Discovery 35 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE WORK PLAN Industry Website Comparison / Best Practices Competitive Benchmarking ●Perform competitive benchmarking on specific website areas based on the learnings in "Gather Business Requirements" (Navigation, Online Services, etc.) Technology Deck Review Current Technology ●Assess the current technology used to run and manage the EVWD website ●Document all 3rd party API's and connections used by the existing EVWD website ●Identify internal requirements that may be in place for technology usage (on-site hosting vs. remote hosting, open-source vs proprietary, cost limitations, etc.) CMS Assessment ●Using the information learned in the previous deliverables, identify at least 3 CMS platforms that will meet the needs of EVWD ●Deliver a ranking of proposed platforms to assist EVWD with internal scoring/selection Web Hosting Assessment ●What are the technical specifications for a new website to be built using the CMS decided in the previous deliverable. (What type of server, hosting, technology, etc. will be required) ●Create CMS Procurement document outlining estimated cost and hosting requirements of the selected CMS Website Plugin Assessment ●Based on the previous decisions what plug-ins/extensions, if any, will be used Phase 1: Discovery (continued) 36 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE WORK PLAN User Experience Sitemap Development ●Create final sitemap with global navigation based on learnings from Phase 1 ●Define custom templates for accommodating the variety of page content Wireframe Creation ●Discuss content requirements of key pages ●Categorize content as requiring new, edited, or existing copywriting and images ●Create wireframes for each of the page templates and global navigation system Visual / User Interface Design Creative Strategy & Design ●Create designs based on approved wireframes ●Provide an example Adobe XD prototype of global navigation Prep for Page Development ●Define global elements such as header styles, form elements, iconography and colors within a documented style guide ●Design repurposable page components at all responsive breakpoints Phase 2: Design Specifications Block / Document Type Analysis ●Based on the approved designs, determine what reusable blocks / document types will be created within the selected CMS (see Toll Roads and OCTA case studies for more information) Phase 3: Development 37 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE WORK PLAN Back End Development Content Management System Setup ●Set up hosting environment ●Install selected CMS and Plug-ins Custom Development ●Determine what CMS features to use for reusable components (dropdowns, text entry areas, etc), and lay out development approach based on design (see “Document Types” page later in this proposal for more detail) ●Build backend for reusable blocks / document types ●Setup and configure site search Front End Development Setup Global Styles and Navigation ●Translating the style guide to code and integrating selectable font styles and colors into CMS editing tools ●Implement into an extensible style system that allows adding features later ●Implement global top and bottom navigation template Component Development ●Based on available CMS concepts, ensure that components are flexible and can be reused in different ways ●Coordinate with backend development to ensure an easy-to-use admin experience ●Translating designs to code and building their responsive behavior Page Layout and Initial Page Creation ●Create styling supporting overall page layouts (after components are added) ●Develop initial pages to provide examples for later content entry using components Third-party Tools ●Setup of Google Analytics and other 3rd party tools as needed Phase 3: Development (continued) 38 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE WORK PLAN Content Migration Content Entry & Training ●Online 1 hour training session on new CMS Environment ●EVWD and WA will work together to create new pages to migrate content to the new CMS QA & Testing Accessibility Review ●ADA Review ●Run PowerMapper (Automated Testing) on site Desktop/Mobile Testing ●Test all site functionality ●Desktop - Cross Browser Testing ●Mobile - Cross Browser Testing Launch Deployment QA & Testing ●Scheduled Server Maintenance ●Scheduled CMS Updates ●Updates and implementation of new functionality as requested by EVWD Phase 4 - Production & Implementation Phase 5 - Website Maintenance 39 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE SERVICES & EXPERIENCE CLIENT, PROJECT, & BILLING MANAGEMENT Ongoing Management Leslie Ayala will continue to be the assigned Senior Project Manager to EVWD in managing new, ongoing and regularly scheduled maintenance: ●Resource management - task needs, allocations and weekly assignments ●Task management - timeline, schedule and execution ●Monitor and oversee activities, tasks and deliverables ●Risk management and contingency planning ●Communication and regular status updates Weekly Check In Meetings Consistent communication between Web Advanced and EVWD team is enabled by recurring meetings. These meetings are an opportunity to capture new tasks, determine priorities, and report on progress. Performance Dashboard Updates Update the performance dashboard on a monthly basis. Digital Collaboration Web Advanced and EVWD will continue to use our online collaboration tool at http://my.webadvanced.com. This tool allows both teams to access documents, designs, files, as well as updated project status, tasks, as well as provide feedback and approval. Billing Management All Web Advanced employees track their time to Client/Project/Task. This allows Web Advanced to submit timely and accurate detailed invoices. 40 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE SERVICES & EXPERIENCE TECHNOLOGY EXPERTS IN UMBRACO CMS Web Advanced has implemented Umbraco CMS over the past 3 years on multiple public agency websites. After reviewing all requirements and the content of many of the current public agency websites, we believe it’s the best qualified and most cost effective option for our clients. Umbraco provides both a very low cost of ownership with the ability to get direct support from Umbraco, in case Web Advanced is not available in the future. ONGOING CUSTOMIZATION AND FUNCTIONALITY We have been able to customize the functionality of the Umbraco platform to maintain a usable, high performing, and mobile responsive website with the ongoing development of custom Doc Types and optimization of the site’s appearance, functionality, and accessibility. See the following pages for more information on how we do this. TEAM EXPERIENCE Web Advanced has a strong team of 5 developers with front and back-end experience and understanding of the development of Umbraco, as well as a library of best practices and documentation related to working with the CMS. We can quickly leverage our past experience to recommend the most effective solution for EVWD. DIGITAL AGENCY PARTNERS Web Advanced is a Digital agency partner with Umbraco as well as many other CMS companies such as Episerver, Wordpress, Magento, and many other open source CMS/ecommerce software providers. 41 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE EXPERIENCE: TECHNOLOGY & SPECIAL PROJECTS WORK PLAN Payment solutions experience Web Advanced has worked closely with a number of agencies to understand their payment workflows, and has the knowledge to help ensure the solution is correctly implemented. ‘ Our design team has worked closely with our front-end and back-end developers, including both Eric Cho and Delane Frear, to implement an easy to use and technically sound platform. Eric and Dan’s experience with .NET and front-end (respectively) development and working with the Metrolink and OCTA accounts will assist with future integration that EVWD may want to undertake with regard to payment solutions. While the scope for this website does not include a specific request for assisting with improvements to the full payment workflow, Web Advanced always tries to look at the key user actions on websites. A key action for EVWD would be account login and payment, so we would ensure that the path to these actions is as straightforward as possible. For other clients, we have also (outside this scope) provided User Experience and Design recommendations for the payment provider to enhance the payment portal and reduce customer service calls. Custom Development Expertise Many Web Advanced projects include follow on phases that add additional functions that were not part of a base system. As an agency, we pride ourselves on having skilled developers in the US that can work with our clients to develop cost effective solutions moving forward, after the initial development is complete. Even if another agency is chosen for future work, or an in-house team extends the initial work that Web Advanced does, the fact that we often extend our own work means that the website will be well positioned to be extended and not a “dead end”. 42 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE EXPERIENCE: CONTENT MANAGEMENT SYSTEM Highly Reusable CMS Components ●Each page is made up of reusable components, ensuring that the EVWD team can implement new pages quickly and easily in the CMS. Every element of the site is directly editable by the EVWD team, while remaining within the Style Guide. ●The close working relationship of the Design and Development teams ensures that these components all work seamlessly together. Accessible Websites ●By leveraging the CMS capabilities of Umbraco, we can help ensure that new pages and content remain accessible, meeting government requirements WORK PLAN HOMEPAGE WHICH PLAN IS RIGHT FOR ME? Recent Umbraco Project: 91 Express Lanes Redesign (February 2022 launch) 43 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE WEB DESIGN & DEVELOPMENT SERVICES DOCUMENT TYPES ●Document types would be split into 3 main types: ○“Simple” document types - Consist of just fields with no custom logic ○“Medium complexity” document types - Some custom logic required for the view and/or minimal JavaScript required. ○“High complexity” document types - Requires extensive custom coding on both the view and back-end service and/or extensive JavaScript code required. Also includes searchable/filterable/paged lists/collections of data. Document Types are the building blocks of the Umbraco CMS. Web Advanced will create a library of document types that can be used by CMS users to easily develop additional pages on the EVWD website. These Doc Types will be identified by Web Advanced during page development. Examples: Simple: Image with Mobile alternate. Medium Complexity: Link + Content List High Complexity: Video with Playlist 44 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE Quality Assurance is a process Web Advanced uses in order to identify the correctness, completeness, and quality of a developed website. This process is completed by a combination of the web developers on the project as well as other team members who are are in a position to view the work through a completely unbiased lens. ●Content and data checking and verification HTML/CSS testing and compliance test ●Module testing (ASP.NET, Umbraco DocType, etc), audit and access verification ●System integration testing ●Platform integration and security checking Accessibility and compliance check ●Asset organization and naming convention check Note: Any devices or browsers not listed above that require testing will need to be scoped separately. Internet Explorer will not be supported as it is past End of Life from Microsoft. MOBILE BROWSER COMPATIBILITY Testing is conducted on actual (as opposed to simulated) devices. ●iPhone X, iPad ●Samsung Galaxy S9 ●Google Nexus tablet DESKTOP BROWSER COMPATIBILITY ●Chrome ●Safari ●Firefox ●Edge QUALITY ASSURANCE WORK PLAN 45 TIER 1: USERTESTING.COM We will watch users interacting with the website to gather their viewpoint on the brand communication, the utility of the website and, unforeseen user experience considerations. A pool of testers that match demographics criteria will be recruited from usertesting.com and presented with specific task models and questions with all interactions documented across video. ●Deeper insights and give customer a real voice ●Validate assumptions ●Optimize messaging WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE Get videos of real people speaking their thoughts as they use your website. The goal of Usability Testing is to better understand how real users interact with your website and to improve the user experience based on the results. TIER 2: SOURCING OVER SOCIAL MEDIA Source real users by reaching out over social media and/or with a message + incentive on the website. Schedule time with the volunteers over a screen sharing platform (Zoom.us), provide them with a series of tasks, record all actions and follow-up conversations. TIER 3: IN-PERSON USER TESTING Source real users and conduct live user testing at a local Los Angeles or Orange County testing facility (such as Adler Weiner) with professional recording and viewing equipment. USER EXPERIENCE: USABILITY TESTING WORK PLAN 46 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE SERVICES & EXPERIENCE Automated Scan We begin by dynamically scanning the accessibility status of your entire site. This efficient scan reviews thousands of lines of code and complicated multi-screen interactions, resulting in the collection of massive amounts of relevant data. Manual Review While automated scans may reveal technical corrections, the ultimate experience of using the website must align with real users’ expectations. We manually check interactions to better align with how persons with disabilities use the web. ADA/ACCESSIBILITY: OUR APPROACH HOW WE MEET ACCESSIBILITY CRITERIA Our specially trained team has experience in implementing accessibility best practices across new websites that are accessible upon launch as well as retrofitting existing websites. We efficiently test by using both automated and manual scans after the initial development of any new page or feature. Case Study - Toll Roads Remediation Web Advanced assisted with a complex remediation of the existing Toll Roads website, working in concert with Criterion to ensure a fully accessible end result. We’re also applying all learning to the updated Umbraco site. 47 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE SERVICES & EXPERIENCE NVDA Screen Reader NVDA allows blind and vision impaired people to access and interact with the Windows operating system and many third party applications. Axe Testing Accessibility checker for WCAG 2 and Section 508 accessibility. Allows our developers to quickly discover accessibility defects by using the axe Chrome extension. ADA/ACCESSIBILITY: TOOLKIT PowerMapper SortSite checks sites against W3 WCAG accessibility standards, and compliance with Section 508 of the Rehabilitation Act. We understand that CMS editors are not trained HTML or accessibility experts. We develop our sites and CMS systems to help them achieve beautiful and accessible text, images, and documents without relying on our team. This enables governance policies to remain focused on organizational best practices, leading to easier training and reduced compliance issues. EASILY CREATE ACCESSIBLE CONTENT THRU EKTRON INCREASED ACCESSIBILITY TESTING CAPACITY Our front-end development team’s efforts are supported by a comprehensive testing toolkit to ensure full coverage for website accessibility testing and compliance. While user testing is the only guaranteed method to get a full picture of a website’s compliance level, these tools allow us to automatically evaluate for potential issues. 48 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE GENERATING SITE TRAFFIC: SEO + SEM STRATEGY SEO strategy is a methodical approach to achieving search engine optimization results with a series of calculated steps. The process can be lengthy but is ultimately successful in generating relevant site traffic, improving conversion rates and influencing search rankings. 1. TECHNICAL SEO Technical SEO refers to site optimization for search engines to crawl and index your site. The actions in this core SEO pillars cover sitemaps, linking, and keyword research. We also enable fast page load to increase visitor retention. 2. ON-PAGE OPTIMIZATION On-page SEO refers to the optimization of title tags, content, internal links and URLs. It includes the editing of existing content as well generating new content to support conversion. 3. QUALITY OF CONTENT Our goal is to convert your users into potential customers - which means offering quality content as opposed to content which simply ranks and gets clicks. Blog posts, articles, lists, directories, guides, and infographics are all examples. 4. OFF-PAGE SEO Off-Page SEO refers to influencing search engine and user perception of a site's relevance and authority of its core subject matter. This involves other high-quality web properties promoting or linking the website. SEO + SEM STRATEGY IN FOUR PILLARS SERVICES & EXPERIENCE 49 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE SERVICES & EXPERIENCE TECHNOLOGY TECHNOLOGY STACK DOCUMENTATION The output of the technology platform definition in Phase 1 (see the Work Plan for more information) will be a technical platform document that outlines the various technology choices for the site, the intended use for each technology, and how they will work together to create. TECHNICAL AUDIT Upon completion of a technical audit, we will create an inventory of the components, metadata, and styles stored within the audited system and review priorities with EVWD in terms of what will be retained and/or improved. An audit would be conducted for any system that we are intending to replace and/or improve so all parties are aware of the current functionality and changes. ADDITIONAL CORE TECHNOLOGIES Microsoft .NET Developer platform for building websites and applications React A framework for building interactive elements. Javascript Core language for front end experience in web browsers. MEASUREMENT SYSTEMS ADDITIONAL INFORMATION MEASUREMENT MODEL As we work together, your organization’s goals are translated into a documented set of Key Performance Indicators (KPIs). These KPIs are the top priorities that your organization will consider when making informed decisions and measuring return on investment. The priorities can vary from simple, such as monthly reviews of Google Analytics, to the more complex - monitoring a strategic set of metrics that reveal shifts in user behavior. Whatever the combination of KPIs, the model should serve the purpose of informing the organization’s next steps to completing its goals. MONTHLY SUMMARY REPORT Our monthly KPI reports are custom-made for each of our clients. Information within these monthly reports typically fall into two main categories: relevant website data and the conclusions that we can draw from that data. In this way, key stakeholders are guided on how to consider the quantitative results and are able to understand how we arrived at our recommendations. The report also offers the opportunity to make adjustments to what is being measured and, based on the findings, where to focus on optimization efforts. INTRODUCTION Web analytics focuses on data and reporting but it’s important to note that the data must be put into the context of the organization’s overarching business goals. We gather raw data from tools such as Google Analytics and Tag Manager to obtain quantitative material and then translate it to executive summary-level insights. Initially we will identify what is important and relevant to your organization and ensure that reports are presented with actionable information. 50 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE 51 WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE REFERENCES CONTENTS 1.References 52 ADDITIONAL INFORMATION Sabrina Davis Senior Manager, Marketing & Digital Programs (0) 213-452-0324 DavisS@scrra.net Ryan Armstrong Marketing and Communications Manager (0) 714.560.5834 rarmstrong@octa.net Monte Traficante Director - Marketing and Business Development, Siebert Financial (0) 310-432-5567 mst@siebert.com REFERENCES WEBSITE DESIGN, DEVELOPMENT AND MAINTENANCE Lori Olin Former Director of External & Internal Communications, The Toll Roads (0) 949-754-3419 loridolin@gmail.com Allyne Clarke Marketing Director, Rio Metro (0) 505-724-3650 aclarke@mrcog-nm.gov AGREEMENT NO XXXX.XX EAST VALLEY WATER DISTRICT FOR FOR PROFESSIONAL SERVICES THIS AGREEMENT is made this 13 day of July 2023, by and between the EAST VALLEY WATER DISTRICT, a County Water District organized and operating pursuant to California Water Code Section 30000 et seq. (hereinafter referred to as the “DISTRICT”), and Web Advanced, a website redesign partner (hereinafter referred to as “CONSULTANT”). RECITALS WHEREAS, the DISTRICT desires to contract with CONSULTANT to provide design professional services for Website Redesign Services (hereinafter referred to as “Project”); and WHEREAS, CONSULTANT is willing to contract with the DISTRICT to provide such services; and WHEREAS, CONSULTANT holds itself as duly licensed, qualified, and capable of performing said services; and WHEREAS, this Agreement establishes the terms and conditions for the DISTRICT to retain CONSULTANT to provide the services described herein for the Project. COVENANTS NOW, THEREFORE, in consideration of the faithful performance of the terms and conditions set forth herein, the parties hereto agree as follows: ARTICLE I ENGAGEMENT OF CONSULTANT AND AUTHORIZATION TO PROCEED 1.1 ENGAGEMENT: The DISTRICT hereby engages CONSULTANT, and CONSULTANT hereby accepts the engagement, to perform certain design professional services described in Section 2.1 of this Agreement for the term set forth in Section 6.7 of this Agreement. 1.2 AUTHORIZATION TO PROCEED: Authorization for CONSULTANT to proceed with all or a portion of the work described in Section 2.1 of this Agreement will be granted in writing by the DISTRICT as soon as both parties sign the Agreement and all applicable insurance and other security documents required pursuant to Section 6.3 of this Agreement are received and approved by the DISTRICT. CONSULTANT shall not proceed with said work until so authorized by the DISTRICT, and shall commence work immediately upon receipt of the Notice to Proceed. 1.3 NO EMPLOYEE RELATIONSHIP: CONSULTANT shall perform the services provided for herein as an independent contractor, and not as an employee of the DISTRICT. The DISTRICT shall have ultimate control over the work performed for the Project. CONSULTANT is not to be considered an agent or employee of the DISTRICT for any purpose, and shall not be entitled to participate in any pension plans, insurance coverage, bonus, stock, or similar benefits that the DISTRICT provides for its employees. CONSULTANT shall indemnify the DISTRICT for any tax, retirement contribution, social security, overtime payment, or workers’ compensation payment which the DISTRICT may be required to make on behalf of CONSULTANT or any employee of CONSULTANT for work performed under this Agreement. ARTICLE II SERVICES OF CONSULTANT 2.1 SCOPE OF SERVICES: The scope of design professional services to be performed by the CONSULTANT under this Agreement are described in the Scope of Work attached hereto as Exhibit “A” and incorporated herein by this reference (“Scope of Work”), and shall, where not specifically addressed, include all related services ordinarily provided by the CONSULTANT under same or similar circumstances and/or otherwise necessary to satisfy the requirements of Section 3.3 of this Agreement. In case of conflict between the terms of this Agreement and the provisions of the Scope of Work, this Agreement shall govern. 2.2 DEPARTMENT OF INDUSTRIAL RELATIONS COMPLIANCE: This project is subject to compliance monitoring and enforcement by the Department of Industrial Relations. A contractor or subcontractor shall not be qualified to bid on, be listed in a bid proposal, subject to the requirements of Section 4104 of the California Public Contract Code, or engage in the performance of any contract for public work, as defined by the California Labor Code, unless currently registered and qualified to perform public work pursuant to Section 1725.5 of the California Labor Code. 2.3 PREVAILING WAGES: In accordance with the provisions of the California Labor Code, CONSULTANT shall secure the payment of compensation to employees. To the extent required by the California Labor Code, CONSULTANT shall pay not less than the prevailing rate of per diem wages as determined by the Director, Department of Industrial Relations, and State of California. Copies of such prevailing rate of per diem wages are on file at the DISTRICT’s office, which copies will be made available to any interested party upon request. CONSULTANT shall post a copy of such determination at each job site. If applicable, CONSULTANT shall forfeit to the DISTRICT the amount of the penalty set forth in Labor Code Section 1777.7(b), or any subsequent amendments thereto, for each calendar day, or portion thereof, for each worker paid less than the specified prevailing rates for such work or craft in which such worker is employed, whether paid by CONSULTANT or by any subcontractor. 2.4 HOURS AND WORKING CONDITIONS: The DISTRICT is a public entity in the State of California and is subject to the provisions of the Government Code and the Labor Code of the State. It is stipulated and agreed that all provisions of law applicable to public contracts are a part of this Agreement to the same extent as though set forth herein and will be complied with by CONSULTANT. CONSULTANT shall comply with all applicable provisions of the California Labor Code relating to working hours and the employment of apprentices on public works projects. CONSULTANT shall, as a penalty to the DISTRICT, forfeit $25.00 for each worker employed in the execution of this Agreement by CONSULTANT or by any subcontractor, for each calendar day during which such worker is required or permitted to work more than 8 hours in any one calendar day and 40 hours in any one calendar week, unless such worker received compensation for all hours worked in excess of 8 hours at not less than 1½ times the basic rate of pay. ARTICLE III RESPONSIBILITIES OF THE DISTRICT AND OF CONSULTANT 3.1 DUTIES OF THE DISTRICT: The DISTRICT, without cost to CONSULTANT, will provide all pertinent information necessary for CONSULTANT’s performance of its obligations under this Agreement that is reasonably available to the DISTRICT unless otherwise specified in the Scope of Work, in which case the CONSULTANT is to acquire such information. The DISTRICT does not guarantee or ensure the accuracy of any reports, information, and/or data so provided. To the extent that any reports, information, and/or other data so provided was supplied to the DISTRICT by persons who are not employees of the DISTRICT, any liability resulting from inaccuracies and/or omissions contained in said information shall be limited to liability on behalf of the party who prepared the information for the DISTRICT. 3.2 REPRESENTATIVE OF DISTRICT: The DISTRICT will designate William Ringland as the person to act as the DISTRICT’s representative with respect to the work to be performed under this Agreement. Such person will have complete authority to transmit instructions, receive information, and interpret and define the DISTRICT’s policies and decisions pertinent to the work. In the event the DISTRICT wishes to make a change in the DISTRICT’s representative, the DISTRICT shall notify the CONSULTANT of the change in writing. 3.3 DUTIES OF CONSULTANT: CONSULTANT shall perform the Project work in such a manner as to fully comply with all applicable professional standards of care, including professional quality, technical accuracy, timely completion, and other services furnished and/or work undertaken by CONSULTANT pursuant to this Agreement. The CONSULTANT shall cause all work and deliverables to conform to all applicable federal, state, and local laws and regulations. 3.4 APPROVAL OF WORK: The DISTRICT’s approval of work or materials furnished hereunder shall not in any way relieve CONSULTANT of responsibility for the technical adequacy of its work. Neither the DISTRICT’s review, approval or acceptance of nor payment for any of the services shall be construed to operate as a waiver of any rights under this Agreement or of any cause of action arising out of the performance of this Agreement. Where approval by the DISTRICT is indicated in this Agreement, it is understood to be conceptual approval only and does not relieve the CONSULTANT of responsibility for complying with all laws, codes, industry standards, and liability for damages caused by negligent acts, errors, omissions, noncompliance with industry standards, or the willful misconduct of the CONSULTANT or its subcontractors. CONSULTANT’s obligation to defend, indemnify, and hold harmless the DISTRICT, and its directors, officers, employees and agents as set forth in Section 6.9 of this Agreement also applies to the actions or omissions of the CONSULTANT or its subcontractors as set forth above in this paragraph. ARTICLE IV PAYMENTS TO CONSULTANT 4.1 PAYMENT: The DISTRICT will pay CONSULTANT for work performed under this Agreement, which work can be verified by the DISTRICT, on the basis of the following: CONSULTANT shall exercise its good faith best efforts to facilitate a full and clear definition of the scope of all assigned work so that the amount set forth in Section 4.3 of this Agreement will cover all tasks necessary to complete the work. The amount set forth in Section 4.3 of this Agreement is the maximum compensation to which CONSULTANT may be entitled for the performance of services to complete the work for the Project, unless the Scope of Work or time to complete the work is changed by the DISTRICT in writing in advance of the work to be performed thereunder. Adjustments in the total payment amount shall only be allowed pursuant to Section 6.4 of this Agreement. In no event shall CONSULTANT be entitled to compensation greater than the amount set forth in Section 4.3 of this Agreement where changes in the Scope of Work or the time for performance are necessitated by the negligence of CONSULTANT or any subcontractor performing work on the Project. 4.2 PAYMENT TO CONSULTANT: Payment will be made by the DISTRICT within thirty (30) calendar days after receipt of an invoice from CONSULTANT, provided that all invoices are complete and product and services are determined to be of sufficient quality by the DISTRICT. CONSULTANT shall invoice DISTRICT monthly for services performed under this Agreement. In the event that a payment dispute arises between the parties, CONSULTANT shall provide to the DISTRICT full and complete access to CONSULTANT’s labor cost records and other direct cost data, and copies thereof if requested by the DISTRICT. 4.3 ESTIMATED CHARGES: The total estimated charges for all work under this Agreement are $318,050 and such amount is the cost ceiling as described herein for a period of three years, with an option to renew for two (2) additional annual contract terms as allowable by the DISTRICT’s Purchasing Policy. The total estimated charges stated herein constitute the total amount agreed to. Website Redesign: $120,000 Post Launch Website Maintenance (Four Years - $20,512.50/year): $82,050 Website Hosting (Five Years - $1,200/year): $6,000 Umbraco Content Management System (Five Years - $12,000/year): $60,000 Website Contingency: $50,000 4.4 COST FOR REWORK: CONSULTANT shall, at no cost to the DISTRICT, prepare any necessary rework occasioned by CONSULTANT’s negligent act or omission or otherwise due substantially to CONSULTANT’s fault. ARTICLE V COMPLETION SCHEDULE 5.1 TASK SCHEDULE: The work is anticipated to be completed in accordance with the schedule contained in the Scope of Work. 5.2 TIME OF ESSENCE: CONSULTANT shall perform all services required by this Agreement in a prompt, timely, and professional manner in accordance with the above schedule. Time is of the essence in this Agreement. ARTICLE VI GENERAL PROVISIONS 6.1 COMPLIANCE WITH FEDERAL, STATE, AND LOCAL LAWS: CONSULTANT shall at all times observe all applicable provisions of Federal, State, and Local laws and regulations including, but not limited to, those related to Equal Opportunity Employment. 6.2 SUBCONTRACTORS AND OUTSIDE CONSULTANTS: No subcontract shall be awarded by CONSULTANT if not identified as a subcontractor in its Proposal unless prior written approval is obtained from the DISTRICT. CONSULTANT shall be responsible for payment to subcontractors used by them to perform the services under this Agreement. If CONSULTANT subcontracts any of the work to be performed, CONSULTANT shall be as fully responsible to the DISTRICT for the performance of the work, including errors and omissions of CONSULTANT’s subcontractors and of the persons employed by the subcontractor, as CONSULTANT is for the acts and omissions of persons directly employed by the CONSULTANT. Nothing contained in this Agreement shall create any contractual relationship between any subcontractor of CONSULTANT and the DISTRICT. CONSULTANT shall bind every subcontractor and every subcontractor of a subcontractor to the terms of this Agreement that are applicable to CONSULTANT’s work unless specifically noted to the contrary in the subcontract in question and approved in writing by the DISTRICT. 6.3 INSURANCE: CONSULTANT shall secure and maintain in full force and effect, until the satisfactory completion and acceptance of the Project by DISTRICT, such insurance as will protect it and the DISTRICT in such a manner and in such amounts as set forth below. Website Redesign: $120,000 Website Maintenance (after launch): $82,050 Website Hosting: $6,000 Umbraco Content Management System (CMS): $60,000 Website Contingency: $50,000 The premiums for said insurance coverage shall be paid by the CONSULTANT. The failure to comply with these insurance requirements may constitute a material breach of this Agreement, at the sole discretion of the DISTRICT. (a) Certificates of Insurance: Prior to commencing services under this Agreement, and in any event no later than ten (10) calendar days after execution of this Agreement, CONSULTANT shall furnish DISTRICT with Certificates of Insurance and endorsements verifying the insurance coverage required by this Agreement is in full force and effect. The DISTRICT reserves the right to require complete and accurate copies of all insurance policies required under this Agreement. (b) Required Provisions: The insurance policies required by this Agreement shall include the following provisions or have them incorporated by endorsement(s): (1) Primary Coverage: The insurance policies provided by CONSULTANT shall be primary insurance and any self-insured retention and/or insurance carried by or available to the DISTRICT or its employees shall be excess and non-contributory coverage so that any self- insured retention and/or insurance carried by or available to the DISTRICT shall not contribute to any loss or expense under CONSULTANT’s insurance. (2) Additional Insured: The policies of insurance provided by CONSULTANT, except Workers' Compensation and Professional Liability, shall include as additional insureds: the DISTRICT, its directors, officers, employees, and agents when acting in their capacity as such in conjunction with the performance of this Agreement. Such policies shall contain a "severability of interests" provision, also known as "Cross liability" or "separation of insured". (3) Cancellation: Each certificate of insurance and insurance policy shall provide that the policy may not be non-renewed, canceled (for reasons other than non-payment of premium) or materially changed without first giving thirty (30) days advance written notice to the DISTRICT, or ten (10) days advance written notice in the event of cancellation due to non-payment of premium. (4) Waiver of Subrogation: The insurance policies provided by CONSULTANT shall contain a waiver of subrogation against DISTRICT, its directors, officers, employees and agents for any claims arising out of the services performed under this Agreement by CONSULTANT. (5) Claim Reporting: CONSULTANT shall not fail to comply with the claim reporting provisions or cause any breach of a policy condition or warranty of the insurance policies required by this Agreement that would affect the coverage afforded under the policies to the DISTRICT. (6) Deductible/Retention: If the insurance policies provided by CONSULTANT contain deductibles or self-insured retentions, any such deductible or self-insured retention shall not be applicable with respect to the coverage provided to DISTRICT under such policies. CONSULTANT shall be solely responsible for any such deductible or self-insured retention and the DISTRICT, in its sole discretion, may require CONSULTANT to secure the payment of any such deductible or self-insured retention by a surety bond or an irrevocable and unconditional letter of credit. (7) Consultant’s Subcontractors: CONSULTANT shall include all subcontractors as additional insureds under the insurance policies required by this Agreement to the same extent as the DISTRICT or shall furnish separate certificates of insurance and policy endorsements for each subcontractor verifying that the insurance for each subcontractor complies with the same insurance requirements applicable to CONSULTANT under this Agreement. (c) Insurance Company Requirements: CONSULTANT shall provide insurance coverage through insurers that have at least an "A" Financial Strength Rating and a "VII" Financial Size Category in accordance with the current ratings by the A. M. Best Company, Inc. as published in Best’s Key Rating Guide or on said company’s web site. In addition, any and all insurers must be admitted and authorized to conduct business in the State of California and be a participant in the California Insurance Guaranty Association, as evidenced by a listing in the appropriate publication of the California Department of Insurance. (d) Policy Requirements: The insurance required under this Agreement shall meet or exceed the minimum requirements as set forth below: (1) Workers' Compensation: CONSULTANT shall maintain Workers' Compensation insurance as required by law in the State of California to cover CONSULTANT’s obligations as imposed by federal and state law having jurisdiction over CONSULTANT’s employees and Employers' Liability insurance, including disease coverage, of not less than $1,000,000. (2) General Liability: CONSULTANT shall maintain Comprehensive General Liability insurance with a combined single limit of not less than $1,000,000 per occurrence or claim and $1,000,000 aggregate. The policy shall include, but not be limited to, coverage for bodily injury, property damage, personal injury, products, completed operations and blanket contractual to cover, but not be limited to, the liability assumed under the indemnification provisions of this Agreement. In the event the Comprehensive General Liability insurance policy is written on a "claims made" basis, coverage shall extend for two years after the satisfactory completion and acceptance of the Project by DISTRICT. (3) Automobile Liability: CONSULTANT shall maintain Commercial Automobile Liability insurance with a combined single limit for bodily injury and property damage of not less than $1,000,000 each occurrence for any owned, hired, or non-owned vehicles. (4) Professional Liability: CONSULTANT shall maintain Professional Liability insurance covering errors and omissions arising out of the services performed by the CONSULTANT or any person employed by him, with a limit of not less than $1,000,000 per occurrence or claim and $1,000,000 aggregate. In the event the insurance policy is written on a "Claims made" basis, coverage shall extend for two years after the satisfactory completion and acceptance of the Project by DISTRICT. (5) Property Coverage – Valuable Papers: Property coverage on an all- risk, replacement cost form with Valuable Papers insurance sufficient to assure the restoration of any documents, memoranda, reports, plans or other similar data, whether in hard copy or electronic form, relating to the services provided by CONSULTANT under this Agreement. 6.4 CHANGES IN SCOPE OR TIME: If the DISTRICT requests a change in the Scope of Work or time of completion by either adding to or deleting from the original scope or time of completion, an equitable adjustment shall be made and this Agreement shall be modified in writing accordingly. CONSULTANT must assert any claim for adjustment under this clause in writing within thirty (30) calendar days from the date of receipt from CONSULTANT of the notification of change unless the DISTRICT grants a further period of time before the date of final payment under this Agreement. 6.5 NOTICES: All notices to either party by the other shall be made in writing and delivered or mailed to such party at their respective addresses as follows, or to other such address as either party may designate, and said notices shall be deemed to have been made when delivered or, if mailed, five (5) days after mailing. To DISTRICT: East Valley Water District 31111 Greenspot Road Highland, CA 92346 Attn: General Manager/CEO To CONSULTANT:Web Advanced 3 MacArthur Place, Ste 430 Santa Ana, CA 92707 Attn: Victor Liu 6.6 CONSULTANT’S ASSIGNED PERSONNEL: CONSULTANT designates Victor Liu to have immediate responsibility for the performance of the work and for all matters relating to performance under this Agreement. Substitution of any assigned personnel shall require the prior written approval of the DISTRICT. If the DISTRICT determines that a proposed substitution is not acceptable, then, at the request of the DISTRICT, CONSULTANT shall substitute with a person acceptable to the DISTRICT. 6.7 TERMINATION: (a) If the engagement of CONSULTANT is not extended by the mutual written consent of the DISTRICT and CONSULTANT, then this Agreement shall expire on the latest date set forth in the schedule contained in the Scope of Work for completion of tasks for the Project. (b) Notwithstanding the above, the DISTRICT may terminate this Agreement or abandon any portion of the Project by giving ten (10) days written notice thereof to CONSULTANT. CONSULTANT may terminate its obligation to provide further services under this Agreement upon thirty (30) calendar days written notice only in the event of substantial failure by the DISTRICT to perform in accordance with the terms of this Agreement through no fault of the CONSULTANT. (c) In the event of termination of this Agreement or abandonment of any portion of the Project, the DISTRICT shall be immediately given title to all original drawings and other documents developed for the Project, and the sole right and remedy of CONSULTANT shall be to receive payment for all amounts due and not previously paid to CONSULTANT for services completed or in progress in accordance with the Agreement prior to such date of termination. If termination occurs prior to completion of any task for which payment has not been made, the fee for services performed during such task shall be based on an amount mutually agreed to by the DISTRICT and CONSULTANT. Such payments available to the CONSULTANT under this paragraph shall not include costs related to lost profit associated with the expected completion of the work or other such payments relating to the benefit of this Agreement. 6.8 ATTORNEYS’ FEES: In the event that either the DISTRICT or CONSULTANT brings an action or proceeding for damages for an alleged breach of any provision of this Agreement, to interpret this Agreement or determine the rights of and duties of either party in relation thereto, the prevailing party shall be entitled to recover as part of such action or proceeding all litigation, arbitration, mediation and collection expenses, including witness fees, court costs, and reasonable attorneys' fees. Such fees shall be determined by the Court in such litigation or in a separate action brought for that purpose. Mediation will be attempted if both parties mutually agree before, during, or after any such action or proceeding has begun. 6.9 INDEMNITY: (a) CONSULTANT shall defend, indemnify and hold DISTRICT, including its directors, officers, employees and agents, harmless from and against any and all claims, demands, causes of action, suits, debts, obligations, liabilities, losses, damages, costs, expenses, attorney’s fees, awards, fines, settlements, judgments or losses of whatever nature, character, and description, that arise out of, pertain to, or relate to the negligence, recklessness, or willful misconduct of CONSULTANT or any of CONSULTANT’s subcontractors, including their respective directors, officers, employees, agents and assigns, excepting only such matters arising from the sole negligence or willful misconduct of the DISTRICT. (b) CONSULTANT shall defend, indemnify and hold DISTRICT, including its directors, officers, employees and agents, harmless from and against any and all claims, demands, causes of action, suits, debts, obligations, liabilities, losses, damages, costs, expenses, attorney’s fees, awards, fines, settlements, judgments or losses of whatever nature, character, and description, with respect to or arising out of any infringement or alleged infringement of any patent, copyright or trademark and arising out of the use of any equipment or materials furnished under this Agreement by the CONSULTANT or CONSULTANT’s subcontractors, including their respective directors, officers, employees, agents and assigns, or out of the processes or actions employed by, or on behalf of, the CONSULTANT or CONSULTANT’s subcontractors, including their respective directors, officers, employees, agents and assigns, in connection with the performance of services under this Agreement. CONSULTANT shall have the right, in order to avoid such claims or actions, to substitute at its expense non-infringing equipment, materials or processes, or to modify at its expense such infringing equipment, materials, and processes so they become non-infringing, provided that such substituted and modified equipment, materials, and processes shall meet all the requirements and be subject to all the provisions of this Agreement. (c) CONSULTANT shall defend, indemnify and hold DISTRICT, including its directors, officers, employees and agents, harmless from and against any and all claims, demands, causes of action, suits, debts, obligations, liabilities, losses, damages, costs, expenses, attorney’s fees, awards, fines, settlements, judgments or losses of whatever nature, character, and description, with respect to or arising out of any breach by CONSULTANT or CONSULTANT’s subcontractors, including their respective directors, officers, employees, agents and assigns, of the aforesaid obligations and covenants, and any other provision or covenant of this Agreement. (d) It is the intent of the parties to this Agreement that the defense, indemnity, and hold harmless obligation of CONSULTANT under this Agreement shall be as broad and inclusive as may be allowed under California Civil Code § 2778 through 2784.5, or other similar state or federal law. 6.10 SAFETY: CONSULTANT shall perform the work in full compliance with applicable State and Federal safety requirements including, but not limited to, Occupational Safety and Health Administration requirements. (a) CONSULTANT shall take all precautions necessary for the safety of, and prevention of damage to, property on or adjacent to the Project site, and for the safety of, and prevention of injury to, persons, including DISTRICT’s employees, CONSULTANT’s employees, and third persons. All work shall be performed entirely at CONSULTANT’s risk. CONSULTANT shall comply with the insurance requirements set forth in Section 6.3 of this Agreement. (b) CONSULTANT shall also furnish the DISTRICT with a copy of any injury prevention program established for the CONSULTANT’s employees pursuant to Labor Code Section 6401.7, including any necessary documentation regarding implementation of the program. CONSULTANT hereby certifies that its employees have been trained in the program, and procedures are in place to train employees whenever new substances, processes, procedures, or equipment are introduced. CONSULTANT shall demonstrate compliance with Labor Code Section 6401.7 by maintaining a copy of its Injury and Illness Prevention Plan at the Project site and making it available to the DISTRICT. 6.11 EXAMINATION OF RECORDS: All original drawings, specifications, reports, calculations, and other documents or electronic data developed by CONSULTANT for the Project shall be furnished to and become the property of the DISTRICT. CONSULTANT agrees that the DISTRICT will have access to and the right to examine any directly pertinent books, documents, papers, and records of any and all of the transactions relating to this Agreement. 6.12 OWNERSHIP OF SOFTWARE: (a) Subject to payment of all compensation due under this Agreement and all other terms and conditions herein, CONSULTANT hereby grants DISTRICT a nonexclusive, transferable, royalty-free license to use the Software furnished to DISTRICT by CONSULTANT under this Agreement. The license granted herein shall authorize DISTRICT to: (1) Install the Software on computer systems owned, leased or otherwise controlled by DISTRICT; (2) Utilize the Software for its internal data-processing purposes; and (3) Copy the Software and distribute as desired to exercise the rights granted herein. (b) CONSULTANT retains its entire right, title and interest in the Software developed under this Agreement. DISTRICT acknowledges that CONSULTANT owns or holds a license to use and sublicense various pre- existing development tools, routines, subroutines and other programs, data and materials that CONSULTANT may include in the Software developed under this Agreement. This material shall be referred to hereafter as “Background Technology.” (c) DISTRICT agrees that CONSULTANT shall retain any and all rights CONSULTANT may have in the Background Technology. CONSULTANT grants DISTRICT an unrestricted, nonexclusive, perpetual, fully paid-up worldwide license to use the Background Technology in the Software developed and delivered to DISTRICT under this Agreement, and all updates and revisions thereto. However, DISTRICT shall make no other commercial use of the Background Technology without CONSULTANT’s written consent. 6.13 INTEGRATION AND AMENDMENT: This Agreement contains the entire understanding between the DISTRICT and CONSULTANT as to those matters contained herein. No other representations, covenants, undertakings or other prior or contemporaneous agreements, oral or written, respecting those matters, which are not specifically incorporated herein, may be deemed in any way to exist or to bind any of the parties hereto. Each party acknowledges that it has not executed this Agreement in reliance on any promise, representation or warranty not set forth herein. This Agreement may not be amended except by a writing signed by all parties hereto. 6.14 ASSIGNMENT: Neither party shall assign or transfer its interest in this Agreement without written consent of the other party. All terms, conditions, and provisions of this Agreement shall inure to and shall bind each of the parties hereto, and each of their respective heirs, executors, administrators, successors, and assigns. 6.15 GOVERNING LAW: This Agreement shall be construed as if it was jointly prepared by both parties hereto, and any uncertainty or ambiguity contained herein shall not be interpreted against the party drafting same. This Agreement shall be enforced and governed by the laws of the State of California. If any action is brought to interpret or enforce any term of this Agreement, the action shall be brought in a state court situated in the County of San Bernardino, State of California, or in a federal court with in rem jurisdiction over the Project. 6.16 HEADINGS: Article and Section headings in this Agreement are for convenience only and are not intended to be used in interpreting or construing the terms, covenants, and conditions of this Agreement. 6.17 PARTIAL INVALIDITY: If any term, covenant, condition, or provision of this Agreement is found by a court of competent jurisdiction to be invalid, void, or unenforceable, the remainder of the provisions hereof shall remain in full force and effect, and shall in no way be affected, impaired, or invalidated thereby. 6.18 EFFECT OF DISTRICT’S WAIVER: Any failure by the DISTRICT to enforce any provision of this Agreement, or any waiver thereof by the DISTRICT, shall not constitute a waiver of its right to enforce subsequent violations of the same or any other terms or conditions herein. 6.19 AUTHORITY: The individuals executing this Agreement represent and warrant that they have the legal capacity and authority to sign this Agreement on behalf of and to so bind their respective legal entities. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. CONSULTANT DISTRICT By: _____________________________ By:_________________________ Victor Liu Michael Moore President General Manager/ CEO Web Advanced East Valley Water District