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HomeMy WebLinkAboutRes - 2026.14 - Intention to Establish CFD 2026-1 Highland EastRESOLUTION NO. 2026.14 A RESOLUTION OF THE EAST VALLEY WATER DISTRICT DECLARING ITS INTENTION TO ESTABLISH COMMUNITY FACILITIES DISTRICT NO. 2026-1 (HIGHLAND EAST) OF EAST VALLEY WATER DISTRICT, TO AUTHORIZE THE LEVY OF A SPECIAL TAX TO PAY THE COST OF ACQUIRING OR CONSTRUCTING CERTAIN PUBLIC FACILITIES, AND TO PAY FOR CERTAIN INCIDENTAL EXPENSES AND TO PAY DEBT SERVICE ON BONDED INDEBTEDNESS WHEREAS, the East Valley Water District (the "District"), a county water district that is duly organized and existing under and by virtue of the laws of the State of California (the "State"), has received a petition from TPG AG EHC III (LEN) CA 6, L.P ., a Delaware limited partnership ("Landbank"), the owner of the territory that is described in Exhibit A hereto (the "Property"), to establish Community Facilities District No. 2026-1 (Highland East) of East Valley Water District (the "Community Facilities District" or "CFD") to finance: (1) the purchase, construction, expansion, improvement or rehabilitation of the public facilities described in Exhibit B hereto (which exhibit is incorporated herein by this reference), including all furnishings, equipment and supplies related thereto (collectively, the "Facilities"), which Facilities have a useful life of five years or longer; and (2) the incidental expenses to be incurred in connection with financing the Facilities, forming the Community Facilities District and administering the Community Facilities District (the "Incidental Expenses"); and WHEREAS, the Board of Directors of the District (the "Board"), acting as the legislative body of the Community Facilities District, further intends to approve an estimate of the costs of the Facilities and the Incidental Expenses for the Community Facilities District; and WHEREAS, it is the intention of the Board to consider financing the Facilities and the Incidental Expenses through the formation of the Community Facilities District and the sale of bonds in an amount not to exceed $6,000,000 for the Community Facilities District (the "Obligations"), and the levy of a special tax in the Community Facilities District to pay directly for the Facilities and to pay debt service on the Obligations, provided that the bond sale and special tax levy are approved at an election to be held for the Community Facilities District. NOW, THEREFORE, BE IT RESOLVED AND ORDERED: SECTION 1. Findin gs. The Board hereby specifically finds and declares that each of the statements, findings and determinations of the District set forth in the above recitals and in the preambles of the documents approved herein are true and correct. SECTION 2. Intention. The Board declares its intention to conduct proceedings pursuant to the Mello-Roos Community Facilities Act of 1982 (California Government Code Section 53311 et seq., the "Act") for the establishment of the Community Facilities District with boundaries coterminous with the Property. It is further proposed that the boundaries of the Community Facilities District shall be the boundaries as set forth in Exhibit A hereto, which boundaries shall, upon recordation of the boundary map for the Community Facilities District, include the entirety of any parcel subject to taxation by the Community Facilities District, except where indicated on the boundary map, and as depicted on the boundary map of the Community Facilities District 4935-4985-5917v7 /022497-0020 East Valley Water District Resolution 2026.14 Page 1 of8 which is on file with the Secretary of the District. The Secretary of the District is hereby directed to sign the original boundary map of the Community Facilities District and record it with all proper endorsements thereon with the County Recorder of the County of San Bernardino within fifteen (15) days after the adoption of this resolution, all as required by Section 3111 of the Streets and Highways Code of the State of California. SECTION 3. Name of the Community Facilities District. The name of the proposed Community Facilities District is "Community Facilities District No. 2026-1 (Highland East) of East Valley Water District." SECTION 4. Typ es of Facilities to be Financed b y the Community Facilities District. The Facilities that are proposed to be provided within the Community Facilities District are public facilities as defined in the Act. The Board hereby finds and determines that the description of the Facilities and Incidental Expenses herein is sufficiently informative to allow taxpayers within the Community Facilities District to understand what the funds of the Community Facilities District may be used to finance, the Facilities to be constructed or acquired and the Incidental Expenses expected to be incurred, including the cost of planning and designing the Facilities, the costs of forming the Community Facilities District, issuing bonds, levying and collecting a special tax within the Community Facilities District and the annual administration costs of the Community Facilities District. The Board hereby finds that the proposed Facilities are necessary to meet increased demands placed upon the District as a result of development occurring in the Community Facilities District. The Facilities may be acquired from one or more property owners as completed public facilities or may be constructed by or on behalf of the District and paid for with bond proceeds and the proceeds of special taxes collected by the Community Facilities District. SECTION 5. S pecial Taxes. Except where funds are otherwise available, it is the intention of the Board to levy annually in accordance with the procedures contained in the Act a special tax within the Community Facilities District secured by recordation of a continuing lien against all non-exempt real property in the Community Facilities District in an amount that is sufficient to pay for the Facilities and Incidental Expenses and the principal and interest and other periodic costs on bonds or other indebtedness issued to finance the Facilities and Incidental Expenses, including the establishment and replenishment of any reserve funds deemed necessary by the District, and any remarketing, credit enhancement and liquidity facility fees (including such fees for instruments which serve as the basis of a reserve fund in lieu of cash) attributable to the Community Facilities District. The rate and method of apportionment of special taxes (the "Rate and Method") and manner of collection of the special tax for the Community Facilities District is described in detail in Exhibit C hereto, which attachment is incorporated herein by this reference. Exhibit C allows each landowner within the Community Facilities District to estimate the maximum amount that may be levied against each parcel. If special taxes of the Community Facilities District are levied against any parcel used for private residential purposes: (i) the maximum special tax rate shall not be increased except to the extent permitted in the Rate and Method; (ii) such special tax shall not be levied later than the fiscal year specified in the Rate and Method; and (iii) under no circumstances shall such special tax in the Community Facilities District be increased as a consequence of delinquency or default by the owner of any other parcel or parcels within the Community Facilities District by more than 4935-4985-5917v7/022497-0020 East Valley Water District Resolution 2026.14 Page 2 of8 ten percent (10%) above the amount that would have been levied in that fiscal year had there never been any such delinquencies or defaults. The Board hereby determines the Rate and Method for the Community Facilities District set forth in Exhibit C to be reasonable. The special tax is apportioned to each parcel on the foregoing basis pursuant to Section 53325.3 of the Act; and such special tax is not on or based upon the value or ownership of real property. In the event that a portion of the property within the Community Facilities District shall become for any reason exempt, wholly or partially, from the levy of the special tax specified in the Rate and Method, the Board shall, on behalf of the Community Facilities District, cause the levy to be increased, subject to the limitation of the maximum special tax for a parcel as set forth in the Rate and Method, to the extent necessary upon the remaining property within the Community Facilities District which is not exempt in order to yield the special tax revenues required for the purposes described in this Section. The obligation to pay special taxes may be prepaid as provided in the Rate and Method set forth in Exhibit C, as such Rate and Method may be amended hereafter. SECTION 6. Public Hearing. A combined public hearing (the "Hearing") on the establishment of the Community Facilities District, the proposed Rate and Method for the Community Facilities District and the proposed issuance of bonds for the Community Facilities District to finance the Facilities and the Incidental Expenses shall be held at 5:00 p.m., or as soon thereafter as practicable, on December 9, 2026, at the District, 31111 Greenspot Road, Highland, California 92346. If the Board determines to form the Community Facilities District, a special election will be held to authorize the issuance of the bonds for the Community Facilities District and the levy of the special tax in accordance with the procedures contained in Government Code Section 53326. If such election is held, the proposed voting procedure at the election will be a landowner vote with each landowner who is the owner of record of land within the Community Facilities District at the close of the Hearing, or the authorized representative thereof, having one vote for each acre or portion thereof owned within the Community Facilities District. Ballots for the special election may be distributed by mail or by personal service. At the time and place set forth above for the Hearing, the Board will receive testimony as to whether the Community Facilities District shall be established and whether special taxes shall be levied in accordance with the proposed Rate and Method, and whether Obligations for the Community Facilities District shall be issued to finance Facilities and Incidental Expenses of the Community Facilities District. At the time and place set forth above for the Hearing, any interested person, including all persons owning lands or registered to vote within the Community Facilities District, may appear and be heard. SECTION 7. Notice. The Secretary of the District is hereby authorized and directed to publish a notice (the "Notice") of the Hearing pursuant to Section 6061 of the Government Code in a newspaper of general circulation published in the area of the Community Facilities District. The Secretary of the District is further authorized and directed to mail a copy of the Notice to each of the landowners within the boundaries of the Community Facilities District at least 15 days prior to the Hearing. The Notice shall contain the text or a summary of this resolution, the time and place of the Hearing, a statement that the testimony of all interested persons or taxpayers will be 4935-4985-5917v7 /022497-0020 East Valley Water District Resolution 2026.14 Page 3 of8 heard, a description of the protest rights of the registered voters and landowners in the Community Facilities District and a description of the proposed voting procedure for the elections required by the Act. Such publication shall be completed at least seven (7) days prior to the date of the Hearing. SECTION 8. Re ports re Facilities. Each District officer who is or will be responsible for providing the Facilities, if the Community Facilities District is established, is hereby directed to study the Community Facilities District and, at or before the time of the Hearing, file a report with the Board containing a brief description of the public facilities by type which will in his or her opinion be required to meet adequately the needs of the Community Facilities District and an estimate of the cost of providing those public facilities. SECTION 9. Advance of Funds. The District may accept advances of funds or work-in-kind from any source, including, but not limited to, private persons or private entities, for any authorized purpose, including, but not limited to, paying any cost incurred by the District in creating the Community Facilities District. The District may enter into an agreement with the person or entity advancing the funds or work-in-kind, to repay all or a portion of the funds advanced, or to reimburse the person or entity for the value, or cost, whichever is less, of the work­ in-kind, as determined by the District, with or without interest. SECTION 10. Maximum Bonded Indebtedness. The reasonably expected maximum principal amount of the Obligations is $6,000,000 for the Community Facilities District. SECTION 11. Appointment of Financin g Team. Koppel & Gruber Public Finance is hereby appointed to act as special tax consultant with respect to the formation of the Community Facilities District therein, the issuance of bonds thereby and the preparation of the Community Facilities District report required by Section 53321.5 of the Act. Stradling Yocca Carlson & Rauth LLP ("Bond Counsel") is hereby appointed to act as bond counsel and special counsel with respect to the fonnation of the Community Facilities District and the bond issuances thereby. SECTION 12. Reservation of Ri ghts. Except to the extent limited in any bond resolution or trust indenture related to the issuance of bonds, the Board hereby reserves to itself all rights and powers set forth in Section 53344.1 of the Act (relating to tenders in full or partial payment). SECTION 13. Other Actions. The President or Vice President of the Board or the General Manager or Chief Financial Officer of the District or the designee thereof and any other proper officers of the District, acting singly, are hereby authorized and directed to do any and all things and to execute and deliver any and all documents and certificates which such officers may deem necessary or advisable in order to effectuate the purposes of this resolution, and such actions previously taken by such officers are hereby ratified and confirmed. SECTION 14. 4935-4985-5917v7/022497-0020 Effect. This resolution shall take effect immediately. East Valley Water District Resolution 2026.14 Page 4 of8 Ayes: Directors: Carrillo, Coats, Goodrich, Morales, Smith Noes: None Abstain: None Absent: None Board President ATTEST: Mic:k/~ Secretary, Board of Directors October 28, 2026 I HEREBY CERTIFY that the foregoing is a full, true and correct copy of Resolution 2026.14 adopted by the Board of Directors of East Valley Water District at its Regular Meeting held October 28, 2026. Mc:2:::(/±' Secretary, Board of Directors 4935-4985-5917v7 /022497-0020 East Valley Water District Resolution 2026 .14 Page 5 of8 EXHIBIT A PROPOSED BOUNDARY MAP OF COMMUNITY FACILITIES DISTRICT NO. 2026-1 (HIGHLAND EAST) OF EAST VALLEY WATER DISTRICT 4935-4985-59 l 7v7 /022497-0020 A-1 ~ ili ~ "' I ___ _.1 ___ :._.= __ -------------------- I I 1 PROPOSED BOUNDARIES OF EAST VALLEY WATER DISTRICT COMMUNITY FACILITIES DISTRICT NO. 2026-1 (HIGHLAND EAST) ® / I / / SAN BERNARDINO COUNTY STATE OF CALIFORNIA -. ---j e I : f- I I I I I ;!: "' s: . -1 I ~ I () r I!: ~ I I ~ ~~ l_ -------___ ,_ L -GREENSPOT RD----------- VICINITY MAP -,----_r,m.Y"'!!!-'-IT--,. CITY OP j COUNTY Of <._ 't~--. V f--l-1...;J t_.::,_i._ \.,. HIGHLAND I SAN BERNARDINO .1 ;J. C,,0 .. -,. I l-J --L----, ,- r_ J f'A_"kJ0 7:~ _ -. 0-zts--1 I .,.. , L, l j.,~J '--; w l.l-1 ~--,, -1..J... '-'1-t::::,,,,~..,.,.r...~--=---~--<,,ii""-\ ..t'.11.-1 / ,,,,,,..,. ,,,-)¥ ·c~K ___ -.'R0~~~~i~;_7 ' -; --.1.8BE1'-WA¥-- ~ N i I I I ,!. ii! ~I ~ I I I _1 N.T.S. SHEET 1 of 1 FILED IN THE OFFICE OF THE CLERK OF THE BOARD OF DIRECTORS OF THE EAST VALLEY WATER DISTRICT THIS ____ DAY OF -------2026. CLERK OF THE BOARD OF DIRECTORS EAST VALLEY WATER DISTRICT I HEREBY CERTIFY THAT THE WITHIN MAF SHOWING THE PROPOSED BOUNDARIES OF COMMUNITY FACILITIES DISTRICT NO. 2026·1 (HIGHLAND EAST) OF THE EAST VALLEY WATER DISTRICT, SAN BERNARDINO COUNTY, STATE OF CALIFORNIA, WAS APPROVED BY THE BOARD OF DIRECTORS OF THE EAST VALLEY WATER DISTRICT AT A REGULAR MEETING THEREOF, HELO ON THE __ DAY OF ----------~ 2026, BY ITS RESOLUTION NO. _______ _ CLERK OF THE BOARD OF DIRECTORS EAST VALLEY WATER DISTRICT SAN BERNARDINO COUNTY RECORDER'S CERTIFICATE THIS MAP HAS BEEN FILED UNDER THE DOCUMENT NUMBER ____ , THIS __ DAY OF _______ , 2026, AT ____ M, IN BOOK __ OF ________ AT PAGE(S) __ , AT THE REQUEST OF _____________ IN THE AMOUNT OF $ _____ _ JOSIE GONZALES ASSESSOR-RECORDER-CLERK SAN BERNARDINO COUNTY ~~~=TY=R""EODRD==ER:------ THE LINES AND DIMENSIONS OF EACH LOT OR PARCEL SHOWN ON THIS DIAGRAM SHALL BE THOSE LINES AND DIMENSIONS AS SHOWN ON THE SAN BERNARDINO COUNTY ASSESSOR'S MAPS FOR THOSE PARCELS LISTED. THE SAN BERNARDINO COUNTY ASSESSORS MAFS SHALL GOVERN FOR ALL THE DETAILS CONCERNING THE LINES AND DIMENSIONS OF SUCH LOTS OF PARCElS. □ MAP REF. NO.I ASSESSOR'S PARCEL NO. 1210-371-14-0000 LEGEND PROPOS ED BOUNDARY 1210-371-16-0000 KOPPEL & GRUBER PUBLIC FINANCE 33-4 Vlo Vero Crvz Suite256 Son ,',\Qrcos. Co~torrio 92078 Phone (760) S10-0290 Fox {1601 510-0288 DATE PREPARED: MAY 2026 EXHIBITB DESCRIPTION OF PUBLIC FACILITIES AND INCIDENTAL EXPENSES Facilities. The proposed types of facilities and expense to be financed by the Community Facilities District include: The construction, purchase, modification, expansion, rehabilitation and/or improvement of water and sewer facilities of the East Valley Water District as well as the acquisition of capacity in the sewer system and/or water system of the East Valley Water District, and all appurtenances and appurtenant work in connection with the foregoing water and sewer facilities, including, without limitation, the cost of engineering, planning, designing, materials testing, coordination, construction staking, construction management and supervision for such water and sewer facilities, and any other expenses incidental to the construction, acquisition, modification, rehabilitation, completion, inspection and financing of such facilities. The Facilities listed herein are representative of the types of improvements authorized to be financed by the Community Facilities District. Detailed scope and limits of specific projects will be determined as appropriate, consistent with the standards of East Valley Water District. Addition, deletion or modification of descriptions of the Facilities may be made consistent with the requirements of the Board of Directors of East Valley Water District, the Community Facilities District and the Act. Incidental Expenses. The Incidental Expenses to be paid from bond proceeds and/or special taxes include all costs associated with the creation of the Community Facilities District, the issuance of the bonds, the determination of the amount of special taxes to be levied, costs otherwise incurred in order to carry out the authorized purposes of the Community Facilities District, including legal fees, fees of consultants, engineering, planning, designing and the annual administration cost of the Community Facilities District. 4935-4985-59 l 7v7 /022497-0020 B-1 EXHIBITC RATE AND METHOD OF APPORTIONMENT FOR COMMUNITY FACILITIES DISTRICT NO. 2026-1 (HIGHLAND EAST) OF EAST VALLEY WATER DISTRICT 4935-4985-5917v7 /022497-0020 C-1 EAST VALLEY WATER DISTRICT COMMUNITY FACILITIES DISTRICT NO. 2026-1 (HIGHLAND EAST) RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX A Special Tax applicable to each Assessor's Parcel in the East Valley Water District Community Facilities District No. 2026-1 (Highland East) shall be levied and collected according to the tax liability determined by the Water District Board through the application of the appropriate amount or rate for Taxable Property, as described below. All of the property in the CFD, unless exempted by law or by the provisions of Section 8 below, shall be taxed for the purposes, to the extent, and in the manner herein provided. 1. DEFINITIONS "Accessory Dwelling Unit(s)" or "ADU(s)" means all Assessor's Parcels of Residential Property for which a building permit(s) has been issued for an "Accessory Dwelling Unit" as defined in California Government Code Section 66313(a), as may be amended from time to time, that is accessory to a primary Residential Unit. The ADU may be located on the same Assessor's Parcel as the primary Residential Unit or on a separate Assessor's Parcel. AD Us shall be subject to the Special Tax as described in Section 2 and Section 3. "Acre" or "Acreage" 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 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 any or all of the following: the fees and expenses of any fiscal agent or trustee (including any fees or expenses of its counsel) employed in connection with any Bonds, and the expenses of the Water District in carrying out its duties with respect to the CFD and the Bonds, including, but not limited to, the levy and collection of Special Taxes, the fees and expenses of its counsel, charges levied by the County in connection with the levy and collection of Special Taxes, costs related to property owner inquiries regarding the Special Tax, costs associated with appeals or requests for interpretation associated with the Special Tax and this RMA, amounts needed to pay rebate to the federal government with respect to Bonds, costs associated with complying with continuing disclosure requirements for the Water District and any major property owners or other obligated parties, costs associated with foreclosure and collection of delinquent Special Taxes, and all other costs and expenses of the Water October 9, 2026 1 Community Facilities District No. 2026-1 (Highland East) East Valley Water District District and the County in any way related to the establishment or administration of the CFD. "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 Assessor designating parcels by Assessor's Parcel number. "Assigned Special Tax" means, for any Land Use Class, the applicable Special Tax identified in Table 1 of Section 3. "Backup Special Tax" means the Special Tax amount applicable to each Assessor's Parcel of Developed Property, as determined in accordance with Section 3.C below. "Bonds" means any obligation of CFD No. 2026-1 to pay or repay a sum of money, including obligations in the form of bonds, certificates of participation, long-term leases, loans from government agencies, or loans from banks, other financial institutions, private businesses, or individuals, or long-term contracts, or any refunding thereof, secured in whole or in part by the levy of Special Taxes. "Building Permit" means a permit that allows for vertical construction of a building or buildings, which shall not include a separate permit issued for construction of the foundation thereof. "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, to administer the Special Tax according to this RMA. "CFD" or CFD No. 2026-1" means Community Facilities District No. 2026-1 (Highland East) of the Water District. "City" means the City of Highland, California. "County" means the County of San Bernardino, California. October 9, 2026 2 Community Facilities District No. 2026-1 (Highland East) East Valley Water District "Debt Service" means for each Fiscal Year, the total amount of principal and interest payable on any Outstanding Bonds during the Calendar Year commencing on January 1 of such Fiscal Year. "Developed Property" means for each Fiscal Year, all Assessor's Parcels of Taxable Property, exclusive of Assessor's Parcels of Provisional Undeveloped Property , for which a Building Permit was issued prior to May 1 of the previous Fiscal Year. "Exempt Property" means Assessor's Parcels designated as being exempt from Special Taxes pursuant to Section 8. "Final Map" means a recorded final map, or portion thereof, approved by the County pursuant to the Subdivision Map Act (California Government Code Section 66410 et seq .) that creates Lots. The term "Final Map" shall not include any large-lot subdivision map, Assessor's Parcel Map, or subdivision map or portion thereof, which does not create Lots, including Assessor's Parcels that are designated as remainder parcels. "Final Map Property" means, in any Fiscal Year, all Lots created within Final Maps recorded prior to January 1 of the preceding Fiscal Year and which are not classified as Developed Property. "Fiscal Year" means the period starting on July 1 and ending the following June 30. "General Manager" means the General Manager of the Water District or his/her designee . "Indenture" means the indenture, fiscal agent agreement, resolution or other instrument pursuant to which Bonds are issued, as modified, amended and/or supplemented from time to time, and any instrument replacing or supplementing the same. "Land Use Class" means any of the classes listed in Table 1 under Section 3 below. "Lot" means an individual residential lot, identified and numbered on a recorded Final Map, for which a Building Permit has been or is permitted to be issued for construction of a Residential Unit without further subdivision of the lot and for which no further subdivision of the lot is anticipated pursuant to an approved Tentative 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. October 9, 2026 3 Community Facilities District No. 2026-1 (Highland East) East Valley Water District "Outstanding Bonds" means 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. "RMA" means this Rate and Method of Apportionment of Special Tax. "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 whether attached or detached. "Special Tax" means any special tax authorized to be levied within CFD No. 2026-1 pursuant to the Act and this RMA. "Special Tax Category" means any of the categories listed in Table 1 under Section 3 below. "Special Tax Obligation" means the total obligation of an Assessor's Parcel of Taxable Property to pay the Special Tax for the remaining life of CFD No. 2026-1. "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 that was not levied in a prior Fiscal Year; (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 Final Map Property, Undeveloped Property or Provisional Undeveloped Property, and (vii) pay for October 9, 2026 4 Community Facilities District No. 2026-1 (Highland East) East Valley Water District reasonably anticipated delinquent Special Taxes based on the delinquency rate for Special Taxes levied in the previous Fiscal Year; less (viii) a credit for funds available to reduce the annual Special Tax levy, as determined by the CFD Administrator pursuant to the Indenture. "State" means the State of California. "Taxable Property" means all of the Assessor's Parcels within the boundaries of CFD No. 2026-1, which are not exempt from the levy of the Special Tax pursuant to law or Section 8 below. "Tentative Map" means a tentative map or substantial conformance exhibit for property within CFD No. 2026-1, including any adjustments or amendments thereto. "Trustee" means the trustee or fiscal agent under the Indenture. "Undeveloped Property" means, for each Fiscal Year, all Taxable Property within the boundaries of CFD No. 2026-1 not classified as Developed Property, Final Map Property, or Provisional Undeveloped Property . "Water District" means the East Valley Water District, California. "Water District Board" means the Board of Directors of the East Valley Water District, acting as the legislative body of CFD No. 2026-1, or its designee. 2. LAND USE CLASSIFICATION Each Fiscal Year, beginning with Fiscal Year 2026/2027, each Assessor's Parcel within the boundaries of CFD No. 2026-1 shall be classified as Taxable Property or Exempt Property. In addition, all Taxable Property within CFD No. 2026-1 shall be classified as Developed Property, Final Map Property, Undeveloped Property or Provisional Undeveloped Property, and all such Taxable Property shall be subject to the levy of Special Taxes in accordance with this RMA determined pursuant to Sections 3 and 4 below. Furthermore, each Assessor's Parcel of Developed Property which is a Residential Unit shall be classified as a Land Use Class based on its Special Tax Category. In relation to Accessory Dwelling Units and for purposes of the calculation of the Maximum Special Tax if both Residential Units are on the same Assessor's Parcel: (A) for ADUs that are permitted prior to the first occupancy of the primary Residential Unit, the Building Square Footage of the ADU shall be added to the Building Square Footage of the primary Residential Unit for determining the Land Use Class and (B) for an ADU that is permitted after first occupancy of the primary Residential Unit, the ADU shall be subject to the then current Water District fees and not used to determine or adjust the Land Use Class used in the application of this RMA or subject to the Special Tax as a Residential Unit. If an Assessor's Parcel contains only an ADU then October 9, 2026 5 Community Facilities District No. 2026-1 (Highland East) East Valley Water District the ADU will be considered Land Use Class 1 and be subject to the Assigned Special Tax shown in Section 3 Table 1. 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. Once classified as Developed Property, an Assessor's Parcel may not be subsequently re-classified as Undeveloped Property or changed to Exempt Property without the Special Tax being paid off in full accordance with Section 6 below. 3. MAXIMUM SPECIAL TAX RATES A. Developed Property The Maximum Special Tax applicable to an Assessor's Parcel classified as Developed Property in CFD No. 2026-1 for Fiscal Year 2026/2027 shall be the greater of (i) the Assigned Special Tax determined pursuant to Table 1 below or (ii) the amount derived by application of the Backup Special Tax. Table 1 Assigned Special Tax Rates Fiscal Year 2026/2027 Land Use Class Special Tax Category Assigned Special Tax 1 2 3 4 October 9, 2026 ADU Less than 1,600 Sq. Ft. 1,600 to 1,800 Sq. Ft. Greater than 1,800 Sq. Ft. 6 $1,890 per Residential Unit $2,466 per Residential Unit $2,490 per Residential Unit $2,516 per Residential Unit Community Facilities District No. 2026-1 (Highland East) East Valley Water District Each July 1, commencing July 1, 2027, the Assigned Special Tax for Developed Property shall be increased by two percent (2.0%) of the amount in effect in the prior Fiscal Year. B. Final Map Property The Maximum Special Tax for Final Map Property is $2,491 per Lot for Fiscal Year 2026/2027, which amount shall increase on July 1, 2027, and each July 1 thereafter by an amount equal to 2.0% of the amount in effect for the prior Fiscal Year. C. Backup Special Tax and Undeveloped Property Maximum Special Tax The Backup Special Tax applicable to an Assessor's Parcel classified as Developed Property or the Maximum Special Tax applicable to an Assessor's Parcel of Undeveloped Property for Fiscal Year 2026/2027 shall be $44,910 per Acre or portion thereof for CFD No. 2026-1. Each July 1, commencing July 1, 2027 , the Backup Special Tax for Developed Property and the Maximum Special Tax for Undeveloped Property shall be increased by two percent (2.0%) of the amount in effect in the prior Fiscal Year. D. Provisional Undeveloped Property The Maximum Special Tax for Provisional Undeveloped Property for Fiscal Year 2026/2027 shall be $44,910 per Acre or portion thereof for CFD No. 2026-1. Each July 1, commencing July 1, 2027, 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 2026/2027 , the CFD Administrator shall calculate the Special Tax on all Taxable Property in accordance with the following steps: October 9, 2026 Step 1: Prior to the issuance of bonds, the Special Tax shall be levied at 100% of the applicable Assigned Special Tax and after the issuance of bonds the Special Tax shall be levied Proportionately on each Assessor 's 7 Community Facilities District No. 2026-1 (Highland East) East Valley Water District Parcel of Developed Property up to 100% of the applicable Assigned Special Tax to satisfy the Special Tax Requirement; Step 2: If additional monies are needed to satisfy the Special Tax Requirement after the first step has been completed, the Special Tax shall be levied Proportionately on each Assessor's Parcel of Final Map Property up to 100% of the Maximum Special Tax for Final Map Property; Step 3: If additional monies are needed to satisfy the Special Tax Requirement after the first two steps have been completed, the Special Tax shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property up to 100% of the Maximum Special Tax for Undeveloped Property; Step 4: If additional monies are needed to satisfy the Special Tax Requirement after the first three steps have been completed, then the levy of the Special Tax on each Assessor's Parcel of Developed Property whose Maximum Special Tax is determined through the application of the Backup Special Tax shall be increased Proportionately from the Assigned Special Tax up to 100% of the Maximum Special Tax for each such Assessor's Parcel; and Step 5: If additional monies are needed to satisfy the Special Tax Requirement after the first four steps have been completed, then the Special Tax shall be levied Proportionately on each Assessor's Parcel of Provisional Undeveloped Property at up to 100% of the Maximum Special Tax for Provisional Undeveloped Property. Notwithstanding the above, under no circumstances will the Special Tax levied in any Fiscal Year against any Assessor's Parcel of Developed Property for which an occupancy permit for private residential use has been issued be increased as a consequence of delinquency or default by the owner of any other Assessor's Parcel within CFD No. 2026-1 by more than ten percent (10%) of the amount that would have been levied in the Fiscal Year in the absence of such delinquency or default, except for those Assessor's Parcels of Developed Property whose owners are also delinquent or in default on their Special Tax payments for one or more other properties within CFD No. 2026-1. 5. COLLECTION OF SPECIAL TAXES Collection of the Special Tax shall be by the County in the same manner as ordinary ad valorem property taxes are collected and the 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 Special Tax, including direct billings thereof to the property owners; and (ii) October 9, 2026 8 Community Facilities District No. 2026-1 (Highland East) East Valley Water District judicial foreclosure of delinquent Special Taxes to meet the financial obligations of CFD No. 2026-1. 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 En gineerin g 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 En gineerin g News-Record Building Cost Index for the City of Los Angeles. "Future Facilities Costs" means the Public Facilities Costs minus (i) costs previously paid from the Construction Fund to acquire or construct the facilities, (ii) monies currently on deposit in the Construction Fund, and (iii) monies currently on deposit in an escrow or other earmarked fund that are expected to be available to finance Public Facilities Costs, but in any event not less than $0. "Outstanding Bonds" means all Previously Issued Bonds, which remain outstanding as of the first interest and/or principal payment date following the current Fiscal Year excluding Bonds to be redeemed at a later date with proceeds of prior prepayments of Maximum Special Taxes. "Previously Issued Bonds" means all CFD No. 2026-1 Bonds that have been issued prior to the date of prepayment. "Public Facilities Costs" means $3,290,000 in 2026 dollars, which shall increase by the Construction Inflation Index (as defined above) on July 1, 2027, and on each July 1 thereafter, or such lower number as (i) shall be determined by the CFD Administrator as sufficient to acquire or construct the facilities to be financed under the authorized Mello-Roos financing program for CFD No. 2026-1, or (ii) shall be determined by the Water District concurrently with a covenant that it will not issue any more CFD No. 2026-1 Bonds (except refunding bonds) to be supported by Special Taxes. A. Prepayment in Full The Special Tax Obligation applicable to an Assessor's Parcel may be prepaid and October 9, 2026 9 Community Facilities District No. 2026-1 (Highland East) East Valley Water District the obligation of the Assessor's Parcel to pay any Special Tax permanently satisfied as described herein, provided that a prepayment may be made with respect to a particular Assessor's Parcel only if there are no delinquent Special Taxes with respect to such Assessor's Parcel at the time of prepayment. An owner of an Assessor's Parcel intending to prepay the Special Tax Obligation shall provide the CFD Administrator with written notice of intent to prepay and the company or agency that will be acting as the escrow agent, if any. The CFD Administrator shall provide the owner with a statement of the Prepayment Amount (as defined below) for such Assessor's Parcel within thirty (30) days of the request and may charge a reasonable fee for providing this service. Prepayment must be made more than sixty (60) days prior to any redemption date for the CFD No. 2026-1 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 Ca pitalized 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 Final Map Property or Undeveloped Property for which a Building Permit has been issued, compute the Maximum Special Tax for that Assessor's Parcel as though it was already designated as Developed Property, based upon the Building Permit(s) which has already been issued for that Assessor's Parcel. For an Assessor's Parcel of Undeveloped Property for which a Building Permit has not been issued, compute the Maximum Special Tax for that Assessor's Parcel. 3. Divide the Maximum Special Tax computed pursuant to paragraph 2 by the total estimated Maximum Special Tax for CFD No. 2026-1 based on the Developed Property Special Tax which could be levied in the current Fiscal Year on all expected development through build-out of CFD No. 2026-1 as October 9, 2026 Community Facilities District No. 2026-1 (Highland East) East Valley Water District 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 ofCFD No. 2026-1, 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 one hundred percent (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. October 9, 2026 11 Community Facilities District No. 2026-1 (Highland East) East Valley Water District 13 . If any capitalized interest for the Outstanding Bonds will not have been expended at the time of the first interest and/or principal payment following the current Fiscal Year, a capitalized interest credit shall be calculated by multiplying the larger quotient computed pursuant to paragraph 3 by the expected balance in the capitalized interest fund after such first interest and/or principal payment (the "Capitalized Interest Credit"). 14. The Special Tax Obligation is equal to the sum of the amounts computed pursuant to paragraphs 4, 5, 7, 10, and 11, less the amounts computed pursuant to paragraphs 12 and 13 (the "Prepayment Amount"). 15. From the Prepayment Amount, the sum of the amounts computed pursuant to paragraphs 4, 5, and 10, less the amounts computed pursuant to paragraphs 12, and 13 shall be deposited into the appropriate fund as established under the Indenture and be used to retire Outstanding Bonds or make Debt Service payments. The amount computed pursuant to paragraph 7 shall be deposited into the Construction Fund. The amount computed pursuant to paragraph 11 shall be retained by CFD No. 2026-1. 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: October 9, 2026 12 Community Facilities District No. 2026-1 (Highland East) East Valley Water District 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 partial prepayment of the Special Tax for an Assessor's Parcel within sixty (60) days of the request and may charge a reasonable fee for providing this service. With respect to any Assessor's Parcel that is partially prepaid, the Water District shall (i) distribute the funds remitted to it according to Section 6.A., and (ii) indicate in the records of CFD No. 2026-1 that there has been a partial prepayment of the Special Tax and that a portion of the Special Tax with respect to such Assessor's Parcel, equal to the outstanding percentage (1.00 -F) of the remaining Maximum Special Tax, shall continue to be levied on such Assessor's Parcel pursuant to Section 3. Notwithstanding the foregoing, no partial prepayment shall be allowed unless the amount of Maximum Special Taxes less Administrative Expenses for each Fiscal Year that may be levied on Taxable Property, respectively, after the proposed partial prepayment is at least 1.1 times the annual Debt Service on all Outstanding Bonds. 7. TERM OF SPECIAL TAX The 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 2075/2076. 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 encumbered by public utility easements or other restrictions, as reasonably determined by the CFD Administrator, provided that cumulatively for each October 9, 2026 13 Community Facilities District No. 2026-1 (Highland East) East Valley Water District of (i) through (iv) no such classification would reduce the sum of all Taxable Property within CFD No. 2026-1 to less than 6.27 Acres. Assessor's Parcels which cannot be classified as Exempt Property because such classification would reduce the sum of all Taxable Property in CFD No. 2026-1 to less than 6.27 Acres shall be classified as Provisional Undeveloped Property, and will continue to be subject to the Special Tax accordingly. Tax exempt status for this purpose of this paragraph will be assigned by the CFD Administrator in the chronological order in which property becomes eligible for classification as Exempt Property. 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 Special Tax and claims the amount of the 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 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 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 Special Tax levied on such Assessor's Parcel. Upon receipt of such notice, the General Manager may establish such procedures as deemed necessary to undertake the review of any such appeal. The General Manager thereof shall interpret this RMA and make determinations relative to the administration of the Special Tax and any landowner appeals . The decision of the General Manager shall be final and binding as to all persons. October 9, 2026 14 Community Facilities Distric t No. 2026-1 (Highland East) East Valley Water District