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Home My WebLink About19-4, Attachment Old Greenwood Official StatementAttachment 4 PRELIMINARY OFFICIAL STATEMENT DATED MAY _, 201;1 NEW ISSUE - BOOK -ENTRY ONLY NO RATING 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 certain representations and compliance with certain covenants and requirements described more fully herein, interest on the 2013 Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations although such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. In the further opinion of Bond Counsel, interest on the 2013 Bonds is exempt from State of California personal income tax. See "LEGAL MATTERS— Tax Exemption " herein. $XX,XXX,000* TRUCKEE DONNER PUBLIC UTILITY DISTRICT COMMUNITY FACILITIES DISTRICT NO. 03-1 (OLD GREENWOOD) 2013 SPECIAL TAX REFUNDING BONDS Dated: Date of Delivery Due: September 1, as shown on the inside cover page The Truckee Donner Public Utility District Community Facilities District No. 03-1 (Old Greenwood) 2013 Special Tax Refunding Bonds (the "2013 Bonds") are being issued and delivered by Truckee Donner Public Utility District Community Facilities District No. 03-1 (Old Greenwood) (the "District") to provide funds to be used, along with other funds available for such purpose, for the defeasance of the District's outstanding Special Tax Bonds which were originally issued in 2003. See "THE REFUNDING PLAN" herein. The District has been formed by and is located in the Truckee Donner Public Utility District ("TDPUD"), in the Town of Truckee in Nevada County, California. The 2013 Bonds are authorized to be issued pursuant to the Mello -Roos Community Facilities Act of 1982, as amended (Sections 53311 et seq. of the Government Code of the State of California), and a Trust Indenture, dated as of [Dated Date], 2013 by and between the District and The Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee") (the "Trust Indenture"). The 2013 Bonds are special obligations of the District and are payable solely from revenues derived from certain annual Special Taxes (as defined herein) to be levied on and collected from the owners of parcels within the District subject to the Special Tax and from certain other funds pledged under the Trust Indenture, all as further described herein. The Special Taxes are to be levied according to the rate and method of apportionment approved by the Board of Directors of TDPUD and the qualified electors within the District. See "SECURITY AND SOURCES OF PAYMENT FOR THE 2013 BONDS — Special Taxes." The Board of Directors of TDPUD is the legislative body of the District. The 2013 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 ("DTC"). Individual purchases of ownership interests in the 2013 Bonds may be made in principal amounts of $5,000 and integral multiples thereof in book -entry form only. Purchasers of 2013 Bonds will not receive certificates representing their beneficial ownership of the 2013 Bonds but will receive credit balances on the books of their respective nominees. The 2013 Bonds will not be transferable or exchangeable except for transfer to another nominee of DTC or as otherwise described herein. Interest on the 2013 Bonds will be payable on March 1, 2014 and semiannually thereafter on each March 1 and September 1. Principal of and interest on the 2013 Bonds will be paid by the Trustee to DTC for subsequent disbursement to DTC Participants, who are to remit such payments to the beneficial owners of the 2013 Bonds. See "THE 2013 BONDS — General Provisions" and APPENDIX G — "BOOK -ENTRY ONLY SYSTEM" herein. Neither the faith and credit nor the taxing power of TDPUD, the County of Nevada, the State of California or any political subdivision thereof other than the District is pledged to the payment of the 2013 Bonds. Except for the Net Taxes (as defined herein), no other taxes are pledged to the payment of the 2013 Bonds. The 2013 Bonds are special tax obligations of the District payable solely from Net Taxes and certain other amounts pledged under the Trust Indenture as more fully described herein. The 2013 Bonds are subject to optional redemption, mandatory sinking fund payment redemption and extraordinary mandatory redemption from prepayments of Special Taxes as set forth herein. See "THE 2013 BONDS — Redemption" herein. CERTAIN EVENTS COULD AFFECT THE ABILITY OF THE DISTRICT TO PAY THE PRINCIPAL OF AND INTEREST ON THE 2013 BONDS WHEN DUE. MOREOVER, THE 2013 BONDS ARE NOT RATED BY ANY NATIONALLY RECOGNIZED RATING ORGANIZATION. THE PURCHASE OF THE 2013 BONDS INVOLVES SIGNIFICANT INVESTMENT RISKS, AND THE 2013 BONDS ARE NOT SUITABLE INVESTMENTS FOR MANY INVESTORS. SEE THE SECTION OF THIS OFFICIAL STATEMENT ENTITLED "SPECIAL RISK FACTORS" FOR A DISCUSSION OF CERTAIN RISK FACTORS THAT SHOULD BE CONSIDERED, IN ADDITION TO THE OTHER MATTERS SET FORTH HEREIN, IN EVALUATING THE INVESTMENT QUALITY OF THE 2013 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 2013 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 to the District with respect to the 2013 Bonds. Certain legal matters will be passed on for TDPUD and the District by . It is anticipated that the 2013 Bonds in book -entry form will be available for delivery through the facilities of DTC on or about July _, 2013. Dated: 12013 * Preliminary, subject to change. BRANDIS TALLMAN, LLC H � � Attachment 4 MATURITY SCHEDULE (Base CUSIPt: 897817) Serial Bonds Maturity Date Principal (September 1) Amount Interest Rate Yield Price CUSIP No. t Term Bonds $ % Term Bonds due September 1, 20 Yield: % Price: CUSIP No.t t Copyright 2013, American Bankers Association. CUSIP data herein is provided by Standard & Poor's, CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. The District takes no responsibility for the accuracy of such data. Attachment 4 TRUCKEE DONNER PUBLIC UTILITY DISTRICT COMMUNITY FACILITIES DISTRICT NO.03-1 (OLD GREENWOOD) BOARD OF DIRECTORS OF TRUCKEE DONNER PUBLIC UTILITY DISTRICT Serving as the Legislative Body of Community Facilities District No. 03-1 (Old Greenwood) Tony Laliotis, President Joe Aguera, Member Jeff Bender, Member Ron Hemig, Member DISTRICT STAFF Michael D. Holley, General Manager Stephen Hollabaugh, Assistant General Manager and Electric Utility Manager Robert Mescher, Treasurer and Administrative Services Manager BOND COUNSEL AND DISCLOSURE COUNSEL Stradling Yocca Carlson & Rauth, a Professional Corporation Newport Beach, California SPECIAL TAX CONSULTANT Willdan Financial Services Temecula, California REAL ESTATE APPRAISER Seevers Jordan Ziegenmeyer, Rocklin, California TRUSTEE The Bank of New York Mellon Trust Company, N.A. San Francisco, California TABLE OF CONTENTS Attachment 4 Page INTRODUCTION................................................................................................................................................ 1 General...........................................................................................................................................................1 TheDistrict.................................................................................................................................................... 1 ForwardLooking Statements......................................................................................................................... 2 Security and Sources of Payment for the 2013 Bonds................................................................................... 3 AppraisalReport ............................................................................................................................................ 4 Descriptionof the 2013 Bonds....................................................................................................................... 4 TaxMatters.................................................................................................................................................... 5 ProfessionalsInvolved in the Offering.......................................................................................................... 5 ContinuingDisclosure.................................................................................................................................... 5 BondOwners' Risks...................................................................................................................................... 5 OtherInformation.......................................................................................................................................... 5 ESTIMATED SOURCES AND USES OF FUNDS............................................................................................ 6 THEREFUNDING PLAN................................................................................................................................... 6 General........................................................................................................................................................... 6 THE2013 BONDS............................................................................................................................................... 7 GeneralProvisions......................................................................................................................................... 7 Authorityfor Issuance.................................................................................................................................... 7 DebtService Schedule................................................................................................................................... 8 Redemption.................................................................................................................................................... 8 Registration, Transfer and Exchange........................................................................................................... 10 SECURITY AND SOURCES OF PAYMENT FOR THE 2013 BONDS.........................................................10 Covenantsand Warranties...........................................................................................................................10 LimitedObligations.....................................................................................................................................10 SpecialTaxes............................................................................................................................................... 11 Estimated Debt Service Coverage from Special Taxes................................................................................15 Reserve Account of the Special Tax Fund................................................................................................... 15 NoParity Bonds........................................................................................................................................... 15 THEDISTRICT..................................................................................................................................................17 General Description of the District..............................................................................................................17 PropertyValues............................................................................................................................................ 17 Estimated Direct and Overlapping Indebtedness......................................................................................... 18 ExpectedTax Burden................................................................................................................................... 19 Special Taxes Levied Against Undeveloped Property ................................................................................. 24 PrincipalTaxpayers......................................................................................................................................24 DelinquencyHistory .................................................................................................................................... 24 AppraisalReport .......................................................................................................................................... 25 EstimatedValue -to -Lien Ratios...................................................................................................................26 PROPERTY OWNERSHIP AND THE DEVELOPMENT...............................................................................29 General Description of the Development..................................................................................................... 29 Northlight..................................................................................................................................................... 29 SPECIALRISK FACTORS............................................................................................................................... 32 Risks of Real Estate Secured Investments Generally................................................................................... 32 Risks Related to Type of Development....................................................................................................... 32 Risks Related to Current Market Conditions............................................................................................... 32 Attachment 4 EconomicUncertainty.................................................................................................................................. 33 LimitedObligations..................................................................................................................................... 33 Insufficiencyof Special Taxes.....................................................................................................................33 Depletion of Reserve Account..................................................................................................................... 34 NaturalDisasters.......................................................................................................................................... 34 HazardousSubstances..................................................................................................................................34 Parity Taxes and Special Assessments......................................................................................................... 35 Disclosures to Future Purchasers................................................................................................................. 35 SpecialTax Delinquencies........................................................................................................................... 35 Non -Cash Payments of Special Taxes......................................................................................................... 36 Payment of the Special Tax is not a Personal Obligation of the Owners ..................................................... 36 Property Values; Value -to -Lien Ratios........................................................................................................ 36 FDIC/Federal Government Interests in Properties....................................................................................... 37 Bankruptcyand Foreclosure........................................................................................................................ 38 NoAcceleration Provision........................................................................................................................... 38 Lossof Tax Exemption................................................................................................................................ 38 Limitationson Remedies............................................................................................................................. 38 LimitedSecondary Market........................................................................................................................... 39 Proposition218............................................................................................................................................ 39 BallotInitiatives...........................................................................................................................................40 CONTINUINGDISCLOSURE.......................................................................................................................... 40 LEGALMATTERS............................................................................................................................................ 41 TaxExemption............................................................................................................................................. 41 Litigation...................................................................................................................................................... 42 LegalOpinion.............................................................................................................................................. 42 NoRating..................................................................................................................................................... 43 Underwriting................................................................................................................................................ 43 FinancialInterests........................................................................................................................................ 43 PendingLegislation...................................................................................................................................... 43 AdditionalInformation................................................................................................................................ 43 APPENDIX A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX................................A-1 APPENDIXB APPRAISAL......................................................................................................................... B-1 APPENDIX C GENERAL INFORMATION CONCERNING NEVADA COUNTY ................................ C-1 APPENDIX D SUMMARY OF CERTAIN PROVISIONS OF THE TRUST INDENTURE ......................D-1 APPENDIX E FORM OF CONTINUING DISCLOSURE AGREEMENT ................................................. E-1 APPENDIX F FORM OF OPINION OF BOND COUNSEL........................................................................F-1 APPENDIX G BOOK -ENTRY ONLY SYSTEM........................................................................................ G-1 Attachment 4 No dealer, broker, salesperson or other person has been authorized by TDPUD, the District, the Trustee or the Underwriter to give any information or to make any representations in connection with the offer or sale of the 2013 Bonds other than those contained herein and, if given or made, such other information or representations must not be relied upon as having been authorized by TDPUD, the District, the Trustee or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the 2013 Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers or Beneficial Owners of the 2013 Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of fact. This Official Statement, including any supplement or amendment hereto, is intended to be deposited with the Municipal Securities Rulemaking Board. The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. The information in APPENDIX G — "BOOK -ENTRY ONLY SYSTEM" attached hereto has been furnished by The Depository Trust Company, and no representation has been made by the District, TDPUD or the Underwriter as to the accuracy or completeness of such information. The information set forth herein which has been obtained from third party sources is believed to be reliable but is not guaranteed as to accuracy or completeness by TDPUD or the District. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of TDPUD or the District or any other parties described herein since the date hereof. All summaries of the Trust Indenture or other documents are made subject to the provisions of such documents respectively and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with TDPUD for further information in connection therewith. A wide variety of other information, including financial information, concerning TDPUD, is available from publications and websites of TDPUD and others. Any such information that is inconsistent with the information set forth in this Official Statement should be disregarded. No such information is a part of or incorporated into this Official Statement. Cautionary Information Regarding Forward -Looking Statements in the Official Statement Certain statements included or incorporated by reference in this Official Statement constitute "forward -looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 2 1 E 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" or other similar words. The achievement of certain results or other expectations contained in such forward -looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward -looking statements. Except as set forth in the Continuing Disclosure Agreement, a form of which is attached as Appendix E, neither TDPUD nor the District plans to issue any updates or revisions to the forward -looking statements set forth in this Official Statement. In connection with the offering of the 2013 Bonds, the Underwriter may overallot or effect transactions which stabilize or maintain the market prices of such bonds at levels above those 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 2013 Bonds to certain dealers and dealer banks and banks acting as agent at prices lower than the public offering prices stated on the inside cover page hereof, and such public offering prices may be changed from time to time by the Underwriter. The 2013 Bonds have not been registered under the Securities Act of 1933, as amended, in reliance upon an exemption contained in such Act. The 2013 Bonds have not been registered or qualified under the securities laws of any state. Attachment 4 [REGIONAL MAP] Attachment 4 [TAHOE AREA MAP] Attachment 4 $XX,XXX,000 TRUCKEE DONNER PUBLIC UTILITY DISTRICT COMMUNITY FACILITIES DISTRICT NO.03-1 (OLD GREENWOOD) 2013 SPECIAL TAX REFUNDING BONDS INTRODUCTION General 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 herein. A full review should be made of the entire Official Statement. The sale and delivery of 2013 Bonds (defined below) to potential investors is made only by means of the entire Official Statement. All capitalized terms used in this Official Statement and not defined shall have the meaning set forth in APPENDIX D — "SUMMARY OF CERTAIN PROVISIONS OF THE TRUST INDENTURE — Definitions." The purpose of this Official Statement, which includes the cover page, the inside cover page, the table of contents and the attached appendices (collectively, the "Official Statement"), is to provide certain information concerning the issuance by Truckee Donner Public Utility District Community Facilities District No. 03-1 (Old Greenwood) (the "District") of the $XX,XXX,000 Truckee Donner Public Utility District Community Facilities District No. 03-1 (Old Greenwood) 2013 Special Tax Refunding Bonds (the "Bonds" or the "2013 Bonds"). The proceeds of the 2013 Bonds, together with certain existing funds of the District, will be used to defease all of the District's outstanding Special Tax Bonds (the "Prior Bonds"), originally issued on or about December 22, 2003 in the aggregate principal amount of $12,445,000 and now outstanding in the principal amount of $ 1000. A portion of the proceeds of the 2013 Bonds will be used to fund a deposit to the Reserve Account for the 2013 Bonds and to pay the costs of issuing the 2013 Bonds. See "THE REFUNDING PLAN" and "ESTIMATED SOURCES AND USES OF FUNDS" herein. The 2013 Bonds are authorized to be issued pursuant to the Mello -Roos Community Facilities Act of 1982, as amended (Sections 53311 et seq. of the Government Code of the State of California) (the "Act"), and a Trust Indenture dated as of [Dated Date], 2013 (the "Trust Indenture") by and between the District and The Bank of New York Mellon Trust Company, N.A. (the "Trustee"). Upon their issuance, the 2013 Bonds will be the only outstanding bonds of the District, and they will be secured under the Trust Indenture by a pledge of and lien upon Net Taxes (as defined herein) and all moneys in the Special Tax Fund (other than the Administrative Expense Account therein) as described in the Trust Indenture. The District will covenant in the Trust Indenture not to issue any obligation or security having a lien or charge upon the Net Taxes superior to or on a parity with the Bonds, but that covenant will not prevent the District from issuing or incurring indebtedness payable from a pledge of Net Taxes which is subordinate in all respects to the pledge of Net Taxes to repay the Bonds. The District Formation Proceedings. The District was formed by the Truckee Donner Public Utility District ("TDPUD") pursuant to the Act and constitutes a governmental entity separate and apart from TDPUD. The Act was enacted by the California legislature to provide an alternative method of financing certain public capital facilities and services, especially in developing areas of the State. Any local agency (as defined in the Act) may establish a community facilities district to provide for and finance the cost of eligible public facilities and services. Generally, the legislative body of the local agency which forms a community facilities district acts on behalf of such district as its legislative body. Subject to approval by two-thirds of the votes cast at an election of the qualified electors within such district and compliance with the other provisions of the Act, Attachment 4 a legislative body of a local agency may issue bonds for a community facilities district and may levy and collect a special tax within such district to repay such indebtedness. Pursuant to the Act, the Board of Directors of TDPUD (the "Board of Directors") adopted the necessary resolutions stating its intent to establish the District, to authorize the levy of Special Taxes on taxable property within the boundaries of the District, and to have the District incur bonded indebtedness. Following public hearings conducted pursuant to the provisions of the Act, the Board of Directors adopted resolutions establishing the District and calling special elections to submit the levy of the Special Taxes and the incurring of bonded indebtedness to the qualified electors of the District. On October 14, 2003, at a consolidated election held pursuant to the Act, the owner of the property within the District (which was the only qualified voter of the District at the time) authorized the District to incur bonded indebtedness in an aggregate principal amount not to exceed $15,000,000 and approved the rate and method of apportionment of the Special Taxes for the District to pay the principal of and interest on the bonds of the District. (the "Rate and Method"), a copy of which is set forth in APPENDIX A hereto. General Information. The District consists of a development known as "Old Greenwood," which includes approximately 616.2 gross acres located south of Interstate 80 in the eastern portion of the Town of Truckee (the "Town"), in Nevada County, California (the "County"). Old Greenwood was developed by Old Greenwood, LLC, a wholly -owned subsidiary of East West Resort Development V, L. P., L. L.L. P., a Delaware limited partnership, limited liability limited partnership. On November 2012, Old Greenwood, LLC sold [all] of its residential parcels in the District to Northlight Financial LLC ("Northlight"). This sale consisted of. a) four undeveloped parcels, 63 lots of which are entitled for fractional ownership development and 8 lots of which are entitled for whole ownership multifamily units; b) 60 fractional ownership interests, with 42 allocated among 13 Cabins and 18 among 10 Townhomes; and c) 18 residences entitled for fractional sale, of which 6 are cabins and 12 are townhomes. The entire Old Greenwood community includes a Jack Nicklaus Signature Design 18-hole championship golf course and a recreation pavilion featuring swim, tennis and fitness facilities, but neither the golf course nor the recreation pavilion is subject to the Special Taxes. The portions of the Old Greenwood community that are subject to the Special Taxes consist of 179 parcels of which 159 are classified as "single- family detached," 16 of which are classified as "single-family attached" and four of which are considered to be undeveloped. The _ parcels on which dwellings have been completed include on which single-family residences have been constructed, on which fractional interest detached cabins have been constructed and on which fractional interest attached cottages have been constructed.] See "THE DISTRICT." Property Values. [TO COME] Forward Looking Statements 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 a "plan," "expect," "estimate," "project," "budget" or similar words. Such forward - looking statements include, but are not limited to certain statements contained in the information under the captions "THE DISTRICT" and APPENDIX B — "APPRAISAL REPORT." THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD -LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD -LOOKING STATEMENTS. THE DISTRICT DOES NOT PLAN TO ISSUE ANY UPDATES 2 Attachment 4 OR REVISIONS TO THE FORWARD -LOOKING STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT. Security and Sources of Payment for the 2013 Bonds General. The 2013 Bonds are limited obligations of the District; and the interest on and principal of and redemption premiums, if any, on the 2013 Bonds are payable solely from a portion of the Special Taxes to be levied annually against the property in the District, or, to the extent necessary, from the moneys on deposit in the Reserve Account. As described herein, the Special Taxes are collected along with ad valorem property taxes on the tax bills mailed by the Treasurer -Tax Collector of the County. Although the Special Taxes will constitute a lien on the property subject to taxation in the District, they will not constitute a personal indebtedness of the owners of such property. There is no assurance that such owners will be financially able to pay the annual Special Taxes or that they will pay such taxes even if they are financially able to do so. Limited Obligations. Except for the Net Taxes, no other taxes are pledged to the payment of the 2013 Bonds. The 2013 Bonds are not general or special obligations of TDPUD or general obligations of the District, but are special obligations of the District payable solely from Net Taxes and amounts held under the Trust Indenture as more fully described herein. Special Taxes. As used in this Official Statement, the term "Special Tax" is that tax which has been authorized pursuant to the Act to be levied against certain property within the District pursuant to the Act and in accordance with the Rate and Method, but excluding penalties and interest imposed upon delinquent installments. See "SECURITY AND SOURCES OF PAYMENT FOR THE 2013 BONDS — Special Taxes" and APPENDIX A — "RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX." Under the Trust Indenture, the District will pledge to repay the 2013 Bonds from the Special Tax revenues, exclusive of any penalties and interest accruing with respect to delinquent Special Tax installments, remaining after the payment of certain annual Administrative Expenses of the District (the "Net Taxes") and from amounts on deposit in the Special Tax Fund (other than the Administrative Expense Account therein) established under the Trust Indenture. With respect to the parcels in the District with fractional interest cabins and cottages, the applicable Special Taxes will be levied against the applicable parcel as a whole. Instead of sending a Special Tax bill to each fractional owner of a particular fractional unit, the County will send a consolidated Special Tax bill for such unit to the applicable homeowners association; and the homeowners association will, in turn, bill each fractional owner for their portion of the Special Tax levy and remit payment to the County from amounts received by it. The Special Taxes are the primary security for the repayment of the 2013 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 2013 Bonds are amounts held by the Trustee in the Special Tax Fund, including amounts held in the Reserve Account therein. See "SECURITY AND SOURCES OF PAYMENT FOR THE 2013 BONDS — Reserve Account of the Special Tax Fund." Foreclosure Proceeds. The District will covenant for the benefit of the Beneficial Owners of the 2013 Bonds that it (i) will commence judicial foreclosure proceedings against all parcels owned by a property owner where the aggregate delinquent Special Taxes on such parcels is greater than $7,500 by the October 1 following the close of each Fiscal Year in which such Special Taxes were due, and (ii) will commence judicial foreclosure proceedings against all parcels with delinquent Special Taxes by the October 1 following the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than 95% of the total Special Tax levied for such Fiscal Year, and (iii) will diligently pursue such foreclosure proceedings until the delinquent Special Taxes are paid; provided that, notwithstanding the foregoing, the District may elect to defer foreclosure proceedings on any parcel which is owned by a delinquent property owner whose property is not, in the aggregate, delinquent in the payment of Special Taxes for a period of three years or more or in an Attachment 4 amount in excess of $12,000 so long as (1) the amount in the Reserve Account of the Special Tax Fund is at least equal to the Reserve Requirement, and (2) the District is not in default in the payment of the principal of or interest on the Bonds. The District may, but shall not be obligated to, advance funds from any source of legally available funds in order to maintain the Reserve Account of the Special Tax Fund at the Reserve Requirement or to avoid a default in payment on the Bonds. See "SECURITY AND SOURCES OF PAYMENT FOR THE 2013 BONDS — Special Taxes — Proceeds of Foreclosure Sales" and Table _ below. There is no assurance that the property within the District can be sold for the values described herein, or for a price sufficient to pay the principal of and interest on the 2013 Bonds in the event of a default in payment of Special Taxes by the current or future property owners within the District. See "SPECIAL RISK FACTORS — Property Values; Value -to -Lien Ratios." Appraisal Report [To be updated when appraisal is received] An MAI appraisal of the undeveloped land within the District was prepared by Seevers Jordan Ziegenmeyer, Rocklin, California (the "Appraiser"). The appraisal is dated , 2013, and entitled " " (the "Appraisal Report"). See APPENDIX B — "APPRAISAL REPORT." The Appraisal Report provides an estimate of the approximate market value of the undeveloped property in the District. The Appraisal Report does not provide an estimate of approximate market value of the developed property. The Appraisal Report is based upon a variety of assumptions and limiting conditions that are described in APPENDIX B. The District makes no representations as to the accuracy of the Appraisal Report. See "THE DISTRICT — Appraisal Report" and "— Estimated Value -to -Lien Ratios." There is no assurance that the undeveloped property within the District can be sold for the prices set forth in the Appraisal report or that any parcel can be sold for a price sufficient to pay the Special Tax for that parcel in the event of a default in payment of Special Taxes by the land owner. See "THE COMMUNITY FACILITIES DISTRICT," "SPECIAL RISK FACTORS — Property Values; Value -to -Lien Ratios" and APPENDIX B — "APPRAISAL REPORT" herein. Description of the 2013 Bonds The 2013 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 purchasers (the `Beneficial Owners") in denominations of $5,000 or any integral multiple thereof under the book -entry system maintained by DTC only through brokers and dealers who are or act through DTC Participants as described herein. Beneficial Owners will not be entitled to receive physical delivery of the 2013 Bonds. In the event that the book -entry only system described herein is no longer used with respect to the 2013 Bonds, the 2013 Bonds will be registered and transferred in accordance with the Trust Indenture. See APPENDIX G — "BOOK -ENTRY ONLY SYSTEM.". Principal of, premium, if any, and interest on the 2013 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 2013 Bonds, the Beneficial Owners will become the registered owners of the 2013 Bonds and will be paid principal and interest by the Trustee, all as described herein. See APPENDIX G — "BOOK -ENTRY ONLY SYSTEM." The 2013 Bonds are subject to optional redemption, mandatory sinking fund payment redemption and extraordinary mandatory redemption from prepayments of Special Taxes as described herein. For a more complete description of the 2013 Bonds and the basic documentation pursuant to which they are being sold and delivered, see "THE 2013 BONDS" and APPENDIX D — "SUMMARY OF CERTAIN PROVISIONS OF THE TRUST INDENTURE." 4 Attachment 4 Tax Matters In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel, based on existing statutes, regulations, rulings and judicial decisions and assuming compliance with certain covenants and requirements described herein, interest on the 2013 Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations although such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. It is the further opinion of Bond Counsel that interest on the 2013 Bonds is exempt from State of California personal income tax. See "LEGAL MATTERS — Tax Exemption" herein. Professionals Involved in the Offering The Bank of New York Mellon Trust Company, N.A. will act as Trustee under the Trust Indenture, and it serves as the trustee under the indenture governing the Prior Bonds (in that capacity, the "Prior Bonds Trustee"). Brandis Tallman, LLC (the "Underwriter") is the Underwriter of the 2013 Bonds. Certain proceedings in connection with the issuance and delivery of the 2013 Bonds are subject to the approval of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel and Disclosure Counsel. See APPENDIX F — "FORM OF OPINION OF BOND COUNSEL." Certain legal matters will be passed upon for the District and TDPUD by I , California. Other professional services have been performed by Seevers Jordan Ziegenmeyer, Rocklin, California, as the appraiser of certain property within the District, by Willdan Financial Services, Temecula, California, as Special Tax Consultant and by ., , as Verification Agent. For information concerning the respects in which certain of the above -mentioned professionals, advisors, counsel and agents may have a financial or other interest in the offering of the 2013 Bonds, see "LEGAL MATTERS — Financial Interests" herein. Continuing Disclosure The District will agree to provide, or cause to be provided, to the Municipal Securities Rulemaking Board's Electronic Municipal Market Access ("EMMA") system certain annual financial information and operating data. The District will further agree to provide notice of certain material events. These covenants will be made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5). See "CONTINUING DISCLOSURE" and APPENDIX E for a description of the specific nature of the annual reports to be filed by the District and notices of material events to be provided by the District. [UPDATE AND VERIFY: Within the last five years, neither TDPUD nor the District has failed to timely comply in all material respects with its prior continuing disclosure obligations under Rule 15c2-12(b)(5), except as described herein.] See "CONTINUING DISCLOSURE." Bond Owners' Risks Certain events could affect the timely repayment of the principal of and interest on the 2013 Bonds when due. See the section of this Official Statement entitled "SPECIAL RISK FACTORS" for a discussion of certain factors which should be considered, in addition to other matters set forth herein, in evaluating an investment in the 2013 Bonds. Moreover, the 2013 Bonds are not rated by any nationally recognized rating organization. The purchase of the 2013 Bonds involves significant investment risks, and the 2013 Bonds may not be suitable investments for many investors. See "SPECIAL RISK FACTORS" herein. Other Information This Official Statement speaks only as of its date, and the information contained herein is subject to change. Attachment 4 Brief descriptions of the 2013 Bonds and the Trust Indenture are included in this Official Statement. Such descriptions and information do not purport to be comprehensive or definitive. All references herein to the Trust Indenture, the 2013 Bonds and the constitution and laws of the State as well as the proceedings of the Board of Directors, 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 2013 Bonds, by reference to the Trust Indenture. Copies of the Trust Indenture, the Appraisal Report, the District's Continuing Disclosure Agreement and other documents and information referred to herein are available for inspection and (upon request and payment to TDPUD of a charge for copying, mailing and handling) for delivery from the District. ESTIMATED SOURCES AND USES OF FUNDS The following table sets forth the expected sources and uses of 2013 Bond proceeds and prior funds: Sources of Funds Principal Amount of 2013 Bonds $ Less Net Original Issue Discount ( ) Less Underwriter's Discount ( ) Other Available Funds(l) TOTALSOURCES $ Uses of Funds Defeasance of Prior Bonds $ Reserve Account(2) Cost of Issuance Account(') Surplus Fund (4) TOTAL USES $ (1) Funds on deposit in the special tax fund and the surplus fund relating to the Prior Bonds. (2) Equals the Reserve Requirement. (3) Includes legal fees, special tax consultant fees, Trustee fees and expenses, accountants' fees and other miscellaneous costs. (4) Amounts in the Surplus Fund are not pledged to the 2013 Bonds. THE REFUNDING PLAN General A portion of the proceeds from the sale of the 2013 Bonds will be used, along with other funds available for such purpose held by the Prior Bonds Trustee, to defease the Prior Bonds. The District will instruct the Trustee to transfer said portion of the 2013 Bonds proceeds to the Prior Bonds Trustee, so that the amount held by the Prior Bonds Trustee will be sufficient to pay the principal of and interest on the Prior Bonds on [September 1, 2013]. The accuracy of the calculation of the amount required to effect such defeasance and redemption will be verified by , . The District has instructed, or in a timely manner will instruct, the Prior Bonds Trustee to give notice of redemption with respect to the Prior Bonds as required pursuant to the indenture governing the Refunding Bonds (the "Prior Bonds Indenture"). As a result of the foregoing, concurrently with the issuance of the 2013 Bonds, the Prior Bonds will be discharged, and the owners of the Prior Bonds will have no rights under the Prior Bonds Indenture except to be paid the principal and interest due on the Prior Bonds from amounts held by the Prior Bonds Trustee. 0 Attachment 4 THE 2013 BONDS General Provisions The 2013 Bonds will be dated their date of delivery and will bear interest at the rates per annum set forth on the inside cover page hereof, payable semiannually on each March 1 and September 1, commencing on March 1, 2014 (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 2013 Bonds will be issued in fully registered form in denominations of $5,000 or any integral multiple thereof. So long as the 2013 Bonds are held in book -entry form, principal and interest on the 2013 Bonds will be paid to DTC for subsequent disbursement to DTC Participants, who are to remit such payments to the Beneficial Owners in accordance with DTC procedures. See APPENDIX G — "BOOK -ENTRY ONLY SYSTEM." Interest will be calculated on the basis of a 360-day year comprised of twelve 30-day months. Interest on any 2013 Bond will be payable from the Interest Payment Date next preceding the date of authentication of that 2013 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 the fifteenth day of the month preceding an Interest Payment Date, regardless of whether such day is a Business Day (the "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 date of the 2013 Bonds; provided, however, that if at the time of authentication of a 2013 Bond, interest is in default, interest on that 2013 Bond will be payable from the last Interest Payment Date to which the interest has been paid or made available for payment. Authority for Issuance The 2013 Bonds will be issued pursuant to the Act and the Trust Indenture. As required by the Act, the Board of Directors has taken the following actions with respect to establishing the District and authorizing the issuance of the 2013 Bonds: Resolutions of Intention: On August 6, 2003, the Board of Directors adopted a resolution stating its intention to establish the District and to authorize the levy of a special tax, and a resolution declaring its intention to incur bonded indebtedness for the District in an amount not to exceed $15,000,000. Resolution of Formation: Immediately following a noticed public hearing held on October 14, 2003, the Board of Directors adopted resolutions which established the District, authorized the levy of a special tax within the District, and declared the necessity to incur bonded indebtedness within the District. Resolution Calling Election: The resolutions adopted by the Board of Directors on October 14, 2003, also called for an election by the landowners in the District for the same date on the issues of the levy of the Special Tax, the incurring of bonded indebtedness in the District, and the establishment of an appropriations limit. Landowner Election and Declaration of Results: On October 14, 2003, an election was held at which Old Greenwood, LLC, the then owner of all of the land within the District that would be subject to the Special Tax and therefore the sole eligible voter, approved a ballot proposition authorizing the issuance of up to $15,000,000 of bonds to finance the acquisition and construction of various public facilities, the levy of the Special Tax, and the establishment of an appropriations limit for the District. On the same day the Board of Directors adopted a resolution approving the canvass of the votes and declaring the District to be fully formed with the authority to levy the Special Taxes, to incur the bonded indebtedness, and to have the established appropriations limit. 7 Attachment 4 Ordinance Levying Special Taxes: Also on October 14, 2003, the Board of Directors adopted Ordinance No. 2003-04 ordering the levy of the Special Tax within the District pursuant to the Rate and Method of Apportionment. Special Tax Lien and Levy: A Notice of Special Tax Lien for the District was recorded in the real property records of the County on , 2003, as a continuing lien against the property in the District. Resolution Authorizing Issuance of the 2013 Bonds: On June 5, 2013, the Board of Directors, acting as the legislative body of the District, adopted a resolution approving the issuance of the 2013 Bonds. Debt Service Schedule The following table presents the annual debt service on the 2013 Bonds, assuming there are no optional or extraordinary redemptions. However, it should be noted that the Rate and Method allows prepayment of the Special Taxes in full or in part and the Trust Indenture permits redemption of 2013 Bonds on any Interest Payment Date from the proceeds of any prepayments of Special Taxes. See "SECURITY AND SOURCES OF PAYMENT FOR THE 2013 BONDS — Special Taxes" and "THE 2013 BONDS — Redemption." Period Ending September I Principal Interest Total 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 Total Source: The Underwriter Redemption Optional Redemption. Subject to the limitations set forth below, the Bonds may be redeemed, at the option of the District from any source of funds on any Interest Payment Date, in whole, or in part in the order of maturity selected by the District and by lot within a maturity, at the following redemption prices, expressed Attachment 4 as a percentage of the principal amount to be redeemed, together with accrued interest to the date of redemption: Redemption Dates Redemption Price The principal amounts of 2013 Bonds to be redeemed as a result of mandatory sinking fund payments as set forth in the foregoing tables will be reduced as proportionately as practicable in integral multiples of $5,000 as a result of any prior partial optional redemption or extraordinary redemption from Prepayments of the applicable 2013 Bonds, as specified in writing by an Authorized Representative of the District the Trustee. Extraordinary Mandatory Redemption from Prepayments. Prepayments of Special Taxes and any corresponding transfers from the Reserve Account shall be used to redeem 2013 Bonds in integral multiples of $5,000 pro rata among maturities and by lot within a maturity on any Interest Payment Date at a redemption price (expressed as a percentage of the principal amount of the 2013 Bonds to be redeemed), as set forth below, together with accrued interest to the date fixed for redemption: Redemption Dates Redemption Price Notice of Redemption. So long as the 2013 Bonds are held by DTC, all notices of redemption will be sent only to DTC in accordance with its procedures and will not be delivered to any Beneficial Owner. The Trustee is obligated to mail, at least 30 days but not more than 60 days prior to the date of redemption, notice of intended redemption, by first-class mail, postage prepaid, to the original purchaser of the 2013 Bonds and the registered Owners of the 2013 Bonds at the addresses appearing on the Bond registration books. The notice of redemption must: (i) specify the CUSIP numbers (if any), the bond numbers and the maturity date or dates of the 2013 Bonds selected for redemption (except that where all of the 2013 Bonds, or all of the 2013 Bonds of one maturity, are to be deemed, the bond numbers need not be specified); (ii) state the date fixed for redemption and surrender of the 2013 Bonds to be redeemed; (iii) state the redemption price; (iv) state the place or places where the 2013 Bonds are to be redeemed; (v) in the case of 2013 Bonds to be redeemed only in part, state the portion of such 2013 Bond which is to be redeemed; (vi) state the date of issue of the 2013 Bonds as originally issued; (vii) state the rate of interest borne by each 2013 Bond being redeemed; and (viii) state any other descriptive information needed to identify accurately the 2013 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 2013 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. Any notice of an optional redemption shall provide that such redemption shall be conditioned on there being on deposit on the redemption date sufficient money to pay the redemption price of the 2013 Bonds to be redeemed and may be further conditioned as stated in the notice of redemption. So long as notice by first class mail has been provided as set forth above, the actual receipt by the Owner of any 2013 Bond of notice of such redemption is not a condition precedent to redemption. Neither the failure to receive such notice nor any defect in such notice will affect the validity of the proceedings for redemption of such 2013 Bonds or the cessation of interest on the date fixed for redemption. W Attachment 4 Effect of Redemption. When notice of redemption has been given, and when the amount necessary for the redemption of the 2013 Bonds called for redemption is set aside for that purpose in the Redemption Account, the 2013 Bonds designated for redemption will become due and payable on the date fixed for redemption, and upon presentation and surrender of such 2013 Bonds at the place specified in the notice of redemption, and no interest will accrue on the 2013 Bonds called for redemption from and after the redemption date, and the Beneficial Owners of the redeemed 2013 Bonds, after the redemption date, may look for the payment of principal and premium, if any, of such 2013 Bonds or portions of 2013 Bonds only to the Redemption Account and shall have no rights, except with respect to the payment of the redemption price from the Redemption Account. Purchase in lieu of redemption. In lieu of redeeming 2013 Bonds, the District may elect, prior to the selection of 2013 Bonds for redemption by the Trustee, to instruct the Trustee to purchase 2013 Bonds at public or private sale at such prices as the District may in its discretion determine; provided that the purchase price thereof (including brokerage and other expenses) shall not exceed the principal amount thereof plus accrued interest to the purchase date and any applicable premium. Registration, Transfer and Exchange Registration. The Trustee will keep sufficient books for the registration and transfer of the 2013 Bonds (the "Bond Register"). The ownership of the 2013 Bonds will be established by the Bond Register books held by the Trustee. Transfer or Exchange. Whenever any 2013 Bond is surrendered for registration of transfer or exchange, the Trustee will authenticate and deliver a new 2013 Bond or 2013 Bonds of the same maturity for a like aggregate principal amount of authorized denominations; provided that the Trustee will not be required to register transfers or make exchanges of (i) 2013 Bonds for a period of 15 days next preceding the date of any selection of the 2013 Bonds to be redeemed, or (ii) any 2013 Bonds chosen for redemption. SECURITY AND SOURCES OF PAYMENT FOR THE 2013 BONDS Covenants and Warranties The District will covenant in the Trust Indenture to comply with the covenants and warranties therein, and the Trust Indenture will be in full force and effect upon the issuance of the 2013 Bonds. See APPENDIX D — "SUMMARY OF CERTAIN PROVISIONS OF THE TRUST INDENTURE — COVENANTS AND WARRANTY." Limited Obligations The 2013 Bonds are special, limited obligations of the District payable only from amounts pledged under the Trust Indenture and from no other sources. The Special Taxes are the primary source of security for the repayment of the 2013 Bonds. Under the Trust Indenture, the District will pledge to repay the 2013 Bonds from the Net Taxes (which are Gross Special Tax revenues received by the District, exclusive of any penalties and interest accruing with respect to delinquent Special Tax installments, remaining after the payment of the annual Administrative Expenses in an amount up to the Administrative Expenses Cap) and from amounts held in the Special Tax Fund (other than amounts held in the Administrative Expense Account therein). Gross Special Tax revenues include the proceeds of the Special Taxes received by the District, including the net proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of delinquent Special Taxes. The Administrative Expense Cap for Fiscal Year is [$29,877.31]; such amount escalates by 2% per Bond Year beginning September 2, 2013. 10 Attachment 4 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 2013 Bonds are amounts held by the Trustee in the Special Tax Fund (other than the Administrative Expense Account therein), including amounts held in the Reserve Account therein, for the benefit of the Beneficial Owners of the Bonds. Neither the faith and credit nor the taxing power of TDPUD, the State of California or any political subdivision thereof (other than the District) is pledged to the payment of the 2013 Bonds. Except for the Net Taxes, no other taxes are pledged to the payment of the 2013 Bonds. The 2013 Bonds are not general or special obligations of TDPUD but are special, limited obligations of the District payable solely from the Net Taxes and other amounts pledged under the Trust Indenture as more fully described herein. Special Taxes Pledge. The District will covenant in the Trust Indenture that, beginning in Fiscal Year 2012-13, it will levy Special Taxes up to the maximum rates permitted under the Rate and Method in an aggregate amount sufficient, together with other amounts on deposit in the Special Tax Fund, to pay the principal of and interest on any Outstanding 2013 Bonds, to replenish the Reserve Account to the Reserve Requirement and to pay the estimated Administrative Expenses. The Special Taxes levied in any Fiscal Year may not exceed the maximum rates authorized pursuant to the Rate and Method, nor may 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 by more than ten percent as a consequence of delinquency or default by the owner of any other Assessor's Parcel within the District. See APPENDIX A — "RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX" hereto. There is no assurance that the Net Taxes will, in all circumstances, be adequate to pay the principal of and interest on the 2013 Bonds when due. See "SPECIAL RISK FACTORS — Insufficiency of Special Taxes" herein. Rate and Method of Apportionment of Special Taxes. All capitalized terms used in this section shall have the meaning in the Rate and Method, the text of which is set forth in full in APPENDIX A. Under the Rate and Method, on or about July 1 of each Fiscal Year, the Administrator shall identify the current Assessor's Parcel numbers for all Parcels of Taxable Property in the District. The Administrator shall also determine: (i) whether each Assessor's Parcel of Taxable Property is Developed Property or Undeveloped Property, (ii) for Developed Property, which parcels are Single Family Detached Property, Single Family Attached Property, and Taxable Other Property, (iii.) for Parcels of Single Family Attached Property, the number of Units on each Parcel, (iv) whether there are Parcels of Rental Property, Excess Public Property or Parcels with Affordable Units, and (v) the Special Tax Requirement. The Special Tax Requirement is defined as the amount necessary in any Fiscal Year to: (i) pay principal and interest on 2013 Bonds which is due in the calendar year that begins in such Fiscal Year; (ii) create and/or replenish reserve funds for the 2013 Bonds; (iii) cure any delinquencies in the payment of principal or interest on 2013 Bonds which have occurred in the prior Fiscal Year or, based on existing delinquencies in the payment of Special Taxes, are expected to occur in the Fiscal Year in which the tax will be collected; (iv) pay Administrative Expenses; and (v) pay the costs of public improvements and public infrastructure authorized to be financed by the District. The amounts referred to in clauses (i) and (ii) of the preceding sentence may be reduced in any Fiscal Year by: (i) interest earnings on or surplus balances in funds and accounts for the 2013 Bonds to the extent that such earnings or balances are available to apply against debt service pursuant to a Bond indenture, Bond resolution or other legal document that sets forth the terms; (ii) proceeds received by the District from the collection of penalties associated with delinquent Special Taxes; and (iii.) any other revenues available to pay debt service on the 2013 Bonds as determined by the Administrator. 11 Attachment 4 The Special Tax for each Fiscal Year is to be levied Proportionately on each Assessor's Parcel of Developed Property at up to 100% of the Maximum Special Tax applicable to such Assessor's Parcel to the extent necessary to satisfy the Special Tax Requirement (subject to the limitation that the Special Tax levied upon any Assessor's Parcel of Developed Property for which an occupancy permit for private residential use has been issued may not be increased by more than ten percent as a consequence of delinquency or default by the owner of any other Assessor's Parcel within the District). If additional revenue is in order to satisfy the Special Tax Requirement, 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 for such Fiscal Year. [VERIFY: The application of these first two steps has been sufficient in each Fiscal Year to satisfy any applicable Special Tax Requirement.] However, if additional revenue is needed after applying the first two steps, the Special Tax would next be levied Proportionately on each Parcel of Association Property up to 100% of the Maximum Special Tax for Undeveloped Property for such Fiscal Year; and if still more revenue is needed after applying the first three steps, the Special Tax would be levied Proportionately on each Assessor's Parcel of Excess Public Property, exclusive of property exempt from the Special Tax pursuant to the Rate and Method, up to 100% of the Maximum Special Tax for Undeveloped Property for such Fiscal Year. Set forth in Table 1 below are the Fiscal Year 2013-13 Maximum Special Tax Rates applicable to each land use class and the Special Tax rates for each of them that have been levied in Fiscal Year 2013-13. The Special Tax rates actually levied in Fiscal Year 2013-13 are approximately _%o of the applicable Maximum Special Tax rates in the case of Developed Property and approximately _% of the applicable Maximum Special Tax rates in the case of Undeveloped Property. The Maximum Special Tax rates escalate at the rate of 2% per Fiscal Year. TABLE 1 FISCAL YEAR 2013-13 MAXIMUM AND ACTUAL SPECIAL TAXES TRUCKEE DONNER PUBLIC UTILITY DISTRICT COMMUNITY FACILITIES DISTRICT NO.03-1 (OLD GREENWOOD) Fiscal Year 2012-13 Fiscal Year Maximum Special 2012-13 Actual Zone Description Units Tax Special Tax 1 Single Family Detached 100 $ 351,497.82 $351,496.00 1 Undeveloped 0 262,461.66 134,505.34 2 Single Family Detached 59 235,034.88 235,034.76 2 Single Family Attached 39 155,362.04 155,361.96 2 Undeveloped 0 28,395.75 14,552.14 Total 198 1,032,752.15 $890,950.20 Source: Willdan Financial Services. The Maximum Special Taxes set forth in Table 1 above were calculated based on the Expected Land Uses as of the date on which the Board of Directors adopted the Resolution of Formation of the District. Under the Rate and Method the Administrator is directed to review Tentative Map revisions and other changes to the land uses proposed within the CFD and compare the revised land uses to the Expected Land Uses in order to evaluate the impact on the Expected Maximum Special Tax Revenues. In addition, the Administrator is directed to review Final Maps to ensure they reflect the number of residential lots that was anticipated in the Tentative Map. If, a change to the Expected Land Uses (a "Land Use/Entitlement Change") is proposed that will result in a reduction in the Expected Maximum Special Tax Revenues, the Administrator is required to take certain actions as set forth in the Rate and Method. See APPENDIX A for the various actions that the Administrator may be required to take under such circumstances. [VERIFY: To date, the Administrator has 12 Attachment 4 not been required to make any changes to the otherwise applicable tax rates as a result of a Lands Use/Entitlement Change.] Prepayment of Special Taxes. The Special Tax obligation applicable to any Assessor's Parcel that is current in the payment of its Special Tax may be prepaid, and the obligation of such Assessor's Parcel to pay the Special Tax may be permanently satisfied, as set forth in Section H of the Rate and Method. Any prepayment of Special Taxes would probably result in an extraordinary redemption of 2013 Bonds. See "THE 2013 BONDS — Redemption — Extraordinary Mandatory Redemption from Prepayments." Collection and Application of Special Taxes. The Special Taxes are 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 Rate and Method provides that the Special Tax for Fractional Units may be billed either directly to individual fractional owners or to a homeowners association, which would then bill the individual fractional owners. The practice of the Treasurer -Tax Collector has then to bill the applicable homeowners association. The County of Nevada (the "County") assesses and collects secured and unsecured property taxes for the cities and special districts within the County, including the Special Taxes for the District. The delinquency dates for property tax payment are December 10 for the first installment and April 10 for the second installment. Once the property taxes are collected, the County conducts its internal reconciliation for accounting purposes and distributes each agency's share of such taxes to it, periodically and typically pursuant to a published schedule. The District will make certain covenants in the Trust Indenture for the purpose of helping to ensure that the current Maximum Special Tax rates are not altered in a manner that would impair the District's ability to collect sufficient Special Taxes to pay debt service on the 2013 Bonds and Administrative Expenses when due. First, the District will covenant that, to the extent it is legally permitted to do so, it will take no action that would discontinue or cause the discontinuance of the Special Tax levy or the District's authority to levy the Special Tax, including the initiation of proceedings to reduce the Maximum Special Tax rates for the District, unless, in connection therewith, (i) the District receives a certificate from one or more Independent Financial Consultants which, when taken together, certify that, on the basis of the parcels of land and improvements existing in the District as of the July 1 preceding the reduction, the maximum amount of the Special Tax which may be levied on then existing Developed Property (as defined in the RMA) in each Bond Year will equal at least 110% of the sum of the estimated Administrative Expenses and Annual Debt Service in that Bond Year on all Bonds to remain Outstanding after the reduction is approved, (ii) the Board of Directors finds that any reduction made under such conditions will not adversely affect the interests of the Owners of the Bonds and (iii) the District is not delinquent in the payment of the principal of or interest on the Bonds. For purposes of estimating Administrative Expenses for the foregoing calculations, the Independent Financial Consultant or the Administrator shall compute the Administrative Expenses for the current Fiscal Year and escalate that amount by two percent (2%) in each subsequent Fiscal Year. See "SPECIAL RISK FACTORS — Proposition 218." Second, the District will covenant not to permit the tender of 2013 Bonds in payment of any Special Taxes except upon receipt of a certificate of an Independent Financial Consultant that to accept such tender will not result in a reduction in the maximum Special Taxes that may be levied on the Taxable Property within the District in any Fiscal Year to an amount less than the sum of 110% of Annual Debt Service in the Bond Year ending on the September 1 following the end of such Fiscal Year plus the estimated Administrative Expenses for such Bond Year. See "SPECIAL RISK FACTORS — Non -Cash Payments of Special Taxes." Although the Special Taxes constitute liens on taxed parcels within the District, they do not constitute a personal indebtedness of the owners of property within the District. In addition to the obligation to pay Special Taxes, properties in the District are subject to other taxes [and assessments] as set forth in Table 4 below. These other taxes and assessments are co -equal to the lien for the Special Taxes. Moreover, other liens for taxes and assessments could come into existence in the future in certain situations without the consent or 13 Attachment 4 knowledge of TDPUD or the landowners in the District. See "SPECIAL RISK FACTORS — Parity Taxes and Special Assessments" herein. There is no assurance that property owners will be financially able to pay the annual Special Taxes or that they will pay such taxes even if financially able to do so, all as more fully described in the section of this Official Statement entitled "SPECIAL RISK FACTORS." Under the terms of the Trust Indenture, all Special Tax revenues received by the District, other than Prepayments, are to be deposited in the Special Tax Fund. Prepayments shall be deposited in the Redemption Account of the Special Tax Fund. Special Tax revenues deposited in the Special Tax Fund are to be applied by the Trustee under the Trust Indenture in the following order of priority: (i) to deposit up to an amount equal to the Administrative Expenses Cap of [$29,877.31] (subject to 2% escalation each Fiscal Year) to the Administrative Expense Account of the Special Tax Fund to pay Administrative Expenses; (ii) to pay the principal of and interest on the 2013 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 (i) above; and (vi) for any other lawful purpose of the District. See APPENDIX D — "SUMMARY OF CERTAIN PROVISIONS OF THE TRUST INDENTURE." Proceeds of Foreclosure Sales. Pursuant to Section 53356.1 of the Act, in the event of any delinquency in the payment of any Special Tax or receipt by the District of Special Taxes in an amount which is less than the Special Tax levied, the Board of Directors, as the legislative body of the District, may order that Special Taxes be collected by a superior court action to foreclose the lien within specified time limits. In such an action, the real property subject to the unpaid amount may be sold at a judicial foreclosure sale. Under the Act, the commencement of judicial foreclosure following the nonpayment of a Special Tax is not mandatory. However, the District will covenant for the benefit of the Beneficial Owners of the 2013 Bonds that it will commence and diligently pursue until the delinquent Special Taxes are paid, judicial foreclosure proceedings against (i) all parcels owned by a property owner with delinquent Special Taxes where the aggregate delinquent Special Taxes on such parcels is greater than $7,500 by the October 1 following the close of each Fiscal Year in which such Special Taxes were due and (ii) all parcels with delinquent Special Taxes by the October 1 following the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than 95% of the total Special Tax levied for such Fiscal Year; provided that, notwithstanding the foregoing, the District may elect to defer foreclosure proceedings on any parcel which is owned by a delinquent property owner whose property is not, in the aggregate, delinquent in the payment of Special Taxes for a period of three years or more or in an amount in excess of $12,000 so long as (1) the amount in the Reserve Account of the Special Tax Fund is at least equal to the Reserve Requirement, and (2) the District is not in default in the payment of the principal of or interest on the Bonds. See APPENDIX D — "SUMMARY OF CERTAIN PROVISIONS OF THE TRUST INDENTURE — COVENANTS AND WARRANTY" herein. If foreclosure is necessary at a time when other funds (including amounts in the Reserve Account) have been exhausted, debt service payments on the 2013 Bonds could be delayed until the foreclosure proceedings have ended with the receipt of any foreclosure sale proceeds. Judicial foreclosure actions are subject to the normal delays associated with court cases and may be further slowed by bankruptcy actions, involvement by agencies of the federal government and other factors beyond the control of TDPUD and the District. See "SPECIAL RISK FACTORS — Bankruptcy and Foreclosure" herein. Moreover, no assurances can be given that the real property subject to foreclosure and sale at a judicial foreclosure sale will be sold or, if sold, that the proceeds of such sale will be sufficient to pay any delinquent Special Tax installment. See "SPECIAL RISK FACTORS — Property Values; Value -to -Lien Ratios" herein. Although the Act authorizes the District to cause such an action to be commenced and diligently pursued to completion, the Act does not impose on the District or TDPUD any obligation to purchase or acquire any lot or parcel of property sold at a foreclosure sale if there is no other purchaser at such sale. 14 Attachment 4 Estimated Debt Service Coverage from Special Taxes Special Taxes will be levied each year in an amount equal to the Special Tax Requirement determined in accordance with the Rate and Method. The Special Tax Requirement is calculated to include an amount at least equal to the debt service on the 2013 Bonds in the ensuing Bond Year plus the amount required to maintain the Reserve Account at the Reserve Requirement and the amount needed to pay Administrative Expenses. The Special Tax Requirement in Fiscal Year 2013-14 is $ , of which $ is budgeted to pay Administrative Expenses. The Special Tax Requirement in Fiscal Year 2013-14 is approximately —% of the aggregate Maximum Special Taxes applicable to Developed Property for such Fiscal Year and approximately —% of the aggregate Maximum Special Taxes applicable to Undeveloped Property for such Fiscal Year. Absent delinquencies, future levies are projected not to exceed % of the applicable Maximum Special Taxes applicable to Developed Property or _% of the applicable Maximum Special Taxes applicable to Undeveloped Property in any Fiscal Year. Based on the land use classifications that are applicable to the levy of Special Taxes for Fiscal Year 2013-14, if Special Taxes were levied each Fiscal Year at 100% of the applicable Maximum Special Tax Rates (which increase at an annual rate of 2%), the Net Taxes available to pay debt service on the 2013 Bonds after the payment of Administrative Expenses in an amount equal to the current levy for such purposes ($ increased by 2% per Fiscal Year would be not less than _% of the debt service due in each Bond Year. However, it may not be possible to levy the Special Taxes at 100% of the applicable Maximum Special Tax Rates because the Rate and Method includes a provision that, "... the Special Tax levied against a Parcel used for private residential purposes shall under no circumstances be increased by more than ten percent as a consequence of delinquency or default by the owner of any other Parcel or Parcels ... ." Reserve Account of the Special Tax Fund In order to secure further the payment of principal of and interest on the 2013 Bonds, the District is required, upon delivery of the 2013 Bonds, to deposit in the Reserve Account an amount equal to the Reserve Requirement and thereafter to maintain in the Reserve Account an amount equal to the Reserve Requirement. The Trust Indenture defines the term "Reserve Requirement" to mean, as of any date of calculation by the District, an amount equal to the lowest of (i) 10% of the principal amount of the 2013 Bonds, as calculated pursuant to the regulations adopted by the United States Department of Treasury with respect to obligations issued pursuant to Section 103 of the Internal Revenue Code of 1986, or (ii) Maximum Annual Debt Service, or (iii) 125% of the average Annual Debt Service. Subject to the limits on the maximum annual Special Tax which may be levied within the District as described in APPENDIX A, the District will covenant to levy Special Taxes in an amount that is anticipated to be sufficient, in light of the other intended uses of the Special Tax proceeds, to maintain the balance in the Reserve Account at the Reserve Requirement. Amounts in the Reserve Account are to be applied to (i) pay debt service on the 2013 Bonds, to the extent other moneys are not available therefor; (ii) redeem the 2013 Bonds in whole or in part; and (iii) pay the principal and interest due in the final year of maturity of a series of the 2013 Bonds. In the event of a prepayment of Special Taxes or an optional redemption of Bonds, under certain circumstances a portion of the Reserve Account will be added to the amount being prepaid and be applied to redeem 2013 Bonds; provided, however, that no such transfer shall be made if it would result in the amount in the Reserve Account being less than the Reserve Requirement. See APPENDIX D — "SUMMARY OF CERTAIN PROVISIONS OF THE TRUST INDENTURE — CREATION OF FUNDS AND APPLICATION OF PROCEEDS — Reserve Account of the Special Tax Fund" herein. No Parity Bonds No future obligations payable from Net Taxes on a parity with the 2013 Bonds are allowed to be issued under the Trust Indenture. 15 Attachment 4 [AERIAL PHOTOGRAPH?] Lo Attachment 4 THE DISTRICT General Description of the District The District consists of a development known as "Old Greenwood," which includes approximately 616.2 gross acres located south of Interstate 80 in the eastern portion of Truckee, California. [THE FOLLOWING TO BE VERIFIED AND UPDATED: Old Greenwood was developed by Old Greenwood, LLC (the "Developer"), a wholly -owned subsidiary of East West Resort Development V, L. P., L. L.L. P., a Delaware limited partnership, limited liability limited partnership, which still owns four undeveloped parcels and interests in _ residential units within the District, as described below.] The entire Old Greenwood community includes a 7,528-yard Jack Nicklaus Signature Design 18-hole championship golf course and a recreation pavilion featuring swim, tennis and fitness facilities. The golf course was ranked fourth among America's finest "Upscale Public Courses" by Golf Digest in 2005, but neither it nor the recreation pavilion is subject to the Special Taxes. [THE FOLLOWING TO BE VERIFIED AND UPDATED: The portions of the Old Greenwood community that are subject to the Special Taxes consist of 179 parcels of which 159 are classified as "single-family detached," 16 of which are classified as "single-family attached" and four of which are considered to be undeveloped. The _ parcels on which dwellings have been completed include on which single-family residences have been constructed, on which fractional interest detached cabins have been constructed and _ on which _ fractional interest attached cottages have been constructed. The single-family residences have been constructed on [99] individual parcels which were initially offered for sale as lots upon which the purchaser could construct his or her own home. GENERAL DESCRIPTION OF THESE HOMES TO COME. The fractional interest detached cabins include [74] three and four bedroom units ranging in size from 2470 to 3000 square feet. Each of these units features a two -car garage, stainless steel kitchen appliances, granite slab countertops, plasma screen televisions, hickory floors and a private outdoor spa. The fractional interest attached townhomes include [85] two and three -bedroom units ranging in size from 1270 to 1760 square feet. These units feature one or two -car garages, stainless steel commercial kitchens and granite countertops. Each of the fractional interest detached cabins and fractional interest attached townhomes has been divided into 17 fractional ownerships. The original sales price for a fractional ownership ranged from $116,200-$234,700 in the case of the detached cabins and from $58,900-$129,200 in the case of the attached townhomes. As of , 2013, Northlight owned _ of the 2,703 fractional interests in the cabins and townhomes, _ single family residences and four parcels of undeveloped property. The remainder of the property within the District was owned by various individuals.] Property Values Information concerning the land use classifications of the Taxable Property within the District and the average net assessed values (gross assessed values, subject to permitted adjustments, minus exemptions) per parcel of Developed Property for Fiscal Year 2012-13 and the appraised value of the Undeveloped Property is set forth in Table 2 below. [To be updated to reflect the Appraisal Report] 17 Attachment 4 TABLE 2 DEVELOPMENT SUMMARY TRUCKEE DONNER PUBLIC UTILITY DISTRICT COMMUNITY FACILITIES DISTRICT NO. 03-1 (OLD GREENWOOD) Land Use Developed Proper!& Land Use Class Single Family Attached Single Family Detached Undeveloped Property Average Net Units/Acres Assessed (1) 39 units $450,515.38 159 units $773,496.53 21.92 acres $1,438,611.00 (1) Developed property assessed value is based on FY 2012-13 Nevada County Assessor's Roll as of January 1, 2013. (2) As defined in the Rate and Method, Single Family Detached Developed Property is all property for which a Final Map has been recorded prior to May 1 of the preceding Fiscal Year. Single Family Attached Developed Property is property that a building permit for new construction has been issued prior to May 1 of the preceding Fiscal Year. Source: Willdan Financial Services. Table 3 below sets forth the gross assessed value of all of the Taxable Property within the District (including the Undeveloped Property the value of which is indicated elsewhere in this Official Statement on the basis of its appraised value) and the annual percentage change in such assessed value for Fiscal Years 2006-07 through 2012-13. TABLE 3 ANNUAL CHANGE IN ASSESSED VALUE TRUCKEE DONNER PUBLIC UTILITY DISTRICT SPECIAL TAX REFUNDING BONDS, SERIES 2013 (CFD No. 03-1, OLD GREENWOOD) Taxable Property Assessed Value"' Year % Change 2006-07 $158,068,619 N/A 2007-08 $188,380,535 19.18% 2008-09 $217,843,081 15.64% 2009-10 $227,227,898 4.31% 2010-11 $208,845,398 -8.09% 2011-12 $158,493,413 -24.11% 2012-13 $141,994,660 -10.41% (1) Assessed Values as of January 1, 2012 provided by the Nevada County Assessor's Office. Source: Nevada County Secured Roll as compiled by Willdan Financial Estimated Direct and Overlapping Indebtedness Property within the boundaries of the District is also included within the boundaries of a number of overlapping local agencies providing public services. [Some of these local agencies have outstanding bonds which are secured by taxes and assessments on the parcels within the District, and some have authorized but have not yet issued bonds which, if issued, will be secured by taxes and assessments levied on parcels within the District.] The approximate amount of the direct and overlapping debt secured by such taxes and 18 Attachment 4 assessments on the parcels within the District, calculated by multiplying the Fiscal Year 2011-12 ad valorem rate by the applicable Fiscal Year 2012-13 assessed value, is shown in Table 4 below. TABLE 4 DIRECT AND OVERLAPPING DEBT SUMMARY TRUCKEE DONNER PUBLIC UTILITY DISTRICT COMMUNITY FACILITIES DISTRICT NO. 03-1 (OLD GREENWOOD [TO COME FROM CAL MUNI] In addition to the bonded indebtedness set forth in Table 4, it is possible that new community facilities districts or special assessment districts might be formed which could include all or a portion of the District and might issue more bonds and levy additional special taxes or other taxes and assessments. In addition to the Special Taxes, the property owners in the District will be required to pay the general ad valorem property taxes applicable to their parcels. Expected Tax Burden Tables 5A, 513, 5C and 5D below set forth an estimated property tax bill for the average residential unit sizes of each type in the two Tax Zones of the District. [The estimated tax rates (other than the Special Tax rates, which are for Fiscal Year 2012-13) and amounts presented herein are based on information for Fiscal Year 2011-12 except that Fiscal Year 2012-13 assessed values have been used to determine the estimated Fiscal Year 2013-14 levy on the parcels in the District. Special Tax rates have been substituted for the Fiscal Year 2011-12 rates.] The actual amounts charged may vary and may increase in future years. For Fiscal Year 2013-14, the projected total effective tax rates for all categories range from approximately % to approximately % of assessed value. 19 Attachment 4 COMMUNITY FACILITIES DISTRICT NO.03-1 (OLD GREENWOOD) ESTIMATED FY 2012-13 SAMPLE TAX BILL SINGLE FAMILY DETACHED PROPERTY - TAX ZONE 1 [TO COME FROM WILLDAN] 20 Attachment 4 TABLE 5B TRUCKEE DONNER PUBLIC UTILITY DISTRICT COMMUNITY FACILITIES DISTRICT NO.03-1 (OLD GREENWOOD) ESTIMATED FY 2012-13 SAMPLE TAX BILL SINGLE FAMILY DETACHED PROPERTY - TAX ZONE 2 [TO COME FROM WILLDAN] 21 Attachment 4 TABLE 5C TRUCKEE DONNER PUBLIC UTILITY DISTRICT COMMUNITY FACILITIES DISTRICT NO.03-1 (OLD GREENWOOD) ESTIMATED FY 2012-13 SAMPLE TAX BILL SINGLE FAMILY ATTACHED PROPERTY - TAX ZONE 1 [TO COME FROM WILLDAN] 22 Attachment 4 TABLE 5D TRUCKEE DONNER PUBLIC UTILITY DISTRICT COMMUNITY FACILITIES DISTRICT NO.03-1 (OLD GREENWOOD) ESTIMATED FY 2012-13 SAMPLE TAX BILL SINGLE FAMILY ATTACHED PROPERTY - TAX ZONE 2 [TO COME FROM WILLDAN] 23 Attachment 4 Special Taxes Levied Against Undeveloped Property [To be updated] For fiscal year 2012-2013, $ of Special Taxes was levied against the Undeveloped Property in the District. As discussed in "THE DISTRICT — Estimated Value -to -Lien Ratios," the value -to -lien ratios of the Undeveloped Properties in the District range from _ to 1 to _ to 1 and the Special Taxes levied against the Undeveloped Properties in the District represent _% of the Special Taxes levied in the District for Fiscal Year 2012-2013. A portion of the savings associated with the issuance of the 2013 Bonds and the refunding of the Prior Bonds is expected to be applied to the reduction of the Special Taxes levied against the Undeveloped Property in the District in 2013-2014 and beyond. The extent of this reduction will not be clear until the 2013 Bonds have priced and the Special Tax levies for Fiscal Year 2013- 2014 have been calculated. Table 6 below shows the savings produced through issuance of the 2013 Bonds which would be necessary to reduce the Special Tax levy on the Undeveloped Properties in the District to specific levels, including zero. Table 6 also shows the periods of time such reductions would remain in place and the Fiscal Years in which Special Tax levies on the Undeveloped Properties would increase. As noted above, the reductions in Special Tax levies on Undeveloped Property is wholly dependent upon the level of savings produced through the issuance of the 2013 Bonds. No assurances can be given that the reductions presented below will occur. TABLE 6 TRUCKEE DONNER PUBLIC UTILITY DISTRICT COMMUNITY FACILITIES DISTRICT NO.03-1 (OLD GREENWOOD) REDUCTIONS IN LEVIES ON UNDEVELOPED PROPERTIES BASED ON REFUNDING SAVINGS [TO COME] Principal Taxpayers In Fiscal Year 2012-13, the Special Taxes are being levied on parcels. _ of those parcels are shown on the County Assessor's Roll as of January 1, 2012 as owned by Northlight. Those _ parcels are responsible for approximately % of the total Special Tax levy for said Fiscal Year. [DISCUSSION OF OTHER OWNERS TO COME.] Delinquency History Table 7 below summarizes the Special Tax delinquencies for property within the boundaries of the District for Fiscal Years 2007-08 through 2011-12. The highest year-end delinquency rate in any of these years was %. The delinquency rate for Fiscal Year 2011-12 was % as of , 2013 and % as of , 2013. Currently, there are no Special Tax foreclosure actions in process in the District. 24 Attachment 4 TABLE 7 TRUCKEE DONNER PUBLIC UTILITY DISTRICT COMMUNITY FACILITIES DISTRICT NO.03-1 (OLD GREENWOOD) SPECIAL TAX DELINQUENCY HISTORY Total Delinquent Total Special Delinquency Number of Taxes at Rate at Total Amount Parcels Fiscal Year Fiscal Year Fiscal Year Levied Levied End") End( ) 2006-07 $763,085 179 $23,825 3.12% 2007-08 $802,564 181 $16,603 1.06% 2008-09 $809,583 181 $48,858 2.06% 2009-10 $873,327 180 $261,005 29.89% 2010-11 $927,139 180 $13,514 1.46% 2011-12 $866,950 179 $34,521 1.92% 2012-13(3) $445,475 179 N/A N/A Parcels Delinquent Delinquent Delinquency as of Amount as of Rate as of 411612013 411612013 411612013 0 $0 0.00% 0 $0 0.00% 0 $0 0.00% 0 $0 0.00% 1 $3,378 0.36% 2 $6,892 0.79% 2 $3,749 0.84% (1) Total amount delinquent as of June 30. (2) Delinquency rate includes prior year delinquencies. (3) Amount levied reflects first installment only. Total annual levy amount equals $890,950. Source: Nevada County Tax Collector's Office as compiled by Willdan Financial Services. Appraisal Report In order to provide information with respect to the value of the undeveloped property within the District, the District engaged Seevers Jordan Ziegenmeyer, Rocklin, California, the Appraiser, to prepare the Appraisal Report. The Appraiser has an "MAI" designation from the Appraisal Institute and has prepared numerous appraisals for the sale of land -secured municipal bonds. The Appraiser was selected by the District and has no material relationships with the District or the owners of the land within the District other than the relationship represented by the engagement to prepare the Appraisal Report and other similar engagements for the District. [confirm] The District instructed the Appraiser to prepare its analysis and report in conformity with District -approved guidelines and the Appraisal Standards for Land Secured Financings published in 1994 and revised in 2004 by the California Debt and Investment Advisory Commission. A copy of the Appraisal Report is included as APPENDIX B to this Official Statement. The purpose of the Appraisal Report was to estimate the aggregate market value of the "as is" condition of the undeveloped property within the District. The Appraiser was not instructed to estimate the market value of the developed property within the District. Subject to the contingencies, assumptions and limiting conditions set forth in the Appraisal Report, the Appraiser concluded that, as of , 2013, the market value of the undeveloped property within the District was as follows: [Information from Appraisal Report to be inserted] Reference is made to APPENDIX B for a complete list of the assumptions and limiting conditions and a full discussion of the appraisal methodology and the basis for the Appraiser's opinions. In the event that any of the contingencies, assumptions and limiting conditions are not actually realized, the value of the property within the District may be less than the amount reported in the Appraisal Report. In any case, there can be no assurance that any portion of the property within the District would actually sell for the amount indicated by the Appraisal Report. The Appraisal Report merely indicates the Appraiser's opinion as to the market value of the property referred to therein as of the date and under the conditions specified therein. The Appraiser's opinion reflects conditions prevailing in the applicable market as of the date of value. The Appraiser's opinion does not predict the future value of the subject property, and there can be no assurance that market conditions will not change adversely in the future. 25 Attachment 4 It is a condition precedent to the issuance of the Bonds that the Appraiser deliver to the District a certification to the effect that, while the Appraiser has not updated the Appraisal Report since the date of the Appraisal Report and has not undertaken any obligation to do so, nothing has come to the attention of the Appraiser subsequent to the date of the Appraisal Report that would cause the Appraiser to believe that the value of the property in the District which was the subject of the Appraisal Report is less than the value of the District reported in the Appraisal Report. However, the Appraiser notes that acts and events may have occurred since the date of the Appraisal Report which could result in both positive and negative effects on market value within the District. Estimated Value -to -Lien Ratios Tables 8 and 9 below set forth the estimated value -to -lien ratios for various categories of property ownership within the District based upon ownership status as of January 1, 2013 and, in the case of Developed Property, the assessed values included on the Fiscal Year 2012-13 Assessor's roll or, in the case of Undeveloped Property, the values shown in the Appraisal. The Fiscal Year 2012-13 assessed value of the parcels which constitute Developed Property is $ . The estimated assessed value -to -lien ratio of those parcels based upon their share of the principal amount of the 2013 Bonds and the assessed values included on the 2012-13 Assessor's roll is to 1. Because a parcel's assessed value generally represents the lower of its acquisition cost plus adjustments for inflation (but not more than 2% per year) or its current market value, it may not be indicative of the parcel's market value. Based upon the Appraisal Report, the aggregate appraised value of the [four] parcels which constitute Undeveloped Property is $ ; and the estimated value -to -lien ratio of those parcels based upon their share of the principal amount of the 2013 Bonds and their appraised value is _ to 1. No assurance can be given that any of the value -to -lien ratios in Table 8 will be maintained during the period of time that the 2013 Bonds are outstanding. The District does not have any control over future property values or the amount of additional indebtedness that may be issued in the future by other public agencies, the payment of which is made through the levy of a tax or an assessment with a lien on a parity with the Special Taxes. See "SPECIAL RISK FACTORS —Property Values; Value -to - Lien Ratios." [Table to updated to reflect the appraised values provided in the Appraisal Report.] 26 Attachment 4 TABLE 8 TRUCKEE DONNER PUBLIC UTILITY DISTRICT SPECIAL TAX REFUNDING BONDS, SERIES 2013 (CFD 03-1, OLD GREENWOOD) ESTIMATED ASSESSED VALUE -TO -LIEN RATIOS BY PROPERTY OWNER Property Owner() Number of Parcels FY2012-13 CFD 03-1 Levy Percentage of Total Levy Special Tax Refunding Bonds, Series 2013(2) Overlapping Debt Total Direct and Overlapping Debt 2012-13 Assessed Value (3) Estimated Assessed Value -to - Lien Ratios (3) Northlight Financial 42 $392,059.52 44.00% $5,157,345.02 $5,157,345.02 $37,426,711 7.26 Other Owners 137 498,890.68 56.00% 6,562,654.98 6,562,654.98 104,567,949 15.93 Total 179 $890,950.20 100.00% $11,720,000.00 $11,720,000.00 $141,994,660 12.12 Ownership for Northlight Financial provided by as of All other ownership provided by Nevada County Assessor's Office as of January 1, 2012. (2) Preliminary, subject to change. Share of debt allocated based on the Fiscal Year 2012-13 Maximum Tax. (3) Assessed Values as of January 1, 2012 provided by the Nevada County Assessor's Office. Source: Willdan Financial Services. 27 Attachment 4 TABLE 9 TRUCKEE DONNER PUBLIC UTILITY DISTRICT SPECIAL TAX REFUNDING BONDS, SERIES 2013 (CFD No. 03-1, OLD GREENWOOD) ESTIMATED ASSESSED VALUE -TO -LIEN RATIOS Estimated Assessed Value -to -Lien Ratio Range Number of Parcels FY 2012-13 CFD 03-1 Levy Percentage of Total Levy Special Tax Refunding Bonds, Series 2013(') Sierra Joint Community College District Tahoe- Truckee Joint USD Tahoe - Truckee Joint USD Facilities Improvement Dist. No. 1 Tahoe Forest Hospital District FY 2012-13 Assessed Value(2) Value -to -Lien Ratios(3) 30:1 and Greater 10 $ 35,149.60 3.96% $ 462,375.24 $ 18,367,467 20:1 to 29.99:1 32 113,884.76 12.78% 1,498,096.51 35,547,991 15:1 to 19.99:1 25 94,435.52 10.60% 1,242,251.58 23,004,534 10:1 to 14.99:1 54 222,849.36 25.01% 2,931,470.80 40,528,358 5:1 to 9.99:1 26 177,154.60 19.88% 2,330,379.31 18,275,054 3:1 to 4.99:1 25 87,874.00 9.86% 1,155,938.10 4,576,145 Less than 3:1(4) 7 159,602.36 17.91% 2,099,488.46 1,695,111 Total 179 $890,950.20 100.00% $11,720,000.00 $141,994,660 (1) Preliminary, subject to change. Share of debt allocated based on prorata of Maximum Tax. (2) Based on assessed value as of January 1, 2012 provided by the Nevada County Assessor's Office. (3) Based on total of Series 2013 Refunding Bonds and Overlapping Debt. (4) Per the Nevada County Assessor's Office a number of parcels in the area qualified for Assessed Value reductions by qualifying under Proposition 8. Source: Willdan Financial Services. 28 Attachment 4 PROPERTY OWNERSHIP AND THE DEVELOPMENT The following information about Northlight has been provided by Northlight. No assurance can be given that the proposed development will occur as described in this Official Statement or that it will be completed in a timely manner, if at all, or that the current major property owners will continue to own the property. Neither the 2013 Bonds nor the Special Taxes securing the 2013 Bonds are personal obligations of the property owners or any affiliate thereof and, in the event that a property owner defaults in the payment of its Special Taxes, the District may proceed with judicial foreclosure but has no direct recourse to the assets of such property owner or any affiliate thereof. See "SPECIAL RISK FACTORS" herein. General Description of the Development The District consists of a development known as "Old Greenwood," which includes approximately 616.2 gross acres located south of Interstate 80 in the eastern portion of the Town of Truckee (the "Town"), in Nevada County, California (the "County"). Old Greenwood was developed by Old Greenwood, LLC, a wholly -owned subsidiary of East West Resort Development V, L. P., L. L.L. P., a Delaware limited partnership, limited liability limited partnership. On November 2012, Old Greenwood, LLC sold [all] of its residential parcels in the District to Northlight. This sale consisted of. a) four undeveloped parcels, 63 lots of which are entitled for fractional ownership development and 8 lots of which are entitled for whole ownership multifamily units; b) 60 fractional ownership interests, with 42 allocated among 13 Cabins and 18 among 10 Townhomes; and c) 18 residences entitled for fractional sale, of which 6 are cabins and 12 are townhomes. The entire Old Greenwood community includes a Jack Nicklaus Signature Design 18-hole championship golf course and a recreation pavilion featuring swim, tennis and fitness facilities, but neither the golf course nor the recreation pavilion is subject to the Special Taxes. The portions of the Old Greenwood community that are subject to the Special Taxes consist of 179 parcels of which 159 are classified as "single- family detached," 16 of which are classified as "single-family attached" and four of which are considered to be undeveloped. The _ parcels on which dwellings have been completed include on which single-family residences have been constructed, on which fractional interest detached cabins have been constructed and on which fractional interest attached cottages have been constructed.] Northlight General. Northlight was founded in November 2002 by Michael Jahrmarkt, Robert Woods and Mark Hirschhorn and has been a Registered Investment Advisor since 2006. Senior professionals at Northlight have originated or acquired more than $7 billion of credit -related assets over their careers and the Northlight founders have partnered since 1985. Northlight is an established corporate lender and asset -based investor that currently manages over $500 million in corporate loans, real estate loans and related assets. Mr. Gerig and his real estate team, Northlight Capital Partners, LLC., ("NCP") manage the firm's real estate through Northlight Asset Management ("NAM") which currently manages over $300 million in commercial real estate loans and real estate assets. Northlight Professionals Directly Involved In Development of Properties in the District. Mr. Gerig [Need full name] is the Chief Investment Officer of NCP and a member of the respective Operating and Investment Committees. In his role as Chief Investment Officer, Mr. Gerig's primary responsibilities is real estate asset valuation, portfolio management, loan servicing and generally executing on Northlight's current managed asset's investment strategy. Mr. Gerig is also responsible for overseeing the acquisitions and business development team as well as overseeing the functional departments for compliance. Prior to becoming affiliated with Northlight, from 2008-2009, Mr. Gerig was founder and the General Manager of HPG, a real estate advisory and investment management firm which originated, evaluated, 29 Attachment 4 acquired and managed distressed assets on behalf of institutional buy -side customers. During this period, HPG was engaged to evaluate and structure the sale of more than $4 billion of non -performing loans and real estate owned assets. Prior to forming HPG, from 2006 through 2007, he was the business development leader with Black Diamond Capital Management, LLC, an $11 billion distressed debt and private equity fund. Mr. Gerig spent 10 years at GE Capital (1996 to 2006) in various management capacities. From 2003 to 2006, Mr. Gerig was a Senior Vice President of GE Real Estate / Global Financial Restructuring where he managed GE Capital's distressed commercial mortgage business for North America, ran strategic planning initiatives for GE Capital's distressed debt group and invested over $475 million of capital in distressed debt over a three year period. From 1996 to 2003, Mr. Gerig worked for GE Equity repositioning its private equity business around strategic investing with GE's business units & fund partners. In this role, he also managed the workout of GE's distressed retail and broadcast private equity portfolio. From 1997 to 2000 Mr. Gerig opened GE Equity's Asia -Pacific offices, growing that portfolio from $0 to $350 million in three years. His responsibilities included deal leadership, and account and risk management for the Asia -Pacific portfolio. Prior to joining GE Capital, from 1994 to 1996, Mr. Gerig was a Senior Auditor at Coopers & Lybrand. Mr. Gerig holds a BA from Princeton University and a MBA from New York University Stern School of Business. Gregory Walter is the Managing Director of Asset Management for NCP and is responsible for overseeing the loan servicing, workout and disposition of loan, corporate buyout and large single asset investments. Prior to working with Northlight, Mr. Walter worked with Mr. Gerig at HPG where he managed the underwriting and structuring of large single asset corporate transactions. Prior to HPG, Mr. Walter worked for 23 years with GE Capital (1986 to 2008) in various executive and leadership roles proactively developing and managing turnaround efforts of portfolios of underperforming credits. During this time, Mr. Walter held the position of Senior Risk Manager, leading underwriting teams and asset management efforts in the acquisition of over $9 billion in commercial and real estate non -performing loans globally. Additionally, Mr. Walter was Senior Vice President reporting directly to the CEO of GE Equity with direct P&L responsibility for a $625 million private equity portfolio. In this position, Mr. Walter led the development of tailored risk and asset management tools and income strategies while representing GE on multiple boards covering various industries. During his tenure at GE Capital, Mr. Walter was recommended for and completed various Leadership Training Programs at GE's elite "Management Development Institute in Crotonville, NY". In addition, Mr. Walter was a nine-year recipient of GE's prestigious "Personal Achievement Awards" Mr. Walter holds a BA from Villanova University. Messrs. Walter and Gerig serve as President and Vice President (respectively) on The Residence Club at PGA West Owner Association's Board (a comparative Fractional Development Resort). Purchase of Residential Assets of Old Greenwood, LLC. As a result of its purchase of the residential assets of Old Greenwood LLL in the District, Northlight acquired four different unit types as follows: 30 Attachment 4 60 Fractions 19 Residences - 4 Bedroom Cabin - Approximately 2,985 square feet 27 0 - 3 Bedroom Cabin - Approximately 2,470 square feet 15 6 - 3 Bedroom Townhome - Approximately 1,883 square feet 13 8 - 2 Bedroom Townhome - Approximately 1,229 square feet 5 4 In addition to the foregoing residences / fractional interests, Northlight acquired the following 71 Undeveloped Lots: 71 Undeveloped Lots Sutlers Miners Carson Villa Location: Trail Trail Ranae Court Total Acreage 6.5 5.24 15.6 2.14 29.48 # Of Lots 17 13 33 8 71 Avg. Lot Size 0.38 0.40 0.47 0.27 0.42 Infrastructure: Utility Ready Yes Yes Yes Yes In Place Access Road Yes No No Yes Entitlements: As Fractional (any combination) Yes Yes Yes Multi -family Whole Ownership Yes Future Development Plans of Northlight. Northlight expects to initially lease the 18 residences on a seasonal basis while simultaneously pursuing a combination of both sales and short term rentals of the 60 fractional interests consistent with respective market demand. It is also likely that Northlight will initially pursue the development of Sutters Trail section of its property due to the readily available utilities and access road. [Discuss anticipated timeframe] Given the current entitlement restrictions on this property, limited to 25% per owner, it is likely that the development to be considered would consist of 15 three bedroom cabins within the 17 Lots at an approximate cost of between $200 and $215 per square foot, resulting in an estimated per unit cost of $494,000 - $531,000 (excluding FF&E). As currently envisioned, Northlight expects to create a separate HOA and promote these newly constructed villas as a new quarter share product. Northlight expects that the corresponding CC&Rs will be structured to capitalize on the year round seasonality of the Old Greenwood Development such that each owner will have a portion of each season and that the major holidays (i.e. New Years, July 4, Labor Day, Thanksgiving) will be allocated on a rotational basis, with the expected flexibility of owners to trade amongst themselves. The anticipated price point for such a product would be market driven, however, given current outlook / comparables, the expected introductory pricing would aapproximate$225K per quarter share. It is expected that the development of Sutters Trail would be self funded from operations. However, if necessary, Northlight would look to provide the financing as needed. 31 Attachment 4 [To be confirmed] Northlight does not currently expect to develop other portions of its undeveloped property in the foreseeable future. SPECIAL RISK FACTORS The purchase of the 2013 Bonds involves significant investment risks and, therefore, the 2013 Bonds may not be suitable investments for many investors. The following is a discussion of certain risk factors which should be considered, in addition to other matters set forth herein, in evaluating the investment quality of the 2013 Bonds. This discussion does not purport to be comprehensive or definitive. The occurrence of one or more of the events discussed herein could adversely affect the ability or willingness of property owners in the District to pay their Special Taxes when due. Such failures to pay Special Taxes could result in the inability of the District to make full and punctual payments of debt service on the 2013 Bonds. In addition, the occurrence of one or more of the events discussed herein could adversely affect the value of the property in the District. See "SPECIAL RISK FACTORS — Property Values; Value -to -Lien Ratios" and "— Limited Secondary Market" below. Risks of Real Estate Secured Investments Generally The Owners of the 2013 Bonds will be 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 residential property or commercial buildings and/or sites 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 endangered species and hazardous materials) and fiscal policies; (iii) natural disasters (including, without limitation, earthquakes, wildfires, landslides and floods), which may result in uninsured losses; (iv) adverse changes in local market conditions; and (v) increased delinquencies due to rising mortgage costs and other factors. Risks Related to Type of Development [Many of the residential structures in Old Greenwood], especially the fractional interest cabins and townhomes therein, are not the primary residences of the owners thereof. The value of such structures is therefore dependent, to a considerable degree, on their attractiveness as vacation homes; and this can be impacted by factors beyond the control of the Developer such as the cost of transportation to and from the principal residences of the owners and other competing vacation home opportunities. [Moreover, the values of vacation home properties, and of fractional interests therein, tend to fluctuate more than the values of primary residences.] Risks Related to Current Market Conditions The housing market in California experienced significant price appreciation and accelerating demand from approximately 2002 to 2006 but subsequently the housing market weakened substantially, with changes from the prior pattern of price appreciation and a slowdown in demand for new housing and declining prices. Beginning in 2007, home developers, appraisers and market absorption consultants reported weak housing market conditions due to factors including but not limited to the following: (i) lower demand for new homes; (ii) significant increase in cancellation rates for homes under contract; (iii) the exit of speculators from the new home market; (iv) increasing mortgage defaults and foreclosures; (v) a growing supply of new and existing homes available for purchase; (vi) increase in competition for new homes orders; (vii) prospective home buyers having a more difficult time selling their existing homes in the more competitive environment; (viii) reduced sales prices and/or higher incentives required to stimulate new home orders or to induce home buyers not to cancel purchase contracts; (ix) more stringent credit qualification requirements by home loan providers and (x) increased unemployment levels.] One or more of these factors may negatively affect property values 32 Attachment 4 in the District and affect the willingness or ability of taxpayers to pay their Special Tax payment prior to delinquency. Economic Uncertainty The 2013 Bonds are being issued at a time of economic uncertainty and volatility. Unemployment rates in the County are approximately _% as of 2013 (not seasonally adjusted) as compared to approximately % for calendar year 2011 (not seasonally adjusted) and are approximately % (not seasonally adjusted) for the State as of June 2013 as compared to approximately % for calendar year 2011 (not seasonally adjusted). The District cannot predict how long these conditions will last or whether to what extent they may affect the ability of property owners to pay Special Taxes or the marketability of the 2013 Bonds. Limited Obligations The 2013 Bonds and interest thereon are not payable from the general funds of TDPUD. Except with respect to the Special Taxes, neither the faith and credit nor the taxing power of the District or TDPUD is pledged for the payment of the 2013 Bonds or the interest thereon; and, except as provided in the Trust Indenture, no Owner of the 2013 Bonds may compel the exercise of any taxing power by the District or TDPUD or force the forfeiture of any PUD or District property. The principal of, premium, if any, and interest on the 2013 Bonds are not a debt of TDPUD or a legal or equitable pledge, charge, lien or encumbrance upon any of TDPUD's or the District's property or upon any of TDPUD's or the District's income, receipts or revenues, except the Special Taxes and other amounts pledged under the Trust Indenture. Insufficiency of Special Taxes Under the Rate and Method, the annual amount of Special Tax to be levied on each Parcel of Taxable Property in the District will generally be based on whether such parcel is categorized as Undeveloped Property or as Developed Property and on the land use class and the Tax Zone to which a parcel of Developed Property is assigned. See APPENDIX A — "RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX" and "SECURITY AND SOURCES OF PAYMENT FOR THE 2013 BONDS — Special Taxes — Rate and Method of Apportionment of Special Taxes." [The maximum Special Taxes that may be levied within the District are at least 110% of Maximum Annual Debt Service on the 2013 Bonds.] Notwithstanding that the maximum Special Taxes that may be levied in the District exceed debt service due on the 2013 Bonds, the Special Taxes actually collected could be inadequate to make timely payment of debt service either because of nonpayment or because property becomes exempt from taxation. The Rate and Method governing the levy of the Special Tax expressly exempts from the Special Tax, all Golf Course Property, Rental Property, Affordable Units and Other Property (unless the Parcel is classified as Taxable Other Property) and up to 30.31 Acres of Public Property. As of December 1, 2013, approximately Acres. If for any reason more property within the District becomes exempt from taxation, subject to the limitations of the maximum authorized rates, the Special Tax will be reallocated to the remaining taxable properties within the District. This would result in the owners of such property paying a greater amount of the Special Tax and could have an adverse impact upon the ability and willingness of the owners of such property to pay the Special Tax when due. Moreover, if a substantial additional portion of land within the District became exempt from the Special Tax because of public ownership, or otherwise, the maximum Special Tax which could be levied upon the remaining property within the District might not be sufficient to pay principal of and interest on the 2013 Bonds when due and a default could occur with respect to the payment of such principal and interest. 33 Attachment 4 Depletion of Reserve Account The Reserve Account is maintained in an amount equal to the Reserve Requirement. See "SECURITY AND SOURCES OF PAYMENT FOR THE 2013 BONDS — Reserve Account of the Special Tax Fund." Funds in the Reserve Account may be used to pay principal of and interest on the 2013 Bonds in the event the proceeds of the levy and the collection of the Special Taxes against the property in the District is not sufficient. If the Reserve Account is depleted, the funds can be replenished from the proceeds of the levy and collection of the Special Tax that are in excess of the amount required to pay Administrative Expenses and principal and interest on the 2013 Bonds. However, no replenishment of the Reserve Account from the proceeds of the Special Taxes can occur as long as the proceeds that are collected from the levy of the Special Taxes at the maximum tax rates, together with available funds, remain insufficient to pay all such amounts. Thus, it is possible that the Reserve Account will be depleted and not replenished by the levy of the Special Taxes. Natural Disasters The District, like all California communities, may be subject to unpredictable seismic activity, fires, landslides, floods or other natural disasters. Northern California is a seismically active area, and the area in which the District is located has been the site of wildfires in the past. Seismic activity, wildfires and other natural disasters represents a potential risk for damage to buildings, roads, bridges and property within the District. In addition, land susceptible to seismic activity may be subject to liquefaction during the occurrence of such event. [According to records available from the State of California Department of Conservation and the United States Geological Service, the property within the District is not within an Alquist-Priolo Earthquake Fault Zone. However, the greater Lake Tahoe region is a seismically active area and the land within the District will likely be subject to seismic shaking at some time in the future.] In the event of a severe earthquake, fire, landslide, flood or other natural disaster, there may be significant damage to both property and infrastructure in the District. 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 the District 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 California 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 has 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. Further, it is possible that liabilities may arise in the future with respect to any of the parcels resulting from the existence, currently, on the parcel of a substance 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 not presently 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. All of these possibilities could significantly affect the value of a parcel that is realizable upon a delinquency. 34 Attachment 4 Parity Taxes and Special Assessments [Property within the District is subject to taxes and assessments imposed by public agencies also having jurisdiction over the land within the District. See "THE DISTRICT — Estimated Direct and Overlapping Indebtedness."] The Special Taxes and any penalties thereon will constitute a lien against the lots and parcels of land on which they will be annually imposed until they are paid. Such lien is on a parity with all special taxes and special assessments levied by TDPUD 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 agencies or instrumentalities of the federal government. See "SPECIAL RISK FACTORS — Bankruptcy and Foreclosure" below. Neither TDPUD 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 payable from all or a portion of the property within the District. In addition, the landowners within the District may, without the consent or knowledge of TDPUD, 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 the District described herein. 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 at the time 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 tax 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. TDPUD has caused a Notice of 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 the District or lending of money thereon. 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 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 Section 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 2013 Bonds are derived, are customarily billed to the properties within the District 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. See "SECURITY AND SOURCES OF PAYMENT FOR THE 2013 BONDS — Special Taxes — Proceeds of Foreclosure Sales," for a discussion of the provisions which apply, and procedures which the District is obligated to follow under the Trust Indenture, in the event of delinquencies in the payment of Special Taxes. See "SPECIAL RISK FACTORS — FDIC/Federal 35 Attachment 4 Government Interests in Properties" below, for a discussion of the policy of the Federal Deposit Insurance Corporation 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. Non -Cash Payments of Special Taxes Under the Act, the Board of Directors, 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 2013 Bond in full or partial payment of any installment of the Special Taxes or the interest or penalties thereon. A 2013 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 2013 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 2013 Bond. Such a practice would decrease the cash flow available to the District to make payments with respect to other 2013 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 2013 Bonds. In order to provide some protection against the potential adverse impact on cash flows which might be caused by the tender of 2013 Bonds in payment of Special Taxes, the Trust Indenture includes a covenant pursuant to which the District will not authorize owners of taxable parcels to satisfy Special Tax obligations by the tender of 2013 Bonds unless the District shall have first obtained a report of an Independent Financial Consultant certifying that doing so would not result in the District having insufficient Special Tax revenues to pay the principal of and interest on all Outstanding 2013 Bonds when due. Payment of the Special Tax is not a Personal Obligation of the Owners An owner of a taxable parcel is not personally obligated to pay the Special Tax. Rather, the Special Tax is an obligation which is secured only by a lien against the taxable parcel. If the value of a taxable parcel is not sufficient, taking into account other liens imposed by public agencies, to secure fully the Special Tax, the District has no recourse against the owner. Property Values; Value -to -Lien Ratios The value of the property within the District is a critical factor in determining the investment quality of the 2013 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, physical events such as earthquakes, fires, landslides or floods, stricter land use regulations, delays in development or other events may adversely impact the security underlying the Special Taxes. There is no assurance that assessed values will not decline in the future. See "THE DISTRICT — Estimated Assessed Value -to -Lien Ratios" herein. The assessed values set forth in this Official Statement do not represent market values arrived at through an appraisal process and generally reflect only the sales price of a parcel when acquired by its current owner, adjusted annually by an amount determined by the Nevada County Assessor, generally not to exceed an increase of more than 2% per fiscal year. No assurance can be given that a parcel could actually be sold for its assessed value. No assurance can be given that the estimated value -to -lien ratios as set forth in Table 8 and Table 9 will be maintained over time. As discussed herein, many factors which are beyond the control of the District could adversely affect the property values within the District. The District does not have 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. A decrease in the assessed values in the District or an increase in the indebtedness secured by taxes and amounts with parity liens on property in the District, or both, could result in a lowering of the value -to -lien ratio of the property in the District. 36 Attachment 4 No assurance can be given that any bid will be received for a parcel with delinquent Special Taxes offered for sale at foreclosure or, if a bid is received, that such bid will be sufficient to pay all delinquent Special Taxes. See "SECURITY AND SOURCES OF PAYMENT FOR THE 2013 BONDS — Special Tax — Proceeds of Foreclosure Sales." FDIC/Federal Government Interests in Properties The ability of the District to collect interest and penalties specified by the Act and to foreclose the lien of delinquent Special Taxes may be limited in certain respects with regard to parcels in which the Federal Deposit Insurance Corporation (the "FDIC"), or other federal government agencies or instrumentalities such as Fannie Mae, Freddie Mac, the Drug Enforcement Agency, the Internal Revenue Service, has or obtains an interest. In the case of the FDIC, in the event that any financial institution making a loan which is secured by parcels is taken over by the FDIC and the applicable Special Tax is not paid, the remedies available to the District may be constrained. The FDIC's policy statement regarding the payment of state and local real property taxes (the "Policy Statement") provides that taxes other than ad valorem taxes which are secured by a valid lien in effect before the FDIC acquired an interest in a property will be paid unless the FDIC determines that abandonment of its interests is appropriate. The Policy Statement provides that the FDIC generally will not pay installments of non -ad valorem taxes which are levied after the time the FDIC acquires its fee interest, nor will the FDIC recognize the validity of any lien to secure payment except in certain cases where the Resolution Trust Corporation had an interest in property on or prior to December 31, 1995. Moreover, the Policy Statement provides that, with respect to parcels on which the FDIC holds a mortgage lien, the FDIC will not permit its lien to be foreclosed out by a taxing authority without its specific consent, nor will the FDIC pay or recognize liens for any penalties, fines or similar claims imposed for the non-payment of taxes. The FDIC has taken a position similar to that expressed in the Policy Statement in legal proceedings brought against Orange County, California in United States Bankruptcy Court and in Federal District Court. The Bankruptcy Court issued a ruling in favor of the FDIC on certain of such claims. Orange County appealed that ruling, and the FDIC cross -appealed. On August 28, 2001, the Ninth Circuit Court of Appeals issued a ruling favorable to the FDIC except with respect to the payment of pre -receivership liens based upon delinquent property tax. The District is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency with respect to parcels in which the FDIC has or obtains an interest, although prohibiting the lien of the FDIC to be foreclosed out at a judicial foreclosure sale would prevent or delay the foreclosure sale. In the case of Fannie Mae and Freddie Mac, in the event a parcel of taxable property or a security interest therein (such as a mortgage or deed of trust) is owned by a federal government entity or federal government sponsored entity, such as Fannie Mae or Freddie Mac, the ability to foreclose on the parcel or to collect delinquent Special Taxes may be limited. 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 a federal government interest. This means that, unless Congress has otherwise provided, if a federal government sponsored entity owns a parcel of taxable property but does not pay taxes and assessments levied on the parcel (including Special Taxes), the applicable state and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments. In addition, it means that, unless 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 the sale can be effected without impairing the federal government's mortgage interest. 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 "— Insufficiency of Special Taxes." 37 Attachment 4 The District's remedies may also be limited in the case of delinquent Special Taxes with respect to parcels in which other federal agencies (such as the Internal Revenue Service and the Drug Enforcement Administration) have or obtain an interest. Bankruptcy and Foreclosure Bankruptcy, insolvency and other laws generally affecting creditors' rights could adversely impact the interests of Beneficial Owners of the 2013 Bonds. The payment of property owners' taxes and the ability of the District to foreclose the lien of a delinquent unpaid Special Tax pursuant to its covenant to pursue judicial foreclosure proceedings may be limited by bankruptcy, insolvency or other laws generally affecting creditors' rights or by the laws of the State relating to judicial foreclosure. See "SECURITY AND SOURCES OF PAYMENT FOR THE 2013 BONDS — Special Taxes — Proceeds of Foreclosure Sales." In addition, the prosecution of a foreclosure could be delayed due to many reasons, including crowded local court calendars or lengthy procedural delays. Although a bankruptcy proceeding would not cause the Special Taxes to become extinguished, the amount of any Special Tax lien could be modified if the value of the property falls below the value of the lien. If the value of the property is less than the lien, such excess amount could be treated as an unsecured claim by the bankruptcy court. In addition, bankruptcy of a property owner or of a related party could result in a delay in prosecuting Superior Court foreclosure proceedings. Such delay would increase the likelihood of a delay or default in payment of delinquent Special Tax installments and the possibility of delinquent Special Tax installments not being paid in full. The various legal opinions to be delivered concurrently with the delivery of the 2013 Bonds (including Bond Counsel's approving legal opinion) will be qualified, as to the enforceability of the various legal instruments, by moratorium, bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally. Moreover, the ability of the District to commence and prosecute enforcement proceedings may be limited by bankruptcy, insolvency and other laws generally affecting creditors' rights (such as the Soldiers' and Sailors' Relief Act of 1940) and by the laws of the State relating to judicial foreclosure. No Acceleration Provision The 2013 Bonds do not contain a provision allowing for the acceleration of the 2013 Bonds in the event of a payment default or other default under the 2013 Bonds or the Trust Indenture. Loss of Tax Exemption As discussed under the caption "LEGAL MATTERS — Tax Exemption," the interest on the 2013 Bonds could become includable in gross income for federal income tax purposes retroactive to the date of issuance of the 2013 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 a change in legislation. Should such an event of taxability occur, the 2013 Bonds are not subject to early redemption and will remain outstanding to maturity or until redeemed under the redemption provisions of the Trust Indenture. Limitations on Remedies Remedies available to the Beneficial Owners of the 2013 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 2013 Bonds or to preserve the tax-exempt status of the 2013 Bonds. 38 Attachment 4 Bond Counsel has limited its opinion as to the enforceability of the 2013 Bonds and of the Trust 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 Beneficial Owners of the 2013 Bonds. Limited Secondary Market There can be no guarantee that there will be a secondary market for the 2013 Bonds or, if a secondary market exists, that the 2013 Bonds can be sold at all or 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 Beneficial Owners on a timely basis. See "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. Proposition 218 An initiative measure commonly referred to as the "Right to Vote on Taxes Act" (the "Initiative") was approved by the voters of the State of California at the November 5, 1996 general election. The Initiative added Article XIIIC and Article XIIID to the California Constitution. According to the "Title and Summary" of the Initiative prepared by the California Attorney General, the Initiative limits "the authority of local governments to impose taxes and property -related assessments, fees and charges." The provisions of the Initiative have not yet been interpreted by the courts, although several lawsuits have been filed requesting the courts to interpret various aspects of the Initiative. The Initiative could potentially impact the Special Taxes available to the District to pay the principal of and interest on the 2013 Bonds as described below. Among other things, Section 3 of Article XIII 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 Government Code Section 5854, 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 the Initiative has not conferred on the voters the power to repeal or reduce the Special Taxes if such reduction would interfere with the timely retirement of the 2013 Bonds. It may be possible, however, for voters or the Board of Directors 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 39 Attachment 4 2013 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 2013 Bonds. Therefore, no assurance can be given with respect to the levy of Special Taxes for Administrative Expenses. Nevertheless, to the maximum extent that the law permits it to do so, the District will covenant in the Trust Indenture that it will not initiate proceedings under the Act to reduce the maximum Special Tax rates on parcels within the District to an amount that is less than 110% of Maximum Annual Debt Service on the Outstanding 2013 Bonds in each future Bond Year. In connection with the foregoing covenant, the District has made a finding and determination that any elimination or reduction of Special Taxes below the foregoing level would interfere with the timely retirement of the 2013 Bonds. The District also will covenant in the Trust Indenture that, in the event an initiative is adopted which purports to alter the Rate and Method, it 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 the Initiative will ultimately be determined by the courts with respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty the outcome of such determination or the timeliness of any remedy afforded by the courts. See "SPECIAL RISK FACTORS — Limitations on Remedies." Ballot Initiatives Articles XIIIC and XIIID of the California Constitution were adopted pursuant to measures qualified for the ballot pursuant to California's constitutional initiative process. From time to time, other initiative measures could be adopted by California voters. The adoption of any such initiative might place limitations on the ability of the State, TDPUD, the District or other governmental agencies to increase revenues or to increase appropriations. CONTINUING DISCLOSURE Pursuant to a Continuing Disclosure Agreement (the "Disclosure Agreement"), the District will agree to provide, or cause to be provided, to the Municipal Securities Rulemaking Board through its Electronic Municipal Market Access (EMMA) website, or other repository authorized under Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission, certain annual financial information and operating data concerning the District. The Annual Report to be filed by the District is to be filed not later than July 1 of each year, beginning July 1, 2014, and is to include audited financial statements of TDPUD. The requirement that TDPUD file its audited financial statements as a part of the Annual Report has been included in the Disclosure Certificate solely to satisfy the provisions of Rule 15c2-12. The inclusion of this information does not mean that the 2013 Bonds are secured by any resources or property of TDPUD. The 2013 Bonds are not general or special obligations of TDPUD. See "SECURITY AND SOURCES OF PAYMENT FOR THE 2013 BONDS" and "SPECIAL RISK FACTORS — Limited Obligations." The full text of the Disclosure Certificate is set forth in APPENDIX E — "FORM OF CONTINUING DISCLOSURE AGREEMENT." Notwithstanding any provision of the Trust Indenture, failure of the District to comply with the Disclosure Certificate shall not be considered an event of default under the Trust Indenture. However, any holder of the 2013 Bonds may take such action as is necessary and appropriate, including seeking mandate or a judgment for specific performance, to cause the District to comply with its obligations with respect to the Disclosure Certificate. The District entered into an agreement to provide continuing disclosure under Rule 15c2-12(b)(5) in connection with the issuance of the Prior Bonds. [TO BE VERIFIED: It has complied with the requirements of that agreement in all material respects for the last five years.] [DISCUSSION OF TDPUD COMPLIANCE TO COME]. 40 Attachment 4 LEGAL MATTERS 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 on the 2013 Bonds is excluded from gross income for federal income tax purposes, and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations although such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California personal income tax. Bond Counsel notes that, with respect to corporations, interest on the 2013 Bonds may be included as an adjustment in calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of such corporations. In the opinion of Bond Counsel, the difference between the issue price of a 2013 Bond (the first price at which a substantial amount of the 2013 Bonds of a maturity is to be sold to the public) and the stated redemption price at maturity of such 2013 Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Beneficial Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Beneficial Owner will increase the Beneficial Owner's basis in the applicable 2013 Bond. The amount of original issue discount that accrues to the Beneficial Owner of the 2013 Bonds is excluded from the gross income of such Beneficial Owner for federal income tax purposes, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and is exempt from State of California personal income tax. Bond Counsel's opinion as to the exclusion from gross income for federal income tax purposes of interest on the 2013 Bonds (including any original issue discount) is based upon certain representations of fact and certifications made by the District, the Underwriter and others and is subject to the condition that the District complies with all requirements of the Internal Revenue Code of 1986, as amended (the "Code") that must be satisfied subsequent to the issuance of the 2013 Bonds to assure that interest on the 2013 Bonds (including any original issue discount) will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest on the 2013 Bonds (including any original issue discount) to be included in gross income for federal income tax purposes retroactive to the date of issuance of the 2013 Bonds. The District will covenant to comply with all such requirements. The amount by which a Beneficial Owner's original basis for determining loss on sale or exchange in the applicable 2013 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 Beneficial Owner's basis in the applicable 2013 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 Beneficial Owner realizing a taxable gain when a 2013 Bond is sold by the Beneficial Owner for an amount equal to or less (under certain circumstances) than the original cost of the 2013 Bond to the Beneficial Owner. Purchasers of the 2013 Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable bond premium. The Internal Revenue Service (the "IRS") has initiated an expanded program for the auditing of tax- exempt bond issues, including both random and targeted audits. It is possible that the 2013 Bonds will be selected for audit by the IRS. It is also possible that the market value of the 2013 Bonds might be affected as a result of such an audit of the 2013 Bonds (or by an audit of similar bonds). No assurance can be given that in 41 Attachment 4 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 2013 Bonds to the extent that it adversely affects the exclusion from gross income of interest (and original issue discount) on the 2013 Bonds or their market value. Subsequent to the execution and delivery of the 2013 Bonds, there might be federal, state or local statutory changes (or judicial or regulatory interpretations of federal, state or local law) that affect the federal, state or local tax treatment of the interest on the 2013 Bonds or the market value of the 2013 Bonds. Legislative changes have been proposed in congress, which, if enacted, would result in additional federal income tax being imposed on certain owners of tax-exempt state or local obligations, such as the 2013 Bonds. The introduction or enactment of any of such changes could adversely affect the market value or liquidity of the 2013 Bonds. No assurance can be given that, subsequent to the execution and delivery of the 2013 Bonds, such changes (or other changes) will not be introduced or enacted or interpretations will not occur. Before purchasing any of the 2013 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 2013 Bonds. Bond Counsel's opinion 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. The Trust Indenture and the Tax Certificate relating to the 2013 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 exclusion from gross income for federal income tax purposes of interest (and original issue discount) with respect to any 2013 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 on the 2013 Bonds (including any original issue discount) is excluded from gross income for federal income tax purposes provided that the District continues to comply with certain requirements of the Code, the accrual or receipt of interest on the 2013 Bonds (including any original issue discount) may otherwise affect the tax liability of the recipient. Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, all potential purchasers should consult their tax advisors before purchasing any of the 2013 Bonds. Should interest on the 2013 Bonds (including any original issue discount) become includable in gross income for federal income tax purposes, the 2013 Bonds are not subject to early redemption and will remain outstanding until maturity or until redeemed in accordance with the Trust Indenture. The proposed form of Bond Counsel's opinion with respect to the 2013 Bonds is attached as APPENDIX F. Litigation No litigation is pending or threatened concerning the validity of the 2013 Bonds, the pledge of Special Taxes to repay the 2013 Bonds or the powers or authority of the District with respect to the 2013 Bonds, or seeking to restrain or enjoin development of the land within the District; and a certificate of the District to that effect will be furnished to the Underwriter at the time of the original delivery of the 2013 Bonds. Legal Opinion The validity of the 2013 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. A complete copy of the proposed form of Bond Counsel opinion is contained in APPENDIX F hereto and will accompany the 2013 Bonds. Certain legal matters will be passed upon for the District by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, as Disclosure Counsel. Stradling Yocca Carlson & Rauth, a Professional Corporation expresses no opinion as to the accuracy, completeness or fairness of this Official Statement or other offering materials relating to the 2013 Bonds and expressly 42 Attachment 4 disclaims any duty to advise the Beneficial Owners of the 2013 Bonds as to matters related to this Official Statement. No Rating The District has not applied to have the 2013 Bonds rated by any nationally recognized bond rating company, and it does not expect to do so in the future. Underwriting The 2013 Bonds are being purchased by Brandis Tallman, LLC (the "Underwriter"). The Underwriter has agreed to purchase the 2013 Bonds at a price of $ ($XX,XXX,000 principal amount, less an original issue discount of $ and less an Underwriter's discount of $ ). The purchase agreement relating to the 2013 Bonds provides that the Underwriter will purchase all of the 2013 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 Underwriter may offer and sell the 2013 Bonds to certain dealers and others at prices lower than the offering prices stated on the inside cover page hereof. The offering prices may be changed from time to time by the Underwriter. Financial Interests The fees being paid to Bond Counsel, Disclosure Counsel and the Underwriter are contingent upon the issuance and delivery of the 2013 Bonds. Pending Legislation The District is not aware of any significant pending legislation which would have material adverse consequences on the 2013 Bonds or the ability of the District to pay the principal of and interest on the 2013 Bonds when due. Additional Information The purpose of this Official Statement is to supply information to prospective buyers of the 2013 Bonds. Quotations and summaries and explanations of the 2013 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. 43 Attachment 4 The execution and delivery of this Official Statement by an authorized representative of the District has been duly authorized by the Board of Directors acting in its capacity as the legislative body of the District. TRUCKEE DONNER PUBLIC UTILITY DISTRICT COMMUNITY FACILITIES DISTRICT NO. 03-1 (OLD GREENWOOD) By: General Manager of the Truckee Donner Public Utility District 44 Attachment 4 APPENDIX A AMENDED AND RESTATED RATE AND METHOD OF APPORTIONMENT FOR TRUCKEE DONNER PUBLIC UTILITY DISTRICT COMMUNITY FACILITIES DISTRICT NO. 03-1 (OLD GREENWOOD) A Special Tax applicable to each Assessor's Parcel in the Truckee Donner Public Utility District Community Facilities District No. 03-1 (Old Greenwood) [herein "CFD No. 03-1"] shall be levied and collected according to the tax liability determined by the Board of Directors or its designee, through the application of the appropriate amount or rate for Taxable Property, as described below. All of the property in CFD No. 03-1, unless exempted by law or by the provisions of Section G below, shall be taxed for the purposes, to the extent, and in the manner herein provided, including property subsequently annexed to the CFD unless a separate Rate and Method of Apportionment is adopted for the annexation area. A. DEFINITIONS The terms hereinafter set forth have the following meanings: "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 or other parcel map recorded with the County. "Act" means the Mello -Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, (commencing with Section 53311), Division 2 of Title 5 of the California Government Code. "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 TDPUD carrying out its duties with respect to CFD No. 03-1 and the Bonds, including, but not limited to, levying and collecting the Special Tax, the fees and expenses of legal counsel, charges levied by the County Auditor's Office, Tax Collector's Office, and/or Treasurer's Office, costs related to annexing property into the CFD, costs related to property owner inquiries regarding the Special Tax, amounts needed to pay rebate to the federal government with respect to the Bonds, costs associated with complying with any continuing disclosure requirements for the Bonds and the Special Tax, and all other costs and expenses of the TDPUD in any way related to the establishment or administration of the CFD. "Administrator" means the person or firm designated by the TDPUD to administer the Special Tax according to this Rate and Method of Apportionment of Special Tax. "Affordable Unit" means any Unit within CFD No. 03-1 which, in the sole discretion of the Town, is either deed -restricted to maintain the affordability of the Unit or is determined by the Administrator to have been planned, designed and/or built to be an affordable unit. "Assessor's Parcel" or "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. A-1 Attachment 4 "Association Property" means any property within the CFD that is owned by a homeowners association, excluding Association Property under the pad or footprint of a Unit. "Board of Directors" or "Board" means the Board of Directors of the Truckee Donner Public Utility District. "Bonds" means bonds or other debt (as defined in the Act), whether in one or more series, issued, insured or assumed by CFD No. 03-1 related to public infrastructure and/or improvements that are authorized to be funded by CFD No. 03-1. "Capitalized Interest" means funds in any capitalized interest account available to pay debt service on Bonds. "CFD Formation" means the date on which the Resolution of Formation to form CFD No. 03-1 was adopted by the Board of Directors. "County" means the County of Nevada. "Developed Property" means, in any Fiscal Year, the following: • for Single Family Detached Property, all parcels for which a Final Map was recorded prior to May 1 of the preceding Fiscal Year • for Single Family Attached Property and Rental Property, all parcels for which a building permit for new construction of a residential structure was issued prior to May 1 of the preceding Fiscal Year. "Excess Public Property" means the acres of Public Property that exceed the acreage exempted in Section G below. In any Fiscal Year in which a Special Tax must be levied on Excess Public Property pursuant to Step 4 in Section E below, Excess Public Property shall be those Assessor's Parcel(s) that most recently became Public Property based on the dates on which Final Maps recorded creating such Public Property. "Expected Land Uses" means the total number of Units expected to be constructed within the CFD as determined from time to time by the Administrator after applying the steps set forth in Section D below. At CFD Formation, the Expected Land Uses were based on the Tentative Map. The Expected Land Uses at CFD Formation are summarized in Attachment 1 hereto; the Administrator shall update Attachment 1 each time a change occurs to the land use plans for property in the CFD. "Expected Maximum Special Tax Revenues" means the amount of annual revenue that would be available if the Maximum Special Tax was levied on the Expected Land Uses. The Expected Maximum Special Tax Revenues as of CFD Formation are shown in Attachment 1 of this Rate and Method of Apportionment of Special Tax. "Final Bond Sale" means the last series of Bonds that will be issued on behalf of CFD No. 03-1 (excluding any Bond refundings), as determined in the sole discretion of the TDPUD. "Final Map" means a final map, or portion thereof, recorded by the County pursuant to the Subdivision Map Act (California Government Code Section 66410 et seq.) that creates individual lots on which building permits for new construction may be issued without further subdivision and for which no further subdivision is anticipated pursuant to the Tentative Map. "Fiscal Year" means the period starting July 1 and ending on the following June 30. "Fractional Unit" means a single family detached unit or a single family attached unit for which multiple owners may each purchase a fractional share of ownership (also referred to as a timeshare unit by the California Department of Real Estate). A-2 Attachment 4 "Golf Course Property" means any property within CFD No. 03-1 that is used as a golf course, including but not limited to, a driving range, clubhouse, parking, lodge, outbuildings, and other golf -related amenities. Golf Course Property shall also include any property within the CFD that is used for a swim, tennis, and/or fitness facility. "Maximum Special Tax" means the greatest amount of Special Tax that can be levied on an Assessor's Parcel in any Fiscal Year determined in accordance with Section C below, as may be adjusted pursuant to Step 3 in Section D below. "Other Property" means, in any Fiscal Year, all Parcels of Taxable Property which are not Single Family Detached Property, Single Family Attached Property, Undeveloped Property. "Proportionately" means, for Developed Property, that the ratio of the actual Special Tax levied in any Fiscal Year to the Maximum Special Tax authorized to be levied in that Fiscal Year is equal for all Assessor's Parcels of Developed Property, and for Undeveloped Property that the ratio of the actual Special Tax to the Maximum Special Tax is equal for all Assessor's Parcels of Undeveloped Property. "Public Property" means any property within the boundaries of CFD No. 03-1 that is owned by the federal government, State of California, County, Town, Truckee Donner Public Utility District, or other public agency. "Rental Property" means, in any Fiscal Year, all Parcels within the CFD for which a building permit was issued for construction of a residential structure with multiple Units that share common walls, all of which are offered or are expected to be offered for rent to the general public and/or employees. Fractional Units within the CFD shall at no time be categorized as Rental Property. "SFD Lot" means an individual residential lot, identified and numbered on a recorded Final Map, on which a building permit has been or is permitted to be issued for construction of a single family detached unit without further subdivision of the lot and for which no further subdivision of the lot is anticipated pursuant to the Tentative Map. "Single Family Attached Property" means, in any Fiscal Year, all Parcels of Developed Property for which a building permit was issued for construction of a residential structure consisting of two or more Units that share common walls and are offered or expected to be offered as for -sale units, including attached Fractional Units and such residential structures that meet that statutory definition of a condominium contained in Civil Code Section 1351. "Single Family Detached Property" means, in any Fiscal Year, all Parcels of Developed Property for which a building permit was issued or is permitted to be issued for construction of a Unit that does not share a common wall with another Unit, including detached Fractional Units. "Special Tax" means a Special Tax levied in any Fiscal Year to pay the Special Tax Requirement. "Special Tax Requirement" means the amount necessary in any Fiscal Year to: (i) pay principal and interest on Bonds which is due in the calendar year that begins in such Fiscal Year; (ii) create and/or replenish reserve funds for the Bonds; (iii) cure any delinquencies in the payment of principal or interest on Bonds which have occurred in the prior Fiscal Year or, based on existing delinquencies in the payment of Special Taxes, are expected to occur in the Fiscal Year in which the tax will be collected; (iv) pay Administrative Expenses; and (v) pay the costs of public improvements and public infrastructure authorized to be financed by CFD No. 03-1. The amounts referred to in clauses (i) and (ii) of the preceding sentence may be reduced in any Fiscal Year by: (i) interest earnings on or surplus balances in funds and accounts for the Bonds to the extent that such earnings or balances are available to apply against debt service pursuant to a Bond indenture, Bond resolution, or other A-3 Attachment 4 legal document that sets forth these terms; (ii) proceeds received by CFD No. 03-1 from the collection of penalties associated with delinquent Special Taxes; and (iii) any other revenues available to pay debt service on the Bonds as determined by the Administrator. "Taxable Other Property" means, in any Fiscal Year, all Assessor's Parcels of Other Property which had, in prior Fiscal Years, been: (i) developed and taxed as Single Family Detached Property or Single Family Attached Property, or (ii) designated in the Tentative Map as Single Family Detached Property or Single Family Attached Property and, when a change to the Expected Land Uses was proposed designating the Parcel as Other Property, no prepayment was received pursuant to Step 3.b in Section D below. "Taxable Property" means all of the Assessor's Parcels within the boundaries of CFD No. 03-1 which are not exempt from the Special Tax pursuant to law or Section G below. "Tax Zone" means one of the two mutually exclusive geographic areas defined below and identified in Attachment 2 of this Rate and Method of Apportionment of Special Tax, and any subsequent Tax Zones created to contain property annexed into the CFD after CFD Formation. "Tax Zone #1" means the geographic area that is specifically identified in Attachment 2 of this Rate and Method of Apportionment of Special Tax as Tax Zone # 1. "Tax Zone #2" means the geographic area that is specifically identified in Attachment 2 of this Rate and Method of Apportionment of Special Tax as Tax Zone #2. "TDPUD" means the Truckee Donner Public Utility District. "Tentative Map" means the Tentative Map and Conditional Use Permit for the Old Greenwood Planned Development, which was included as Exhibit D to the Development Agreement between East West Partners and the Town which was recorded at the County Recorder's Office on August 23, 2002. "Town" means the incorporated Town of Truckee. "Undeveloped Property" means, in any Fiscal Year, all Parcels of Taxable Property within the CFD that are not Developed Property. "Unit" means (i) for Single Family Detached Property, an individual single-family detached unit, and (ii) for Single Family Attached Property, an individual residential unit within a duplex, triplex, fourplex, townhome, or condominium structure. B. DATA FOR ANNUAL ADMINISTRATION On or about July 1 of each Fiscal Year, the Administrator shall identify the current Assessor's Parcel numbers for all Parcels of Taxable Property. The Administrator shall also determine: (i) whether each Assessor's Parcel of Taxable Property is Developed Property or Undeveloped Property, (ii) for Developed Property, which Parcels are Single Family Detached Property, Single Family Attached Property, and Taxable Other Property, (iii) for Parcels of Single Family Attached Property, the number of Units on each Parcel, (iv) whether there are Parcels of Rental Property, Excess Public Property or Parcels with Affordable Units, and (v) the Special Tax Requirement. For Single Family Attached Property, the number of Units shall be determined by referencing the site plan, condominium plan, or other development plan. If, in any Fiscal Year, an Assessor's Parcel includes both Developed Property and Undeveloped Property, the Administrator shall determine the Acreage associated with the Developed Property, subtract this Acreage from the total Acreage of the Assessor's Parcel, and use the A-4 Attachment 4 remaining Acreage to calculate the Special Tax that will apply to Undeveloped Property within the Assessor's Parcel. In addition, the Administrator shall, on an ongoing basis, monitor whether changes in land use have been proposed that will affect the Expected Land Uses and whether Final Maps that have been proposed for approval by the Town are consistent with the Expected Land Uses. If changes to the Expected Land Uses are proposed, the Administrator shall apply the steps set forth in Section D below. C. MAXIMUM SPECIAL TAX 1. Single Family Detached Property The Maximum Special Tax for Single Family Detached Property in Zone 1 for Fiscal Year 2004-05 is $3,000 per SFD Lot. The Maximum Special Tax for Single Family Detached Property in Zone 2 for Fiscal Year 2004-05 is $3,400 per SFD Lot. On July 1, 2005 and on each July 1 thereafter, these Maximum Special Tax rates shall be increased by an amount equal to two percent (2%) of the amount in effect for the prior Fiscal Year. 2. Single Family Attached Property The Maximum Special Tax for Single Family Attached Property in Zone 1 for Fiscal Year 2004-05 is $3,000 per Unit. The Maximum Special Tax for Single Family Attached Property in Zone 2 for Fiscal Year 2004-05 is $3,400 per Unit. On July 1, 2005 and on each July 1 thereafter, these Maximum Special Tax rates shall be increased by an amount equal to two percent (2%) of the amount in effect for the prior Fiscal Year. 3. Taxable Other Property The Maximum Special Tax for Taxable Other Property shall be the amount needed on a per -acre basis to maintain the Maximum Special Tax that was assigned to the Parcel prior to the Parcel becoming Taxable Other Property. After the Maximum Special Tax has been determined for a Parcel of Taxable Other Property, the Maximum Special Tax shall be increased each Fiscal Year thereafter by an amount equal to two percent (2%) of the amount in effect the prior Fiscal Year. 4. Undeveloped Property The Maximum Special Tax for Undeveloped Property for Fiscal Year 2004-05 is $11,325 per Acre. On July 1, 2005 and on each July 1 thereafter, this Maximum Special Tax shall be increased by an amount equal to two percent (2%) of the amount in effect for the prior Fiscal Year. Pursuant to Section 53321 (d) of the Act, the Special Tax levied against a Parcel used for private residential purposes shall under no circumstances increase more than ten percent (10016) as a consequence of delinquency or default by the owner of any other Parcel or Parcels and shall, in no event, exceed the Maximum Special Tax in effect for the Fiscal Year in which the Special Tax is being levied. D. BACK-UP FORMULA The Maximum Special Taxes set forth in Section C above were calculated based on the Expected Land Uses at CFD Formation. The Administrator shall review Tentative Map revisions and other changes to the land uses proposed within the CFD and compare the revised land uses to the Expected Land Uses to evaluate the impact on the Expected Maximum Special Tax Revenues. In addition, the Administrator shall review Final Maps to ensure they reflect the number of residential lots that was anticipated in the Tentative Map. A-5 Attachment 4 If, prior to the Final Bond Sale, a change to the Expected Land Uses (a "Land Use/Entitlement Change") is proposed that will result in a reduction in the Expected Maximum Special Tax Revenues, no action will be needed pursuant to this Section D as long as the reduction in Expected Maximum Special Tax Revenues does not reduce debt service coverage on outstanding Bonds below the amount committed to in the Bond documents. Upon approval of the Land Use/Entitlement Change, the Administrator shall update Attachment 1 to show the reduced Expected Maximum Special Tax Revenues, and the reduced Expected Maximum Special Tax Revenues shall be the amount used to determine the amount of the Final Bond Sale. If a Land Use/Entitlement Change is proposed after the Final Bond Sale, the following steps shall be applied: Step 1: By reference to Attachment 1 (which will be updated by the Administrator each time a Land Use/Entitlement Change has been processed according to this Section D), the Administrator shall identify the Expected Maximum Special Tax Revenues for CFD No. 03-1; Step 2: The Administrator shall calculate the Maximum Special Tax revenues that could be collected from property in the CFD if the Land Use/Entitlement Change is approved; Step 3: If the amount determined in Step 2 is higher than that calculated in Step 1, the Land Use/Entitlement Change may be approved without further action. If the revenues calculated in Step 2 are less than those calculated in Step 1, and if. (a) The landowner does not withdraw the request for the Land Use/Entitlement Change that was submitted to the Town; or (b) Before approval of the Land Use/Entitlement Change, the landowner requesting the Land Use/Entitlement Change does not prepay a portion of the Special Tax for the CFD in an amount that corresponds to the lost Maximum Special Tax revenue, as determined by applying the steps set forth in Section H below; or (c) The Land Use/Entitlement Change proposes that a Parcel of Single Family Detached Property or Single Family Attached Property be developed as another land use (other than Public Property), and the landowner requesting the Land Use/Entitlement Change fails to submit a written request to the TDPUD to designate the Parcel as Taxable Other Property, thereby maintaining the Expected Maximum Special Tax Revenues for the Parcel; then, the amount of the prepayment determined in Step 3.b shall be allocated on a per - acre basis and included on the next property tax bill for all Assessor's Parcels within the property affected by the Land Use/Entitlement Change. The amount allocated to each Assessor's Parcel shall be added to and, until paid, shall be a part of, the Maximum Special Tax for the Assessor's Parcel. If multiple Land Use/Entitlement Changes are proposed at one time (which may include approval of multiple Final Maps at one time), the Administrator may consider the combined effect of all the Land Use/Entitlement Changes to determine if there is a reduction in Expected Maximum Special Tax Revenues that necessitates implementation of Step 3.b or 3.c. If, based on this comprehensive analysis, the Administrator determines that there is a reduction in Expected Maximum Special Tax Revenue, and all of the Land Use/Entitlement Changes are being proposed by the same land owner, the Administrator shall determine the required prepayment (pursuant to Step 3.b) by analyzing the combined impact of all of the proposed Land Use/Entitlement Changes. Notwithstanding the foregoing, if the Administrator analyzes the combined impacts of A-6 Attachment 4 multiple Land Use/Entitlement Changes, and the Town subsequently does not approve one or more of the Land Use/Entitlement Changes that was proposed, the Administrator shall once again apply the three steps set forth above to determine the combined impact of those Land Use/Entitlement Changes that were approved simultaneously by the Town. If, based on the comprehensive analysis, the Administrator determines that there is a reduction in Expected Maximum Special Tax Revenue, and the Land Use/Entitlement Changes are not all being proposed by the same land owner, the Administrator shall consider the proposed Land Use/Entitlement Changes individually to determine the required prepayment from each owner. E. METHOD OF LEVY OF THE SPECIAL TAX Each Fiscal Year, the Administrator shall determine the Special Tax Requirement to be collected in that Fiscal Year, and the Special Tax shall be levied according to the steps outlined below. Step 1: The Special Tax shall be levied Proportionately on each Parcel of Developed Property within the CFD up to 100% of the Maximum Special Tax for each Parcel for such Fiscal Year until the amount levied on Developed Property is equal to the Special Tax Requirement prior to applying any Capitalized Interest that is available in the CFD accounts. Step 2: If additional revenue is needed after Step 1, and after applying Capitalized Interest to the Special Tax Requirement, the Special Tax shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property within the CFD, up to 100% of the Maximum Special Tax for Undeveloped Property for such Fiscal Year determined pursuant to Section C; Step 3: If additional revenue is needed after applying the first two steps, the Special Tax shall be levied Proportionately on each Parcel of Association Property within the CFD, up to 100% of the Maximum Special Tax for Undeveloped Property for such Fiscal Year determined pursuant to Section C; Step 4: If additional revenue is needed after applying the first three steps, the Special Tax shall be levied Proportionately on each Assessor's Parcel of Excess Public Property, exclusive of property exempt from the Special Tax pursuant to Section G below, up to 100% of the Maximum Special Tax for Undeveloped Property for such Fiscal Year determined pursuant to Section C. F. COLLECTION OF SPECIAL TAX The Special Taxes for CFD No. 03-1 shall be collected in the same manner and at the same time as ordinary ad valorem property taxes, provided, however, that prepayments are permitted as set forth in Section H below and provided further that the TDPUD may directly bill the Special Tax, may collect Special Taxes at a different time or in a different manner, and may collect delinquent Special Taxes through foreclosure or other available methods. The Special Tax for Fractional Units may be billed either directly to individual fractional owners or to a homeowners association, which shall then bill the individual fractional owners; non-payment of Special Taxes billed by the homeowners association shall result in interest and penalties, and the fractional ownership shall be subject to foreclosure proceedings as set forth in the Bond covenants. The Special Tax shall be levied and collected until principal and interest on Bonds have been repaid, costs of constructing or acquiring authorized facilities from Special Tax proceeds have been paid, and all A-7 Attachment 4 administrative expenses have been reimbursed. However, in no event shall a Special Tax be levied after Fiscal Year 2039-2040. G. EXEMPTIONS Notwithstanding any other provision of this Rate and Method of Apportionment of Special Tax, no Special Tax shall be levied on up to 30.31 Acres of Public Property. A separate amount of public acreage may be exempted each time property annexes into CFD No. 03-1, and such additional exemption shall only apply to property within the annexation area. A Special Tax may be levied on Excess Public Property pursuant to Step 4 of Section E; however, a public agency may require that the special tax obligation on land conveyed to it that would be classified as Excess Public Property be prepaid pursuant to Section H below. In addition, no Special Tax shall be levied in any Fiscal Year on (i) Golf Course Property, (ii) Rental Property, (iii) Affordable Units, or (iv) Other Property unless the Parcel is determined to be Taxable Other Property. H. PREPAYMENT OF SPECIAL TAX The following definitions apply to this Section H: "Outstanding Bonds" means all Previously Issued Bonds which remain outstanding, with the following exception: if a Special Tax has been levied against, or already paid by, an Assessor's Parcel making a prepayment, and a portion of the Special Tax will be used to pay a portion of the next principal payment on the Bonds that remain outstanding (as determined by the Administrator), that next principal payment shall be subtracted from the total Bond principal that remains outstanding, and the difference shall be used as the amount of Outstanding Bonds for purposes of this prepayment formula. "Previously Issued Bonds" means all Bonds that have been issued on behalf of the CFD prior to the date of prepayment. "Public Facilities Requirements" means either $9,850,000 in 2003 dollars, which shall increase on January 1, 2004, and on each January 1 thereafter by the percentage increase, if any, in the construction cost index for the San Francisco region for the prior twelve (12) month period as published in the Engineering News Record or other comparable source if the Engineering Record is discontinued or otherwise not available, or such lower number as shall be determined by the TDPUD as sufficient to fund improvements that are authorized to be funded by the CFD. The Public Facilities Requirements shown above may be adjusted or a separate Public Facilities Requirements identified each time property annexes into CFD No. 03-1; at no time shall the added Public Facilities Requirement for that annexation area exceed the amount of public improvement costs that are expected to be supportable by the Maximum Special Tax revenues generated within that annexation area. "Remaining Facilities Costs" means the Public Facilities Requirements (as defined above), minus public facility costs funded by Outstanding Bonds (as defined above), developer equity, and/or any other source of funding. The Special Tax obligation applicable to an Assessor's Parcel in the CFD may be prepaid and the obligation of the Assessor's Parcel to pay the Special Tax permanently satisfied as described herein, provided that a prepayment may be made only if there are no delinquent Special Taxes with respect to such 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 TDPUD with written notice of intent to prepay. Within 30 days of receipt of such written notice, the TDPUD or its designee shall notify such owner of the prepayment amount for such Assessor's Parcel. Prepayment must be made not less than 75 days prior to any redemption date for Bonds to be A-8 Attachment 4 redeemed with the proceeds of such prepaid Special Taxes. The Prepayment Amount shall be calculated as follows: (capitalized terms as defined below): Bond Redemption Amount plus Remaining Facilities Amount plus Redemption Premium plus Defeasance Requirement plus Administrative Fees and Expenses less Reserve Fund Credit equals Prepayment Amount As of the proposed date of prepayment, the Prepayment Amount shall be determined by application of the following steps: Step 1. Compute the total Maximum Special Tax that could be collected from the Assessor's Parcel prepaying the Special Tax in the Fiscal Year in which prepayment would be received by the TDPUD or, in the event of a prepayment pursuant to Step 3.b in Section D, compute the amount by which the Maximum Special Tax revenues would be reduced by the Land Use/Entitlement Change and use the amount of this reduction as the figure for purposes of this Step 1. Step 2. Divide the Maximum Special Tax from Step 1 by the then -current Expected Maximum Special Tax Revenues for the CFD. Step 3. Multiply the quotient computed pursuant to Step 2 by the Outstanding Bonds to compute the amount of Outstanding Bonds to be retired and prepaid (the "Bond Redemption Amount"). Step 4. Compute the current Remaining Facilities Costs (if any). Step 5. Multiply the quotient computed pursuant to Step 2 by the amount determined pursuant to Step 4 to compute the amount of Remaining Facilities Costs to be prepaid (the "Remaining Facilities Amount"). Step 6. Multiply the Bond Redemption Amount computed pursuant to Step 3 by the applicable redemption premium, if any, on the Outstanding Bonds to be redeemed (the "Redemption Premium"). Step 7. Compute the amount needed to pay interest on the Bond Redemption Amount starting with the first Bond interest payment date after which the prepayment has been received until the earliest redemption date for the Outstanding Bonds, which, depending on the Bond offering document, may be as early as the next interest payment date. Step 8. Compute the amount of interest the TDPUD reasonably expects to derive from reinvestment of the Bond Redemption Amount plus the Redemption Premium from the first Bond interest payment date after which the prepayment has been received until the redemption date for the Outstanding Bonds. Step 9. Take the amount computed pursuant to Step 7 and subtract the amount computed pursuant to Step 8 (the "Defeasance Requirement"). A-9 Attachment 4 Step 10. Determine the costs of computing the prepayment amount, the costs of redeeming Bonds, and the costs of recording any notices to evidence the prepayment and the redemption (the "Administrative Fees and Expenses"). Step IL If and to the extent so provided in the indenture pursuant to which the Outstanding Bonds to be redeemed were issued, 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"). Step 12. The Special Tax prepayment is equal to the sum of the amounts computed pursuant to Steps 3, 5, 6, 9, and 10, less the amount computed pursuant to Step 11 (the "Prepayment Amount"). A partial prepayment may be made in an amount equal to any percentage of full prepayment desired by the party making a partial prepayment. The Maximum Special Tax that can be levied on an Assessor's Parcel after a partial prepayment is made is equal to the Maximum Special Tax that could have been levied prior to the prepayment, reduced by the percentage of a full prepayment that the partial prepayment represents, all as determined by or at the direction of the Administrator. L INTERPRETATION OF SPECIAL TAX FORMULA The TDPUD reserves the right to make minor administrative and technical changes to this document that do not materially affect the rate and method of apportioning Special Taxes. In addition, the interpretation and application of any section of this document shall be left to the TDPUD's discretion. Interpretations may be made by the TDPUD by ordinance or resolution for purposes of clarifying any vagueness or ambiguity in this Rate and Method of Apportionment of Special Tax. A-10 Attachment 4 ATTACHMENT 1 TRUCKEE DONNER PUBLIC UTILITY DISTRICT COMMUNITY FACILITIES DISTRICT NO. 03-1 (OLD GREENWOOD) EXPECTED LAND USES AND EXPECTED MAXIMUM SPECIAL TAX REVENUES AT CFD FORMATION Total Expected Maximum Special Tax Maximum Number of Per Unit/Acre for Special Tax Expected Land Uses Expected Units/Acres Fiscal Year 2004-05* Revenues* Single Family Detached Property and Single Family 104 Units $3,000 per SFD Lot $312,000 Attached Property in Zone 1 Single Family Detached Property and Single Family 154 Units $3,400 per SFD Lot $523,000 Attached Property in Zone 2 Taxable Other Property 0 Acres N/A $0 Total Expected Maximum Special Tax Revenues $835,000 * Figures are shown in fiscal year 2004-05 dollars and will escalate two percent (201o) per year thereafter. A-11 Attachment 4 ATTACHMENT 2 IDENTIFICATION OF TAX ZONES A-12 Attachment 4 APPENDIX B APPRAISAL [TO COME] M. Attachment 4 APPENDIX C GENERAL INFORMATION CONCERNING NEVADA COUNTY [TO COME] C-1 Attachment 4 APPENDIX D SUMMARY OF CERTAIN PROVISIONS OF THE TRUST INDENTURE Certain provisions of the Trust Indenture (the "Indenture') that have not been previously discussed in this Official Statement are summarized below. These summaries do not purport to be complete or definitive and are qualified in their entirety by reference to the full terms of the Indenture. Purchasers of the Bonds are referred to the complete text of the Indenture, copies of which are available upon written request from the District. DEFINITIONS Unless the context otherwise requires, the following terms shall have the following meanings for purposes of the Indenture: "Act" means the Mello -Roos Community Facilities Act of 1982, as amended, Sections 53311 et seq. of the California Government Code. "Administrative Expenses" means the administrative costs incurred by the District or the PUD on behalf of the District with respect to the calculation, levy, and collection of the Special Taxes, including all attorneys' fees and other costs related thereto, the fees and expenses of the Trustee, any fees for credit enhancement for the 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 arbitrage rebate, and any other costs otherwise incurred by the District or the PUD 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 under the Indenture. "Administrative Expense Account" means the account by such name in the Special Tax Fund created and established pursuant to the Indenture. "Administrative Expense Cap" means the amount of [$29,877.311 with such amount escalating by 2% per Bond Year beginning September 2, 2013, provided that the District may, in its sole discretion, fund Administrative Expenses, without limitation, from any other funds available to the District, including the Surplus Fund. "Alternative Penalty Account" means the account by such name created and established in the Rebate Fund pursuant to the Indenture. "Annual Debt Service" means the principal amount of any Outstanding Bonds payable in a Bond Year either at maturity or pursuant to a Sinking Fund Payment and any interest payable on any Outstanding Bonds in such Bond Year, if the Bonds are retired as scheduled. "Authorized 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) Direct obligations of the United States of America (including obligations issued or held in book -entry form on the books of the Department of the Treasury, and CATS and TIGRS) or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America ("Direct Obligations"); D-1 Attachment 4 (b) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself): (i) U.S. Export -Import Bank ("Eximbank") - direct obligations or fully guaranteed certificates of beneficial ownership, (ii) Farmers Home Administration ("FmHA") - certificates of beneficial ownership, (iii) Federal Financing Bank, (iv) Federal Housing Administration Debentures ("FHA"), (v) General Services Administration - participation certificates, (vi) Government National Mortgage Association ("GNMA" or "Ginnie Mae") - GNMA- guaranteed mortgage -backed bonds and GNMA-guaranteed pass -through obligations, (vii) U.S. Maritime Administration - guaranteed Title XI financing, and (viii) U.S. Department of Housing and Urban Development ("HUD") - project notes, local authority bonds, new communities debentures (U.S. government guaranteed debentures), and U.S. Public Housing Notes and Bonds (U.S. government guaranteed public housing notes and bonds); (c) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non -full faith and credit U.S. government agencies (stripped securities are only permitted if they have been stripped by the agency itself): W Federal Home Loan Bank System - senior debt obligations, (ii) Federal Home Loan Mortgage Corporation ("FHLMC" or "Freddie Mac") - participation certificates and senior debt obligations, (iii) Federal National Mortgage Association ("FNMA" or "Fannie Mae") - mortgage - backed securities and senior debt obligations, (iv) Student Loan Marketing Association ("SLMA" or "Sallie Mae") - senior debt obligations, (v) Resolution Funding Corp. ("REFCORP") obligations, and (vi) Farm Credit System Corp. - Consolidated system -wide bonds and notes; (d) Money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Securities Act of 1933, and having a rating by Standard & Poor's of AAAm-G, AAAm or AAm, and, if rated by Moody's, rated Aaa, Aal or Aa2 (including those of the Trustee and its affiliates or funds for which the Trustee or affiliates provide investment advisory or other management services); (e) Certificates of deposit secured at all times by collateral described in (a) and/or (b) above. Such certificates must be issued by commercial banks, savings and loan associations or mutual savings banks. The collateral must be held by a third party and the Trustee on behalf of the Bondholders must have a perfected first security interest in the collateral; "_J Attachment 4 (f) Certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by FDIC or which are with a bank rated AA or better by Standard & Poor's and Aa or better by Moody's (including those of the Trustee and its affiliates); (g) Investment Agreements with any corporation, including banking or financial institutions, provided that: (i) the long-term debt of the provider of any such investment agreement, or in the case of a guaranteed corporation the long-term debt of the guarantor, or in the case of a monoline financial guaranty insurance company the claims paying ability, is rated, at the time of investment, in one of the two highest rating categories offered by each Rating Agency (without regard to gradations of plus or minus, or numerical gradations, within such category), and (ii) any such investment agreement shall include a provisions that in the event that the long-term debt rating or claims paying ability rating of the provider or the guarantor is downgraded below AA- by Standard & Poor's or Aa3 by Moody's during the term of the agreement the provider must either (A) deliver to the Trustee or a third party custodian collateral in the form of Unites States Treasury or agency obligations which at least equal 102% of the principal amount invested under the Indenture or (B) assign the existing agreement and all of its obligations under the Indenture to a financial institution mutually acceptable to the provider, the District and the Trustee which is rated in one of the two highest rating categories offered by each Rating Agency (without regard to gradations of plus or minus, or numerical gradations, within such category), and (iii) any such investment agreement shall include a provision that in the event that the long-term debt rating or claims paying ability rating of the provider, or the guarantor, is downgraded below A- by Standard & Poor's or A3 by Moody's during the term of the agreement the provider must repay the principal of and accrued by it unpaid interest on the invested moneys, and (iv) any such agreement shall include a provision to the effect that in the event of default under such Investment Agreement by such provider or in the event of a bankruptcy of such provider, the District has the right to withdraw or cause the Trustee to withdraw all funds invested in such agreement and thereafter to invest such funds pursuant to the Indenture, and (v) any such investment agreement permits withdrawal upon not more than three (3) days notice (excepting only withdrawals from the Acquisition and Construction Fund, from which withdrawals may be permitted upon not more than seven (7) days notice) for any purpose authorized for the use of the invested funds under the Indenture; (h) Commercial paper rated, at the time of purchase, "Prime - 1" by Moody's and "A- I" or better by Standard & Poor's; (i) Bonds or notes issued by any state or municipality which are rated by both Rating Agencies in one of the two highest rating categories assigned by such agencies; 0) Federal funds or bankers acceptances with a maximum term of one year of any bank which has an unsecured, uninsured or unguaranteed obligation rating of "Prime - 1" or "AY or better by Moody's and "A-1" or "A" or better by Standard & Poor's; (k) Repurchase agreements collateralized by Direct Obligations, GNMAs, FNMAs or FHLMCs with any registered broker/dealer subject to the Securities Investors' Protection Corporation jurisdiction or any commercial bank insured by the FDIC, if such broker/dealer or bank has an uninsured, unsecured and unguaranteed obligation rated "P-l" or "AY or better by Moody's, and "A-l" or "A-" by Standard & Poor's; provided: D-3 Attachment 4 (i) a master repurchase agreement or specific written repurchase agreement governs the transaction, and (ii) the securities are held free and clear of any lien by the Trustee or an independent third party acting solely as agent ("Agent") for the Trustee, and such third party is (i) a Federal Reserve Bank, (ii) a bank which is a member of the Federal Deposit Insurance Corporation and which has combined capital, surplus and undivided profits of not less than $50 million, or (iii) a bank approved in writing for such purpose by the District, and the Trustee shall have received written confirmation from such third party that it holds such securities, free and clear of any lien, as agent for the Trustee, and (iii) a perfected first security interest under the Uniform Commercial Code, or book entry procedures prescribed at 31 C.F.R. 306.1 et seq. or 31 C.F.R. 350.0 et seq. in such securities is created for the benefit of the Trustee, and (iv) the Agent will value the collateral securities no less frequently than weekly and will liquidate the collateral securities if any deficiency in the required collateral percentage is not restored within two Business Days of such valuation, and (v) the fair market value of the securities in relation to the amount of the repurchase obligation, including principal and interest, is equal to at least 103%; (1) The State of California Local Agency Investment Fund; and (m) Any other investment which the District is permitted by law to make. To the extent that any of the requirements concerning Authorized Investments embodies a legal conclusion, the Trustee shall be entitled to conclusively rely upon a certificate from the appropriate party or an opinion from counsel to such party, that such requirement has been met. "Authorized Representative of the District" means the General Manager of the PUD, the Assistant General Manager of the PUD, [the Treasurer of the PUD] and any other person or persons designated by the legislative body of the District and authorized to act on behalf of the District by a written certificate signed by the President of the legislative body of the District and containing the specimen signature of each such person. "Board of Directors" means the Board of Directories of the PUD. "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 shall be recorded. "Bondowner" or "Owner" means the person or persons in whose name or names any Bond is registered. "Bonds" means the District's $XX,XXX,000 2013 Special Tax Refunding Bonds issued pursuant to the 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 shall begin on the Delivery D-4 Attachment 4 Date and end on the first September 1 which is not more than 12 months after the Delivery Date, provided that for purposes of the Indenture relating to the calculation of arbitrage rebate amounts "Bond Year" shall have the meaning ascribed thereto in the Tax Certificate. "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 Principal Office of the Trustee is located, are not required or authorized to remain closed. "Certificate of the General Manager" means a written certificate or warrant request executed by the General Manager, or his or her written designee, on behalf of the District. "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. "Costs oflssuance" means the costs and expenses incurred in connection with the issuance and sale of the Bonds, including the acceptance and initial annual fees and expenses of the Trustee, legal fees and expenses, costs of printing the Bonds and the preliminary and final official statements for the Bonds, fees of financial consultants, and all other related fees and expenses, as set forth in a Certificate of the General Manager. "Costs oflssuance Fund" means the Account by that name created and established in the Acquisition and Construction Fund pursuant to the Indenture. "Delivery Date" means, the date on which the Bonds were issued and delivered to the initial purchasers thereof. "District" means Truckee Donner Public Utility District Community Facilities District No. 03-1 (Old Greenwood) established pursuant to the Act and the Resolution of Formation. "DTC" means The Depository Trust Company, New York, New York, and its successors and assigns. "DTC Participants" means securities brokers and dealers, banks, trust companies, clearing corporations and other organizations maintaining accounts with DTC. "Federal Securities " means any of the following: (a) Cash, (b) United States Treasury Certificates, Notes and Bonds (including State and Local Government Series — "SLGS"), (c) Direct obligations of the U.S. Treasury which have been stripped by the U.S. Treasury itself, e.g., CATS, TIGRS and similar securities, (d) The interest component of Resolution Funding Corp. strips which have been stripped by request to the Federal Reserve Bank of New York and are in book -entry form, (e) Pre -refunded municipal bonds rated "Aaa" by Moody's and "AAA" by Standard & Poor's, (f) Obligations issued by the following agencies which are backed by the full faith and credit of the United States: D-5 Attachment 4 (i) U.S. Export -Import Bank - direct obligations or fully guaranteed certificates of beneficial ownership, (ii) Farmers Home Administration - certificates of beneficial ownership, (iii) Federal Financing Bank, (iv) General Services Administration - participation certificates, (v) U.S. Maritime Administration - guaranteed Title XI financing, and (vi) U.S. Department of Housing and Urban Development (HUD) - project notes, local authority bonds, new communities debentures - U.S. government guaranteed debentures, U.S. Public Housing Notes and Bonds - U.S. government guaranteed public housing notes and bonds. "Fiscal Year" means the period beginning on July 1 of each year and ending on the next following June 30. "General Manager" means the General Manager of the PUD. "Gross Taxes" means the amount of all Special Taxes received by the District, together with the proceeds collected from the sale of property pursuant to the foreclosure provisions of the Indenture for the delinquency of such Special Taxes remaining after the payment of all the costs related to such foreclosure actions, including, but not limited to, all legal fees and expenses, court costs, consultant and title insurance fees and expenses. "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 or the PUD; (b) does not have any substantial interest, direct or indirect, in the District or the PUD; and (c) is not connected with the District or the PUD as a member, officer or employee of the District or the PUD, but who may be regularly retained to make annual or other reports to the District or the PUD. "Indenture" means the Trust Indenture, together with any Supplemental Indenture entered into pursuant to Article VI. "Interest Account" means the account by such name created and established in the Special Tax Fund pursuant to the Indenture. "Interest Payment Date" means each March I and September 1, commencing March 1, 2014; provided, however, that, if any such day is not a Business Day, interest up to, but not including, the Interest Payment Date will be paid on the Business Day next following such date. "Investment Agreement" means one or more agreements for the investment of funds of the District complying with the criteria therefor as set forth in subsection (g) of the definition of Authorized Investments. "Maximum Annual Debt Service" means the maximum amount of the Annual Debt Service for any Bond Year prior to the final maturity of the Bonds. WO Attachment 4 "Moody's" means Moody's Investors Service, and its successors and assigns. "Net Taxes" means for each Fiscal Year, Gross Taxes (exclusive of any penalties and interest accruing with respect to delinquent Special Tax installments) minus amounts (not in excess of the then current Administrative Expense Cap) set aside to pay Administrative Expenses and minus the portion of any Prepayment that not required to be deposited in the Special Tax Fund pursuant to the Indenture. "Outstanding" or "Outstanding Bonds" means all Bonds theretofore issued by the District, except: (a) Bonds theretofore cancelled or surrendered for cancellation in accordance with the Indenture; (b) Bonds for payment or redemption of which moneys shall have been theretofore deposited in trust (whether upon or prior to the maturity or the redemption date of such Bonds), provided that, if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as provided in the Indenture; and (c) Bonds which have been surrendered to the Trustee for transfer or exchange or for which a replacement has been issued. "Person" means natural persons, firms, corporations, partnerships, associations, trusts, public bodies and other entities. "Prepayment" means money received by the PUD or the District as a complete or partial prepayment of Special Taxes permitted pursuant to the RMA. "Prepayment Account" means the Account by such name created and established in the Special Tax Fund pursuant to the Indenture. "Principal Account" means the Account by such name created and established in the Special Tax Fund pursuant to the Indenture. "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. "Prior Bonds" means the Truckee Donner Public Utility District Community Facilities District No. 03-1 (Old Greenwood) Special Tax Bonds originally issued by the District on or about December 22, 2003 in the initial principal amount of $12,445,000. "Prior Indenture" means the Trust Indenture, dated as of December 1, 2003, between the District and the Prior Trustee. "Prior Trustee" means The Bank of New York Mellon Trust Company, N.A., as successor to BNY Western Trust Company, in its capacity as trustee under the Prior Indenture. "PUD" means the Truckee Donner Public Utility District. "Rating Agency" means either Moody's or Standard & Poor's, or both, as the context requires. "Rebate Account" means the Account by such name created and established in the Rebate Fund pursuant to the Indenture. D-7 Attachment 4 "Rebate Fund" means the fund by such name created and established pursuant to the Indenture. "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 such name created and established in the Special Tax Fund pursuant to the Indenture. "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 representation letter or letters from the District to DTC. "Reserve Account" means the account by such name created and established in the Special Tax Fund pursuant to the Indenture. "Reserve Requirement" means, as of any date of calculation by the District, an amount equal to the lowest of (i) 10% of the principal amount of the Bonds, as calculated pursuant to the Regulations, or (ii) Maximum Annual Debt Service, or (iii) 125% of the average Annual Debt Service. "Resolution of Formation" means the resolution adopted by the Board of Directors of the PUD on October 14, 2003, pursuant to which the PUD formed the District. "RMA" means the Rate and Method of Apportionment of Special Taxes approved by the qualified electors of the District at an election conducted on October 14, 2003, a copy of which is attached to the Indenture as Exhibit C. "Sinking Fund Payment" means the annual payment in those years indicated in the Indenture to be deposited in the Redemption Account to redeem a portion of the Term Bonds in accordance with the schedule set forth in the Indenture to retire the Term Bonds. "Six -Month Period" means the period of time beginning on the Delivery Date of each issue of Bonds, and ending six consecutive months thereafter, and each six-month period thereafter until the latest maturity date of the Bonds (and any obligations that refund an issue of the Bonds). "Special Tax Administrator" means such person or firm as may be designated by the Board of Directors to administer the calculation and collection of the Special Taxes, or any successor person or entity acting in such capacity. "Special Taxes " means the taxes authorized to be levied by the District in accordance with the RMA, as the RMA may be amended from time to time (if and to the extent such amendment is consistent with the covenant set forth in the Indenture). "Special Tax Fund" means the fund by such name created and established pursuant to the Indenture. "Standard & Poor's" means Standard & Poor's Ratings Services, a Standard & Poor's Financial Services LLC business and division of McGraw-Hill, and its successors and assigns. "Supplemental Indenture" means any supplemental indenture entered into in accordance with the provisions of the Indenture amending or supplementing the Indenture. MI. Attachment 4 "Surplus Fund" means the Fund by such name created and established pursuant to the Indenture. "Tax Certificate" means the certificate by that name to be executed by the District on the Delivery Date to establish certain facts and expectations and which contains certain covenants relevant to compliance with the Code. "Term Bonds" means the Bonds maturing September 1, 2033. "Trustee" means The Bank of New York Mellon Trust Company, N.A., a banking corporation organized and existing under the laws of the United States, and its successors or assigns, or any other bank or trust company which may at any time be substituted in its place as provided in the Indenture and any successor thereto. "Underwriter" means the institution or institutions, if any, with whom the District enters into a purchase contract for the sale of the Bonds. CREATION OF FUNDS AND APPLICATION OF REVENUES AND GROSS TAXES Creation of Funds; Application of Proceeds. The Indenture creates and establishes and requires that the Trustee maintain the following funds and accounts: (i) the Truckee Donner Public Utility District Community Facilities District No. 03-1 (Old Greenwood) Special Tax Fund (the "Special Tax Fund") (in which there shall be established and created an Interest Account, a Principal Account, a Redemption Account, a Prepayment Account, a Reserve Account and an Administrative Expense Account); (ii) the Truckee Donner Public Utility District Community Facilities District No. 03-1 (Old Greenwood) Costs of Issuance Fund (the "Costs of Issuance Fund"); (iii) the Truckee Donner Public Utility District Community Facilities District No. 03-1 (Old Greenwood) Rebate Fund (the "Rebate Fund") (in which there shall be established a Rebate Account and an Alternative Penalty Account); and (iv) the Truckee Donner Public Utility District Community Facilities District No. 03-1 (Old Greenwood) Surplus Fund (the "Surplus Fund"). The amounts on deposit in the foregoing funds and accounts shall be held by the Trustee; and the Trustee shall invest and disburse the amounts in such funds and accounts in accordance with the provisions of the Indenture. Deposits to and Disbursements from Special Tax Fund. The Trustee shall, on each date on which the Special Taxes are received from the PUD or the District, deposit the Special Taxes in the Special Tax Fund in accordance with the terms of the Indenture to be held by the Trustee, provided that any Prepayment shall be deposited in the funds and accounts (and in the respective amounts) specified in the certificate of the Special Tax Administrator delivered to the Trustee in connection with the delivery of the Prepayment to the Trustee. The Trustee shall transfer the amounts on deposit in the Special Tax Fund on the dates and in the amounts set forth below, in the following order of priority, to: the Administrative Expense Account, the Interest Account, the Principal Account, the Redemption Account, the Reserve Account, the Rebate Fund, and the Surplus Fund. At the maturity of all of the Bonds and, after all principal and interest then due on the 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. Attachment 4 Administrative Expense Account of the Special Tax Fund. In addition to the amount deposited in the Administrative Expense Account pursuant to the Indenture, the Trustee shall, commencing in Fiscal Year 2013-2014, not less often than annually transfer from the Special Tax Fund and deposit in the Administrative Expense Account from time to time amounts necessary to make timely payment of Administrative Expenses upon the written direction of the District; provided, however, that the total amount of the transfers from the Special Tax Fund into the Administrative Expense Account in any Bond Year shall not exceed the Administrative Expense Cap until such time as (i) there has been deposited in the Interest Account and the Principal Account an amount, together with any amounts already on deposit therein, that is sufficient to pay the interest and principal on all Bonds due in such Bond Year and (ii) there has been deposited in the Reserve Account the amount, if any, required in order to cause the amount on deposit therein to equal the Reserve Requirement. In addition to the foregoing, the Trustee shall also deposit in the Administrative Expense Account the portion of any Prepayment directed to be deposited in the certificate of the Special Tax Administrator delivered to the Trustee in connection with such Prepayment. Interest Account and Principal Account of the Special Tax Fund. The principal of and interest due on the Bonds until maturity, other than principal due upon redemption, shall be paid by the Trustee from the Principal Account and the Interest Account, respectively. For the purpose of assuring that the payment of principal of and interest on the Bonds will be made when due, the Trustee shall make the transfers described below from the Special Tax Fund on each Interest Payment Date 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, the transfer from the Special Tax Fund need not be made; and provided, further, that, if amounts in the Special Tax Fund are inadequate to make the foregoing transfers then any deficiency shall be made up by an immediate transfer from the Reserve Account: To the Interest Account, an amount such that the balance in the Interest Account shall be equal to the installment of interest due on the Bonds on said Interest Payment Date and any installment of interest due on a previous Interest Payment Date which remains unpaid. Moneys in the Interest Account shall be used for the payment of interest on the Bonds as the same become due. To the Principal Account, an amount such that the balance in the Principal Account on September 1 of each year, shall equal the sum of (i) the principal payment due on the Bonds maturing on such September 1, (ii) the Sinking Fund Payment due on any Outstanding Bonds on such September 1, and (iii) 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 of such Bonds as the same become due at maturity or pursuant to the Sinking Fund Payment schedules set forth in the Indenture and in any Supplemental Indenture. In addition to the transfers to the Interest Account and Principal Account described in the first paragraph of this caption, the Trustee shall also transfer thereto such portions of a Prepayment as may be directed to be so transferred in the certificate of the Special Tax Administrator delivered to the Trustee in connection with the Prepayment. Redemption Account of the Special Tax Fund. After making the deposits to the Interest Account and the Principal Account of the Special Tax Fund described above, and in accordance with the District's election to call Bonds for optional redemption, 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 called for optional redemption; provided, however, that amounts in the Special Tax Fund (other than the Administrative Expense Account therein) may be so deposited in the Redemption Account and applied to optionally redeem Bonds only if immediately following such transfer and redemption the amount in the Reserve Account will equal the Reserve Requirement. The Trustee shall deposit in the Redemption Account moneys other than Special Taxes in the amounts and at the times directed in writing by an Authorized Representative of the District. D-10 Attachment 4 Moneys set aside in the Redemption Account shall be used solely for the purpose of redeeming Bonds and shall be applied on or after the redemption date to the payment of the principal of and premium, if any, on the Bonds to be redeemed upon presentation and surrender of such Bonds; provided, however, that in lieu or partially in lieu of such call and redemption, moneys deposited in the Redemption Account as set forth above may be used to purchase Outstanding Bonds in the manner hereinafter provided. Purchases of Outstanding 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, the premium applicable at the next following call date. Any accrued interest payable upon the purchase of 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. Prepayment Account of the Special Tax Fund. The Trustee shall deposit in the Prepayment Account the portion of each Prepayment directed to be so deposited in the certificate of the Special Tax Administrator delivered to the Trustee in connection with the delivery of such Prepayment. On each date on which Bonds are to be redeemed from moneys on deposit in the Prepayment Account, the Trustee shall withdraw from the Reserve Account and deposit in the Prepayment Account the amount, if any, directed to be so withdrawn and deposited in the certificate of the Special Tax Administrator delivered to the Trustee in connection with the Prepayment giving rise to such redemption. Moneys set aside in the Prepayment Account shall be used solely for the purpose of redeeming Bonds shall be applied on or after the redemption date to the payment of the principal of and premium, if any, on the Bonds to be redeemed upon presentation and surrender of such Bonds; provided, however, that in lieu or partially in lieu of such call and redemption, moneys deposited in the Prepayment Account as set forth above may be used to purchase Outstanding Bonds in the manner hereinafter provided. Purchases of Outstanding 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 the premium applicable at the next following call date. Any accrued interest payable upon the purchase of Bonds may be paid from the amount reserved in the Interest Account for the payment of interest on such Bonds on the next following Interest Payment Date. Reserve Account of the Special Tax Fund. There shall be maintained in the Reserve Account an amount equal to the Reserve Requirement. Notwithstanding any provision of the Indenture to the contrary, the amounts in the Reserve Account shall be applied as follows: Moneys in the Reserve Account shall be used solely for the purpose of (i) paying the principal of, including Sinking Fund Payments, and interest on any Bonds when due in the event that the moneys in the Interest Account and the Principal Account are insufficient therefor, (ii) making any required transfer to the Rebate Fund upon written direction from the District, and (iii) making any required transfer to the Prepayment Account. If the amounts in the Interest Account or the Principal Account are insufficient to pay the principal of, including Sinking Fund Payments, or interest on any 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 or the Principal Account or the Rebate Fund, as applicable, moneys necessary for such purposes. Whenever moneys are withdrawn from the Reserve Account, after making the required transfers referred to in the Indenture, the Trustee shall transfer to the Reserve Account from available moneys in the Special Tax Fund, or from any other legally available funds which 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 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 Interest Account or the Principal Account for the next succeeding Interest Payment Date. If amounts in the Special Tax Fund or otherwise transferred to replenish the Reserve Account are inadequate to restore the Reserve Account to the D-11 Attachment 4 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 and to the extent permitted by the Act. In connection with an optional redemption of the Bonds under the Indenture a partial defeasance of the Bonds, amounts in the Reserve Account may be applied to such optional redemption or partial defeasance so long as the amount on deposit in the Reserve Account following such optional redemption or partial defeasance equals the Reserve Requirement. To the extent that the Reserve Account is at the Reserve Requirement as of the first day of the final Bond Year for Outstanding Bonds, amounts in the Reserve Account may be applied to pay the principal of and interest due on the Bonds in such final Bond Year. Moneys in the Reserve Account in excess of the Reserve Requirement not transferred in accordance with the preceding provisions of this paragraph shall be withdrawn from the Reserve Account on each Interest Payment Date and transferred to the Interest Account. Rebate Fund. The Trustee shall establish and maintain a fund separate from any other fund established and maintained under the Indenture 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. All amounts on deposit in the Rebate Fund with respect to the Bonds shall be governed by the Indenture 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 such Bonds will not be adversely affected if such requirements are not satisfied. Surplus Fund. After making the transfers required by of the Indenture, as soon as practicable after each September 1, and in any event prior to each October 1, the Trustee shall transfer all remaining amounts in the Special Tax Fund, if any, to the Surplus Fund, other than amounts in the Special Tax Fund which the District has deemed available in the Special Tax Fund in calculating the amount of the levy of Special Taxes for such Fiscal Year. Moneys deposited in the Surplus Fund may be transferred by the Trustee, (i) to the Interest Account or the Principal Account to pay the principal of, including Sinking Fund Payments, and interest on the Bonds when due in the event that moneys in the Special Tax Fund and the Reserve Account are insufficient therefor, (ii) to the Reserve Account in order to replenish the Reserve Account to the Reserve Requirement, and (iii) to the Administrative Expense Account to pay Administrative Expenses to the extent that the amounts on deposit in the Administrative Expense Account are insufficient to pay Administrative Expenses. In the event unexpended amounts remain on deposit in the Surplus Fund after the foregoing transfers, if any, the District shall apply such unexpended amounts to, in its sole discretion, either (i) pay Project Costs, (ii) to reduce the next fiscal year's Special Tax levy by depositing such amount in the Special Tax Fund, or (iii) for any other lawful purpose of the District. The amounts in the Surplus Fund are not pledged to the repayment of the 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, upon the written direction of the District, 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 in Authorized 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 Authorized Investments at a yield not in excess of the yield on the Bonds, 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. Cost of Issuance Fund. The moneys in the Costs of Issuance Fund shall be applied exclusively to pay the Costs of Issuance. Amounts for Costs of Issuance shall be disbursed by the Trustee from the Costs of D-12 Attachment 4 Issuance Fund pursuant to a requisition signed by an Authorized Representative of the District, which must be submitted in connection with each requested disbursement. [TO BE UPDATED] Upon the earlier of December 1, 2013 or its receipt of a Certificate of the General Manager that all or a specified portion of the amount remaining in the Costs of Issuance Fund is no longer needed to pay Costs of Issuance, the Trustee shall transfer all or such specified portion of said amount to the Administrative Expense Account. Investments. Moneys held in any of the funds, accounts and subaccounts under the Indenture shall be invested at the written direction of an Authorized Representative of the District in accordance with the limitations set forth below only in Authorized Investments which shall be deemed at all times to be a part of such funds, accounts and subaccounts. Any investment earnings, gains or losses resulting from such Authorized Investments shall be credited or charged to the fund, account or subaccount from which such investment was made. Moneys in the funds, accounts and subaccounts held under the Indenture may be invested by the Trustee on the written direction of the District, from time to time, in Authorized Investments subject to the following restrictions: Moneys in the Interest Account, the Principal Account and the Redemption Account shall be invested only in Authorized 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 as the same become due. One-half of the amount in the Reserve Account may be invested only in Authorized Investments which mature not later than two years from their date of purchase, and one-half of the amount in the Reserve Account may be invested only in Authorized Investments which mature not more than five years from the date of purchase; provided that such amounts may be invested in an Investment Agreement to the final maturity of Bonds so long as such amounts may be withdrawn at any time, without penalty, for application in accordance with the Indenture; and provided that no such Authorized Investment of amounts in the Reserve Account allocable to the Bonds shall mature later than the final maturity date of the Bonds. Amounts in the Reserve Fund on the Delivery Date for the Bonds shall not be invested at yields greater than those set forth in the Tax Certificate. Moneys in the Rebate Fund shall be invested only in Authorized 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 the Indenture or in Authorized Investments of the type described in clause (d) of the definition thereof. In the absence of written investment directions from the District, the Trustee shall invest solely in Authorized Investments specified in clause (d) of the definition thereof. The Trustee shall sell, or present for redemption, any Authorized Investment 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 and marked to market at least annually. In making any valuations of investments under the Indenture, the Trustee may utilize computerized securities pricing services that may be available to it, including those available through its regular accounting system, and rely thereon. The Trustee shall not be responsible for any loss from investments, sales or transfers undertaken in accordance with the provisions of the Indenture. The Trustee or an affiliate may act as principal or agent in connection with the acquisition or disposition of any Authorized Investments and shall be entitled to its customary fee therefor. Any Authorized Investments that are registrable securities shall be registered in the name of the Trustee. D-13 Attachment 4 For investment purposes, the Trustee may commingle the funds and accounts established under the Indenture (other than the Rebate Fund) but shall account for each separately. The Trustee or any of its affiliates may act as sponsor, advisor or manager in connection with any investments made by the Trustee under the Indenture. COVENANTS AND WARRANTY Warranty. The District shall preserve and protect the security pledged under the Indenture to the Bonds against all claims and demands of all persons. Covenants. So long as any of the Bonds issued under the Indenture are Outstanding and unpaid, the District makes the following covenants with the Bondowners under the provisions of the Act and the 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 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: Punctual Payment; Against Encumbrances. The District covenants that it will receive all Special Taxes in trust and will immediately deposit such amounts with the Trustee, and the District shall have no beneficial right or interest in the amounts so deposited except as provided by the Indenture. All such Special Taxes shall be disbursed, allocated and applied solely to the uses and purposes set forth in the Indenture, and shall be accounted for separately and apart from all other money, funds, accounts or other resources of the District. The District further covenants that, in connection with the delivery of any Prepayment to the Trustee, the District will also deliver to the Trustee a certificate of the Special Tax Administrator identifying with respect to the Prepayment: (i) the absence of any "Remaining Facilities Amount" (as defined in the RMA), (ii) the "Administrative Fees and Expenses" (as defined in the RMA), with instructions that said amount shall be deposited in the Administrative Expense Account, (iii) the amount that represents the Special Taxes levied in the current Fiscal Year on the subject Assessor's Parcel which had not been paid, with instructions to deposit portions of said amount in the Interest Account and the Principal Account of the Special Tax Fund, (iv) the amount of the "Reserve Fund Credit" (as defined in the RMA), with instructions to withdraw said amount from the Reserve Account and transfer it to the Prepayment Account in connection with the redemption of Bonds, and (v) the amount to be deposited in the Prepayment Account. The District covenants that it will duly and punctually pay or cause to be paid the principal of and interest on every Bond issued under the Indenture, together with the premium, if any, thereon on the date, at the place and in the manner set forth in the Bonds and in accordance with the Indenture to the extent that Net Taxes are available therefor, and that the payments into the Funds and Accounts created under the Indenture will be made, all in strict conformity with the terms of the Bonds, and the Indenture, and that it will faithfully observe and perform all of the conditions, covenants and requirements of the Indenture and all Supplemental Indentures and of the Bonds issued under the Indenture. The District will not mortgage or otherwise encumber, pledge or place any charge upon any of the Net Taxes except as provided in the 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. Nothing in the Indenture prevents the District from issuing or incurring indebtedness which is payable from a pledge of Net Taxes which is subordinate in all respects to the pledge of Net Taxes to repay the Bonds. Lew of Special Tax. Beginning in Fiscal Year 2013-2014 and in each Fiscal Year thereafter so long as any Bonds issued under the 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, to D-14 Attachment 4 pay (1) the principal (including Sinking Fund Payments) of and interest on the Bonds when due, (2) to the extent permitted by law, the Administrative Expenses, and (3) any amounts required to replenish the Reserve Account of the Special Tax Fund to the Reserve Requirement. Commence Foreclosure Proceedings. The District covenants for the benefit of the Owners of the Bonds that it (i) will commence judicial foreclosure proceedings against all parcels owned by a property owner where the aggregate delinquent Special Taxes on such parcels is greater than $7,500 by the October 1 following the close of each Fiscal Year in which such Special Taxes were due and (ii) will commence judicial foreclosure proceedings against all parcels with delinquent Special Taxes by the October 1 following the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than 95% of the total Special Tax levied for such Fiscal Year, and (iii) will diligently pursue such foreclosure proceedings until the delinquent Special Taxes are paid; provided that, notwithstanding the foregoing, the District may elect to defer foreclosure proceedings on any parcel which is owned by a delinquent property owner whose property is not, in the aggregate, delinquent in the payment of Special Taxes for a period of three years or more or in an amount in excess of $12,000 so long as (1) the amount in the Reserve Account of the Special Tax Fund is at least equal to the Reserve Requirement, and (2) the District is not in default in the payment of the principal of or interest on the Bonds. The District may, but shall not be obligated to, advance funds from any source of legally available funds in order to maintain the Reserve Account of the Special Tax Fund at the Reserve Requirement or to avoid a default in payment on the Bonds. The District covenants that it will deposit the proceeds of any foreclosure which constitute Net Taxes in the Special Tax Fund. The District will not, in collecting the Special Taxes or in processing any such judicial foreclosure proceedings, exercise any authority which it has pursuant to Sections 53340, 53344.1, 53344.2, 53356.1 and 53356.5 of the California Government Code in any manner which would materially and adversely affect the interests of the Bondowners and, in particular, will not permit the tender of Bonds in full or partial payment of any Special Taxes except upon receipt of a certificate of an Independent Financial Consultant that to accept such tender will not result in a reduction in the maximum Special Taxes that may be levied on the taxable property within the District in any Fiscal Year to an amount less than the sum of 110% of Annual Debt Service in the Bond Year ending on the September 1 following the end of such Fiscal Year plus the estimated Administrative Expenses for such Bond Year. 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 Expense Account therein), or which might impair the security of the Bonds then Outstanding; provided that nothing in the Indenture requires the District to make any such payments so long as the District in good faith shall contest the validity of any such claims. 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 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 Owners of not less than 10% of the principal amount of the Bonds then Outstanding or their representatives authorized in writing. Federal Tax Covenants. Notwithstanding any other provision of the Indenture, absent an opinion of Bond Counsel that the exclusion from gross income of interest on the Bonds 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: D-15 Attachment 4 (i) Private Activity. The District will take no action or refrain from taking any action or make any use of the proceeds of the Bonds or of any other moneys or property which would cause the Bonds to be "private activity bonds" within the meaning of Section 141 of the Code; (ii) Arbitrage. The District will make no use of the proceeds of the Bonds or of any other amounts or property, regardless of the source, or take any action or refrain from taking any action which will cause the Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Code; (iii) Federal Guaranty. The District will make no use of the proceeds of the Bonds or take or omit to take any action that would cause the Bonds to be "federally guaranteed" within the meaning of Section 149(b) of the Code; (iv) 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; (v) Hedge Bonds. The District will make no use of the proceeds of the Bonds or other amounts or property, regardless of the source, or take any action or refrain from taking any action that would cause the Bonds 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 (vi) Miscellaneous. The District will take no action and will refrain from taking any action inconsistent with its expectations stated in the Tax Certificate and will comply with the covenants and requirements stated therein, including payment of amounts required to pay the District's pro rata share of any rebate amounts owing to the United States on the Bonds. (vii) Other Tax Exempt Issues. The District will not use proceeds of other tax exempt securities to redeem any 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. Reduction of Maximum Special Taxes. The District finds and determines that, historically, delinquencies in the payment of special taxes authorized pursuant to the Act in community facilities districts in California have from time to time been at levels requiring 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 determines that a reduction in the Maximum Special Tax (as defined in the RMA) authorized to be levied on parcels in the District below the levels specified above would interfere with the timely retirement of the Bonds. The District determines it to be necessary in order to preserve the security for the Bonds to covenant, and, to the maximum extent that the law permits it to do so, the District does covenant, that it will take no action that would discontinue or cause the discontinuance of the Special Tax levy or the District's authority to levy the Special Tax, including the initiation of proceedings to reduce the Maximum Special Tax rates for the District, unless, in connection therewith, (i) the District receives a certificate from one or more Independent Financial Consultants which, when taken together, certify that, on the basis of the parcels of land and improvements existing in the District as of the July 1 preceding the reduction, the maximum amount of the Special Tax which may be levied on then existing Developed Property (as defined in the RMA) in each Bond Year will equal at least 110% of the sum of the estimated Administrative Expenses and Annual Debt Service in that Bond Year on all Bonds to remain Outstanding after the reduction is approved, (ii) the Board of Directors finds that any reduction made under such conditions will not adversely affect the interests of the Owners of the Bonds and (iii) the District is not delinquent in the payment of the principal of or interest on the Bonds. For purposes of estimating Administrative Expenses for the foregoing calculations, the Independent Financial Consultant or Special Tax Administrator shall compute the Administrative Expenses for the current Fiscal Year and escalate that amount by two percent (2%) in each subsequent Fiscal Year. D-16 Attachment 4 Covenant 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 above or to limit the power of the District to levy the Special Taxes for the purposes set forth above, it will commence and pursue legal action in order to preserve its ability to comply with such covenants. Continuing Disclosure and Reporting Requirements. The District covenants to comply with the terms of the Continuing Disclosure Agreement executed by it on the Delivery Date with respect to compliance with the Securities and Exchange Commission's Rule 15c2-12, provided the failure of the District to comply with the terms of said Continuing Disclosure Agreement shall not constitute an event of default under Article VIII of the Indenture. AMENDMENTS TO INDENTURE Supplemental Indentures or Orders Not Requiring Bondowner Consent. The District and Trustee may from time to time, and at any time, without notice to or consent of any of the Bondowners, enter into Supplemental Indentures for any of the following purposes: (a) to cure any ambiguity, to correct or supplement any provisions in the Indenture which may be inconsistent with any other provision in the Indenture, or to make any other provision with respect to matters or questions arising under the 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 the Indenture, other covenants, agreements, limitations and restrictions to be observed by the District which are not contrary to or inconsistent with the Indenture as theretofore in effect or which further secure Bond payments; (c) to modify, amend or supplement the Indenture in such manner as to permit the qualification of the Indenture 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 under the Indenture, and to add such other 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 then Outstanding; or (d) to modify, alter or amend the RMA 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 the District to an amount which is less than that permitted under the Indenture; or (e) to modify, alter, amend or supplement the Indenture in any other respect which is not materially adverse to the Bondowners. Supplemental Indentures or Orders Requiring Bondowner Consent. Exclusive of the Supplemental Indentures described above, the Owners of not less than a majority in aggregate principal amount of the Bonds Outstanding shall have the right to consent to and approve the execution and delivery 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 the Indenture; provided, however, that nothing in the Indenture permits, or shall be construed as permitting, (a) an extension of the maturity date of the principal, or the payment date of interest on, any Bond, (b) a reduction in the principal amount of, or redemption premium on, any Bond or the rate of interest thereon, (c) a preference or priority of any Bond over any other Bond, or (d) a reduction in the aggregate principal amount of the Bonds the Owners of which are required to consent to such Supplemental Indenture, without the consent of the Owners of all Bonds then Outstanding. D-17 Attachment 4 If at any time the District shall desire to adopt a Supplemental Indenture, which pursuant to the terms of the Indenture 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 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 Outstanding as required by the Indenture. 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 a majority in aggregate principal amount of the 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. In determining whether the Owners of a majority of the aggregate principal amount of the Bonds have consented to the adoption of any Supplemental Indenture, Bonds which are owned by the District or by any person directly or indirectly controlling or controlled by or under the direct or indirect common 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 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 in instances where such consent is required pursuant to the provisions of the Indenture, the Indenture shall be, and shall be deemed to be, modified and amended in accordance therewith, and the respective rights, duties and obligations under the Indenture of the District and all Owners of Outstanding Bonds shall thereafter be determined, exercised and enforced under the Indenture, subject in all respects to such modifications and amendments. Notation of Bonds; Delivery of Amended Bonds. After the effective date of any action taken as hereinabove provided, the District may determine that the 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 at such effective date and presentation of his Bond for the purpose at the 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. If the District shall so determine, new 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 at such effective date such new Bonds shall be exchanged at the 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, upon surrender of such Outstanding Bonds. TRUSTEE Duties, Immunities and Liabilities of Trustee. The Bank of New York Mellon Trust Company, N.A. shall be the Trustee for the Bonds unless and until another Trustee is appointed by the District under the Indenture. The Trustee shall, prior to an event of default and after curing all events of default which may have occurred, perform such duties and only such duties as are specifically set forth in the Indenture. Upon the occurrence and upon the continuance of an event of default, the Trustee shall exercise such of the rights and powers vested in it by the Indenture, and use the same degree of care and skill in their exercise, as a reasonable corporate trustee would exercise or use as trustee under a trust indenture. The District may, at any time, appoint a successor Trustee satisfying the requirements of the Indenture for the purpose of receiving all money which the District is required to deposit with the Trustee under the Indenture and to allocate, use and apply the same as provided in the Indenture. D-18 Attachment 4 The Trustee is authorized to and shall mail or cause to be mailed by first class mail, postage prepaid, or wire transfer, interest payments to the Bondowners, to select Bonds for redemption, and to maintain the Bond Register. The Trustee is authorized to pay the principal of and premium, if any, on the 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 presented to it for such purposes, to provide for the cancellation of Bonds all as provided in the Indenture, and to provide for the authentication of Bonds, and shall perform such other duties expressly assigned to or imposed on it as provided in the Indenture; provided, however, that no other duties of the Trustee shall be implied or imposed upon the Trustee other than as expressly stated under the Indenture. The Trustee shall keep accurate records of all funds administered by it and all Bonds paid, discharged and cancelled by it. The Trustee is authorized to redeem the Bonds when duly presented for payment at maturity, or on redemption prior to maturity. The Trustee shall cancel all Bonds upon payment thereof. 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 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 under the Indenture, and indemnify and save the Trustee and its officers, directors and employees harmless against costs, claims, expenses (including the reasonable expense of its counsel) and liabilities not arising from its own negligence or willful misconduct which it may incur in the exercise and performance of its powers and duties under the Indenture. The foregoing obligation of the District to indemnify the Trustee shall survive the removal or resignation of the Trustee or the discharge of the Bonds. Removal of Trustee. The District may at any time at its sole discretion remove the Trustee initially appointed, and any successor thereto, by delivering to the Trustee a written notice of its decision to remove the Trustee and may appoint a successor or successors thereto; provided that any such successor, other than the Trustee, shall be a bank or trust company having (or in the case of a financial institution that is part of a bank holding company, such company shall have) a combined capital (exclusive of borrowed capital) and surplus of at least $50,000,000, and subject to supervision or examination by federal or state authority. Any removal shall become effective only upon acceptance of appointment by the successor Trustee. If any bank 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 the provisions described above, the combined capital and surplus of such bank 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. 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 in the office of the Trustee. Upon receiving such notice of resignation, the District shall promptly appoint a successor Trustee satisfying the criteria of the Indenture by an instrument in writing. In the event a successor trustee shall not have been designated within 30 Business Days, the Trustee shall have the right to petition any federal court for an order appointing a replacement Trustee. 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. Liability of Trustee. The recitals of fact and all promises, covenants and agreements contained in the Indenture and in the Bonds shall be taken as statements, promises, covenants and agreements of the District, and the Trustee assumes no responsibility and shall have no liability for the correctness of the same and makes no representations as to the validity or sufficiency of the Indenture, the Bonds, and shall incur no responsibility and have no liability in respect thereof, other than in connection with its express duties or obligations D-19 Attachment 4 specifically set forth in the Indenture, in the Bonds, or in the certificate of authentication of the Trustee. The Trustee shall be under no responsibility or duty and shall have no responsibility with respect to the issuance of the Bonds for value. The Trustee shall not be liable in connection with the performance of its duties under the Indenture, 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, certificate of an Independent Financial Consultant 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 under the Indenture in good faith and in accordance therewith. The Trustee shall not be bound to recognize any person as the Owner of a Bond unless and until such Bond is submitted for inspection, if required, and his title thereto satisfactorily established, if disputed. Whenever in the administration of its duties under the Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action under the Indenture, such matter (unless other evidence in respect thereof is specifically prescribed in the Indenture) 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 the 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 deem reasonable. The Trustee shall have no duty or obligation whatsoever to monitor or enforce the collection of Special Taxes or other funds to be deposited with it under the Indenture, or as to the correctness of any amounts received. The sole obligation of the Trustee with respect thereto shall be limited to the proper accounting for such funds as it shall actually receive. No provision in the 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 under the Indenture, or in the exercise of its rights or powers. In the event the Trustee shall advance funds in connection with its administration of the trust, the Trustee shall be entitled to interest at the maximum interest rate permitted by law. The Trustee shall not be deemed to have knowledge of any event of default that doesn't involve a failure to make payment unless and until it shall have actual knowledge thereof by receipt of written notice thereof at its corporate trust office. 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. EVENTS OF DEFAULT; REMEDIES 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 when and as the same shall become due and payable, whether at maturity as therein expressed, by declaration or otherwise; D-20 Attachment 4 (b) Default in the due and punctual payment of the interest on any Bond when and as the same shall become due and payable; or (c) Except as described in (a) or (b), default shall be made by the District in the observance of any of the agreements, conditions or covenants on its part contained in the Indenture, the 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 Owners of 25% in aggregate principal amount of the Outstanding Bonds. The District agrees to give notice to the Trustee immediately upon the occurrence of an event of default under (a) or (b) above and within 30 days of the District's knowledge of an event of default under (c) above. Remedies of Owners. Following the occurrence of an event of default, any Owner shall have the right for the equal benefit and protection of all Owners similarly situated: (a) By mandamus or other suit or proceeding at law or in equity to enforce his 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 the 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. Nothing in the Indenture, the 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 to the respective Owners thereof at the respective dates of maturity, out of the Net Taxes and other amounts pledged for such payment, or affect or impair the right of action, which is also absolute and unconditional, of such Owners to institute suit to enforce such payment by virtue of the contract embodied in the Bonds and in the Indenture. A waiver of any default or breach of duty or contract by any Owner 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 by any Owner 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 Owners by the Act or by the Indenture may be enforced and exercised from time to time and as often as shall be deemed expedient by the Owners. If any suit, action or proceeding to enforce any right or exercise any remedy is abandoned or determined adversely to the Owners, the District and the Owners shall be restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken. No remedy conferred upon or reserved 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 under the Indenture 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. The Trustee's counsel is not and shall not be deemed counsel to the Bondholders. Any communication between the Trustee and its counsel shall be deemed confidential and privileged. In case the moneys held by the Trustee after an event of default consisting of a failure to make payment shall be insufficient to pay in full the whole amount so owing and unpaid upon the Outstanding D-21 Attachment 4 Bonds, then all available amounts shall be applied to the payment of such principal and interest without preference or priority of principal over interest, or interest over principal, or of any installment of interest over any other installment of interest, ratably to the aggregate of such principal and interest. DEFEASANCE If the District shall pay or cause to be paid, or there shall otherwise be paid, to the Owner of an Outstanding Bond the interest due thereon and the principal thereof, at the times and in the manner stipulated in the Indenture or any Supplemental Indenture, then the Owner of such 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 under the Indenture shall thereupon cease, terminate and become void and be discharged and satisfied. In the event of a defeasance of all Outstanding Bonds, 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 the Indenture which are not required for the payment of the principal of, premium, if any, and interest due on such Bonds. Any Outstanding Bond shall be deemed to have been paid if such 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, 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 Expense Account) and available for such purpose, is fully sufficient to pay the principal of, premium, if any, and interest on such 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, noncallable 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 Expense Account) and available for such purpose, together with the interest to accrue thereon, to pay and discharge the principal of, premium, if any, and interest on such Bond, as and when the same shall become due and payable; then, at the election of the District, and notwithstanding that any Outstanding Bonds shall not have been surrendered for payment, all obligations of the District under the Indenture and any Supplemental Indenture with respect to such Bond shall cease and terminate, except for the obligation of the Trustee to pay or cause to be paid to the Owner of any such Bond not so surrendered and paid, all sums due thereon and except for the covenants of the District 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 (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 to be defeased, 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 being defeased have been legally defeased in accordance with the Indenture and any applicable Supplemental Indenture. If a forward supply contract is employed in connection with an advance refunding to be effected under (c) above, (i) such verification report shall expressly state that the adequacy of the amounts deposited with the bank under (c) above to accomplish the refunding relies solely on the initial escrowed investments and the maturing principal thereof and interest income thereon and does not assume performance under or compliance with the forward supply contract, and (ii) the applicable escrow agreement executed to effect an advance refunding in D-22 Attachment 4 accordance with (c) above shall provide that, in the event of any discrepancy or difference between the terms of the forward supply contract and the escrow agreement, the terms of the escrow agreement shall be controlling. Upon a defeasance, the Trustee, upon request of the District, shall release the rights of the Owners of such Bonds 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 under the Indenture of all Outstanding Bonds, the Trustee shall pay over or deliver to the District any funds held by the Trustee at the time of a defeasance, which are not required for the purpose of paying and discharging the principal of or interest on the 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 have been defeased, in the form directed by the District, stating that the defeasance has occurred. MISCELLANEOUS Execution of Documents and Proof of Ownership. Any request, direction, consent, revocation of consent, or other instrument in writing required or permitted by the Indenture to be signed or executed by Bondowners may be in any number of concurrent instruments of similar tenor 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 shall be sufficient for the purposes of the Indenture (except as otherwise provided in the Indenture), 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. (b) As to any 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, 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 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 the 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 stated in the Indenture which the Trustee or the District may deem sufficient. Any request or consent of the Owner of any Bond shall bind every future Owner of the same Bond in respect of anything done or suffered to be done by the Trustee or the District in pursuance of such request or consent. Unclaimed Moneys. Anything in the Indenture to the contrary notwithstanding, any money held by the Trustee in trust for the payment and discharge of any of the Outstanding Bonds which remain unclaimed for a period ending at the earlier of two Business Days prior to the date such funds would escheat to the State or two years after the date when such Outstanding Bonds have become due and payable, if such money was held by the Trustee at such date, or for a period ending at the earlier of two Business Days prior to the date such funds would escheat to the State or two years after the date of deposit of such money if deposited with the Trustee after the date when such Outstanding Bonds become due and payable, shall be repaid by the Trustee to the District, as its absolute property and 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; provided, however, that, before being required to make any such payment to the District, the Trustee at the written request of the District or the Trustee shall, at the expense of the District, cause to be D-23 Attachment 4 mailed by first-class mail, postage prepaid, to the registered Owners of such Outstanding 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. Provisions Constitute Contract. The provisions of the Indenture shall constitute a contract between the District and the Bondowners and the provisions of the Indenture 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 the Indenture shall be irrepealable, but shall be subject to modifications to the extent and in the manner provided in the Indenture, but to no greater extent and in no other manner. Future Contracts. Nothing contained in the Indenture shall be deemed to restrict or prohibit the District from making contracts or creating bonded or other indebtedness payable from a pledge of the Gross Taxes which is subordinate to the pledge under the Indenture, or which is payable from the general fund of the District or from taxes or any source other than the Gross Taxes and other amounts pledged under the Indenture. 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 the Indenture, and for the better assuring and confirming unto the Owners of the Bonds the rights and benefits provided in the Indenture. Action on Next Business Day. If the date for making any payment or the last date for performance of any act or the exercising of any right, as provided in the Indenture, is not a Business Day, such payment, with no interest accruing for the period from and after such nominal date, may be made or act performed or right exercised on the next succeeding Business Day with the same force and effect as if done on the nominal date provided therefor in the Indenture. Severability. If any covenant, agreement or provision, or any portion thereof, contained in the Indenture, or the application thereof to any person or circumstance, is held to be unconstitutional, invalid or unenforceable, the remainder of the 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 the Indenture, the Bonds shall remain valid and the Bondowners shall retain all valid rights and benefits accorded to them under the laws of the State of California. D-24 Attachment 4 APPENDIX E FORM OF DISTRICT CONTINUING DISCLOSURE AGREEMENT This Continuing Disclosure Agreement, dated as of [Dated Date], 2013 (the "Disclosure Agreement"), is executed and delivered by the Truckee Donner Public Utility District Community Facilities District No. 03-1 (Old Greenwood) (the "District") in connection with the issuance of its $ aggregate principal amount of Truckee Donner Public Utility District Community Facilities District No. 03-1 (Old Greenwood) 2013 Special Tax Refunding Bonds (the "Bonds"). The Bonds are being issued pursuant to a Trust Indenture (the "Indenture"), dated [Dated Date], 2013, by and between the District and The Bank of New York Mellon Trust Company, N.A., (the "Trustee"), relating to the Bonds. The District covenants and agrees as follows: Section 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the District for the benefit of the Owners and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with S.E.C. Rule 15c2-12(b)(5). Section 2. Definitions. In addition to the definitions set forth in the 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 District 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 purposes. "Dissemination Agent" means Willdan Financial Services, or any successor Dissemination Agent designated in writing by the District and which has filed with the District and the Trustee a written acceptance of such designation. "EMMA " means the Electronic Municipal Market Access system of the MSRB. "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 and any successor entity designated under the Rule as the repository for filings made pursuant to the Rule. "Official Statement" means the Official Statement for the Bonds, dated 92013. "Participating Underwriter" means Brandis Tallman, LLC. "Rate and Method of Apportionment" means the Rate and Method of Apportionment of Special Taxes for Truckee Donner Public Utility District Community Facilities District No. 03-1 (Old Greenwood), as amended from time to time. "Repository" means the MSRB or any other entity designated or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. 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. E-1 Attachment 4 "Rule" means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. "TDPUD " means Truckee Donner Public Utility District. Section 3. Provision of Annual Reports. The District shall, or shall cause the Dissemination Agent by written direction to the Dissemination Agent to, not later than the July 1 following the end of the TDPUD's fiscal year (which currently ends on December 31), commencing with the report for the fiscal year ending December 31, 2013, provide to the Repository an Annual Report which 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 include by reference other information as provided in Section 4 of this Disclosure Agreement; provided that the audited financial statements of TDPUD may be submitted separately from and later than the balance of the Annual Report if they are not available by the date required above for the filing of the Annual Report. An Annual Report shall be provided at least annually notwithstanding any fiscal year longer than 12 calendar months. The District's fiscal year is currently effective from July 1 to the immediately succeeding June 30 of the following year. The District will promptly notify the Repository of a change in the fiscal year dates. (b) In the event that the Dissemination Agent is an entity other than the District, then the provisions of this Section 3(b) shall apply. Not later than fifteen (15) Business Days prior to the date specified in subsection (a) for providing the Annual Report, the District shall provide the Annual Report to the Dissemination Agent. If by fifteen (15) Business Days prior to the due date for an Annual Report the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall contact the District to determine if the District will be filing the Annual Report in compliance with subsection (a). The District 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 it hereunder. The Dissemination Agent may conclusively rely upon such certification of the District and shall have no duty or obligation to review such Annual Report. (c) If the Dissemination Agent is other than the District and if the Dissemination Agent is unable to verify that an Annual Report has been provided to the Repository by the date required in subsection (a), the Dissemination Agent shall send a notice to the Repository, in the form required by the Repository. (d) If the Dissemination Agent is other than the District, the Dissemination Agent shall: (i) determine each year prior to the date for providing the Annual Report the name and address of the Repository if other than the MSRB; and (ii) promptly after receipt of the Annual Report, file a report with the District certifying that the Annual Report has been provided to the Repository and the date it was provided. (e) Notwithstanding any other provision of this Disclosure Agreement, all filings shall be made in accordance with the MSRB's EMMA system or in another manner approved under the Rule. Section 4. Content of Annual Reports. The Annual Report shall contain or incorporate by reference the following: (a) The audited financial statements of the District for the most recent fiscal year of the District then ended, which may be included in the audited financial statements of TDPUD. If the audited E-2 Attachment 4 financial statements are not available by the time the Annual Report is required to be filed, the Annual Report shall contain any unaudited financial statements of the District in a format similar to the audited 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 of the District shall be audited by such auditor as shall then be required or permitted by State law or the Indenture. Audited financial statements 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 District 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 District shall modify the basis upon which its financial statements are prepared, the District shall provide a notice of such modification to each Repository, including a reference to the specific federal or state law or regulation specifically describing the legal requirements for the change in accounting basis. (b) The Annual report shall also contain the following information: (i) the principal amount of the Bonds outstanding as of the September 2 preceding the filing of the Annual Report; (ii) the balance in each fund under the Indenture as of the September 2 preceding the filing of the Annual Report; (iii) The Special Tax delinquency rate for all parcels within the on which the Special Tax is levied, as shown on the assessment roll of the Nevada County Assessor last equalized [prior to the date of the Annual Report], the number of parcels within the District on which the Special Tax is levied that are delinquent in payment of the Special Tax, as shown on the assessment roll of the Nevada County Assessor last equalized [prior to the date of the Annual Report], the amount of each delinquency and the length of time delinquent, or similar information pertaining to delinquencies deemed appropriate by the District; provided, however, that parcels with delinquencies of $2,500 or less may be grouped together and such information may be provided by category. (iv) an update of Table _ in the Official Statement for the Bonds, based on the assessed values (rather than appraised values) within the District and the Special Tax levy for the fiscal year in which the Annual Report is being filed; (v) any changes to the Rates and Method of Apportionment of the Special Tax approved or submitted to the qualified electors for approval prior to the filing of the Annual Report; (vi) the status of any foreclosure actions being pursued by the District with respect to delinquent Special Taxes; (vii) any information not already included under (i) through (vi) above that the Board of Directors of the PUD is required to file in its annual report to the California Debt and Investment Advisory Commission pursuant to the provisions of the Mello -Roos Community Facilities Act of 1982, as amended; and (viii) such further information, if any, as may be necessary to make the statements specifically required pursuant to this Section 4(b), in the light of the circumstances under which they are made, not misleading. Any or all of the items above may be included by specific reference to other documents, including official statements of debt issues of TDPUD, the District or related public entities, which have been submitted to the Repository or the Securities and Exchange Commission. If the document included by reference is a final E-3 Attachment 4 official statement, it must be available from the Municipal Securities Rulemaking Board. The District shall clearly identify each such other document so included by reference. Neither the Trustee nor the Dissemination Agent shall have any responsibility for the content of the Annual Report, or any part thereof. Section 5. Renortina of Sienificant Events. (a) Pursuant to the provisions of this Section 5, the District shall give, or cause the Dissemination Agent to give, 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: 1. principal and interest payment delinquencies; 2. unscheduled draws on debt service reserves reflecting financial difficulties; 3. unscheduled draws on credit enhancements reflecting financial difficulties; 4. substitution of credit or liquidity providers, or their failure to perform; 5. adverse tax opinions or the issuance by the Internal Revenue Service of proposed or final determinations of taxability or of a Notice of Proposed Issue (IRS Form 5701- TEB); 6. tender offers; 7. defeasances; 8. ratings changes; and 9. bankruptcy, insolvency, receivership or similar proceedings. Note: for the purposes of the event identified in subparagraph (9), 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 District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material: 1. unless described in paragraph 5(a)(5) above, notices or determinations by the Internal Revenue Service with respect to the tax status of the Bonds or other material events affecting the tax status of the Bonds; 2. the consummation of a merger, consolidation or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to E-4 Attachment 4 undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms; appointment of a successor or additional trustee or the change of the name of a trustee; 4. nonpayment related defaults; modifications to the rights of Owners of the Bonds; 6. notices of redemption; and 7. release, substitution or sale of property securing repayment of the Bonds. (c) Whenever the District obtains knowledge of the occurrence of a Listed Event under Section 5(b) above, the District shall as soon as possible determine if such event would be material under applicable federal securities laws. (d) If the District determines that knowledge of the occurrence of a Listed Event under Section 5(b) would be material under applicable federal securities laws, the District shall file a notice of such occurrence with the Repository in a timely manner not more than 10 business days after the event. (e) The District hereby agrees that the undertaking set forth in this Disclosure Agreement is the responsibility of the District and that the Dissemination Agent shall not be responsible for determining whether the District's instructions to the Dissemination Agent under this Section 5 comply with the requirements of the Rule. Section 6. Termination of Reporting Obli ag tion. The District's and Dissemination Agent'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 District shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). Section 7. Dissemination Agent. From time to time, the District may appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. If at any time there is not any other designated Dissemination Agent, the District shall be the Dissemination Agent. Section 8. Amendment. (a) This Disclosure Agreement may be amended, by written agreement of the parties, without the consent of the Owners, if all of the following conditions are satisfied: (i) such amendment is made in connection with a change in circumstances that arises from a change in legal (including regulatory) requirements, a change in law, or a change in the identity, nature or status of the District or the type of business conducted thereby; (ii) this Disclosure Agreement as so amended would have complied with the requirements of the Rule as of the date of this Disclosure Agreement, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; (iii) the District shall have delivered to the Dissemination Agent an opinion of a nationally recognized bond counsel or counsel expert in federal securities laws, addressed to the District, to the same effect as set forth in clause (ii) above; (iv) the District shall have delivered to the Dissemination Agent an opinion of nationally recognized bond counsel or counsel expert in federal securities laws, addressed to the District, to the effect that the amendment does not materially impair the interests of the Owners or Beneficial Owners; and (v) the District shall have delivered copies of such opinion and amendment to the Repository. E-5 Attachment 4 (b) This Disclosure Agreement also may be amended by written agreement of the parties upon obtaining consent of Owners in the same manner as provided in the Trust Indenture for amendments to the Trust Indenture with the consent of the Owners of the Bonds; provided that the conditions set forth in Section 8(a)(i), (ii), (iii) and (v) have been satisfied. (c) To the extent any amendment to this Disclosure Agreement results in a change in the type of financial information or operating data provided pursuant to this Disclosure Agreement, the first Annual Report provided thereafter shall include a narrative explanation of the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. (d) If an amendment is made to the basis on which financial statements are prepared, the Annual Report for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Such comparison shall include a quantitative and, to the extent reasonably feasible, qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information. Section 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the District 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 District 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 District shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 10. Default. In the event of a failure of the District or the Dissemination Agent 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 District and/or the Dissemination Agent to comply with their respective obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Trust Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the District or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance. 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 District agrees to indemnify and hold harmless (but only to the extent of Special taxes available for such purpose) the Dissemination Agent, its officers, directors, employees and agents, against any loss, expense and liabilities which the Dissemination Agent may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys' fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The obligations of the District under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. Neither the Trustee nor the Dissemination Agent shall be required to consent to any amendment which would impose any greater duties or risk of liability on the Trustee or the Dissemination Agent. No person shall have any right to commence any action against the Dissemination Agent seeking any remedy other than to compel specific performance of this Agreement. The Dissemination Agent shall not be liable under any circumstances for monetary damages to any person for any breach of this Agreement. The Dissemination Agent shall have no responsibility whatsoever for the content of any report or notice required of the District hereunder. E-6 Attachment 4 Section 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the District, the Trustee, the Dissemination Agent, the Participating Underwriter and Owners and Beneficial Owners from time to time of the Bonds and shall create no rights in any other person or entity. TRUCKEE DONNER PUBLIC UTILITY DISTRICT COMMUNITY FACILITIES DISTRICT NO.03-1 (OLD GREENWOOD) By: General Manager, Truckee Donner Public Utility District The undersigned hereby agrees to act as Dissemination Agent pursuant to the foregoing Continuing Disclosure Agreement. WILLDAN FINANCIAL SERVICES, as Dissemination Agent Bv: Authorized Signatory E-7 Attachment 4 EXHIBIT A NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO FILE ANNUAL REPORT Name of District: Truckee Donner Public Utility District Community Facilities District No. 03-1 (Old Greenwood) Name of Bond Issue: Truckee Dormer Public Utility District Community Facilities District No. 03-1 (Old Greenwood) 2013 Special Tax Refunding Bonds Date of Issuance: 12013 NOTICE IS HEREBY GIVEN that the Truckee Donner Public Utility District Community Facilities District No. 03-1 (Old Greenwood) (the "District") has not provided an Annual Report with respect to the above -named Bonds as required by Section 3 of the Continuing Disclosure Agreement, dated [Dated Date], 2013, executed by the District for the benefit of the Owners and Beneficial Owners of the above -referenced Bonds. The District anticipates that the Annual Report will be filed by Dated: cc: District WILLDAN FINANCIAL SERVICES By: Title: E-8 Attachment 4 APPENDIX F FORM OF OPINION OF BOND COUNSEL 2013 Truckee Donner Public Utility District Community Facilities District No. 03-1 (Old Greenwood) Truckee, California Re: $XK XVC, 000 Truckee Donner Public Utility District Community Facilities District No. 03-1 (Old Greenwood) 2013 Special Tax Refunding Bonds Ladies and Gentlemen: We have examined the Constitution and the laws of the State of California, a certified record of the proceedings taken in connection with the authorization and issuance by the Truckee Donner Public Utility District Community Facilities District No. 03-1 (Old Greenwood) (the "District") of its 2013 Special Tax Refunding Bonds in the aggregate principal amount of $XX,XXX,000 (the "2013 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 District, the initial purchasers of the 2013 Bonds and others. We have not undertaken to verify through independent investigation the accuracy of the representations and certifications relied upon by us. The 2013 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 Trust Indenture, dated as of [Dated Date], 2013 (the "Indenture"), between the District and The Bank of New York Mellon Trust Company, N.A., as Trustee (the "Trust Indenture"). All capitalized terms not defined herein shall have the meaning set forth in the Trust Indenture. The 2013 Bonds are dated their date of delivery and mature on the dates and in the amounts set forth in the Trust Indenture. The 2013 Bonds bear interest payable semiannually on each March 1 and September 1, commencing on March 1, 2014, at the rates per annum set forth in the Trust Indenture. The 2013 Bonds are registered 2013 Bonds in the form set forth in the Trust Indenture, redeemable in the amounts, at the times and in the manner provided for in the Trust 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 2013 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 Trust Indenture, except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws affecting creditors' rights generally, or by the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases, or by the limitations on legal remedies against public agencies in the State of California. The 2013 Bonds are limited obligations of the District but are not a debt of the Truckee Donner Public Utility District, the State of California 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 Truckee Donner Public Utility District, the State of California, or any of its political subdivisions is pledged for the payment thereof. F-1 Attachment 4 (2) The execution and delivery of the Trust Indenture has been duly authorized by the District, and the Trust Indenture is valid and binding upon the District and is enforceable in accordance with its terms, except to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws affecting creditors' rights generally, or by the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases, or by the limitations on legal remedies against public agencies in the State of California; provided, however, we express no opinion as to the enforceability of the covenant of the District contained in the Trust Indenture to levy Special Taxes for the payment of Administrative Expenses and we express no opinion as to any provisions with respect to indemnification, penalty, contribution, choice of law, choice of forum or waiver provisions contained therein. (3) The Trust Indenture creates a valid pledge of that which the Trust Indenture purports to pledge, subject to the provisions of the Trust Indenture, except to the extent that enforceability of the Trust Indenture may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws affecting creditors' rights generally, or by the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases, or by the limitations on legal remedies against public agencies in the State of California. (4) Under existing statutes, regulations, rulings and judicial decisions, interest on the 2013 Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations; however, it should be noted that, with respect to corporations, such interest will be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of corporations. (5) Interest on the 2013 Bonds is exempt from State of California personal income tax. (6) The difference between the issue price of a 2013 Bond (the first price at which a substantial amount of the 2013 Bonds of a maturity are to be sold to the public) and the stated redemption price at maturity with respect to such 2013 Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bondowner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Bondowner will increase the Bondowner's basis in the applicable 2013 Bond. Original issue discount that accrues for the Bondowner is excluded from the gross income of such owner for federal income tax purposes, is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals or corporations (as described in paragraph 4 above) and is exempt from State of California personal income tax. (7) The amount by which a Bondowner's original basis for determining loss on sale or exchange in the applicable 2013 Bond (generally the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable 2013 Bond premium which must be amortized under Section 171 of the Internal Revenue Code of 1986, as amended (the "Code"); such amortizable 2013 Bond premium reduces the Bondowner's basis in the applicable 2013 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 2013 Bond premium may result in a Bondowner realizing a taxable gain when a 2013 Bond is sold by the owner for an amount equal to or less (under certain circumstances) than the original cost of the 2013 Bond to the owner. The opinions expressed in paragraphs (4) and (6) above as to the exclusion from gross income for federal income tax purposes of interest and original issue discount on the 2013 Bonds is subject to the condition that the District complies with all requirements of the Code, that must be satisfied subsequent to the issuance of the 2013 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 requirements of the Code might F-2 Attachment 4 cause interest and original issue discount on the 2013 Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the 2013 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 2013 Bonds. Certain requirements and procedures contained or referred to in the Trust Indenture may be changed, and certain actions may be taken, under the circumstances and subject to the terms and conditions set forth in the Trust Indenture, 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 as to the effect on the exclusion of interest or original issue discount on the 2013 Bonds from gross income for federal income tax purposes on and after the date on which any such change occurs or action is taken upon the advice or approval of counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation. We are admitted to the practice of law only in the State of California and 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 Trust Indenture. The opinions expressed herein are based upon an analysis of existing statutes, regulations, rulings and judicial decisions and cover certain matters not directly addressed by such authorities. 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). We express no opinion herein as to the accuracy, completeness or sufficiency of the Official Statement or other offering material relating to the 2013 Bonds and expressly disclaim any duty to advise the owners of the 2013 Bonds with respect to the matters contained in the Official Statement. Respectfully submitted, F-3 Attachment 4 APPENDIX G BOOK ENTRY ONLY SYSTEM The information in this section concerning DTC and DTC's book -entry only system has been obtained from sources that the District believes to be reliable, but the District takes no 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 ofprincipal, 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. Reference made to www.dttc.com is presented as a link for additional information regarding DTC and is not a part of this Official Statement. The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the Bonds (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 certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. If, however, the aggregate principal amount of any issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal of such issue. 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. The information on such website is not incorporated herein by such reference or otherwise. 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 G-1 Attachment 4 Owners will not receive certificates representing their ownership interests in 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 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 an issue 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 District 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 District or the Paying Agent, 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 Paying Agent, or the District, 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 Paying Agent, 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 Beneficial Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant, to the Paying Agent, 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 Paying Agent. 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 Paying Agent's DTC account. G-2 Attachment 4 DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the District or the Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, physical Bonds are required to be printed and delivered. The District may decide to discontinue use of the system of book -entry transfers through DTC (or a successor securities depository). In that event, physical Bond certificates will be printed and delivered. The information in this section concerning DTC and DTC's book -entry system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the accuracy thereof. G-3