$4,825,000 CITY OF BAKERSFIELD ASSESSMENT ...cdiacdocs.sto.ca.gov/2008-0239.pdfBonds, nor shall...

NEW ISSUE NO RATINGBOOK-ENTRY-ONLY SYSTEM

In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel, based upon an analysis of existing laws, regulations, rulings, and court decisions and assuming (among other things) compliance with certain covenants, interest on the Bonds is excluded from gross income for federal tax purposes and is exempt from State of California personal income taxes. In the opinion of Bond Counsel, interest on the Bonds is not a specific preference item for purposes of the federal individual and corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings in calculating federal corporate alternative minimum taxable income. Bond Counsel expresses no opinion regarding any other tax consequences caused by the ownership or disposition of, or the accrual or receipt of interest on, the Bonds. See “TAX MATTERS.”

$4,825,000CITY OF BAKERSFIELD

ASSESSMENT DISTRICT NO. 07-2(SYDNEY HARBOUR)

LIMITED OBLIGATION IMPROVEMENT BONDSDated: Date of Delivery Due: September 2, as shown below

The Bonds described herein (the “Bonds”) are special, limited obligation bonds being issued by the City of Bakersfield, California (the “City”), a portion of the proceeds of which will be used to finance the acquisition of certain public improvements specially benefiting properties located within the boundaries of the City of Bakersfield Assessment District No. 07-2 (Sydney Harbour) (the “Assessment District”). The Assessment District was formed and the acquisition of the improvements will be undertaken as authorized under the provisions of the Municipal Improvement Act of 1913 (Division 12 of the California Streets and Highways Code) and the Municipal Code of the City. The Bonds are being issued pursuant to the provisions of the Improvement Bond Act of 1915 (Division 10 of the California Streets and Highways Code) (the “1915 Act”).

The Bonds are issuable only as fully-registered Bonds in the denomination of $5,000 each or any integral multiple thereof. Principal, interest at maturity or upon earlier redemption, as applicable, and premium, if any, with respect to the Bonds will be payable upon presentation and surrender thereof at the corporate trust office of U.S. Bank National Association, the paying agent, registrar, and transfer agent for the Bonds (the “Paying Agent”), in St. Paul, Minnesota. Interest on the Bonds (other than the final payment of interest, which is payable upon surrender of the Bonds) will be payable semiannually on March 2 and September 2 (each an “Interest Payment Date”), commencing September 2, 2008, by check of the Paying Agent mailed on each Interest Payment Date to the persons in whose names such Bonds are registered at the close of business on the fifteenth day of the calendar month immediately prior to an Interest Payment Date (or, in the case of an owner of at least $1,000,000 in principal amount of the Bonds who so requests in writing prior to the close of business on the fifteenth day of the month immediately preceding such Interest Payment Date, by wire transfer).

The Bonds will be issued initially in book-entry-only form through the book-entry system of The Depository Trust Company, New York, New York (“DTC”). See “BOOK-ENTRY-ONLY SYSTEM.”

The Bonds are subject to redemption on any Interest Payment Date in advance of maturity at the option of the City upon giving at least 30 days prior notice and upon payment of the principal thereof and interest accrued thereon to the date of redemption, plus any applicable redemption premium, as more fully described herein.

The Term Bonds maturing on September 2, 2028, are also subject to mandatory redemption in part prior to their stated maturity, as more fully described herein.

Further development of parcels within the Assessment District, transfers of property ownership, and other similar circumstances could result in prepayment of all or part of the assessments. Such prepayment would result in redemption of a portion of the Bonds prior to their stated maturities.

Under the provisions of the 1915 Act, installments of principal and interest sufficient to meet annual debt service requirements with respect to the Bonds shall be included on the regular tax bills of the County of Kern (the “County”) sent to owners of property against which there are unpaid assessments. The portion of the annual installments for the payment of principal of and interest on the Bonds is to be paid into the Redemption Fund, to be held by the Finance Director, and will be used to pay debt service on the Bonds as it becomes due.

To provide funds for payment of the Bonds and the interest thereon as a result of any delinquent assessment installments, the City will establish a Special Reserve Fund and deposit therein Bond proceeds in the original amount of $467,168.76. Additionally, the City has covenanted that, under certain circumstances, by no later than October 1 in any year, it will file an action in superior court to foreclose the lien on each delinquent assessment, as more particularly described herein.

IF A DELINQUENCY OCCURS IN THE PAYMENT OF ANY ASSESSMENT INSTALLMENT, THE CITY WILL HAVE A DUTY ONLY TO TRANSFER INTO THE REDEMPTION FUND THE AMOUNT OF THE DELINQUENCY OUT OF THE SPECIAL RESERVE FUND. THIS DUTY OF THE CITY IS CONTINUING DURING THE PERIOD OF DELINQUENCY, ONLY TO THE EXTENT OF FUNDS AVAILABLE FROM THE SPECIAL RESERVE FUND, UNTIL REINSTATEMENT, REDEMPTION, OR SALE OF THE DELINQUENT PROPERTY. THERE IS NO ASSURANCE THAT SUFFICIENT FUNDS WILL BE AVAILABLE FROM THE SPECIAL RESERVE FUND FOR THIS PURPOSE. THEREFORE, IF, DURING THE PERIOD OF DELINQUENCY, THERE ARE INSUFFICIENT AVAILABLE FUNDS, A DELAY MAY OCCUR IN PAYMENTS TO THE OWNERS OF THE BONDS. IN ACCORDANCE WITH SECTION 8769(b) OF THE 1915 ACT, THE CITY HAS DETERMINED THAT IT WILL NOT OBLIGATE ITSELF TO ADVANCE FUNDS FROM ITS TREASURY TO CURE ANY DEFICIENCY IN THE REDEMPTION FUND.

This cover page contains certain information for quick reference only. It is not a summary of the issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision.

MATURITY SCHEDULE

Maturity(September 2)

PrincipalAmount

InterestRate Price CUSIP (1) No.

Maturity(September 2)

PrincipalAmount

InterestRate Price CUSIP (1) No.

2009 $125,000 4.250% 100.000% 057510 H69 2012 $145,000 5.150% 100.000% 057510 H932010 130,000 4.550 100.000 057510 H77 2013 150,000 5.350% 100.000 057510 J262011 140,000 4.800 100.000 057510 H85

$4,135,000 7.375% Term Bond Due September 2, 2028 – Price: 100.000% (CUSIP (1) No. 057510 K99)

____________________

(1) Copyright 2008, American Bankers Association. CUSIP data is provided by Standard & Poor’s CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. (“CUSIP Service Bureau”). Such CUSIP data is provided only for the convenience of the reader and is not intended to create a database and does not serve in any way as a substitute for the services and information provided by the CUSIP Service Bureau. CUSIP is a registered trademark of the American Bankers Association. The City takes no responsibility for the accuracy of any CUSIP data set forth herein or for any changes or errors in such data.

THE BONDS ARE NOT SECURED BY THE GENERAL TAXING POWER OF THE CITY, THE COUNTY, THE STATE OF CALIFORNIA (THE “STATE”), OR ANY OTHER POLITICAL SUBDIVISION OF THE STATE, AND NEITHER THE CITY, NOR THE COUNTY, NOR THE STATE, NOR ANY OTHER POLITICAL SUBDIVISION OF THE STATE HAS PLEDGED ITS FULL FAITH AND CREDIT FOR THE PAYMENT OF THE BONDS.

The Bonds are being offered when, as, and if issued by the City and received by the Underwriter, subject to prior sale and to the approval of validity by Orrick, Herrington & Sutcliffe LLP, San Francisco, California, Bond Counsel, and the approval of certain matters for the City by the City Attorney of the City of Bakersfield. Certain other legal matters will be passed on by Goodwin Procter LLP, Los Angeles, California, as Disclosure Counsel to the City. It is expected that the Bonds in definitive form will be available for delivery through the facilities of DTC on or about April 23, 2008.

Dated: April 9, 2008.

toneil

Text Box

2008-0239

No dealer, broker, salesperson, or other person has been authorized by the City or the Underwriter to give any information or to make any representations other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy the Bonds, nor shall there be any sale of the Bonds, by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation, or sale.

This Official Statement is not to be construed to be a contract with the purchasers of the Bonds. Statements contained in this Official Statement that involve estimates, forecasts, or matters of opinion, whether or not expressly described herein, are intended solely as such and are not to be construed as representations of fact.

The information set forth herein has been obtained from the City and other sources that are believed to be reliable, but it is not guaranteed as to accuracy or completeness, and it is not to be construed as a representation by the City. 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 will, under any circumstances, create any implication that there has been no change in the affairs of the City or the Assessment District since the date hereof.

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.

This Official Statement is submitted in connection with the sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose.

THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

CITY OF BAKERSFIELD

Mayor and City Council

Harvey L. Hall, Mayor Irma Carson, Councilmember First Ward

Susan M. Benham, Councilmember Second Ward Ken Weir, Councilmember Third Ward

David R. Couch, Councilmember Fourth Ward Harold Hanson, Vice Mayor, Councilmember Fifth Ward

Jacquie Sullivan, Councilmember Sixth Ward Zack Scrivner, Councilmember Seventh Ward

City Staff

Alan Tandy, City Manager Virginia Gennaro, City Attorney Pamela A. McCarthy, City Clerk

Nelson K. Smith, Finance Director Raul M. Rojas, Public Works Director

BOND COUNSEL

Orrick, Herrington & Sutcliffe LLP San Francisco, California

ASSESSMENT ENGINEER

Wilson & Associates Fresno, California

PROPERTY APPRAISER

Launer & Associates, Inc. Bakersfield, California

DISCLOSURE COUNSEL

Goodwin Procter LLP Los Angeles, California

PAYING AGENT, REGISTRAR, AND TRANSFER AGENT

U.S. Bank National Association Los Angeles, California

The City of Bakersfield, California, the county seat of the County of Kern, is Located at the southern end of California's San Joaquin Valley. Bakersfield is approximately 110 miles north of Los Angeles and 290 miles south of San Francisco.

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TABLE OF CONTENTS

Page

INTRODUCTORY STATEMENT .................................................................................................................................1 The Bonds ................................................................................................................................................................1 The Assessment District ...........................................................................................................................................1 Property Ownership..................................................................................................................................................1 Improvements...........................................................................................................................................................2 Assessments..............................................................................................................................................................2 Appraisal ..................................................................................................................................................................2 Security for the Bonds ..............................................................................................................................................3 Special Reserve Fund ...............................................................................................................................................3 Foreclosure ...............................................................................................................................................................3 Assessment Delinquencies .......................................................................................................................................3 Book-Entry-Only System .........................................................................................................................................4 Continuing Disclosure ..............................................................................................................................................4 Forward-Looking Statements ...................................................................................................................................4 Miscellaneous...........................................................................................................................................................4

ESTIMATED SOURCES AND USES OF FUNDS .......................................................................................................5 THE BONDS...................................................................................................................................................................5

Purpose of the Bonds................................................................................................................................................5 Authority for Issuance ..............................................................................................................................................5 General .....................................................................................................................................................................6 Transfer and Exchange of Bonds..............................................................................................................................7 Bonds Mutilated, Destroyed, or Lost........................................................................................................................7 Redemption ..............................................................................................................................................................7 Effect of Redemption; Defeasance ...........................................................................................................................8 Refunding Bonds......................................................................................................................................................8 Disposition of Surplus from the Improvement Fund ................................................................................................9 Investment of Bond Proceeds ...................................................................................................................................9 Security for the Bonds ..............................................................................................................................................9 Special Reserve Fund ...............................................................................................................................................10 Redemption Fund Deficiencies ................................................................................................................................11 Covenant to Commence Superior Court Foreclosure ...............................................................................................11 Priority of Lien .........................................................................................................................................................12 Tax Covenants..........................................................................................................................................................12 Debt Service Schedule..............................................................................................................................................13

BOOK-ENTRY-ONLY SYSTEM ..................................................................................................................................13 THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS .................................................................................15

General .....................................................................................................................................................................15 Description of the Community Areas and the Improvements ..................................................................................16 Estimated Improvement Costs..................................................................................................................................18 Method of Assessment Spread .................................................................................................................................18

OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT..........19 Ownership of Property in the Assessment District ...................................................................................................19 The Developer ..........................................................................................................................................................20 Development and Financing Plans ...........................................................................................................................21 Assessment Roll .......................................................................................................................................................27 Utilities .....................................................................................................................................................................27 Flood and Earthquake Zones ....................................................................................................................................27 Zoning ......................................................................................................................................................................27 Tax Delinquencies ....................................................................................................................................................27 Environmental Issues Affecting Assessment District Property ................................................................................28 Bulk Value-to-Assessment Lien Ratio .....................................................................................................................29

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Direct and Overlapping Debt....................................................................................................................................31 SPECIAL RISK FACTORS............................................................................................................................................32

General .....................................................................................................................................................................32 Risks of Real Estate Secured Investments Generally ...............................................................................................32 Concentration of Ownership.....................................................................................................................................32 Property Values ........................................................................................................................................................33 Availability of Funds to Pay Delinquent Assessment Installments ..........................................................................33 Hazardous Substances ..............................................................................................................................................34 Endangered and Threatened Species ........................................................................................................................34 Factors That May Affect Land Development ...........................................................................................................35 Private Improvements; Increased Debt.....................................................................................................................35 Subordinate Debt; Payments by FDIC and Other Federal Agencies ........................................................................35 Assessment District Tax Delinquencies ...................................................................................................................36 Limited Obligation of the City Upon Delinquency ..................................................................................................36 City-Wide Property Tax and Assessment District Delinquencies ............................................................................37 Increased Risk of Mortgage Default in Other Areas of City May Impact Home Sales in Assessment

District...............................................................................................................................................................38 Factors Relating to Sub-Prime Loans.......................................................................................................................39 Bankruptcy and Foreclosure.....................................................................................................................................39 Economic, Political, Social, and Environmental Conditions....................................................................................40 Articles XIIIA and XIIIB of the California Constitution..........................................................................................40 Articles XIIIC and XIIID of the California Constitution..........................................................................................42 Future Initiatives.......................................................................................................................................................43 Covenant to Commence Superior Court Foreclosure ...............................................................................................43 Price Realized Upon Foreclosure .............................................................................................................................43 Priority of Lien .........................................................................................................................................................44 Refunding Bonds......................................................................................................................................................44 Absence of Market for Bonds...................................................................................................................................44 Loss of Tax Exemption ............................................................................................................................................45

ENFORCEABILITY OF REMEDIES ............................................................................................................................45 NO LITIGATION............................................................................................................................................................45 CERTAIN INFORMATION CONCERNING THE CITY.............................................................................................45 TAX MATTERS .............................................................................................................................................................46 APPROVAL OF LEGALITY .........................................................................................................................................46 UNDERWRITING ..........................................................................................................................................................47 NO RATING ...................................................................................................................................................................47 CONTINUING DISCLOSURE.......................................................................................................................................47 MISCELLANEOUS........................................................................................................................................................48

APPENDIX A - CITY OF BAKERSFIELD ECONOMIC, FINANCIAL, AND DEMOGRAPHIC INFORMATION ..............................................................................................A-1

APPENDIX B - APPRAISAL...................................................................................................................................B-1 APPENDIX C - FORM OF OPINION OF BOND COUNSEL ................................................................................C-1 APPENDIX D - ASSESSMENT DIAGRAM...........................................................................................................D-1 APPENDIX E - ASSESSMENT ROLL AND VALUE-TO-LIEN DATA............................................................... E-1 APPENDIX F - FORMS OF CONTINUING DISCLOSURE CERTIFICATES ..................................................... F-1

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OFFICIAL STATEMENT $4,825,000

CITY OF BAKERSFIELD ASSESSMENT DISTRICT NO. 07-2

(SYDNEY HARBOUR) LIMITED OBLIGATION IMPROVEMENT BONDS

INTRODUCTORY STATEMENT

THIS INTRODUCTORY STATEMENT IS SUBJECT IN ALL RESPECTS TO THE MORE COMPLETE INFORMATION IN THIS OFFICIAL STATEMENT, INCLUDING THE COVER PAGE AND APPENDICES HERETO, AND THE OFFERING OF THE BONDS TO POTENTIAL INVESTORS IS MADE ONLY BY MEANS OF THE ENTIRE OFFICIAL STATEMENT.

The Bonds

The purpose of this Official Statement, which includes the cover page and the appendices hereto, is to set forth certain information concerning the issuance and sale by the City of Bakersfield, California (the “City”), of $4,825,000 in aggregate principal amount of its City of Bakersfield Assessment District No. 07-2 (Sydney Harbour) Limited Obligation Improvement Bonds (the “Bonds”) for the City of Bakersfield Assessment District No. 07-2 (Sydney Harbour) (the “Assessment District”). The Bonds are issued pursuant to the Improvement Bond Act of 1915, being Division 10 of the California Streets and Highways Code (the “1915 Act”), the Charter and Municipal Code of the City, and Resolution No. 042-08 adopted by the City Council of the City (the “City Council”) on March 12, 2008 (the “Bond Resolution”).

The Assessment District

The Assessment District was formed and the assessments are being levied in accordance with the Municipal Improvement Act of 1913, being Division 12 of the California Streets and Highways Code (the “1913 Act”), and the Municipal Code of the City. Proceedings for the formation of the Assessment District were commenced by the City Council pursuant to a property owner petition filed by Stuart Thomas, Inc., a Nevada corporation, doing business as Lenox Homes (the “Developer”), as the owner at the date of the filing thereof of more than 60% of the assessable land within the Assessment District. See “OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT.”

The Assessment District is comprised of approximately 102.0 gross acres (or approximately 93.1 net acres) of land located in the southeast area of the City. The Assessment District has been divided into two separate community areas generally identified as (i) Sydney Harbour Area – portion (Tract No. 6520) (“Tract No. 6520”) and (ii) Sydney Harbour Area – portion (Tract No. 6611) (“Tract No. 6611”) (collectively, the “Community Areas”). The Assessment District boundaries are shown on the assessment diagram, a copy of which is attached hereto as APPENDIX D. For a further description of the Assessment District and the Community Areas, see “THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS.”

Property Ownership

As of February 15, 2008, the property within the Assessment District subject to the lien of the assessments was owned as follows: the Developer owned all 132 lots within Phase 1 of Tract No. 6520, all of the property within future Phase 2 of Tract No. 6520, which has been approved for subdivision into 153 lots, and 148 lots in Tract No. 6611, and individual homeowners owned the remaining seven lots in Tract No. 6611. The Developer and the individual homeowners are collectively referred to herein as the “Landowners.” See “OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT.”

Upon the issuance of the Bonds, the Community Areas will bear 100% of the total assessment lien. The property within the Assessment District is involved in various stages of the land development process. See

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“OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT – Development and Financing Plans” for a description of the planned development of the Community Areas.

Improvements

Proceeds from the sale of the Bonds issued pursuant to the Assessment District proceedings will be used to finance (i) the acquisition of certain public infrastructure improvements for the Community Areas, which improvements will be owned, operated, and maintained by the City (collectively, the “Improvements”), and (ii) the payment of certain incidental costs and expenses related to the acquisition of the Improvements, the Assessment District proceedings, and the issuance of the Bonds, including the establishment of a Special Reserve Fund for the Bonds and the funding of capitalized interest on the Bonds through September 2, 2008. For a further description of the Community Areas and the Improvements, see “THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS – Description of the Community Areas and the Improvements.”

The Improvements are proposed to be financed by the City in accordance with the terms and conditions of the Acquisition and Disclosure Agreement No. 07-352, effective October 10, 2007 (the “Acquisition Agreement”), by and between the City and the Developer. Upon their completion by the Developer, the Improvements are proposed to be acquired by the City using Bond proceeds.

Assessments

The land within the Community Areas in the Assessment District specially benefited by the Improvements has been assessed to pay the estimated cost of the Improvements and certain financing costs related thereto. See “THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS – Estimated Improvement Costs.” The City Council, pursuant to Resolution No. 020-08, adopted on January 30, 2008, confirmed the original amount of assessments for the Assessment District in the aggregate amount of $5,275,000, and subsequently, pursuant to Resolution No. 040-08, adopted on March 12, 2008, reduced the aggregate amount of the assessments for the Assessment District to $4,825,000. See “THE BONDS – Authority for Issuance.” The Bonds are secured by the assessments as hereinafter described under the heading “THE BONDS – Security for the Bonds.” The total assessment lien is not less than the aggregate principal amount of the Bonds being issued.

Appraisal

Launer & Associates, Inc., Bakersfield, California (the “Appraiser”), has prepared an appraisal, dated February 27, 2008 (the “Appraisal”), appraising, as of February 27, 2008, the property within the Assessment District that is subject to the lien of the assessments, which appraised property consists of approximately 93.1 net acres. Based on the Appraisal, the ratio of the aggregate Bulk Value (as defined herein) of the Assessment District property to the aggregate assessment lien is approximately 4.01:1. See “OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT – Bulk Value-to-Assessment Lien Ratio.” The assumptions and limitations regarding the appraised valuations are set forth in the Appraisal, a copy of which is attached hereto as APPENDIX B. Certain considerations relating to the Appraisal are discussed under the heading “SPECIAL RISK FACTORS.” Neither the City nor the Underwriter makes any representation as to the accuracy or completeness of the Appraisal.

Set forth in APPENDIX E is the assessment roll, including Bulk Value to assessment lien ratio information, for the parcels of property within the Assessment District that are subject to the lien of the assessments. The assessment roll shows the amount of the total estimated cost of the proposed Improvement acquisition, construction, and incidental cost that is assessed upon each of the lots and parcels within the Assessment District based upon the alternate method and rate of assessment permitted under Section 13.08.070 of the Municipal Code of the City. See “THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS – Method of Assessment Spread.” The assessment numbers that appear on the assessment roll correspond to the assessment numbers shown on the assessment diagram, attached hereto as APPENDIX D.

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Security for the Bonds

The Bonds are issued upon and secured by the unpaid assessments and, together with interest thereon, constitute security for the redemption and payment of the principal of the Bonds and the interest thereon. All the Bonds are secured by the moneys in the Redemption Fund created pursuant to the Bond Resolution and by the unpaid assessments levied to provide for payment of said acquisition of the Improvements, and, including principal and interest, are payable exclusively out of the Redemption Fund. The unpaid assessments represent fixed liens on the parcels of land assessed under the proceedings. They do not, however, constitute the personal indebtedness of the owners of said parcels.

Under the provisions of the 1915 Act, assessment installments sufficient to meet annual debt service on the Bonds are to be collected on the regular tax bills of the County of Kern (the “County”) sent to owners of property within the Assessment District against which there are unpaid assessments. These annual installments are to be paid into the Redemption Fund, which will be held by the Finance Director and used to pay Bond principal and interest as they become due. The installments billed against each parcel of property each year represent a pro rata share of the total principal and interest coming due that year, based on the percentage that the unpaid assessment against that property bears to the total of unpaid assessments within the Assessment District.

The Bonds are not secured by the general taxing power of the City, the County, the State of California (the “State”), or any other political subdivision of the State, and neither the City, nor the County, nor the State, nor any other political subdivision of the State has pledged its full faith and credit for the payment of the Bonds.

Special Reserve Fund

The City will establish a Special Reserve Fund (the “Special Reserve Fund”) in the amount of $467,168.76 from Bond proceeds, which amount will be transferred to the Redemption Fund in the event of delinquencies in the payment of the assessment installments to the extent of such delinquencies. The Special Reserve Fund will be maintained, from assessment installment payments and from proceeds of redemption or sale of parcels with assessment delinquencies, in an amount equal to the Reserve Requirement (as defined herein). See “THE BONDS – Special Reserve Fund.”

Foreclosure

The City has covenanted that it will, no later than October 1 in any year, file an action in the Superior Court of the County to foreclose the lien on each delinquent assessment if (i) the sum of uncured assessment delinquencies for the preceding fiscal year exceeds 5% of the assessment installments posted to the tax roll for that fiscal year and (ii) the amount in the Special Reserve Fund is less than the Reserve Requirement. See “THE BONDS – Covenant to Commence Superior Court Foreclosure” and “SPECIAL RISK FACTORS – Covenant to Commence Superior Court Foreclosure.”

Assessment Delinquencies

If a delinquency occurs in the payment of any assessment installment, the City has a duty to transfer into the Redemption Fund the amount of the delinquency out of the Special Reserve Fund. This duty of the City is continuous during the period of delinquency, until reinstatement, redemption, or sale of the delinquent property. There is no assurance that funds will be available for such purpose and if, during the period of delinquency, there are insufficient moneys in the Special Reserve Fund, a delay may occur in payments to the owners of the Bonds.

As authorized by the 1915 Act, the City has elected not to obligate itself to advance available funds from its treasury to cure any deficiency that may occur in the Redemption Fund by reason of the failure of a property owner to pay an assessment installment when due. If there are additional delinquencies after depletion of funds in the Special Reserve Fund, the City is not obligated to transfer into the Redemption Fund the amount of such delinquencies out of any other available moneys of the City.

4

Book-Entry-Only System

The Bonds will be initially issued and registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”), New York, New York. Payment of principal of and interest on the Bonds to the Beneficial Owners (as defined below) will be made in accordance with the procedures of DTC described below. See “BOOK-ENTRY-ONLY SYSTEM.”

Continuing Disclosure

Each of the City and the Developer has covenanted in its respective Continuing Disclosure Certificate for the benefit of owners of the Bonds to provide annual or semi-annual reports, as applicable, containing certain financial information and operating data relating to the Assessment District and the property in the Assessment District and to provide notices of the occurrence of certain enumerated events, if material. The form of each such Continuing Disclosure Certificate is attached hereto as “APPENDIX F – FORMS OF CONTINUING DISCLOSURE CERTIFICATES.” These covenants have been made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5), as amended from time to time. See “CONTINUING DISCLOSURE.”

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 “plan,” “intend,” “expect,” “propose,” “estimate,” “project,” “budget,” “anticipate,” or other similar words. The achievement of certain results or other expectations contained in such forward-looking statements involves known and unknown risks, uncertainties, and other factors that may cause the 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. No updates or revisions to these forward-looking statements are expected to be issued if or when the expectations, events, conditions, or circumstances on which such statements are based change. The forward-looking statements in this Official Statement are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by such forward-looking statements. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON SUCH FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF.

Miscellaneous

Set forth herein are brief descriptions of the Bonds, the Assessment District, the Community Areas, the Improvements, the City, the Bond Resolution, the Developer, and certain other matters. Such descriptions and the discussions and information contained herein do not purport to be comprehensive or definitive. All references in this Official Statement to documents, the Bonds, and the Assessment District proceedings are qualified in their entirety by references to such documents and the City’s resolutions setting forth the terms and descriptions thereof. Copies of the Bond Resolution and other documents described in this Official Statement may be obtained from the City. The City’s address for such purpose is: City of Bakersfield, 1501 Truxtun Avenue, Bakersfield, California 93301, Attention: Finance Director; telephone number (661) 326-3740.

[Remainder of Page Intentionally Left Blank.]

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ESTIMATED SOURCES AND USES OF FUNDS

The proceeds of the sale of the Bonds will be deposited with the Finance Director in trust pursuant to the terms of the Bond Resolution in the amounts set forth below. The moneys in the Improvement Fund established for the Bonds will be used to acquire the Improvements and to pay certain costs associated with the issuance and delivery of the Bonds. A portion of the net proceeds of the Bonds will be deposited in the Special Reserve Fund. Capitalized interest on the Bonds from their dated date to September 2, 2008, will be deposited into the Redemption Fund.

The estimated sources and uses of funds for the Bonds are summarized as follows:

TABLE 1 SOURCES AND USES OF FUNDS

Sources of Funds Principal Amount of Bonds $4,825,000.00 Less: Underwriter’s Discount (45,837.50)

Total $4,779,162.50

Uses of Funds Improvement Fund $4,190,735.08(1) Special Reserve Fund 467,168.76 Redemption Fund 121,258.66(2)

Total $4,779,162.50 ___________________ (1) Includes costs of issuance of approximately $247,420.22. (2) Represents capitalized interest on the Bonds from their dated date to September 2, 2008.

THE BONDS

Purpose of the Bonds

Proceeds from the sale of the Bonds will be used to finance (i) the Improvements, which comprise the acquisition of certain public improvements within the Community Areas, and (ii) the payment of certain incidental costs and expenses related to the acquisition of the Improvements, the Assessment District proceedings, and the issuance of the Bonds, including the establishment of a Special Reserve Fund for the Bonds and the funding of capitalized interest on the Bonds through September 2, 2008. See “THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS – Description of the Community Areas and the Improvements.”

Authority for Issuance

The Assessment District proceedings are being conducted pursuant to the 1913 Act, the Municipal Code of the City, and a Resolution of Intention No. 1552, adopted by the City Council on September 26, 2007. The Bonds, which represent the unpaid assessments levied against privately owned property in the Assessment District, are being issued pursuant to the provisions of the 1915 Act and the Bond Resolution approving the issuance of the Bonds under the 1915 Act and the terms thereof.

In the proceedings of the City with respect to the Assessment District, all costs either are estimated or are ascertained prior to the construction or acquisition of the improvements, rights-of-way, or property involved. Under such proceedings, the assessments are then levied, cash collections are made, and bonds are sold to represent unpaid assessments. The money obtained from cash collections and bond proceeds is used by the City as payment for the improvements to be acquired, for the property or rights-of-way (if any) to be acquired, and for incidental expenses and expenses of the Bond issue. Each of the Landowners has waived the cash collection period and no such cash collections were made.

Assessment district proceedings can be initiated by either a petition or by the City Council without a petition. A petition filed with the City Council and signed by the Developer as the owner of more than 60% of the

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assessable land within the Assessment District at the time of such filing, initiated the proceedings for the Assessment District. The property owner petition was accepted by Resolution No. 206-07, adopted by the City Council on September 26, 2007.

After the proceedings were initiated, Wilson & Associates, Fresno, California (the “Assessment Engineer”), prepared a written report, which contains, among other things, the list of improvement costs and the amount of the assessments to be levied against the parcels in the Assessment District. The assessments were levied on the basis of the special benefit to be derived by such parcels from the Improvements. (See “THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS – Method of Assessment Spread.”)

The Assessment Engineer’s written report was filed with the City Clerk on November 30, 2007, and was approved by the City Council in preliminary form on December 12, 2007. The Assessment Engineer’s written report was filed with the City Clerk on January 18, 2008. The public hearing required by law was held on January 30, 2008. The property owners in the Assessment District had the right to protest the levy of the proposed assessments in writing prior to or at the commencement of the hearing and to be heard at the hearing. No such protests were made. In accordance with Article XIIID of the State Constitution, the property owners were also requested to submit ballots, weighted according to the proportional financial obligation of the affected property, in favor of or opposition to the assessment. All ballots submitted by property owners were in favor of the assessment. See “SPECIAL RISK FACTORS – Articles XIIIC and XIIID of the California Constitution.”

Upon conclusion of the hearing, the City Council tabulated the ballots and adopted its resolution confirming the assessments and ordering the acquisition of the Improvements. The assessments confirmed by the City were based on the improvement costs listed in the Assessment Engineer’s written report. After confirmation, the assessments became liens against the assessed parcels by recordation of a notice of assessment, which recording was made in the Office of the Superintendent of Streets on January 31, 2008, and in the Office of the County Recorder on February 7, 2008. No cash payments were made by the property owners.

Subsequent to the confirmation of the original assessments and the recordation of notice of assessment with the Office of the County Recorder, the Assessment Engineer amended its written report, which amended written report (the “Engineer’s Report”) reduced the aggregate amount of the assessments for the Assessment District to $4,825,000, based upon revised improvement costs listed in the Engineer’s Report. On March 12, 2008, the City Council adopted a resolution approving the Engineer's Report and confirming the reduced amount of the assessments. After confirmation, the reduced assessments became liens against the assessed parcels by recordation of an amended notice of assessment, which recording was made in the Office of the Superintendent of Streets and in the Office of the County Recorder on March 17, 2008.

General

The Bonds will be issued in fully-registered form, without coupons, in the denomination of $5,000 each or in any integral multiple thereof. The Bonds will be dated the date of delivery, and will bear interest at the rates per annum, will mature on the dates (each a “Principal Payment Date”), and will mature in the amounts set forth on the front cover pages of this Official Statement.

Interest on the Bonds is payable semiannually on March 2 and September 2 (each an “Interest Payment Date”), commencing on September 2, 2008. Principal, interest at maturity or upon earlier redemption, if applicable, and premium, if any, with respect to the Bonds will be payable at the corporate trust office of U.S. Bank National Association, as paying agent, registrar, and transfer agent (the “Paying Agent”), in St. Paul, Minnesota, upon presentation and surrender of the Bonds. Interest (other than at maturity or upon earlier redemption) on the Bonds will be payable by check of the Paying Agent mailed on each Interest Payment Date to the owners of record at the addresses shown on the registration books maintained by the Paying Agent for such purposes (the “Registration Books”) as of the fifteenth day of the month immediately prior to an Interest Payment Date (or, in the case of an owner of at least $1,000,000 in principal amount of the Bonds who so requests in writing prior to the close of business on the fifteenth day of the month immediately preceding such Interest Payment Date, by wire transfer).

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Transfer and Exchange of Bonds

Any Bond may be transferred or exchanged upon surrender of such Bond for cancellation, accompanied by delivery of a written instrument of transfer or authorization for exchange, duly executed in a form approved by the Paying Agent. The Paying Agent shall not be obligated to make any transfer or exchange of any Bond during the period commencing with the fifteenth day of the month immediately preceding each Interest Payment Date and ending on such Interest Payment Date. The City may require the Bond owner requesting such transfer or exchange to pay any tax or other governmental charge required to be paid with respect to such transfer or exchange.

Bonds Mutilated, Destroyed, or Lost

If any Bond becomes mutilated, the City, at the expense of the owner of such Bond, will execute, and the Paying Agent will authenticate and deliver, a new Bond in exchange and substitution for the Bond so mutilated, but only upon surrender by the owner of the Bond so mutilated. Every mutilated Bond so surrendered will be canceled. If any Bond becomes lost or destroyed, evidence of such loss or destruction may be submitted to the City and, if such evidence is approved by the City and indemnity satisfactory to the City is given, the City, at the expense of the Owner, will execute, and the Paying Agent will authenticate and deliver, a new Bond in lieu of and in replacement for the Bond so lost or destroyed. The owner must pay all costs of issuance of the new Bond.

Redemption

Optional Redemption and Prepayment of Bonds. Any Bond or portion thereof in the amount of $5,000 or any integral thereof outstanding may be called for redemption prior to maturity on any Interest Payment Date upon payment of the principal, plus accrued interest to the date of redemption, together with a redemption premium (calculated as a percentage of the par value of Bonds being redeemed) as set forth in the following table:

Redemption Dates Redemption Premium September 2, 2008, through September 2, 2017 3.0% March 2, 2018, and thereafter 0.0

No interest will accrue on a Bond beyond the Interest Payment Date on which said Bond is called for redemption. Notice of redemption must be given to the registered owner of the Bond by registered or certified mail or by personal service at least 30 days prior to the redemption date, as provided in the 1915 Act. In accordance with the 1915 Act, the Finance Director will select Bonds for redemption in such a way that the ratio of outstanding Bonds to issued Bonds will be approximately the same in each annual series insofar as possible. Within each annual series, Bonds shall be selected for redemption by lot.

Further development of the parcels in the Assessment District, a transfer of property ownership, and other similar circumstances could result in prepayment of all or part of the assessments. Such prepayment would result in redemption of a portion of the Bonds prior to their stated maturities.


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Mandatory Redemption of Term Bonds. The Bonds maturing on September 2, 2028 (the “Term Bonds”), are subject to mandatory advance redemption in part prior to their stated maturity, as authorized under the Bond Resolution. The redemption shall occur on September 2 in the following years and in the following principal amounts, together with interest accrued on such amounts to the date fixed for redemption, and shall be without premium:

Year Principal Amount 2014 $160,000 2015 170,000 2016 185,000 2017 200,000 2018 210,000 2019 230,000 2020 245,000 2021 265,000 2022 280,000 2023 305,000 2024 325,000 2025 350,000 2026 375,000 2027 405,000 2028 (maturity) 430,000

If the Bonds are redeemed in part, as described under the subheading “Optional Redemption and Prepayment of Bonds” above, the principal of the Term Bonds to be redeemed on each of the payment dates set forth above shall be modified by deducting the principal amount of the Bonds redeemed in $5,000 increments as proportionally as practicable from the principal amounts set forth above.

Effect of Redemption; Defeasance

From and after the date fixed for redemption pursuant to the Bond Resolution, if funds available for the payment of the principal of and interest (and redemption premium, if any) on the Bonds or portion of Bonds so called for redemption have been duly provided, then Bonds or portion of Bonds so called for redemption will become due and payable at the redemption price therein specified, and from and after such date (unless the City shall default in the payment of the redemption price or interest) such Bonds or portions of Bonds shall be defeased and shall cease to be entitled to any benefit or security under the Bond Resolution (other than the right to receive payment of the redemption price and interest) and shall cease to bear interest.

Receipt of notice of redemption by the owner of a Bond shall not be a condition precedent to redemption and failure by the owner of a Bond to actually receive such notice of redemption shall not affect the validity of the proceedings for the redemption of such Bond or the cessation of interest.

Refunding Bonds

Pursuant to the Refunding Act of 1984 for 1915 Improvement Act Bonds (Division 11.5 of the California Streets and Highways Code), the City may issue refunding bonds for the purpose of redeeming the Bonds. The City may issue and sell refunding bonds without giving notice to and conducting a hearing for the owners of property in the Assessment District, or giving notice to the owners of the Bonds, if the City Council finds that:

(A) Each estimated annual installment of principal and interest on the reassessment to secure the refunding bonds is less than the corresponding annual installment of principal and interest on the portion of the original assessment being superseded and supplanted by the same percentage for all subdivisions of land within the Assessment District. Any amount added to the annual installments on the reassessment due to a delinquency in payment on the original assessment need not be considered in this calculation;

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(B) The number of years to maturity of all refunding bonds is not more than the number of years to the last maturity of the Bonds; and

(C) The principal amount of the reassessment on each subdivision of land within the Assessment District is less than the unpaid principal amount of the portion of the original assessment being superseded and supplanted by the same percentage for each subdivision of land within the Assessment District. Any amount added to a reassessment because of a delinquency in payment on the original assessment need not be considered in this calculation.

Upon issuing refunding bonds, the City Council could require that the Bonds be exchanged for refunding bonds on any basis that the City Council determines is for the City’s benefit, if the Bond owners consent to the exchange. As an alternative to exchanging the refunding bonds for the Bonds, the City could sell the refunding bonds and use the proceeds to pay the principal of and interest and redemption premium, if any, on the Bonds as they become due, or advance the maturity of the Bonds and pay the principal of and interest and redemption premium thereon.

Disposition of Surplus from the Improvement Fund

The amount of any surplus remaining in the Improvement Fund after completion of the acquisition of the Improvements and payment of all claims shall be applied as a credit to the assessments or to call Bonds, all as provided in the 1913 Act.

Investment of Bond Proceeds

Moneys held in the Improvement, Redemption, and Special Reserve Funds created pursuant to the Bond Resolution shall be invested by the Finance Director in accordance with generally applicable City investment policies, subject to State law and federal tax regulations governing the investment of tax-exempt bond proceeds. Investment income on moneys in the Redemption Fund shall be retained therein. Proceeds of the investment of amounts in the Improvement Fund and the Special Reserve Fund will be deposited into an Investment Earnings Fund, to be established and maintained by the Finance Director. Moneys in the Investment Earnings Fund will be rebated, to the extent required by law, to the federal government. To the extent that moneys in the Investment Earnings Fund are not required for rebate to the federal government, as determined by the Finance Director as of June 30 of each year, such moneys shall be transferred to the Special Reserve Fund until the balance therein is equal to the Reserve Requirement. The remaining balance, if any, in the Investment Earnings Fund will be transferred, first, to the Improvement Fund until the Improvements are completed and such fund is closed and, thereafter, to the Redemption Fund to be used, in the discretion of the Finance Director, as a credit upon the annual installments of assessments or for the advance retirement of Bonds.

Security for the Bonds

The Bonds are issued upon and secured by the unpaid assessments against the property in the Assessment District, together with interest thereon, and said unpaid assessments, together with interest thereon, constitute security for the redemption and payment of the principal of the Bonds and the interest thereon. The Bonds are further secured by the moneys in the Redemption Fund and the Special Reserve Fund created pursuant to the Assessment District proceedings. Principal of and interest and redemption premiums, if any, on the Bonds are payable exclusively out of the Redemption Fund.

The assessments and each installment thereof and any interest and penalties thereon constitute a lien against the parcels of land on which the assessments are levied until the same are paid. Such lien is subordinate to all fixed special assessment liens previously imposed upon the same property, but has priority over all existing and future private liens and over all fixed special assessment liens that may thereafter be created against the property. Such lien is co-equal to and independent of the lien for general property taxes and special taxes, including, without limitation, special taxes created pursuant to the Mello-Roos Community Facilities Act of 1982 (being Chapter 2.5, Part 1, Division 2, Title 5 of the Government Code of the State of California) (the “Mello-Roos Act”), whenever created against the property.

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Upon the issuance of the Bonds, none of the property in the Assessment District will be subject to any other special assessment lien created under the 1913 Act or any special tax lien created under the Mello-Roos Act. See “THE BONDS – Priority of Lien.”

The Bonds are not secured by the general taxing power of the City, the County, the State, or any other political subdivision of the State, and neither the City, nor the County, nor the State, nor any other political subdivision of the State has pledged its full faith and credit for the payment thereof.

Although the unpaid assessments constitute fixed liens on the parcels assessed, they do not constitute the personal indebtedness of the owners of said parcels. Furthermore, there can be no assurance as to the ability or the willingness of such owners to pay the unpaid assessments. In addition, there can be no assurance that the present owners will continue to own all or any of said parcels.

The unpaid assessments will be collected in semi-annual installments, together with interest on the declining balance, on the County tax roll on which general taxes on real property are collected, and are payable and become delinquent at the same time and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do said general taxes. Notwithstanding the City’s covenant to commence foreclosure proceedings in connection with delinquent assessments, the property upon which the assessments were levied is subject to the same provisions for sale and redemption as are properties for nonpayment of general taxes. The semi-annual assessment installments are to be paid into the Redemption Fund, which will be held by the Finance Director and used to pay the principal of and interest on the Bonds as they become due. The installments billed against all of the parcels of property in the Assessment District subject to the assessments will be equal to the total principal and interest coming due on all of the Bonds that year, plus, with respect to each parcel in the Assessment District, an additional amount to cover the administrative charges of the City.

Special Reserve Fund

Out of the proceeds of the sale of the Bonds, the City Council will set aside into a Special Reserve Fund the amount of $467,168.76. The Special Reserve Fund will be maintained, from assessment installment payments and from proceeds of redemption or sale of parcels with assessment delinquencies, in an amount equal to the least of (i) 10% of the proceeds of the Bonds, (ii) the maximum annual debt service on the Bonds, or (iii) 125% of the average annual debt service on the Bonds, less any amounts transferred to the Redemption Fund when assessments are paid following the issuance of the Bonds, as determined from time to time (the “Reserve Requirement”). The Special Reserve Fund will constitute a trust fund for the benefit of the owners of the Bonds. The Special Reserve Fund will be maintained, used, transferred, reimbursed, and liquidated as follows:

(a) Whenever there are insufficient funds in the Redemption Fund to pay the next maturing installment of principal of or interest on the Bonds, an amount necessary to make up such deficiency will be transferred from the Special Reserve Fund, to the extent of available funds, to the Redemption Fund. The amounts so advanced will be reimbursed from the proceeds of redemption or sale of the parcel for which payment of delinquent installments of the assessments and interest thereon has been made from the Special Reserve Fund. In the event that the Special Reserve Fund is completely depleted from such advances prior to reimbursement from resales of property or delinquency redemptions, payments to the owners of the Bonds will be dependent upon reimbursement of the Special Reserve Fund.

(b) If any assessment or any portion thereof is prepaid prior to the final maturity of the Bonds, the amount of principal of the assessment to be prepaid will be reduced by an amount that is in the same ratio to the original amount of the Special Reserve Fund as the original amount of the prepaid assessment bears to the total original amount of unpaid assessments originally securing the Bonds. The reduction in the amount of principal prepaid shall be compensated for by a transfer of like amount from the Special Reserve Fund to the Redemption Fund.

(c) All proceeds from the investment of moneys in the Special Reserve Fund will be deposited into an Investment Earnings Fund, to be established and maintained by the Finance Director. Moneys in the Investment Earnings Fund will be rebated, to the extent required by law, to the federal government. To the extent that moneys in the Investment Earnings Fund are not required for rebate to the federal government, as determined by the Finance

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Director as of June 30 of each year, such moneys shall be transferred to the Special Reserve Fund until the balance therein is equal to, as of the date of calculation, the Reserve Requirement. The remaining balance, if any, in the Investment Earnings Fund will be transferred, first, to the Improvement Fund until the Improvements are completed and such fund is closed and, thereafter, to the Redemption Fund to be used, in the discretion of the Finance Director, as a credit upon the annual installments of assessments or for the advance retirement of Bonds. Amounts in the Special Reserve Fund in excess of the Reserve Requirement shall be deposited into the Investment Earnings Fund. See “THE BONDS – Investment of Bond Proceeds.”

(d) When the balance in the Special Reserve Fund is sufficient to retire all Bonds then outstanding (whether by advance retirement or otherwise), the amount of the Special Reserve Fund will be transferred to the Redemption Fund, and the remaining installments of principal and interest not yet due from the assessed property owners will be canceled without payment, and the Special Reserve Fund will be liquidated upon the retirement of the Bonds.

(e) In the event that the balance in the Special Reserve Fund at the time of liquidation exceeds the amount necessary to retire all Bonds then outstanding, the excess will be paid to the owners of the assessed parcels in the Assessment District provided, however, that, if the excess is less than $1,000, such excess may be transferred by the Finance Director to the General Fund of the City.

The need to make advances from the Special Reserve Fund may result in its total depletion prior to reimbursement from resales of property or delinquency redemptions. In that event, there could be a default in payments to owners of the Bonds, the curing of which would be dependent upon reimbursement of the Special Reserve Fund.

Redemption Fund Deficiencies

If there are not sufficient funds in the Special Reserve Fund to fully cover a Redemption Fund deficiency and the City Council determines that there is a deficiency in the Redemption Fund to pay the principal of and interest on the Bonds such that there will be an ultimate loss accruing to the owners of the Bonds, the City will pay to the owners of the Bonds a proportionate share of the principal and interest due on the Bonds based on the percentage that the amount on deposit in the Redemption Fund is of the total amount of the unpaid principal of the Bonds and the interest thereon. Thereafter, as moneys representing payments of the assessments are periodically deposited into the Redemption Fund, similar proportionate payments will be made to the owners of the Bonds, all in accordance with the procedures set forth in the 1915 Act.

If there are not sufficient funds in the Special Reserve Fund to fully cover a Redemption Fund deficiency and it is determined by the Finance Director that there will not be an ultimate loss to the owners of the Bonds, the Finance Director is required to direct the Paying Agent to pay matured Bonds as presented and pay interest on the Bonds when due as long as there are available funds in the Redemption Fund, in the following order of priority: (1) all matured interest payments shall be made before the principal of any Bonds is paid; (2) interest on Bonds of earlier maturity shall be paid before interest on Bonds of later maturity; (3) within a single maturity, interest on lower-numbered Bonds shall be paid before interest on higher-numbered Bonds; and (4) the principal of Bonds shall be paid in the order in which the Bonds are presented for payment. This procedure could result in some matured Bonds not being redeemed and interest on the Bonds not being fully paid on the due dates. Such matured Bonds would not be fully redeemed and such delayed interest would not be paid until funds are available from a foreclosure sale of the property having the delinquent assessment installments.

Covenant to Commence Superior Court Foreclosure

The 1915 Act provides that in the event any assessment or installment thereof or any interest thereon is not paid when due, the City may order the institution of a court action to foreclose the lien of the unpaid assessment. In such an action, the real property subject to the unpaid assessment may be sold at judicial foreclosure sale. This foreclosure sale procedure is not mandatory. However, in the Bond Resolution, the City has covenanted with the Bond owners that, in the event any assessment or installment thereof, including any interest thereon, is not paid when due, the City will, no later than October 1 in any year, file an action in the Superior Court of the County to foreclose the lien on each delinquent assessment if (i) the sum of uncured assessment delinquencies for the

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preceding fiscal year exceeds 5% of the assessment installments posted to the tax roll for that fiscal year, and (ii) the amount in the Special Reserve Fund is less than the Reserve Requirement. In the event such Superior Court foreclosure or foreclosures are necessary, there may be a delay in payments to Bond owners pending prosecution of the foreclosure proceedings and receipt by the City of the proceeds of the foreclosure sale. It is also possible that no bid for the purchase of the applicable property would be received at the foreclosure sale. See “SPECIAL RISK FACTORS – Covenant to Commence Superior Court Foreclosure.”

Priority of Lien

Each assessment (and any reassessment) and each installment thereof, and any interest and penalties thereon, constitutes a lien against the parcel of land on which it was imposed until the same is paid. Such a lien is subordinate to all fixed special assessment liens previously imposed upon the same property, but has priority over all private liens and over all fixed special assessment liens that may thereafter be created against the property. Such a lien is co-equal to and independent of the lien for general property taxes and special taxes, including, without limitation, special taxes created pursuant to the Mello-Roos Act, whenever created against the property.

None of the property in the Assessment District is subject to any other special assessment lien created under the 1913 Act or any special tax lien created under the Mello-Roos Act.

Tax Covenants

Pursuant to the Bond Resolution, the City has covenanted that it will not make any use of the proceeds of the Bonds that would cause the Bonds to become “arbitrage bonds” subject to federal income taxation pursuant to the provisions of Section 148(a) of the Internal Revenue Code of 1986, as amended (the “Code”), or to become “federally-guaranteed obligations” pursuant to the provisions of Section 149(b) of the Code, or to become “private activity bonds” pursuant to the provisions of Section 141(a) of the Code. To that end, the City will comply with all applicable requirements of the Code and all regulations of the United States Department of Treasury issued thereunder to the extent such requirements are, at the time, applicable and in effect.


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Debt Service Schedule

Set forth below is the debt service schedule for the Bonds.

TABLE 2 ANNUAL BOND DEBT SERVICE

Period Ending (September 2)

Principal Maturing

Interest

Total Bond Debt Service

2008 $ -- $ 121,258.66(1) $ 121,258.66 2009 125,000.00 338,396.26 463,396.26 2010 130,000.00 333,083.76 463,083.76 2011 140,000.00 327,168.76 467,168.76 2012 145,000.00 320,448.76 465,448.76 2013 150,000.00 312,981.26 462,981.26 2014 160,000.00 304,956.26 464,956.26 2015 170,000.00 293,156.26 463,156.26 2016 185,000.00 280,618.76 465,618.76 2017 200,000.00 266,975.00 466,975.00 2018 210,000.00 252,225.00 462,225.00 2019 230,000.00 236,737.50 466,737.50 2020 245,000.00 219,775.00 464,775.00 2021 265,000.00 201,706.26 466,706.26 2022 280,000.00 182,162.50 462,162.50 2023 305,000.00 161,512.50 466,512.50 2024 325,000.00 139,018.76 464,018.76 2025 350,000.00 115,050.00 465,050.00 2026 375,000.00 89,237.50 464,237.50 2027 405,000.00 61,581.26 466,581.26 2028 430,000.00 31,712.50 461,712.50 Total $4,825,000.00 $4,589,762.52 $9,414,762.52

_____________________________ (1) Capitalized interest on the Bonds has been funded through September 2, 2008. Source: Underwriter.

BOOK-ENTRY-ONLY SYSTEM

DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-registered Bonds, registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of such issue, and will be deposited with DTC. The following description of DTC and its book-entry system has been provided by DTC and has not been verified for accuracy or completeness by the City, and the City shall have no liability in respect thereof. The City shall have no responsibility or liability for any aspects of the records maintained by DTC relating to or payments made on account of beneficial ownership, or for maintaining, supervising, or reviewing any records maintained by DTC relating to beneficial ownership, of interests in the Bonds.

DTC, the world’s largest 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 2.2 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money market instrument 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

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companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation, and Emerging Markets Clearing Corporation (NSCC, FICC, and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. 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” and, collectively with Direct Participants, “Participants”). DTC has Standard & Poor’s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission (the “SEC”). More information about DTC can be found at www.dtcc.com and www.dtc.org. The foregoing internet addresses are included for reference only and the information on the internet site is not a part of this Official Statement or incorporated by reference into this Official Statement. No representation is made in this Official Statement as to the accuracy or adequacy of the information included in such internet sites.

Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds except in the event that use of the book-entry system for the Bonds is discontinued.

To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other 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 the Bonds may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the security 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 the notices be provided directly to them.

REDEMPTION NOTICES SHALL BE SENT TO DTC. IF LESS THAN ALL OF THE BONDS ARE BEING REDEEMED, DTC’S PRACTICE IS TO DETERMINE BY LOT THE AMOUNT OF THE INTEREST OF EACH DIRECT PARTICIPANT IN SUCH ISSUE TO BE REDEEMED.

Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC’s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City 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 the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

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Principal, redemption price, and interest payments with respect to 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 City 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 or its nominee, the Paying Agent, or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, redemption price, and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or 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.

DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the City or the Paying Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Bond certificates are required to be printed and delivered in accordance with the terms of the Bond Resolution.

The City may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, the Bonds will be printed and delivered to DTC as described in the Bond Resolution.

THE INFORMATION IN THIS SECTION CONCERNING DTC AND DTC’S BOOK-ENTRY SYSTEM HAS BEEN OBTAINED FROM SOURCES THAT THE CITY BELIEVES TO BE RELIABLE, BUT THE CITY TAKES NO RESPONSIBILITY FOR THE ACCURACY THEREOF. THE CITY CANNOT AND DOES NOT GIVE ANY ASSURANCES THAT DTC WILL DISTRIBUTE PAYMENTS TO DTC PARTICIPANTS OR THAT PARTICIPANTS OR OTHERS WILL DISTRIBUTE PAYMENTS WITH RESPECT TO THE BONDS RECEIVED BY DTC OR ITS NOMINEES AS THE REGISTERED OWNER, ANY REDEMPTION NOTICES, OR OTHER NOTICES TO THE BENEFICIAL OWNERS, OR THAT THEY WILL DO SO ON A TIMELY BASIS, OR THAT DTC WILL SERVE AND ACT IN THE MANNER DESCRIBED IN THIS OFFICIAL STATEMENT.

THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS

The information under this heading is taken primarily from the Engineer’s Report for the Assessment District prepared by Wilson & Associates, Fresno, California, which Engineer’s Report is on file with the City, and from information provided by the Developer.

General

The Assessment District was formed in accordance with the 1913 Act and the Municipal Code of the City. Proceedings for the formation of the Assessment District were commenced by the City Council pursuant to a property owner petition filed by the Developer, which, at the time the petition was filed, was the owner of over 60% of the assessable land within the Assessment District. The petition was accepted by Resolution No. 206-07, adopted by the City Council on September 26, 2007, and the petition is on file with the City Clerk of the City.

The Assessment District is comprised of approximately 102.0 gross acres (or approximately 93.1 net acres) of land located in the southeast area of the City. The Assessment District has been divided into two separate community areas defined herein as (i) Tract No. 6520, generally bounded by Berkshire Road on the north and Marvin Street on the west, and (ii) Tract No. 6611, generally bounded by Berkshire Road on the south, Madison Street on the east, and Arvin-Edison canal on the north. The Assessment District boundaries are shown on the assessment diagram, a copy of which is attached hereto as APPENDIX D. For a further description of the Assessment District and the Community Areas, see “THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS.” The two irregularly shaped Community Areas are located within a rectangular section of southeast Bakersfield that has a north-to-south dimension of about three quarters of a mile as measured from the north end of Tract No. 6611 to the south end of Tract No. 6520 and a west-to-east dimension of about one half mile

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as measured from the west end of Tract No. 6520 to the east end of Tract No. 6611. Each of the two Community Areas is involved in various stages of the land development process. See “OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT – Development and Financing Plans.”

The Assessment District boundaries are shown on the assessment diagram, consisting of four sheets, entitled “ASSESSMENT DIAGRAM OF CITY OF BAKERSFIELD ASSESSMENT DISTRICT NO. 07-2 (SYDNEY HARBOUR), COUNTY OF KERN, STATE OF CALIFORNIA,” a copy of which is attached hereto as APPENDIX D.

Proceeds from the sale of the Bonds issued pursuant to the Assessment District proceedings will be used to finance (i) the Improvements, which are generally described as the acquisition of certain public infrastructure improvements for the Community Areas, which Improvements will be owned, operated, and maintained by the City, and (ii) the payment of certain incidental costs and expenses related to the acquisition of the Improvements, the Assessment District proceedings, and the issuance of the Bonds, including the establishment of a Special Reserve Fund for the Bonds and the funding of capitalized interest on the Bonds through September 2, 2008.

The Improvements are proposed to be financed by the City in accordance with the terms and conditions of the Acquisition Agreement. The Acquisition Agreement sets forth the procedure by which the Improvements are to be constructed and installed by the Developer and, upon their completion, acquired by the City using funds provided through the Assessment District proceedings.

The scope of the Improvements includes the acquisition by the City of various “off-site” and “on-site” (in-tract) subdivision improvements and the payment of incidental costs that are already required or that are expected by the Developer to be required to be installed as conditions of final subdivision or site plan approvals within the Community Areas. The costs financed by the Assessment District for the acquisition of the Improvements located within or adjacent to each of the two Community Areas have been allocated only to the parcels that are located within the Community Area to be served by such Improvements. Bond proceeds are not expected to be used for the acquisition of land, easements, or rights-of-way.

Description of the Community Areas and the Improvements

The information under this subheading has been provided by the Engineer’s Report or the Developer and has not been verified for accuracy or completeness by the City or the Underwriter, and neither the City nor the Underwriter shall have liability with respect thereto.

The current development plans for the respective Community Areas are subject to change. Furthermore, the current plans are subject, in large part, to the financial resources and construction and marketing capabilities and efforts of the Developer and the other builders or persons to whom the parcels within the Assessment District are sold. There can be no assurance that such development will occur as described herein, or that it will occur at all.

Tract No. 6520

Tract No. 6520 encompasses approximately 67.0 gross acres and is generally bounded by Berkshire Road on the north and Marvin Street on the west. Tract No. 6520 has been approved for subdivision into a combined total of 285 single-family residential (“R-1”) lots, one public park lot, and one storm drain sump lot, all pursuant to Vesting Tentative Tract No. 6520. The Developer is the subdivider of Tract No. 6520 and is responsible for constructing the Improvements benefiting Tract No. 6520. The Developer intends to subdivide Tract No. 6520 into two phases and has recorded the following subdivision map with the County Recorder as follows: Tract No. 6520-Phase 1 with 132 R-1 lots. The Developer has informed the City that the subdivision map for the remaining phase of Tract No. 6520 is not expected to be recorded with the County Recorder prior to the issuance of the Bonds.

The Improvements to be constructed in connection with Tract No. 6520 are related to the development of Tract No. 6520 and are generally described as Tract No. 6520 on-site sewer, water, storm drain, and street improvements, and as subdivision block wall improvements along Berkshire Road that are required to be constructed or are expected by the Developer to be required to be constructed as conditions of approval for the Tract

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No. 6520 subdivision. Also included in the scope of Improvements are the Developer’s incidental costs for design engineering, construction staking, soils and materials analysis and testing, plan check fees, and inspection fees. The general location and extent of the Tract No. 6520 planned Improvements are described below.

Tract No. 6520 On-site Sewer. Construction of a complete on-site (in-tract) sewer system for Tract No. 6520, including 6- and 8-inch diameter sewer mains, 4-inch diameter services for each residential lot, manholes, and cleanouts.

Tract No. 6520 On-site Water. Construction of a complete on-site (in-tract) water system for Tract No. 6520, including 8-inch diameter water mains with gate valves, fire hydrants, 2-inch diameter blow-off, 2-inch diameter landscape service, tie-in to an existing water line, and 1-inch diameter services for each residential lot.

Tract No. 6520 On-site Storm Drain. Construction of a complete on-site (in-tract) storm drain system for Tract No. 6520, including 18-, 24-, and 30-inch diameter pipelines with manholes, catch basins, and an outlet structure, and around the sump a 6-foot high chain-link fence with slats and curb, together with a 12-foot wide double drive gate.

Tract No. 6520 On-site Street. Construction of a complete on-site (in-tract) street system for Tract No. 6520, including paving, curb, gutter, sidewalk, cross gutters, street signs, street lights, and monument encasements.

Berkshire Road (south side). Construction of subdivision block wall on the south side of Berkshire Road along the frontage of Tract No. 6520 (between Marvin Street and the easterly boundary of Tract No. 6520).

The Developer anticipates that all of the Improvements that it is constructing in connection with Tract No. 6520 will be completed by January 2009. There can be no assurance that the actual construction of the Improvements within Tract No. 6520 will occur as projected.

Tract No. 6611

Tract No. 6611 encompasses approximately 35.0 gross acres and is generally bounded by Berkshire Road on the south, Madison Street on the east, and Arvin-Edison canal on the north. The Developer is the subdivider of Tract No. 6611 and is responsible for constructing the Improvements benefiting Tract No. 6611. The Developer subdivided Tract No. 6611 as a single phase and has recorded the subdivision map with 155 R-1 lots, one storm drain sump lot, and four public landscape lots with the County Recorder.

The Improvements to be constructed in connection with Tract No. 6611 are related to the development of Tract No. 6611 and are generally described as improvements in and along Berkshire Road and Madison Street, and as Tract No. 6611 on-site street and storm drain improvements that are required to be constructed or are expected by the Developer to be required to be constructed as conditions of approval for the Tract No. 6611 subdivision. Also included in the scope of Improvements are the Developer’s incidental costs for design engineering, construction staking, soils and materials analysis and testing, plan check fees, and inspection fees. The general location and extent of the Tract No. 6611 planned Improvements are described below.

Tract No. 6611 On-site Street. Construction of a complete on-site (in-tract) street system for Tract No. 6611, including grading, paving, curb, gutter, sidewalk, driveway approaches, handicap ramps, and cross gutters.

Tract No. 6611 On-site Storm Drain. Construction of a complete on-site (in-tract) storm drain system for Tract No. 6611, including 18-, 24-, 30-, and 36-inch diameter pipelines with manholes, catch basins, and an outlet structure.

Berkshire Road (north side). Construction of the north side of Berkshire Road along the frontage of Tract No. 6611 (between Madison Street and the westerly boundary of Tract No. 6611), including

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grading, paving, curb, gutter, sidewalk, handicap ramps, sawcut, AC dike, 18-inch diameter storm drain pipeline, and subdivision block wall.

Madison Street (west side). Construction of the west side of Madison Street along the frontage of Tract No. 6611 (between Berkshire Road and the northerly boundary of Tract No. 6611), including grading, paving, curb, gutter, sidewalk, handicap ramps, and subdivision block wall..

The Developer anticipates that all of the Improvements that it is constructing in connection with Tract No. 6611 will be completed by January 2009. There can be no assurance that the actual construction of the Improvements within Tract No. 6611 will occur as projected.

Estimated Improvement Costs

Set forth below are the confirmed assessment amounts with regard to the estimated costs of the Improvements and other costs relating to the Assessment District proceedings, as described in the Engineer’s Report. A copy of the Engineer’s Report is on file with the City.

TABLE 3 ENGINEER’S ESTIMATE OF TOTAL COST AND ASSESSMENT

CITY OF BAKERSFIELD ASSESSMENT DISTRICT NO. 07-2 (SYDNEY HARBOUR)

ACTIVITY DESCRIPTION

CONFIRMEDASSESSMENT

SYDNEY HARBOUR AREA – PORTION (TRACT NO. 6520) IMPROVEMENT COST A. IMPROVEMENTS $2,504,077.00 B. CONTINGENCY 0.00 C. INCIDENTALS 0.00 D. TOTAL SYDNEY HARBOUR AREA – PORTION (TRACT NO. 6520) IMPROVEMENT COST $2,504,077.00

SYDNEY HARBOUR AREA – PORTION (TRACT NO. 6611) IMPROVEMENT COST A. IMPROVEMENTS $1,193,732.00 B. CONTINGENCY 119,373.00 C. INCIDENTALS 165,295.00 D. TOTAL SYDNEY HARBOUR AREA – PORTION (TRACT NO. 6611) IMPROVEMENT COST $1,478,400.00

TOTAL COST OF IMPROVEMENTS, CONTINGENCY, AND INCIDENTALS A. IMPROVEMENTS $3,697,809.00 B. CONTINGENCY 119,373.00 C. INCIDENTALS 165,295.00 D. TOTAL COST OF IMPROVEMENTS, CONTINGENCY, AND INCIDENTALS $3,982,477.00

ESTIMATED ASSESSMENT DISTRICT PROCEEDING COST AND EXPENSE A. SYDNEY HARBOUR AREA – PORTION (TRACT NO. 6520) $151,201.36 B. SYDNEY HARBOUR AREA – PORTION (TRACT NO. 6611) 89,268.86 C. TOTAL ESTIMATED ASSESSMENT DISTRICT PROCEEDING COST AND EXPENSE $240,470.22

1915 ACT BOND ISSUANCE COST AND RESERVE A. SYDNEY HARBOUR AREA – PORTION (TRACT NO. 6520) $378,554.98 B. SYDNEY HARBOUR AREA – PORTION (TRACT NO. 6611) 223,497.80 C. TOTAL 1915 ACT BOND ISSUANCE COST AND RESERVE $602,052.78

TOTAL AMOUNT ASSESSED A. SYDNEY HARBOUR AREA – PORTION (TRACT NO. 6520) $3,033,833.34 B. SYDNEY HARBOUR AREA – PORTION (TRACT NO. 6611) 1,791,166.66 C. TOTAL AMOUNT ASSESSED $4,825,000.00

___________________________ Source: Engineer’s Report.

Method of Assessment Spread

Spread of the Assessment District Costs to Benefited Parcels

Section 10204 of the 1913 Act requires that the assessments must be levied in proportion to the estimated benefit that the subject properties receive from the works of improvement. The statute does not provide the specific method or formula that should be used in any particular special assessment district proceeding. That responsibility

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rests initially with the Assessment Engineer, who is retained by the City for the purpose of making an independent analysis of the facts and recommendations about the apportionment of the assessment obligation. For the proceedings with respect to the Assessment District, the City has retained Wilson & Associates, Fresno, California, to serve as the Assessment Engineer.

The 1913 Act provides that the Assessment Engineer makes his recommendations as to the cost and method of apportionment of the assessments in the Engineer’s Report, which is then considered at the public hearing on the Assessment District. Final authority and action with respect to the levy of the assessments rests with the City Council after hearing all testimony and evidence presented at the public hearing. Upon the conclusion of the public hearing, the City Council must take final action in determining the proportionality of the benefits received by the properties assessed.

The financed costs will be spread to the assessed parcels in the Assessment District in the manner set forth in Municipal Code Section 13.08.070 – Benefit Spread, which was added to the City’s Municipal Code on April 5, 1995, by City Council adoption of Ordinance No. 3643. The parcel assessment shares for City assessment districts are to be allocated or spread in accordance with the 1913 Act, which requires that the financed cost in a special assessment proceeding be allocated among the benefited parcels of land in proportion to the estimated benefit each parcel can be expected to receive from the work and improvement covered by the assessment. Municipal Code Section 13.08.070 authorizes the “reallocation” to alternate properties of assessments initially allocated to parcels in proportion to their estimated benefit (i.e., initial allocation made in accordance with the 1913 Act cost/benefit requirement), when such reallocation is so requested by the owner of all property to be assessed and upon the written consent of the owner of the property to which assessments are reallocated and approval thereof by the City Council.

The Assessment District individual parcel assessment amounts shown on APPENDIX E have been calculated or spread among the assessed parcels pursuant to Municipal Code Section 13.08.070. The alternate method used by the Assessment Engineer to reallocate the benefit based assessment shares, if any, initially allocated by the Assessment Engineer to each assessed parcel was approved by the Developer. The Assessment Engineer has determined that the spreading of the assessments in accordance with the alternate method conforms to the requirements of Municipal Code Section 13.08.070. To the extent that any assessments are reapportioned after the Bonds have been issued, the City will approve the same only if the security for the Bonds is not reduced or impaired.

Reallocation Spread Method

In accordance with Municipal Code Section 13.08.070, the Developer requested a proposed alternate method and rate of assessment in its property owner petition to initiate proceedings for the Assessment District. The request to use an alternate method and rate of assessment was approved by the City in Resolution No. 206-07, which resolution accepted the property owner petition, adopted by the City Council on September 26, 2007. Further, the Developer has stated that, as of the date of the approval for the requested alternate method and rate of assessment, the Developer was the owner of all the property proposed to be reallocated a share of the assessment and, as of such date, consented to the reallocation. The Assessment Engineer’s estimates of the costs of the Improvements is presented above under the heading “THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS – Estimated Improvement Costs.”

The alternate method (the “Reallocation Spread Method”) is described as follows: the total improvement acquisition cost allocated within each Community Area is spread among the developed and undeveloped parcels within each area in direct proportion to parcel acreage and to each planned or existing R-1 lot within those developed and undeveloped parcels as an equal per R-1 lot cost share. There are no exceptions in the Community Areas to the equal cost share per acre and equal cost per existing or planned R-1 lot Reallocation Spread Method.

OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT

Ownership of Property in the Assessment District

As of February 15, 2008, the property within the Assessment District subject to the lien of the assessments was owned as follows: the Developer owned all 132 lots within Phase 1 of Tract No. 6520, all of the property

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within future Phase 2 of Tract No. 6520, which has been approved for subdivision into 153 lots, and 148 lots in Tract No. 6611, and individual homeowners owned the remaining seven lots in Tract No. 6611. The property within Tract No. 6520 will bear approximately 63% of the total assessment lien and the property within Tract No. 6611 will bear approximately 37% of the total assessment lien.

None of the Landowners, or any other subsequent owner of property within the Assessment District (each, a “Property Owner”), will be personally liable for payments of the assessments to be applied to pay the principal of and interest on the Bonds. In addition, there is no assurance that the Landowners or any other Property Owner will be able to pay the assessment installments or that the Landowners or any other Property Owner will pay such installments even if it is financially able to do so. Furthermore, except to the extent expressly set forth herein, no representation is made that the Landowners or any other Property Owner will have moneys available to complete or improve the development of the land within the Assessment District (other than the Improvements) in the manner described herein. Accordingly, no Property Owner’s financial statements are included in this Official Statement.

The Developer

The information under this subheading has been provided by the Developer and has not been verified for accuracy or completeness by the City or the Underwriter, and the City and the Underwriter shall have no liability in respect thereof.

General. Stuart Thomas, Inc. was formed in July 1997 and was purchased by David A. Cates on February 20, 1998. The current owner of Stuart Thomas, Inc. is The David A. and Linda A. Cates Family Trust. A dba for Lenox Homes was filed in February 1998, and Lenox Homes began immediately building homes within the County and primarily within the City limits.

During the first two years of its existence, Lenox Homes built larger semi-custom homes and the business grew to have annual revenues that exceeded $4.7 million. In 2000, Lenox Homes purchased a small parcel of land in Bakersfield and began land development to build small homes for the entry-level market. At that same time, the entry-level home market was growing such that Lenox Home’s revenues in 2000 grew to over $7.1 million dollars. Over the next several years, Lenox Homes continued buying raw land and developing tracts in order to build starter homes. From 2000 to 2007, Lenox Homes has developed over 1,300 lots and built over 1,000 homes on such lots.

Lenox Homes has grown in revenues from $682,000 in 1998 to $65.4 million in 2006. With the declining housing market, Lenox Homes’ revenue projections for 2007 are approximately $30 million, with projections for 2008 to be estimated at approximately the same amount.

Principals.

David A. Cates, President - While serving for 20 years in the United States Air Force, Mr. Cates began building homes in the Tehachapi, California, area. From 1993 until 1998, he built 20 custom homes under the role of framer and/or general contractor. After retiring from active duty with the rank of Senior Master Sergeant, he went to work for Burlington Homes as its Superintendent. Mr. Cates built approximately 50-80 homes per year from 1994 until 1998, when he started Lenox Homes. Since 1998, Lenox Homes has grown to be the largest locally owned home builder in Bakersfield, California. In 2006, Mr. Cates was named Builder of the Year by the Bakersfield Home Builders Association.

Dorene Cates, Treasurer - Ms. Cates has two years of experience with a major land developer in Bakersfield, California, and 12 years of experience with homebuilders in the Bakersfield, California, and Las Vegas, Nevada, markets as either the Controller or the Accounting Manager. In May 2000, she completed her Masters Degree in Accounting from the University of Nevada, Las Vegas. In February 2001, she returned to Bakersfield, California, to assist Mr. Cates in the management of Lenox Homes.

Warren Albert, Vice President of Operations - Mr. Albert graduated from California Polytechnic State University in San Luis Obispo, California, in March 1982 with a Bachelor of Science Degree in Engineering Technology with a concentration in Electronics. He worked for Pacific Gas and Electric Company for nearly 23

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years, with nine years as an Engineer and the remainder as a Senior New Business Representative. Job duties required him to work directly with local land developers to help establish gas and electric service through the application of the line extension rules on file with the California Public Utility Commission. In March 2006, Mr. Albert accepted employment with Lenox Homes as the Land Development Manager and is currently acting as the Vice President of Operations, overseeing Land Development, Home Production, and Home Owner Warranty.

A representative sampling of projects recently or currently under active development in the City by the Developer is summarized in the chart below. The Developer’s development plan for each project listed below is to construct residential lots and sell and convey such lots to individual homeowners.

TABLE 4 STUART HOMES, INC. DBA LENOX HOMES

RECENT OR CURRENT PROJECTS IN THE CITY

Project Number

of Units Square

Footage Range Sales

Price Range Month/Year

Sales Commenced Month/Year

of Closeout Northern Lights 201 1,000 – 2,305 $180,000 – $247,000(1) February 2007 December 2010(3)

Los Portales 156 1,000 – 1,740 $225,000 – $283,000(2) December 2005 June 2007 Tract 6585 79 1,000 – 2,305 $245,000 – $292,000(1) July 2012(3) December 2012(3)

Tract 6712 186 1,000 - 2,305 $225,000 – $272,000(1) August 2011(3) July 2012(3) Tract 6397 122 1,000 - 2,305 $235,000 – $282,000(1) January 2012(3) August 2011(3) ________________________ (1) Average range of base sales prices; excludes any options, upgrades, and lot premiums and any sales concessions or price reductions being

offered. (2) Average range of actual sales prices. (3) Projected dates. Source: The Developer.

Development and Financing Plans

The current development plans and financing plans of the Developer for the development of the property within the Assessment District are subject to change. Furthermore, the current development plans and financing plans envisioned for the Assessment District are subject, in large part, to the financial resources and construction and marketing capabilities and efforts of the Developer and any other merchant builders and other persons to whom the parcels within the Assessment District may be sold. There can be no assurance that such development will occur as described herein, or that it will occur at all. The information under this section has been provided by the Developer and has not been verified for accuracy or completeness by the City or the Underwriter, and neither the City nor the Underwriter shall have any liability with respect thereto.

The Development Plan

The Developer is the developer of Tract No. 6520 and Tract No. 6611. The Developer plans to develop such Community Areas as described below.

Tract No. 6520. Tract No. 6520 encompasses approximately 67.0 gross acres and is planned for subdivision into 285 R-1 lots, one public park lot, and one storm drain sump lot, all pursuant to Vesting Tentative Tract No. 6520. The Developer plans to construct 285 single-family homes on the Tract No. 6520 property in two phases for sale to individual homebuyers, and has recorded the following subdivision map with the County Recorder: Tract No. 6520-Phase 1, with 132 R-1 lots. The Developer has informed the City that the subdivision map for the remaining phase of Tract No. 6520 is not expected to be recorded with the County Recorder prior to the issuance of the Bonds.

The Developer plans to construct 285 single-family homes in 11 floor plans in Tract No. 6520. The first phase of Tract No. 6520 is expected to include 132 homes and the second phase of Tract No. 6520 is expected to include the remaining 153 homes. The floor plans will range in size from approximately 1,000 to 2,305 square feet, with expected average sales prices ranging from approximately $179,900 to $247,900. The foregoing price ranges

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exclude any options, upgrades, and lot premiums and any sales concessions or price reductions being offered. Grading and storm drain and sewer improvements have been completed in Tract No. 6520, and the Developer expects to commence home construction in September 2009 for the first phase and in September 2010 for the second phase. The Developer expects that all infrastructure improvements in Tract No. 6520, including the applicable Improvements, will be completed by March 2009. The Developer expects the first home sale to close by January 2010 for the first phase and by January 2011 for the second phase. The Developer expects to sell homes at an annual rate of approximately 72 units in the first phase, with the final home sale occurring in November 2011, and at an annual rate of approximately 72 units in the second phase, with the final home sale occurring in March 2013. For purposes of determining the appraised value of the property within the Assessment District, however, the Appraiser assumed an annual absorption rate of approximately 36 units. See “APPENDIX B – Appraisal.”

Tract No. 6611. Tract No. 6611 encompasses approximately 35.0 gross acres and has been subdivided into 155 R-1 lots, one storm drain sump lot, and four public landscape lots. The Developer plans to construct 155 single-family homes on the Tract No. 6611 property in one phase for sale to individual homebuyers.

The Developer plans to construct 155 single-family homes in 11 floor plans in Tract No. 6611. The floor plans will range in size from approximately 1,000 to 2,305 square feet with expected average sales prices ranging from approximately $179,900 to $247,900. The foregoing price ranges exclude any options, upgrades, and lot premiums and any sales concessions or price reductions being offered. The Developer has constructed 10 model homes, which were opened to the public in August 2007. The Developer has reported that all development impact fees have been paid, all in-tract improvements have been substantially completed in Tract No. 6611, and home construction has commenced. The Developer expects that all infrastructure improvements in Tract No. 6611, including the applicable Improvements, will be completed by January 2009. The first home sale closed in November 2007, and, as of February 15, 2008, the Developer had closed escrow on a total of seven homes and had an additional 12 homes under contract that had not yet closed escrow. To the Developer’s best knowledge, all of such 19 homes have been or will be financed by the purchasers with traditional 30 year fixed-rate loans. The Developer expects to sell homes at an annual rate of approximately 72 units, with the final home sale occurring in January 2010. For purposes of determining the appraised value of the property within the Assessment District, however, the Appraiser assumed an annual absorption rate of approximately 36 units. See “APPENDIX B – Appraisal.”

The table below sets forth the final sale prices of the homes on which the Developer has closed escrow as of February 15, 2008. The sale prices below may have included options, upgrades, and lot premiums and any sales concessions or price reductions offered.

TABLE 5 TRACT NO. 6611

FINAL SALE PRICES OF HOMES THAT CLOSED ESCROW AS OF FEBRUARY 15, 2008

Lot No. Lot Size

(Square Feet) Sale Price Lot 103 6,806 $254,990 Lot 104 6,059 $288,990 Lot 105 6,620 $279,990 Lot 106 6,600 $288,950 Lot 113 6,617 $269,990 Lot 114 6,617 $200,000 Lot 118 6,616 $289,990 ____________________ Source: The Developer.

The Financing Plan

Tract No. 6520. The following table details the construction budget for the development of Tract No. 6520. Such budget has been prepared based upon assumptions of future sales revenues, development costs, operating costs, property taxes, and other matters, all of which are subject to change. There can be no assurance that the actual development costs for Tract No. 6520 will not be greater than projected.

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ESTIMATED CONSTRUCTION BUDGET(1)

Total

Amount SOURCES OF FUNDS Third-Party Financing

Promissory Note $13,483,000 Bank Loans 4,000,000

Total Third-Party Financing $17,483,000 Bond Proceeds 2,504,077 Home Sale Revenues (285 units x $223,990(2)) 63,837,150

Total Sources of Funds $83,824,227

Amount Spentas of 02-01-08

Amount Remaining

Total Amount

EXPENDITURES Project Direct Costs

Land Acquisition(3) $13,788,564 $ 363,748 $14,152,312 Land Development(4) 1,554,611 5,823,661 7,378,272 General Allocables 3,256 852,499 855,755 Model Decorating 300,000 0 300,000 Sales and Marketing 84,142 9,171,533 9,255,675 Financing – Repayment of Principal N/A 17,483,000 17,483,000 Financing – Interest and Fees 440,544 1,355,518 1,796,062

Total Project Direct Costs $16,171,117 $35,049,959 $51,221,076 Home Construction (285 units x $86,143(5)) 0 24,550,755 24,550,755

Total Expenditures $16,171,117 $59,600,714 $75,771,831 Total Gross Profit $8,052,396 _______________________ (1) Totals may not add due to rounding. (2) $223,990 is the estimated average sales price for each unit. (3) Includes property taxes paid to date and property taxes estimated to be paid through sell-out of Tract No. 6520. (4) Approximately $2,504,077 of the offsite improvement costs are expected to be reimbursed with Bond proceeds. (5) $86,143 is the estimated average cost to construct each unit. Source: The Developer.

In February 2006, the Developer acquired the property within Tract No. 6520 from Union/Berk, LLC, in consideration of a cash payment and a promissory note in the principal amount of $13,483,000 to Union/Berk, LLC (the “Tract No. 6520 Note”). The owner of the Developer is The David A. and Linda A. Cates Family Trust, which is also a member of Union/Berk, LLC. Union/Berk, LLC acquires raw land that the company then entitles and sells to either the Developer or an unrelated party. In connection with the delivery of the Tract No. 6520 Note, the Developer also entered into a Short Form Deed of Trust and Assignment of Rents, dated January 26, 2006 (the “Tract No. 6520 Note Deed of Trust”) in favor of Union/Berk, LLC. The property comprising Tract No. 6520 serves as security for, and is subject to, the lien of the Tract No. 6520 Note Deed of Trust. As the residential units in Tract No. 6520 close escrow, and provided that all conditions for a release are satisfied pursuant to the Tract No. 6520 Note Deed of Trust, such property will be released from the lien of the Tract No. 6520 Note Deed of Trust. The Tract No. 6520 Note matures on May 31, 2009, and is subject to two three-month extensions. As of February 1, 2008, the outstanding amount of the Tract No. 6520 Note was approximately $7,645,963.21.

The Developer expects to finance the development of Tract No. 6520, including all applicable Improvements not financed with proceeds from the sale of the Bonds, through a combination of available cash, home sale revenues, and a secured development loan from San Joaquin Bank in the principal amount of $4,000,000

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(the “San Joaquin Bank Loan”). The San Joaquin Bank Loan is evidenced by a Promissory Note, dated July 18, 2007, and a Deed of Trust, dated July 18, 2007 (the “San Joaquin Bank Deed of Trust”), executed by the Developer in favor of San Joaquin Bank. Proceeds of the San Joaquin Bank Loan were used, or will be used, to develop the property within Tract No. 6520 with single-family homes. The property comprising Tract No. 6520 serves as security for, and is subject to, the lien of the San Joaquin Bank Loan. As the residential units in Tract No. 6520 close escrow, and provided that all conditions for a release are satisfied pursuant to the San Joaquin Bank Loan, such property will be released from the lien of the San Joaquin Bank Deed of Trust. The San Joaquin Bank Loan matures on July 17, 2008, and is subject to two three-month extensions. As of February 1, 2008, the balance of funds drawn on the San Joaquin Bank Loan was approximately $3,936,250.96.

The Developer intends to use such third party financing and available cash provided by it or an affiliated entity, together with home sale proceeds, to finance all carrying costs for its property (including property taxes and assessments) until full sell-out of the residential units that it is developing within Tract No. 6520.

The Developer has represented that it currently expects the funding sources described above will be sufficient to complete the development of Tract No. 6520 as described herein. There is no assurance, however, that amounts necessary to finance any outstanding development costs will be available from the Developer, or any other source when needed. Neither the Developer nor any of its affiliates is under any legal obligation of any kind to expend funds for the development of Tract No. 6520. Any contributions by the Developer to fund the costs of such development are entirely voluntary. Notwithstanding available sources of financing, neither the Developer nor any of its affiliates is under any obligation to apply such sources to the completion of development within Tract No. 6520.

Tract No. 6611. The following table details the construction budget for the development of Tract No. 6611. Such budget has been prepared based upon assumptions of future sales revenues, development costs, operating costs, property taxes, and other matters, all of which are subject to change. There can be no assurance that the actual development costs for Tract No. 6611 will not be greater than projected.


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ESTIMATED CONSTRUCTION BUDGET

Total

Amount SOURCES OF FUNDS Third-Party Financing

Promissory Note $ 4,947,000 Bank Loans 16,220,600

Total Third-Party Financing $21,167,600 Bond Proceeds 1,478,400 Home Sale Revenues (155 units x $223,990(2)) 34,718,450

Total Sources of Funds $57,364,450

Amount Spentas of 02-01-08

Amount Remaining

Total Amount

EXPENDITURES Project Direct Costs

Land Acquisition(3) $ 6,198,412 $ 225,000 $ 6,423,412 Land Development(4) 4,527,891 0 4,527,891 General Allocables 106,152 133,808 239,960 Model Decorating 197,234 0 197,234 Sales and Marketing 185,954 4,384,923 4,570,877 Financing – Repayment of Principal 0 21,167,600 21,167,600 Financing – Interest and Fees 1,300,080 1,772,616 3,072,696

Total Project Direct Costs $12,515,723 $27,683,947 $40,199,670 Home Construction (155 units x $86,143(5)) 2,977,153 10,375,012 13,352,165

Total Expenditures $15,492,876 $38,058,959 $53,551,835 Total Gross Profit $3,812,615 _______________________ (1) Totals may not add due to rounding. (2) $223,990 is the estimated average sales price for each unit. (3) Includes property taxes paid to date and property taxes estimated to be paid through sell-out of Tract No. 6611. (4) Approximately $1,478,400 of the offsite improvement costs are expected to be reimbursed with Bond proceeds. (5) $86,143 is the estimated average cost to construct each unit. Source: The Developer.

In July 2006, the Developer acquired the property within Tract No. 6611 and 112 lots in tentative tract no. 6397 (“Tract No. 6397”), which is not located within the Assessment District, from H. Arthur Davis and Annette L. Davis, Trustees of the Davis Family Trust, and Robert E. Smith and Pamela G. Smith, Co-Trustees of The Smith Revocable Living Trust dated April 22, 2004 (collectively, the “Davis and Smith Family Trusts”), in consideration of a cash payment and a Note Secured by Deed of Trust, dated July 7, 2006, in the amount of $4,947,000 to the Davis and Smith Family Trusts, as amended (the “Tract No. 6611 Note”). The cash payment towards the purchase price was financed, in part, with a loan the Developer obtained from United Security Bank in the original principal amount of $5,800,000, which loan is currently secured solely by property that is not within the Assessment District. In connection with the delivery of the Tract No. 6611 Note, the Developer also entered into a Short Form Deed of Trust and Assignment of Rents, dated July 7, 2006 (the “Tract No. 6611 Note Deed of Trust”) in favor of the Davis and Smith Family Trusts. The property comprising Tract No. 6611 and Tract No. 6397 serves as security for, and is subject to, the lien of the Tract No. 6611 Note Deed of Trust. As the residential units in Tract No. 6611 close escrow, and provided that all conditions for a release are satisfied pursuant to the Tract No. 6611 Note Deed of Trust, such property will be released from the lien of the Tract No. 6611 Note Deed of Trust. The Developer has informed the City that the Tract No. 6611 Note matures on July 14, 2008, and is subject to two three-

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month extensions. As of February 1, 2008, the outstanding amount of the Tract No. 6611 Note was approximately $3,500,907.

The Developer expects to finance the development of Tract No. 6611, including all applicable Improvements not financed with proceeds from the sale of the Bonds, through a combination of available cash, home sale revenues, a secured construction loan from United Security Bank in the principal amount of $7,350,000 (the “$7.35M United Security Bank Loan”), a secured construction loan from United Security Bank in the principal amount of $1,870,600 (the “$1.87M United Security Bank Loan”), and a secured construction loan from United Security Bank in the principal amount of $7,000,000 (the “$7.00M United Security Bank Loan”).

The $7.35M United Security Bank Loan was obtained pursuant to a Construction Loan Agreement, dated February 12, 2007, and a Deed of Trust, dated February 12, 2007 (the “$7.35M United Security Bank Deed of Trust”), executed by the Developer in favor of United Security Bank. A portion of the proceeds of the $7.35M United Security Bank Loan was used to pay down a portion of the United Security Bank loan in the original principal amount of $5,800,000, described in the preceding paragraph. A portion of the proceeds of the $7.35M United Security Bank Loan were also used, or will be used, to develop the property within Tract No. 6611 with single-family homes. The property comprising Tract No. 6611 serves as security for, and is subject to, the lien of the $7.35M United Security Bank Loan. As the residential units in Tract No. 6611 close escrow, and provided that all conditions for a release are satisfied pursuant to the $7.35M United Security Bank Loan, such property will be released from the lien of the $7.35M United Security Bank Deed of Trust. As of February 15, 2008, the Developer had closed escrow on Lots 103, 104, 105, 106, 113, 114, and 118, and such lots were released from the lien of the $7.35M United Security Bank Deed of Trust. The $7.35M United Security Bank Loan matures on August 5, 2008, and is subject to two three-month extensions. As of February 1, 2008, the balance of funds drawn on the $7.35M United Security Bank Loan was approximately $5,430,702.

The $1.87M United Security Bank Loan was obtained pursuant to a Construction Loan Agreement, dated April 27, 2007, and a Deed of Trust, dated April 27, 2007 (the “$1.87M United Security Bank Deed of Trust”), executed by the Developer in favor of United Security Bank. Proceeds of the $1.87M United Security Bank Loan were used, or will be used, to develop only Lots 33 through 36 and 39 through 44 in Tract No. 6611 with models homes. The proceeds of the $1.87M United Security Bank Loan may only be used for housing construction and land development of these ten lots. Lots 33 through 36 and 39 through 44 in Tract No. 6611 serve as security for, and are subject to, the lien of the $1.87M United Security Bank Loan. As the model units within Tract No. 6611 close escrow, and provided that all conditions for a release are satisfied pursuant to the $1.87M United Security Bank Loan, such property will be released from the lien of the $1.87M United Security Bank Deed of Trust. The $1.87M United Security Bank Loan matures on April 5, 2008, and is subject to two six-month extensions. As of February 1, 2008, the balance of funds drawn on the $1.87M United Security Bank Loan was approximately $1,837,429.87.

The $7.00M United Security Bank Loan was obtained pursuant to a Construction Loan Agreement, dated August 22, 2007, and a Deed of Trust, dated August 22, 2007 (the “$7.00M United Security Bank Deed of Trust”), executed by the Developer in favor of United Security Bank. Proceeds of the $7.00M United Security Bank Loan were only used, or will only be used, to develop Lots 85 through 149 within Tract No. 6611 with single-family homes. The property comprising Lots 85 through 149 within Tract No. 6611 serves as security for, and is subject to, the lien of the $7.00M United Security Bank Loan. As the residential units on Lots 85 through 149 within Tract No. 6611 close escrow, and provided that all conditions for a release are satisfied pursuant to the $7.00M United Security Bank Loan, such property will be released from the lien of the $7.00M United Security Bank Deed of Trust. As of February 15, 2008, the Developer had closed escrow on Lots 103, 104, 105, 106, 113, 114, and 118, and such lots were released from the lien of the $7.00M United Security Bank Deed of Trust. The $7.00M United Security Bank Loan matures on September 5, 2008, and is subject to two three-month extensions. As of February 1, 2008, the balance of funds drawn on the $7.00M United Security Bank Loan was approximately $2,171,936.08.

The Developer intends to use such third party financing and available cash provided by it or an affiliated entity, together with home sale proceeds, to finance all carrying costs for its property (including property taxes and the assessments) until full sell-out of the residential units that it is developing within Tract No. 6611.

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The Developer has represented that it currently expects the funding sources described above will be sufficient to complete the development of Tract No. 6611 as described herein. There is no assurance, however, that amounts necessary to finance any outstanding development costs will be available from the Developer, or any other source when needed. Neither the Developer nor any of its affiliates is under any legal obligation of any kind to expend funds for the development of Tract No. 6611. Any contributions by the Developer to fund the costs of such development are entirely voluntary. Notwithstanding available sources of financing, neither the Developer nor any of its affiliates is under any obligation to apply such sources to the completion of development within Tract No. 6611.

Assessment Roll

Set forth in APPENDIX E is the assessment roll, including Bulk Value to assessment lien ratio information, for the parcels of property within the Assessment District that are subject to the lien of the assessments. The assessment roll shows the amount of the total estimated cost of the proposed Improvement acquisition, construction and incidental cost that is assessed upon each of the lots and parcels within the Assessment District based upon the alternate method and rate of assessment permitted under Section 13.08.070 of the Municipal Code of the City. See “THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS – Method of Assessment Spread” above. The assessment numbers that appear on the assessment roll correspond to the assessment numbers shown on the assessment diagram, attached hereto as APPENDIX D.

Utilities

For each Community Area, all utilities, including gas, water, electricity, sewer, storm drains, telephone service, and cable television service are or will be installed in the frontages along the streets within the Community Area and will connect to existing facilities in the surrounding streets. For each Community Area, electricity and natural gas services are provided by Pacific Gas & Electric, storm drain, sewer, and refuse service is provided by the City, telephone service is provided by AT&T, and cable television is provided by Bright House Networks. In addition, the Developer has received will-serve letters from Greenfield Water to provide water service in each Community Area.

Flood and Earthquake Zones

Pursuant to the Appraisal, according to the maps prepared by the Federal Emergency Management Agency, the Community Areas are situated in a Zone C flood area. “Zone C” denotes an area that is not considered a flood hazard zone. No flood insurance is required for property in a Zone C flood area, and no flood insurance has been obtained for any property within the Assessment District.

Pursuant to the Appraisal, the Assessment District is not located within any Special Studies Zone, as defined in the Alquist-Priolo Special Studies Zone Act. Southern California is a seismically active area. A major seismic event proximate to the Assessment District could result in substantial damage to properties in the Assessment District, which, in turn, could substantially reduce the value of such properties and could affect the ability or willingness of the property owners to pay their assessments.

Zoning

According to the Planning Department of the City, all of the parcels in the Assessment District are zoned R-1 for residential uses. An R-1 zoning designation allows single-family residential land uses, with a minimum lot size of 6,000 square feet for each dwelling unit.

Tax Delinquencies

The City has represented that, based upon the records of the office of the County Tax Collector, as of February 15, 2008, there were no delinquent property taxes or penalties owed against the parcels in the Assessment District. The Developer has reported that none of the property it owns within the Assessment District or elsewhere is currently delinquent in the payment of any special taxes, assessments, or ad valorem property tax obligations, and that such entity has never defaulted on any such payments for which such delinquency was not cured within the

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same fiscal year, or lost any property to foreclosure as a result of not paying special taxes, assessments, or ad valorem property tax obligations.

Delinquencies have recently existed with respect to the property within the Assessment District, however, which delinquencies have recently been cured, as summarized below.

The City reports that, except as described below, based upon the records of the office of the County Tax Collector, none of the parcels in the Assessment District shows delinquencies in the payment of property tax installments in the time that the Developer has owned such property.

For Assessor’s Parcel Number 518-040-08 in Tract No. 6520, (i) the second installment of Tax Bill No. 05-1366021-00-2 (Secured Bill) became delinquent on April 10, 2006, and the total outstanding amount of $1,469.68, inclusive of any penalties, was posted as paid by the County Tax Collector on June 30, 2006, (ii) the second installment of Tax Bill No. 06-4063254-00-0 (Secured Supplemental Bill) became delinquent on October 1, 2007, and the total outstanding amount of $5,638.82, inclusive of any penalties, was posted as paid by the County Tax Collector on January 14, 2008, and (iii) the second installment of Tax Bill No. 06-4063255-00-3 (Secured Supplemental Bill) became delinquent on October 1, 2007, and the total outstanding amount of $16,741.18, inclusive of any penalties, was posted as paid by the County Tax Collector on January 14, 2008.

For Assessor’s Parcel Number 518-040-09 in Tract No. 6520, (i) the second installment of Tax Bill No. 05-1366022-00-5 (Secured Bill) became delinquent on April 10, 2006, and the total outstanding amount of $3,219.66, inclusive of any penalties, was posted as paid by the County Tax Collector on June 30, 2006, (ii) the second installment of Tax Bill No. 06-4063256-00-9 (Secured Supplemental Bill) became delinquent on October 1, 2007, and the total outstanding amount of $12,384.74, inclusive of any penalties, was posted as paid by the County Tax Collector on January 14, 2008, and (iii) the second installment of Tax Bill No. 06-4063257-00-6 (Secured Supplemental Bill) became delinquent on October 1, 2007, and the total outstanding amount of $36,792.84, inclusive of any penalties, was posted as paid by the County Tax Collector on January 14, 2008.

For Assessor’s Parcel Number 518-040-10 in Tract No. 6520, (i) the second installment of Tax Bill No. 05-1366023-00-8 (Secured Bill) became delinquent on April 10, 2006, and the total outstanding amount of $2,010.24, inclusive of any penalties, was posted as paid by the County Tax Collector on June 30, 2006, (ii) the second installment of Tax Bill No. 06-4063258-00-2 (Secured Supplemental Bill) became delinquent on October 1, 2007, and the total outstanding amount of $7,719.36, inclusive of any penalties, was posted as paid by the County Tax Collector on January 14, 2008, (iii) the second installment of Tax Bill No. 06-4063259-005 (Secured Supplemental Bill) became delinquent on October 1, 2007, and the total outstanding amount of $22,925.38, inclusive of any penalties, was posted as paid by the County Tax Collector on January 14, 2008, and (iv) the first installment of Tax Bill No. 07-1375711-00-6 (Secured Bill) became delinquent on December 10, 2007, and the total outstanding amount of $25,690.90, inclusive of any penalties, was posted as paid by the County Tax Collector on January 11, 2008.

For Assessor’s Parcel Number 518-030-11 in Tract No. 6611, the first installment of Tax Bill No. 06-13698595-00-1 (Secured Bill) became delinquent on December 11, 2006, and the total outstanding amount of $2,281.63, inclusive of any penalties, was posted as paid by the County Tax Collector on February 28, 2007.

Environmental Issues Affecting Assessment District Property

Pursuant to the Municipal Code of the City, the formation of an assessment district is exempt from compliance with the California Environmental Quality Act (“CEQA”). Accordingly, a Notice of Exemption from CEQA was filed by the City with the County Clerk for the Assessment District proceedings on October 30, 2007. The City reports that separate environmental review proceedings will be conducted for the improvement projects proposed to be financed within the Assessment District as part of the CEQA compliance associated with the land use entitlement and subdivision approval process within each Community Area. The Developer has reported that, to its knowledge, except as set forth below, there are no additional environmental issues affecting its property within the Assessment District that would materially adversely affect the development of such property as described in this Official Statement.

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A description of the environmental assessments that have been conducted with respect to each of the Community Areas is set forth below.

Air Quality Impact Studies. An Air Quality Impact Study, dated January 2005, was prepared by WZI Inc. for the property within Tract No. 6520 and an Air Quality Impact Study, dated January 2005 (collectively, the “Air Quality Impact Studies”), was prepared by WZI Inc. for the property within Tract No. 6611. The Air Quality Impact Studies identified the property within the Assessment District as being located within the San Joaquin Valley Air Basin and within the jurisdiction of the San Joaquin Valley Air Pollution Control District. According to the Air Quality Impact Studies, the following sources of pollutants are expected from all or a portion of the Developer’s proposed development: ozone, reactive organic gases and volatile organic compounds, carbon monoxide, nitrogen oxides, particulate matter, sulfur oxides, vinyl chloride, and hydrogen sulfide. The Air Quality Impact Studies concluded that both short-term and long-term impacts would be less than significant with mitigation.

Cultural Resources Assessment. A Cultural Resources Assessment, dated April 2004 (the “Cultural Resources Assessment”), was prepared by Three Girls and A Shovel, LLC for the property within Tract No. 6611. The purpose of the Cultural Resources Assessment was to satisfy requirements of CEQA regarding identification and protection of cultural resources. The Cultural Resources Assessment concluded that “no sites or isolated artifacts were located as a result of the survey” and that “no further archaeological work is necessary” on the project until the commencement of construction. However, the Cultural Resources Assessment made certain recommendations based on the fact that the project is in proximity of several archaeology sites containing significant artifacts and human remains, the project area is in the Kern River flood plain, and the project area is located in the old slough area of south Bakersfield. Such recommendations included: (i) a qualified archaeologist monitor earth moving activities on the project area or, prior to such earth moving activities, construction workers be trained by a qualified archaeologist to recognize possible archaeological remains; (ii) extreme caution be taken by said construction workers during earth moving activities; and (iii) if human remains are located, the coroner and a qualified archaeologist be called immediately.

Traffic Impact Studies. A Traffic Impact Study, dated January 14, 2005 (the “Tract No. 6520 Traffic Impact Study”), was prepared by Crenshaw Traffic Engineering for the property within Tract No. 6520. The purpose of the Tract No. 6520 Traffic Impact Study was to determine the traffic impact on the local roadway system from traffic generated by the proposed residential development. The Tract No. 6520 Traffic Impact Study concluded that the overall traffic volumes that may be generated from the proposed development will require certain traffic mitigation measures as outlined in the Tract No. 6520 Traffic Impact Study. Such mitigation measures include installation of traffic signals, intersection upgrades, and street improvements. The Tract No. 6520 Traffic Impact Study noted that the Developer may satisfy its proportional share of improvements by paying an impact fee to the City. Traffic impact fees are collected by the City when building permits are issued. Such traffic impact fees are adjusted annually.

A Traffic Study, dated January 2005 (the “Tract No. 6611 Traffic Study”), was prepared by Ruettgers & Schuler Civil Engineers for the property within Tract No. 6611. The Tract No. 6611 Traffic Study evaluated the potential traffic impacts of a proposed general plan amendment and zone change for the subject property. The Tract No. 6611 Traffic Study identified intersection and roadway improvements that are needed to maintain or improve the operational level of service of the street system in the vicinity of the project as well as the improvements that are not covered by the Regional Transportation Impact Fee (“RTIF”) program. The Tract No. 6611 Traffic Study concluded that, provided RTIF Improvements are constructed and the mitigation measures identified in the study are implemented, traffic generated by the proposed residential development will have “minimal impact on existing and future traffic operations in the vicinity of the project.”

Bulk Value-to-Assessment Lien Ratio

An Appraisal of the property within each of the two Community Areas in the Assessment District that is subject to the lien of the assessments has been prepared for the City by the Appraiser. The Appraisal, subject to the various limitations and assumptions set forth therein, provides an estimate of the as-is market value (designated in the Appraisal as the “Bulk Value of Recorded Lots or Land” and defined herein as the “Bulk Value”) of each parcel of property within the Assessment District.

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The “Aggregate Finished Lot Value When Complete” is described in the Appraisal as the value of each parcel assuming the completion of the Improvements and taking into account the value added by existing improvements, a recorded subdivision map, and the “Completion Costs,” which are defined therein as the costs associated with the developer-funded improvements necessary to develop such parcel as a finished lot available for improving with new housing units. The Completion Costs were presumed by the Appraiser to include direct and indirect costs for each lot, taxes during construction, profits, commissions, administrative and miscellaneous expenses, and other direct and indirect overlapping debt. See “APPENDIX B – Appraisal.” For a discussion of liens encumbering the Assessment District property other than the assessments, see “Direct and Overlapping Debt” below and “THE BONDS – Priority of Lien” herein.

Based on the Appraisal, the ratio of the aggregate Bulk Value of the Assessment District property to the aggregate assessment lien is approximately 4.01:1. The table below sets forth the Bulk Value of the Assessment District property and the applicable Bulk Value-to-assessment lien ratios.

TABLE 8 APPRAISED VALUES AND BULK VALUE-TO-ASSESSMENT LIEN RATIOS


Assessment No. Development Area Description Net Land

Area

Bulk Value of Recorded Lots or Land

Total Assessment

Lien Value-to-Lien

Ratio

SYDNEY HARBOUR AREA – PORTION (TRACT NO. 6520)

1-132 Tract No. 6520-Phase 1 (132 Residential Lots) 26.97 $ 5,415,554.00 $1,405,143.86 3.85

133 Future Tract No. 6520-Phase 2 – Portion (79 Residential Lots) 15.99 2,527,962.00 840,957.31 3.01

134 Future Tract No. 6520-Phase 2 – Portion (74 Residential Lots) 18.96 2,367,965.00 787,732.17 3.01

TOTALS/AVERAGES FOR SYDNEY HARBOUR AREA – PORTION (TRACT NO. 6520) 61.92 $10,311,481.00 $3,033,833.34 3.40

SYDNEY HARBOUR AREA – PORTION (TRACT NO. 6611) 135-141 and

143-290 Tract No. 6611 (155 Residential Lots) 31.16 $ 9,014,035.00 $1,791,166.66 5.03

TOTALS/AVERAGES FOR SYDNEY HARBOUR AREA – PORTION (TRACT NO. 6611) 31.16 9,014,035.00 1,791,166.66 5.03

ASSESSMENT DISTRICT TOTALS/AVERAGES 93.08 $19,325,517.00 $4,825,000.00 4.01

____________________________ Source: Appraisal.

The assumptions and limitations regarding the appraised valuations are set forth in the Appraisal, a copy of which is attached hereto as APPENDIX B. See APPENDIX E for additional information regarding the appraised value of each assessed parcel and the ratio of such value to the amount of the assessment lien against such parcel. The City makes no representations as to the accuracy or completeness of the Appraisal. Certain considerations relating to the Appraisal are discussed under the heading “SPECIAL RISK FACTORS.”

According to the Appraisal, the housing market downturn in the City started in 2006 and resulted in a projected 40% decrease in sales between 2006 and 2007 with a corresponding 10% drop in the median average new home sales price. Issuance of new building permits in the City dropped 35% in 2006 and 27% in 2007. In addition, the current housing market is reflective of a greater proportion of entry-level housing (less than $250,000), which increased from 13% to 30% of the overall market. The Developer’s estimated average sales price has dropped from approximately $260,000 in mid-December 2007 to approximately $249,000, as set forth in the Appraisal, and is reflective of prices in the entry-level home segment of the Bakersfield market. See “SPECIAL RISK FACTORS – City-Wide Property Tax and Assessment District Delinquencies,” “– Increased Risk of Mortgage Default in Other Areas of City May Impact Home Sales in Assessment District,” and “– Factors Relating to Sub-Prime Loans.”

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NO REPRESENTATIONS ARE MADE REGARDING THE APPRAISED VALUATIONS QUOTED IN APPENDIX B OR E, AND PROSPECTIVE PURCHASERS ARE CAUTIONED NOT TO RELY ON THE VALUATIONS IN DETERMINING WHETHER OR NOT THE BONDS DESCRIBED HEREIN ARE A SUITABLE INVESTMENT. PROSPECTIVE PURCHASERS OF THE BONDS SHOULD NOT ASSUME THAT THE PROPERTY WITHIN THE ASSESSMENT DISTRICT COULD BE SOLD FOR THE VALUATION AMOUNT AT A FORECLOSURE SALE FOR DELINQUENT ASSESSMENTS.

Direct and Overlapping Debt

The following table (the “Direct and Overlapping Debt Table”) details the direct and overlapping debt currently encumbering property within the Assessment District. The Direct and Overlapping Debt Table has been derived from data assembled and reported to the City by California Municipal Statistics, Inc., as of February 1, 2008. Neither the City nor the Underwriter has independently verified the information in the Direct and Overlapping Debt Table and neither the City nor the Underwriter guarantees its completeness or accuracy. The Direct and Overlapping Debt Table does not include the special tax liens described under the heading “THE BONDS – Priority of Lien” herein.

TABLE 9 DIRECT AND OVERLAPPING DEBT


2007-08 Local Secured Assessed Valuation: $14,648,912 DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 2/1/08 Kern Community College District Safety Repair and Improvement District 0.023% $ 27,294 Kern High School District 0.031 74,629 Kern Delta Water District 0.281 5,381 Greenfield Union School District 0.655 126,699 Panama Union School District 0.008 367 Kern Community College District Assessment District 0.025 1,390 City of Bakersfield Assessment District No. 07-2 100.000 - (1) TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $235,760 OVERLAPPING GENERAL FUND DEBT: Kern County General Fund Obligations 0.020% $ 10,237 Kern County Pension Obligations 0.020 96,020 Kern County Board of Education Certificates of Participation 0.020 11,422 Kern Community College District Certificates of Participation 0.019 16,468 Kern High School District General Fund Obligations 0.032 39,968 City of Bakersfield Certificates of Participation 0.058 19,465 TOTAL OVERLAPPING GENERAL FUND DEBT $193,580 COMBINED TOTAL DEBT $429,340 (2) (1) Excludes 1915 Act bonds to be sold. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and

non-bonded capital lease obligations. Ratios to 2007-08 Assessed Valuation: Direct Debt ....................................................................................... - % Total Direct and Overlapping Tax and Assessment Debt................... 1.61% Combined Total Debt ......................................................................... 2.93% STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/07: $0 _________________________ Source: California Municipal Statistics, Inc.

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SPECIAL RISK FACTORS

Investment in the Bonds involves risks that may not be appropriate for certain investors. The following is a discussion of certain risk factors that should be considered, in addition to other matters set forth herein, in evaluation the Bonds for investment. The information set forth below does not purport to be an exhaustive listing of the risks and other considerations that may be relevant to an investment in the Bonds. In addition, the order in which the following information is presented is not intended to reflect the relative importance of any such risks.

General

Under the provisions of the 1915 Act, assessment installments, from which funds for the payment of annual installments of principal and interest with respect to the Bonds are derived, will be billed to properties against which there are unpaid assessments on the regular property tax bills sent to owners of such properties. Such assessment installments are due and payable, and bear the same penalties and interest for non-payment, as do regular property tax installments. Therefore, the unwillingness or inability of a property owner to pay regular property tax bills as evidenced by property tax delinquencies will likely indicate an unwillingness or inability to make regular property tax payments and assessment installment payments in the future.

In order to pay debt service on the Bonds, it is necessary that unpaid installments of assessments on land within the Assessment District are paid in a timely manner. Should the installments not be paid on time, the City has established a Special Reserve Fund in the initial amount of $467,168.76, which will thereafter be maintained, from assessment installment payments and from proceeds of redemption or sale of parcels with assessment delinquencies, in the amount of the Reserve Requirement, to cover delinquencies in the payment of assessments. The assessments are secured by a lien on the parcels of land and the City can institute foreclosure proceedings to sell land in the Assessment District with delinquent installments for the amount of such delinquent installments in order to obtain funds to pay debt service on the Bonds.

Failure by owners of the parcels to pay installments of assessments when due, depletion of the Special Reserve Fund, or the inability of the City to sell parcels that have been subject to foreclosure proceedings for amounts sufficient to cover the delinquent installments of assessments levied against such parcels may result in the inability of the City to make full or punctual payments of debt service on the Bonds, and Bond owners would therefore be adversely affected.

The Bonds are not secured by the general taxing power of the City, the County, the State, or any other political subdivision of the State, and neither the City, nor the County, nor the State, nor any other political subdivision of the State has pledged its full faith and credit for the payment thereof.

Unpaid assessments do not constitute a personal indebtedness of the owners of the lots and parcels within the Assessment District. There is no assurance the owners will be able to pay the assessment installments or that they will pay such installments even though financially able to do so.

Risks of Real Estate Secured Investments Generally

Owners of the 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 and in the vicinity of the Assessment District, the supply of or demand for competitive properties in such area, and the market value of residential property or buildings or sites in the event of sale or foreclosure; (ii) changes in real estate tax rate and other operating expenses, governmental rules (including, without limitation, zoning laws and laws relating to endangered species and hazardous materials) and fiscal policies; and (iii) natural disasters (including, without limitation, earthquakes and floods), which may result in uninsured losses.

Concentration of Ownership

As of February 15, 2008, the property within the Assessment District subject to the lien of the assessments was owned as follows: the Developer owned all 132 lots within Phase 1 of Tract No. 6520, all of the property

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within future Phase 2 of Tract No. 6520, which has been approved for subdivision into 153 lots, and 148 lots in Tract No. 6611, and individual homeowners owned the remaining seven lots in Tract No. 6611. The property within Tract No. 6520 will bear approximately 63% of the total assessment lien and the property within Tract No. 6611 will bear approximately 37% of the total assessment lien.

There is no assurance of any degree of further diversification of ownership of the assessed property. Also, unless and until such ownership is further diversified, the inability or refusal of any of the Landowners to pay its respective assessment installments when due could result in the rapid total depletion of the Special Reserve Fund prior to reimbursement thereof from foreclosure proceedings. Under such circumstances, there would be insufficient moneys with which to pay principal of and interest on the Bonds.

Failure of any future property owners to pay installments of assessments when due could also result in a default in payment of the principal of and interest on the Bonds prior to the resales of foreclosed property or delinquency redemptions. In that event, there could be a default in payments of the principal of and interest on the Bonds.

Property Values

Reference is made to APPENDIX B, which contains the Appraisal and the Appraiser’s opinion with respect to the value of the property that is subject to the lien of the assessments and the assumptions made by the Appraiser in connection therewith. Reference is also made to “OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT – Bulk Value-to-Assessment Lien Ratio” for a summary of the value of the property within each of the two Community Areas in the Assessment District that is subject to the lien of the assessments and the ratio of the appraised value of such property to the total amount of the assessment liens on such property that secure the Bonds. See also APPENDIX E for a listing of the ratio of the appraised value of each assessed parcel to the amount of the assessment lien against such parcel.

No assurance can be given that this appraised value-to-lien ratio will not decline should subsequent liens be placed on property within the Assessment District. Further, there is no assurance that in the event of a foreclosure sale for a delinquent assessment installment, any bid will be received for any such property within the Assessment District or that any bid received or resale price will be sufficient to pay such delinquent installments (plus costs and penalties). The 1915 Act provides that a parcel be sold for the delinquent installment(s) amount (plus costs and penalties) and not the entire outstanding assessment.

The Appraiser has made various assumptions, which may vary from the assumptions made by other parties (including the Landowners), in order to derive the aggregate valuation estimate of the property within the Assessment District to be assessed. See APPENDIX B for an explanation of methodology and a statement of contingent and limiting conditions and assumptions used by the Appraiser to derive the aggregate value of the property. Although these contingent and limiting conditions and assumptions were considered reasonable by the Appraiser based on information available to the Appraiser, neither the Appraiser nor the City can give any assurance that any parcel will be developed in accordance with the uses that the Appraiser has projected.

See also “SPECIAL RISK FACTORS – City-Wide Property Tax and Assessment District Delinquencies,” “– Increased Risk of Mortgage Default in Other Areas of City May Impact Home Sales in Assessment District,” and “– Factors Relating to Sub-Prime Loans.”

Availability of Funds to Pay Delinquent Assessment Installments

The City will establish a Special Reserve Fund out of Bond proceeds in the amount of $467,168.76, which will thereafter be maintained, from assessment installment payments and from proceeds of redemption or sale of parcels with assessment delinquencies, in the amount of the Reserve Requirement. As discussed herein under the heading “THE BONDS – Special Reserve Fund,” if a delinquency occurs in the payment of any assessment installment, the City has a duty to transfer to the Redemption Fund the amount of the delinquency out of the Special Reserve Fund. This duty of the City is continuing during the period of delinquency, until reinstatement, redemption, or sale of the delinquent property. There is no assurance that the balance in the Special Reserve Fund will always be adequate to pay all delinquent installments and if, during the period of delinquency, there are insufficient funds in

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the Special Reserve Fund to pay all delinquent installments, a delay may occur in payments to the owners of the Bonds.

Hazardous Substances

Although governmental taxes, assessments, and charges are a common claim against the value of an assessed parcel, other less common claims may be relevant. One of the most serious in terms of the potential reduction in the value that may be realized to pay the unpaid assessments is a claim with regard to hazardous substances. In general, the owners and operators of parcels within the Assessment District may be required by law to remedy conditions of the parcels related to the 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 substances condition of a property whether or not the owner (or operator) has anything to do with creating or handling the hazardous substance. The effect, therefore, should any parcel within the Assessment District be affected by a hazardous substance, would be to reduce the marketability and value of the parcel by the costs of remedying the condition, because the owner (or operator) is obligated to remedy the condition. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling or disposing of it. All of these possibilities could significantly affect the financial and legal ability of a property owner to develop the affected parcel or other parcels, as well as the value of the property that is realizable upon a delinquency and foreclosure.

The appraised values set forth in the Appraisal do not, unless expressly noted, take into account the possible reduction in marketability and value of any of the parcels by reason of the possible liability of the owner (or operator) for the remedy of a hazardous substance condition of the parcel. The Developer has represented to the City that, to its knowledge, there is no current liability for hazardous substances with respect to any property it owns within the Assessment District that would materially adversely affect the development of such property as described in this Official Statement.

Further, it is possible that liabilities may arise in the future with respect to any of the parcels within the Assessment District resulting from the existence, currently, on the parcel of a substance presently classified as hazardous but that 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 that may in the future be so classified. Such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling or disposing of it. All of these possibilities could significantly affect the value of an assessed parcel that is realizable upon a delinquency of an unpaid assessment. See “OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT – Environmental Issues Affecting Assessment District Property.”

Endangered and Threatened Species

The Developer has reported that, to its knowledge, no threatened or endangered species (or their respective habitats) have been identified in any of its parcels within the Community Areas. If, however, any threatened or endangered species (or their respective habitats) were to be discovered on a parcel within the Assessment District prior to or during development, the ability of the then-current landowner to develop the affected parcel could be severely limited. In such an event, the then-current landowner’s willingness or ability to pay assessment installments could be adversely affected.

The property within the Assessment District is subject to the Metropolitan Bakersfield Habitat Conservation Plan (“MBHCP”), a joint program of the City and the County that was undertaken to assist urban development applicants in complying with State and federal endangered species laws. Under the MBHCP, each development applicant pays to the City a mitigation fee for grading or building permits that funds the purchase and maintenance of habitat land to compensate for the effects of urban development on endangered species habitat. The lands acquired for the MBHCP program are generally located outside the metropolitan Bakersfield area. In exchange for the MBHCP mitigation fee, the applicant is relieved of the obligation of demonstrating compliance

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with the endangered species laws by preparing biological reports, securing compensation lands, and undertaking other measures to avoid impacts to the species.

Factors That May Affect Land Development

There is no assurance that the amount to be financed by the assessments will be sufficient to pay for the entire cost of the Improvements. The Developer will be obligated to pay all of its costs in excess of the amount financed by the assessments. See “THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS – Description of the Community Areas and the Improvements.”

Future development in the Assessment District may be affected by changes in the general economic conditions, fluctuations in the real estate market, and other factors. In addition, development may be subject to future federal, state, and local regulations. Approval may be required from various agencies from time to time in connection with the layout and design of any proposed development in the Assessment District, the nature and extent of public improvements, land use, zoning, and other matters. Although no such delays are anticipated, failure to meet any such future regulations or obtain any such approvals in a timely manner could delay or adversely affect any proposed development in the Assessment District. The development of property within the Assessment District could be adversely affected if lawsuits or other actions were commenced to restrict or prevent further development within the Assessment District.

Private Improvements; Increased Debt

The development of the property within the Assessment District depends upon both public and private improvement of land within the Assessment District. The cost of additional private improvements within the Assessment District, together with public improvements financed with any additional property secured financing, will increase the public and private debt for which the land within the Assessment District is the security. Any additional public improvements for which the property owners or their properties might be obligated could reduce the ability or willingness of the property owners within the Assessment District to pay the annual assessment installments levied against their property. See “SPECIAL RISK FACTORS – Priority of Lien.”

In addition to the assessments being levied to finance the construction and acquisition of the Improvements, the City intends to include as a part of such levy an annual assessment upon each parcel of land in the Assessment District to cover all administrative costs of the City with respect to the Assessment District. These additional administrative assessment amounts could reduce the ability or willingness of the property owners within the Assessment District to pay the annual assessment installments levied against their property.

Subordinate Debt; Payments by FDIC and Other Federal Agencies

The Developer has reported that its property within the Assessment District currently serves as security for certain of its obligations to third party lenders. See “OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT – Development and Financing Plans.”

All or portions of the Assessment District property may in the future secure additional loans of the owners thereof. Any such loans are subordinate to the lien of the assessments. However, in the event that any of the financial institutions making any loan that is secured by real property within the Assessment District is taken over by the Federal Deposit Insurance Corporation (“FDIC”) or if a lien is imposed on the property by the Drug Enforcement Agency, the Internal Revenue Service, or other similar federal governmental agency, and, prior thereto or thereafter, the loan or loans go into default, the ability of the City to collect interest and penalties specified by state law and to foreclose the lien of a delinquent unpaid assessment may be limited.

Specifically, with respect to the FDIC, on June 4, 1991, the FDIC issued a Statement of Policy Regarding the Payment of State and Local Property Taxes (the “1991 Policy Statement”). The 1991 Policy Statement was revised and superseded by new Policy Statement effective January 9, 1997 (the “Policy Statement”). The Policy Statement provides that real property owned by the FDIC is subject to state and local real property taxes only if those taxes are assessed according to the property’s value, and that the FDIC is immune from real property taxes assessed on any basis other than property value. According to the Policy Statement, the FDIC will pay its property

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tax obligations when they become due and payable and will pay claims for delinquent property taxes as promptly as is consistent with sound business practice and the orderly administration of the institution’s affairs, unless abandonment of the FDIC’s interest in the property is appropriate. The FDIC will pay claims for interest on delinquent property taxes owed at the rate provided under state law, to the extent the interest payment obligation is secured by a valid lien. The FDIC will not pay any amounts in the nature of fines or penalties and will not pay nor recognize liens for such amounts. If any property taxes (including interest) on FDIC owned property are secured by a valid lien (in effect before the property became owned by the FDIC), the FDIC will pay those claims. The Policy Statement further provides that no property of the FDIC is subject to levy, attachment, garnishment, foreclosure or sale without the FDIC’s consent. In addition, the FDIC will not permit a lien or security interest held by the FDIC to be eliminated by foreclosure without the FDIC’s consent.

The Policy Statement is unclear as to whether the FDIC considers assessments such as those levied by the City to be “real property taxes” that they intend to pay. However, the Policy Statement states that the FDIC generally will not pay non-ad valorem taxes, including special assessments, on property in which it has a fee interest unless the amount of tax is fixed at the time that the FDIC acquires its fee interest in the property, nor will it recognize the validity of any lien to the extent it purports to secure the payment of any such amounts.

The City is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency on a parcel within the Assessment District in which the FDIC has or obtains an interest, although prohibiting the lien of the FDIC to be foreclosed at a judicial foreclosure sale would reduce or eliminate the persons willing to purchase a parcel at a foreclosure sale. Owners of the Bonds should assume that the City will be unable to foreclose on any parcel owned by the FDIC. Such an outcome could cause a draw on the Special Reserve Fund and perhaps, ultimately, a default in payment on the Bonds. Based on the secured tax roll as of January 1, 2008, the FDIC does not presently own any property within the Assessment District. The City expresses no view concerning the likelihood that the risks described above will materialize while the Bonds are outstanding.

Assessment District Tax Delinquencies

Assessment installments, from which funds necessary for the payment of annual installments of principal of and interest on the Bonds are to be derived, will be billed to each property against which there is an unpaid assessment on the regular property tax bills sent to the owner of such property. Such installments are due and payable, and bear the same penalties and interest for non-payment, as do regular property tax installments. Under certain circumstances, assessment installment payments on parcels of property in the County can be made separately from regular property tax payments for such parcels. Property tax payments will not be accepted, however, unless the assessment installments for such parcels have also been paid. Therefore, the unwillingness or inability of a property owner to pay regular property tax bills, as evidenced by property tax delinquencies, will likely indicate an unwillingness or inability to make regular property tax payments and assessment installment payments in the future. A failure of property owners to pay installments of assessments when due could result in a default in payments of the principal of and interest on the Bonds.

The City reports that, based upon the records of the office of the County Tax Collector, none of the parcels in the Assessment District currently shows delinquencies in the payment of property tax installments. Delinquencies have occurred, however, during the time the Developer has owned such property. See “OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT – Tax Delinquencies.”

Limited Obligation of the City Upon Delinquency

If a delinquency occurs in the payment of any assessment installment, the City has a duty only to transfer into the Redemption Fund the amount of the delinquency out of the Special Reserve Fund and to undertake, under certain circumstances, judicial foreclosure proceedings to recover such delinquencies. See “THE BONDS –Covenant to Commence Superior Court Foreclosure.” This duty of the City is continuing during the period of delinquency, until reinstatement, redemption, or sale of the delinquent property. There is no assurance that funds will be available for this purpose and if, during the period of delinquency, there are insufficient funds in the Special Reserve Fund, a delay may occur in payments to the owners of the Bonds. If there are additional delinquencies after exhaustion of funds in the Special Reserve Fund, the City is not obligated to transfer into the applicable Redemption Fund the amount of such delinquency out of any other available moneys of the City.

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THE CITY’S LEGAL RESPONSIBILITIES WITH RESPECT TO SUCH DELINQUENT INSTALLMENTS ARE LIMITED TO ADVANCING THE AMOUNT THEREOF SOLELY FROM ANY AVAILABLE MONEYS IN THE SPECIAL RESERVE FUND AND TO UNDERTAKING, UNDER CERTAIN CIRCUMSTANCES, JUDICIAL FORECLOSURE PROCEEDINGS TO RECOVER SUCH DELINQUENCIES. THIS DUTY OF THE CITY TO ADVANCE FUNDS IS CONTINUING DURING THE PERIOD OF DELINQUENCY ONLY TO THE EXTENT OF FUNDS AVAILABLE FROM THE SPECIAL RESERVE FUND UNTIL REINSTATEMENT, REDEMPTION, OR SALE OF THE DELINQUENT PROPERTY. IN ACCORDANCE WITH SECTION 8769(b) OF THE 1915 ACT, THE CITY HAS DETERMINED THAT IT WILL NOT ADVANCE FUNDS FROM ITS TREASURY TO CURE ANY DEFICIENCY IN THE REDEMPTION FUND.

City-Wide Property Tax and Assessment District Delinquencies

The table below summarizes the City’s current secured property tax levies and delinquencies for fiscal years 2002-03 through 2006-07.

TABLE 10 CITY OF BAKERSFIELD

PROPERTY TAX RECORDS REGARDING DELINQUENCIES FIVE YEAR HISTORY – CURRENT SECURED TAXES ONLY

As of 06-30-2003

As of 06-30-2004

As of 06-30-2005

As of 06-30-2006

As of 06-30-2007

Current Secured - Taxes Charged $20,273,285 $21,669,883 $24,224,039 $28,150,621 $33,964,024 Current Secured - Delinquencies $373,128 $334,519 $379,773 $665,826 $923,724 % of Delinquencies to Taxes Charged 1.84% 1.54% 1.57% 2.37% 2.72% ____________________________ Source: Kern County Auditor-Controller.

As of June 30, 2007, the City administered 27 active assessment districts with an aggregate annual assessment of approximately $8,849,000. Total delinquencies for all 27 assessment districts as of June 30, 2007, was approximately $270,000. Within seven assessment districts, the sum of the uncured assessment delinquencies for the preceding fiscal year exceeded 5% of the assessment installments posted to the tax roll for that fiscal year, although, to date, no withdrawals from any of the respective special reserve funds established for such assessment districts have been made. In accordance with the City’s policies, on September 26, 2007, the City Council approved Resolution Nos. 216-07, 196-07, 197-07, 198-07, 199-07, 200-07, 201-07 authorizing the commencement of foreclosure proceedings for 296 delinquent parcels. During September and October 2007, the City mailed letters to the owners of the delinquent parcels, notifying them of the City Council’s action approving the initiation of foreclosure proceedings. Delinquencies on approximately 130 of such parcels were cured without further action by the City. The City sent a list of the remaining delinquent parcels to its foreclosure counsel, who continued the foreclosure process. As of February 2008, 136 parcels remain delinquent in these seven assessment districts. The City’s foreclosure counsel is in process of filing actions in the Superior Court of the County to foreclose the lien on all such delinquent assessments.


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The table below summarizes the City’s aggregate assessment district assessment levies and delinquencies for fiscal years 2004-05 through 2006-07.

TABLE 11 CITY OF BAKERSFIELD

PROPERTY TAX RECORDS REGARDING DELINQUENCIES THREE YEAR HISTORY – ASSESSMENT DISTRICT ASSESSMENTS ONLY

As of 06-30-2005

As of 06-30-2006

As of 06-30-2007

Assessment District - Assessments Charged $6,413,343 $6,383,752 $8,849,078 Assessment District - Delinquencies $143,063 $136,187 $270,783 % of Delinquencies to Assessments Charged 2.23% 2.13% 3.06% ____________________________ Source: Kern County Auditor-Controller.

Increased Risk of Mortgage Default in Other Areas of City May Impact Home Sales in Assessment District

During calendar years 2003 through 2006, many persons financed the purchase of new homes using mortgage loans that featured adjustable interest rates and “creative” loan structures, such as interest only payments, negative amortization of principal, and introductory “teaser” rates. Interest only payments on loans allow the borrower to pay interest only for an initial period (e.g., five years), and negative amortization of principal results in lower monthly mortgage payments, but an increasing mortgage loan balance. Teaser rates are mortgage interest rates that start low and are subject to being reset at higher rates on a specified date or upon the occurrence of specified conditions.

Some economists predict that, in the event interest rates on more conventional loans increase and as the interest rates on adjustable rate loans are reset at higher rates (and payments are increased), there will be a decrease in home prices. Some financial studies predict that, nationwide, mortgage loans with teaser rates will experience significant resets from May 2007 through October 2008, resulting in higher levels of mortgage payments.

Some borrowers who purchased homes with adjustable rate loans may refinance before the interest reset date to obtain loans with fixed interest rates. However, other borrowers who purchased homes in recent years may not be able to access replacement financing for their adjustable rate mortgage loans for a number of reasons. Recent news accounts indicate that many borrowers in recent years have financed 100% of the price of their home with adjustable rate loans. In the event there is a decline in home value, such borrowers may not be able to obtain replacement financing because outstanding loan balances exceed the value of their homes. Additionally, according to recent articles in the financial press, there has been a tightening of underwriting criteria for mortgage loans, such that lenders may no longer offer 100% financing or other creative mortgage structures. Regulatory changes or changes in standards of practice in the mortgage lending industry could also create requirements of stricter income verification, higher income to loan ratios, higher credit ratings, or some combination of such credit factors. In the event borrowers experience a decline in income or an increase in mortgage interest rates, or both, taxpayers may be less able to pay their special tax payments when due.

Some economists also report recent increases in recorded notices of default on home mortgage loans in California. The filing of a notice of default reflects the failure of a homeowner to pay mortgage loan payments in a timely manner for a certain period of time, usually three consecutive months. If home prices decline in the future, the number of notices of default may increase due to decreased home equity. It has been estimated that, historically, up to 95% of the notices of default filed on mortgage loans are filed within the first three years after the origination of such loans. Given that many of the mortgage loans in the City’s other assessment districts were originated within the past three years, the level of mortgage loan defaults and assessment installment delinquencies in such assessment districts may increase in the future.

Foreclosures by lenders against mortgage-defaulted properties have recently increased in the City. Such foreclosures may result in an increased number of lender-owned properties. Lenders typically attempt to re-sell such properties at below-market prices, which may compete with home prices in the Assessment District. An abundance of lower-cost housing stock throughout the City may slow the sales of homes within the Assessment District and

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adversely impact home absorption rates. In addition, the Developer’s development and financing plans with respect to the construction of homes in each of Tract No. 6520 and Tract No. 6611 assume that such construction will be financed, in significant part, using revenues generated by home sales within such respective Tracts. Any slowdown in anticipated home sales may adversely impact the development timelines of property in the Assessment District. See “OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT – Development and Financing Plans.”

Factors Relating to Sub-Prime Loans

Since the end of 2002, many homeowners have financed the purchase of their new homes using loans with little or no down-payment and with adjustable interest rates that are subject to being reset at higher rates on a specified date or on the occurrence of specified conditions. Homeowners who purchased their homes with such “sub-prime loans” have begun to experience difficulty in making their loan payments due to automatic rate increases on their adjustable loans and rising interest rates in the market.

To the Developer’s best knowledge, all of the homes that have closed or are currently in escrow in the Assessment District have been or will be financed by the purchasers with traditional 30 year fixed-rate loans and not with “sub-prime loans.” Notwithstanding the foregoing, as a result of increasing defaults on “sub-prime loans” in recent months, credit has become more difficult and more expensive to obtain, not only in the residential market, but also in the commercial and industrial sectors. Unavailability of loans for the purchase of homes or the development of real property in the Assessment District may adversely impact assessed values and development timelines of property in the Assessment District and, as a result, adversely impact assessment installments available to pay debt service on the Bonds.

Bankruptcy and Foreclosure

The payment of assessment installments and the ability of the City to foreclose on the lien of a delinquent unpaid assessment, as discussed below in the section entitled “SPECIAL RISK FACTORS – Covenant to Commence Superior Court Foreclosure,” may be limited by bankruptcy, insolvency, or other laws generally affecting creditors’ rights or by the laws of the State of California relating to judicial foreclosure.

The various legal opinions to be delivered concurrently with the delivery of the Bonds will be qualified, as to the enforceability of the various legal instruments, by reference to bankruptcy, insolvency, reorganization, arrangement, moratorium, and other similar laws affecting the rights of creditors generally, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases, and to the limitations on legal remedies in the State.

On July 30, 1992, the United States Court of Appeals for the Ninth Circuit issued its opinion in a bankruptcy case entitled In re Glasply Marine Industries. In that case, the court held that ad valorem property taxes levied by Snohomish County in the State of Washington after the date that the property owner filed a petition for bankruptcy were not entitled to priority over a secured creditor with a prior lien on the property. The court upheld the priority of unpaid taxes imposed after the filing of the bankruptcy petition as “administrative expenses” of the bankruptcy estate, payable after all secured creditors. As a result, the secured creditor was able to foreclose on the property and retain all of the proceeds of the sale except the amount of the pre-petition taxes.

According to the court’s ruling, as administrative expenses, post-petition taxes would have to be paid, assuming that the debtor has sufficient assets to do so. In certain circumstances, payment of such administrative expenses may be allowed to be deferred. Once the property is transferred out of the bankruptcy estate (through foreclosure or otherwise) it would at that time become subject to current ad valorem taxes.

Glasply is controlling precedent on bankruptcy courts in the State of California. Pursuant to statute, the lien date for general ad valorem property taxes levied in the State of California is the January 1 preceding the fiscal year for which the taxes are levied. Therefore, under Glasply, a bankruptcy petition filing would prevent the lien for general ad valorem property taxes levied in subsequent fiscal years from attaching so long as the property was a part of the estate in bankruptcy. Under current law, the lien of an assessment, unlike the lien for general ad valorem property taxes, attaches upon recordation of the notice of assessment. The original notice of assessment for the

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Assessment District assessments was recorded in the Official Records of Kern County on February 7, 2008. Therefore, before applying Glasply to a bankruptcy situation involving assessments rather than general ad valorem property taxes, a court would need to consider the differences in the statutory provisions for creation of the applicable assessment lien. If a court were to apply Glasply to eliminate the priority as a secured claim of the assessment lien with respect to post petition levies of the assessments as against property owners within the Assessment District who file for bankruptcy, collections of the assessments from such property owners could be reduced.

It should also be noted that on October 22, 1994, Congress enacted 11 U.S.C. Section 362(b)(18), which added a new exception to the automatic stay for ad valorem property taxes imposed by a political subdivision after the filing of a bankruptcy petition. Pursuant to this new provision of law, in the event of a bankruptcy petition filed on or after October 22, 1994, the lien for ad valorem taxes in subsequent fiscal years will attach even if the property is part of the bankruptcy estate. Bond owners should be aware that the potential effect of 11 U.S.C. Section 362(b)(18) on the Assessment District assessments depends upon whether a court were to determine that the assessments should be treated like ad valorem taxes for this purpose.

Whether or not bankruptcy proceedings were to cause the assessment liens to become extinguished, bankruptcy of a property owner in all likelihood would result in a delay in prosecuting superior court foreclosure proceedings. Such a delay would increase the likelihood of a delay or default in payment of the principal of and interest on the Bonds, and the possibility that delinquent assessment installments might not be paid in full.

Economic, Political, Social, and Environmental Conditions

Prospective investors are encouraged to evaluate current and prospective economic, political, social, and environmental conditions as part of an informed investment decision. Changes in economic, political, social, or environmental conditions on a local, state, federal, or international level may adversely affect investment risk generally. Such changes may also adversely affect the value of property within the Assessment District or the willingness or ability of the owners of land within the Assessment District to pay their assessments. Such conditional changes may include (but are not limited to) fluctuations in business production, consumer prices, or financial markets, unemployment rates, technological advancements, shortages or surpluses in natural resources or energy supplies, changes in law, social unrest, fluctuations in the crime rate, political conflict, acts of war or terrorism, environmental damage, and natural disasters.

Articles XIIIA and XIIIB of the California Constitution

On June 6, 1978, California voters approved an amendment to the California Constitution, commonly known as Proposition 13 (the Jarvis/Gann Initiative) that added Article XIIIA to the California Constitution. The effect of Article XIIIA is to limit ad valorem taxes on real property. On November 7, 1978, California voters approved Proposition 8, which made certain clarifications to Article XIIIA.

Article XIIIA of the California Constitution limits the amount of ad valorem taxes on real property to 1% of “full cash value” as determined by the county assessor. Article XIIIA defines “full cash value” to mean “the county assessor’s valuation of real property as shown on the 1975-76 tax bill under ‘full cash value’ or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment.” The “full cash value” is subject to annual adjustment to reflect increases, not to exceed 2% per year, or decreases in the consumer price index or comparable local data, or to reflect reductions in property value caused by damage, destruction or other factors.

Article XIIIA exempts from the 1% tax limitation any ad valorem taxes to pay interest or redemption charges on (1) indebtedness approved by the voters prior to July 1, 1978, (2) any bonded indebtedness for the acquisition or improvement of real property approved on or after July 1, 1978, by two-thirds of the votes cast by the voters voting on the proposition, or (3) bonded indebtedness incurred by a school district or community college district for the construction, reconstruction, rehabilitation or replacement of school facilities or the acquisition or lease of real property for school facilities, approved by 55% of the voters of the district voting on the proposition, but only if certain accountability measures are included in the proposition. Article XIIIA requires a vote of two-thirds of the qualified electorate to impose special taxes on real property, while otherwise generally precluding the

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imposition of any additional ad valorem, sales or transaction tax on real property. In addition, Article XIIIA requires the approval of two-thirds of all members of the State Legislature to change any State laws resulting in increased tax revenues.

Enactment of Article XIIIA has reduced the amount of general property tax revenues received by the City. This reduction in such revenues makes it less likely that the City will have surplus funds, other than the Special Reserve Fund, with which to advance funds to make any payments or to cure any deficiency in the Redemption Fund, should the City, in the exercise of its discretion, choose to do so. If there are additional delinquencies after exhaustion of funds in the Special Reserve Fund, the City has no obligation to transfer into the Redemption Fund the amount of any such delinquencies out of any surplus moneys of the City.

On July 2, 1979, the Fifth District Court of Appeal rendered a 3-0 decision in the case of County of Fresno v. Malmstrom (94 Cal. App. 3d 1974) that determined that special assessments are not subject to the limitations of Article XIIIA (Proposition 13). The Court held the one percent tax limitation imposed by California Constitution Article XIIIA on ad valorem taxes does not apply to special assessments levied pursuant to the Improvement Act of 1911 (Streets and Highways Code, Section 5000 et seq., the relevant portions of which are incorporated in the 1915 Act) and the 1913 Act. The Court further held that because special assessments pursuant to such acts are not within the definition of “special taxes” in Article XIIIA, the Constitution does not require the levy of assessments and the issuance of bonds to be approved by a two-thirds vote of the qualified electors in an assessment district. On September 12, 1979, the California Supreme Court refused to hear an appeal of the lower court’s decision.

At the November 6, 1979, general election, Proposition 4 (the Gann Initiative) was approved by the voters of California. Such proposition added Article XIIIB to the California Constitution.

Article XIIIB of the California Constitution limits the annual appropriations of the State and of any city, county, school district, authority or other political subdivision of the State to the level of appropriations of the particular governmental entity for the prior fiscal year, as adjusted for changes in the cost of living, population, and services rendered by the governmental entity. The “base year” for establishing such appropriation limit is the fiscal year 1978-79 and the limit is to be adjusted annually to reflect changes in population, consumer prices, and certain increases in the cost of services provided by these public agencies.

Appropriations subject to Article XIIIB generally include the proceeds of taxes levied by the State or other entity of local government, exclusive of certain State subventions, refunds of taxes, benefit payments from retirement, unemployment insurance, and disability insurance funds. “Proceeds of taxes” include, but are not limited to, all tax revenues and the proceeds to an entity of government from (i) regulatory licenses, user charges, and user fees (but only to the extent such proceeds exceed the cost of providing the service or regulation), and (ii) the investment of tax revenues. Article XIIIB includes a requirement that if an entity’s revenues in any year exceed the amounts permitted to be spent, the excess would have to be allocated to fund schools or be returned by revising tax rates or fee schedules over the subsequent two years.

On December 17, 1980, the Third District Court of Appeal rendered a 3-0 decision in the case County of Placer v. Corin (113 Cal. App. 3d 443) that determined that special assessments are not subject to the limitation of Article XIIIB (Proposition 4). The Court held that the definition of “proceeds of taxes” imposed by California Constitution Article XIIIB does not apply to special assessments and improvement bonds issued pursuant to the 1915 Act and the 1913 Act. The decision of the Court was not appealed.

The enactment of Article XIIIA of the California Constitution (Proposition 13) and subsequent legislative enactments effectively repeal the otherwise mandatory duty on the part of the City, under the 1915 Act, to levy and collect a special tax (in an amount necessary to meet delinquencies, but not to exceed ten cents on each $100 of assessable property within the City in any one year) if other funds are not available to cover delinquencies.

In early 1990, the U.S. Supreme Court struck down as a violation of equal protection certain property tax assessment practices in West Virginia, which had resulted in vastly different assessments of similar properties. Since Article XIIIA provides that property may only be reassessed up to 2%, per year, except upon change of ownership or new construction, recent purchasers may pay substantially higher property taxes than long-time owners

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of comparable property in a community. The U.S. Supreme Court in the West Virginia case expressly declined to comment in any way on the constitutionality of Article XIIIA.

Based on this decision, however, property owners in California brought three suits challenging the acquisition value assessment provisions of Article XIIIA. Two cases involved residential property and one case involved commercial property. In all three cases, State trial and appellate courts upheld the constitutionality of Article XIIIA’s assessment rules and concluded that the West Virginia case did not apply to California’s laws. The U.S. Supreme Court agreed to hear the appeal in the challenge relating to commercial property, but the plaintiff subsequently decided to drop the case.

On June 18, 1992, in the case of Nordlinger v. Lynch (112 U.S. 2326), the U.S. Supreme Court affirmed the decision of the California Court of Appeal, Second Appellate District, which lower court previously held that Article XIIIA does not violate the U.S. Constitution.

The City cannot predict whether any other pending or future challenges to the State’s present system of property tax assessment will be successful, when the ultimate resolution of any challenge will occur, or the ultimate effect any decision regarding the State’s present system of property tax assessment will have on the City’s revenues or on the State’s financial obligations to local governments.

Articles XIIIC and XIIID of the California Constitution

Proposition 218, a state ballot initiative known as the “Right to Vote on Taxes Act,” was approved by California voters on November 5, 1996. Proposition 218 added Articles XIIIC and XIIID to the State Constitution, and, with the exception of certain provisions, Articles XIIIC and XIIID became effective on November 6, 1996.

Article XIIID, entitled “Assessment and Property Related Fee Reform,” contains several new provisions making it generally more difficult for local agencies to levy and maintain “assessments” for municipal services and programs. Article XIIID requires that, beginning July 1, 1997, the proceedings for the levy of any assessment by the City under the 1913 Act (including, if applicable, any increase in such assessment or any supplemental assessment under the 1913 Act) must be conducted in conformity with the provisions of Section 4 of Article XIIID. “Assessment” is defined to mean any levy or charge upon real property for a special benefit conferred upon the real property. Article XIIID additionally provides that in levying “assessments” a local government must separate the “general benefits” from the “special benefits” conferred on a parcel and may not impose on any parcel an assessment that exceeds the “reasonable cost of the proportional special benefit conferred on that parcel.” Article XIIID also contains various notice requirements and a public hearing requirement and prohibits the imposition of an assessment if ballots submitted by property owners, weighted according to the proportional financial obligation of the affected property, in opposition to the assessment exceed the ballots submitted in favor of the assessment. The City believes that it has complied with all provisions of Article XIIID applicable to the Assessment District proceedings described herein. All ballots submitted by property owners were in favor of the assessment.

Article XIIIC, entitled “Voter Approval for Local Tax Levies,” provides, in Section 3 thereof, that the initiative power shall “not be prohibited or otherwise limited in matters of reducing or repealing any … assessment” of the City. Therefore, Article XIIIC removes limitations on the initiative power in matters of, among other things, assessments. Consequently, the voters of the City could, by future initiative, repeal, reduce, or prohibit the future imposition or increase of any assessment. “Assessment” is not defined in Article XIIIC and it is not clear whether the definition of that term in Article XIIID (which is generally property-related as described above) would be applied to Article XIIIC. No assurance can be given that the voters of the City will not, in the future, approve initiatives that repeal, reduce, or prohibit the future imposition or increase of any assessments.

In the case of the unpaid assessments that are pledged as security for payment of the Bonds, the 1915 Act provides a mandatory, statutory duty of the City and the County Auditor-Controller to post installments on account of the unpaid assessments to the County property tax roll each year while any of the Bonds are outstanding in aggregate amounts equal to the principal of and interest on the Bonds coming due in the succeeding calendar year. Although the provisions of Article XIIIC have not been interpreted by the courts, the City believes that the initiative power cannot be used to reduce or repeal the unpaid assessments that are pledged as security for payment of the

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Bonds or to otherwise interfere with the mandatory, statutory duty of the City and the County Auditor-Controller with respect to the unpaid assessments that are pledged as security for payment of the Bonds.

The interpretation and application of Proposition 218 will ultimately be determined by the courts with respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty the outcome of such determination.

Future Initiatives

Articles XIIIA, XIIIB, XIIIC, and XIIID of the Constitution were each adopted as measures that qualified for the ballot pursuant to California’s initiative process. From time to time other initiative measures could be adopted, which may affect the ability of the City to levy and maintain assessments.

Covenant to Commence Superior Court Foreclosure

The 1915 Act provides that in the event any assessment or installment thereof or any interest thereon is not paid when due, the City may order the institution of a court action to foreclose the lien of assessment. In such an action, the real property subject to the unpaid assessment may be sold at judicial foreclosure sale. This foreclosure sale procedure is not mandatory. However, in the Bond Resolution, the City has covenanted that, in the event any assessment or installment thereof, including any interest thereon, is not paid when due, the City will, no later than October 1 in any year, file an action in the Superior Court of Kern County to foreclose the lien on each delinquent assessment if (i) the sum of uncured assessment delinquencies for the preceding fiscal year exceeds 5% of the assessment installments posted to the tax roll for that fiscal year and (ii) the amount in the Special Reserve Fund is less than the Reserve Requirement. In the event such Superior Court foreclosure or foreclosures are necessary, there may be a delay in payments to the owners of the Bonds, pending prosecution of the foreclosure proceedings and receipt by the City of the proceeds of the foreclosure sale. It is also possible that no bid for the purchase of the applicable property would be received at the foreclosure sale.

Prior to July 1, 1983, the right of redemption from foreclosure sales was limited to a period of one year from the date of sale. Under legislation effective July 1, 1983, the statutory right of redemption from such foreclosure sales has been repealed. However, a period of 140 days must elapse after a court adjudges and decrees a lien against the lot or parcel of land covered by an assessment or reassessment before the sale of such parcel can be given. Furthermore, if the purchaser at the sale is the judgment creditor, i.e., the City, an action may be commenced by the delinquent property owner within 90 days after the date of sale to set aside such sale.

Price Realized Upon Foreclosure

The 1915 Act provides that, under certain circumstances, property may be sold upon foreclosure at less than the Minimum Price or without a Minimum Price upon petition by the City. “Minimum Price” as used in this section is the amount equal to the delinquent installments of principal and interest on the assessment or reassessment, together with all interest, penalties, costs, fees, charges and other amounts more fully detailed in the 1915 Act. The court may authorize a sale at less than the Minimum Price if the court determines, based on the evidence introduced at the required hearing, any of the following:

(A) Sale at the lesser Minimum Price or without a Minimum Price will not result in an ultimate loss to the owners of the Bonds.

(B) Owners of 75% or more of the outstanding Bonds, by principal amount, have consented to such petition by the City and the sale will not result in an ultimate loss to the non-consenting Bond owners.

(C) Owners of 75% or more of the outstanding Bonds, by principal amount, have consented to the petition and all of the following apply:

(1) By reason of determination pursuant to the 1915 Act, the City is not obligated to advance funds to cure a deficiency (the City made such a determination not to be obligated with respect to the Bonds).

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(2) No bids equal to or greater than the Minimum Price have been received at the foreclosure sale.

(3) No funds remain in the Special Reserve Fund.

(4) The City has reasonably determined that a reassessment and refunding proceeding is not practicable, or has in good faith endeavored to accomplish a reassessment and refunding and has not been successful, or has completed a reassessment and refunding arrangement that will, to the maximum extent feasible, minimize the ultimate loss to the Bond owners.

(5) No other remedy acceptable to owners of 75% or more of the outstanding Bonds, by principal amount, is reasonably available.

The assessment or reassessment lien upon property sold pursuant to this procedure at a lesser price than the Minimum Price shall be reduced by the difference between the Minimum Price and the sale price. In addition, the court shall permit participation by the Bond owners in its consideration of the petition as necessary to its determinations.

Implementation of the above-described Minimum Price provision by the court upon foreclosure could result in nonpayment of amounts due to Bond owners who are not in agreement with the 75% of such Bond owners required to approve the sale at less than the Minimum Price. Reference should be made to the 1915 Act for a complete presentation of this provision.

Priority of Lien

Each assessment (and any reassessment) and each installment thereof, and any interest and penalties thereon, constitutes a lien against the parcel of land on which it was imposed until the same is paid. Such a lien is subordinate to all fixed special assessment liens previously imposed upon the same property, but has priority over all private liens and over all fixed special assessment liens that may thereafter be created against the property. Such a lien is co-equal to and independent of the lien for general property taxes and special taxes, including, without limitation, special taxes created pursuant to the Mello-Roos Act, whenever created against the property.

Upon the issuance of the Bonds, none of the property in the Assessment District will be subject to any other special assessment lien created under the 1913 Act or any special tax lien created pursuant to the Mello-Roos Act. See “THE BONDS – Priority of Lien.”

Refunding Bonds

Pursuant to the Refunding Act of 1984 for 1915 Improvement Act Bonds (Division 11.5 of the California Streets and Highways Code), the City may issue refunding bonds for the purpose of redeeming the Bonds. After the making of certain required findings by the City Council, the City may issue and sell refunding bonds without giving notice to and conducting a hearing for the owners of property in the assessment district, or giving notice to the owners of the Bonds. See “THE BONDS – Refunding Bonds.” Upon issuing refunding bonds, the City Council could require that the Bonds be exchanged for refunding bonds on any basis that the City Council determines is for the City’s benefit, if the Bond owners consent to the exchange. As an alternative to exchanging the refunding bonds for the Bonds, the City could sell the refunding bonds and use the proceeds to pay the principal of and interest and redemption premium, if any, on the Bonds as they become due, or advance the maturity of the Bonds and pay the principal of and interest and redemption premium thereon.

Absence of Market for Bonds

No application has been made for a rating for the Bonds, and it is not known whether a rating for the Bonds could be secured either now or in the future. There can be no assurance that there will ever be a secondary market for purchase or sale of the Bonds, and from time to time there may be no market for them, depending upon prevailing market conditions and the financial condition or market position of firms that may comprise the secondary market.

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Loss of Tax Exemption

As discussed under the heading “TAX MATTERS,” interest on the Bonds could cease to be excluded from gross income for purposes of federal income taxation, retroactive to the date the Bonds were issued, as a result of future acts or omissions of the City.

On May 21, 2007, the United States Supreme Court (the “Supreme Court”) agreed to review the State of Kentucky Court of Appeals decision in Davis v. Department of Revenue of the Finance and Administration Cabinet, et al. (197 S.W.3d 557, 564 (Ky.Ct.App. 2006)) (the “Kentucky Case”). The Supreme Court heard oral arguments with respect to the Kentucky Case on November 5, 2007. The Supreme Court is expected to decide whether a state violates the commerce clause of the United States Constitution by providing an exemption from its income tax for interest income derived from bonds issued by the state and its political subdivisions, while treating interest income realized from bonds issued by other states and their political subdivisions as taxable to the same extent, and in the same manner, as interest earned on bonds issued by commercial entities, whether foreign or domestic. The outcome of this or any similar case cannot be predicted, but the result could be a change in the treatment for state tax purposes of interest with respect to the Bonds. If the decision in the Kentucky Case is affirmed by the Supreme Court, states such as California may be required to eliminate the disparity between the income tax treatment of out-of-state tax-exempt obligations and the income tax treatment of in-state tax-exempt obligations, such as the interest with respect to the Bonds. The impact of such a Supreme Court decision may also affect the market price for, or the marketability of, the Bonds. Prospective purchasers of the Bonds should consult their tax advisors regarding these matters. See also ‘TAX MATTERS.”

ENFORCEABILITY OF REMEDIES

The remedies available to the Paying Agent, the City, or the owners of the Bonds upon any nonpayment of assessment installments are in many respects dependent upon judicial actions, which are often subject to discretion and delay. Under existing constitutional and statutory law and judicial decisions, including specifically Title 11 of the United States Code (the federal bankruptcy code) and relevant banking and insurance law, the remedies provided in the 1915 Act and the 1913 Act may not be readily available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Bonds will be qualified as to the enforceability of the various legal instruments by limitations imposed by bankruptcy, reorganization, insolvency, or other similar laws affecting the rights of creditors generally, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases, and to the limitations on legal remedies in the State of California.

NO LITIGATION

No litigation is pending concerning the validity of the Bonds or the Bond Resolution, and an opinion of the City Attorney to that effect will be furnished to the purchaser at the time of the original delivery of the Bonds. The City is not aware of any litigation pending or threatened questioning the political existence of the City or contesting the City’s ability to pay interest on the Bonds. There are a number of lawsuits and claims pending against the City. In the opinion of the City Attorney, the aggregate amount of liability that the City might incur as a result of adverse resolutions in such cases would likely be covered under the City’s insurance policies or self-insurance program.

CERTAIN INFORMATION CONCERNING THE CITY

Certain general information concerning the City is included in APPENDIX A hereto. THE GENERAL FUND OF THE CITY IS NOT LIABLE FOR THE PAYMENT OF THE BONDS OR THE INTEREST THEREON, AND THE TAXING POWER OF THE CITY IS NOT PLEDGED FOR THE PAYMENT OF THE BONDS OR THE INTEREST THEREON.

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TAX MATTERS

In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel, based upon an analysis of existing laws, regulations, rulings, and court decisions, interest on the Bonds is excluded from gross income for federal income tax purposes and is exempt from State of California personal income taxes. Bond Counsel is also of the opinion that interest on the Bonds is not a specific preference item for purposes of the federal individual and corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings in calculating federal corporate alternative minimum taxable income. A complete copy of the opinion of Bond counsel is set forth in APPENDIX C hereto.

The Internal Revenue Code of 1986 (the “Code”) imposes various restrictions, conditions, and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Bonds. The City has covenanted to comply with certain restrictions designed to assure that interest on the Bonds will not be included in federal gross income. Failure to comply with these covenants may result in interest on the Bonds being included in federal gross income, possibly from the date of issuance of the Bonds. The opinion of Bond Counsel assumes compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken) or events occurring (or not occurring) after the date of issuance of the Bonds may adversely affect the tax status of the interest on the Bonds.

Certain requirements and procedures contained or referred to in the Bond Resolution, the tax certificate to be executed by the City at closing, and other relevant documents may be changed and certain actions (including, without limitation, defeasance of the Bonds) may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. Bond Counsel expresses no opinion as to any Bonds or the interest thereon if any such change occurs or actions are taken or omitted upon the advice or approval of bond counsel other than Orrick, Herrington & Sutcliffe LLP. However, without limiting the generality of the foregoing, the City has covenanted in the Bond Resolution that, prior to making any change to or taking or omitting to take any action with respect to any of the agreements, requirements, or procedures contained or referred to in the Bond Resolution, the tax certificate, or other relevant documents pertaining to the Bonds, the City will do either of the following: (i) obtain a subsequent opinion of Orrick, Herrington & Sutcliffe LLP that such change, action, or omission will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds; or (ii) obtain an opinion of alternative nationally recognized bond counsel to the effect originally delivered by Bond Counsel that, notwithstanding such change, action, or omission, interest on the Bonds is excluded from gross income for federal income tax purposes.

Although Bond Counsel will render an opinion that interest on the Bonds is excluded from gross income for federal income tax purposes and is exempt from California personal income taxes, the ownership or disposition of, or the accrual or receipt of interest on, the Bonds may otherwise affect a Bondholder’s federal tax liability. The nature and extent of these other tax consequences will depend upon the particular tax status of the Bondholder or the Bondholder’s other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences.

APPROVAL OF LEGALITY

The validity of the Bonds and certain other legal matters are subject to the approving opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel. A complete copy of the proposed form of bond counsel opinion is contained in APPENDIX C hereto and is printed on the Bonds. Bond counsel undertakes no responsibility for the accuracy, completeness, or fairness of this Official Statement. Certain matters will be passed upon for the City by the City Attorney of the City of Bakersfield. Certain other matters will be passed upon by Goodwin Procter LLP, Los Angeles, California, as disclosure counsel to the City.

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UNDERWRITING

Pursuant to a Bond Purchase Contract between the City and RBC Capital Markets Corporation (the “Underwriter”), the Bonds are being purchased by the Underwriter at a purchase price equal to the principal amount of Bonds being issued, less an Underwriter’s discount of $45,837.50. The Bond Purchase Contract provides that the Underwriter will purchase all of the Bonds if any are purchased, the obligation to make such purchase, if made, being subject to certain terms and conditions set forth in the Bond Purchase Contract, the approval of certain legal matters by counsel, and certain other conditions.

The Underwriter may offer and sell Bonds to certain dealers and others at a price other than the offering price. The offering price may be changed from time to time by the Underwriter.

NO RATING

The City has not made and does not contemplate making application to any rating agency for the assignment of a rating to the Bonds.

CONTINUING DISCLOSURE

Each of the City and the Developer has covenanted for the benefit of Bondholders to provide annual or semi-annual reports, as applicable, containing certain financial information and operating data relating to the Assessment District and the property in the Assessment District, and to provide notices of the occurrence of certain enumerated events, if material. The specific nature of the information to be contained in each annual or semi-annual report, as applicable, or each notice of material events, if any, and the applicable deadlines, are set forth in the respective Continuing Disclosure Certificates, the forms of which are attached hereto as “APPENDIX F – FORMS OF CONTINUING DISCLOSURE CERTIFICATES.” These covenants have been made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5), as amended from time to time (the “Rule”). Each of the City and the Developer has represented that, in the past five years, neither it nor any entity providing annual financial information or notices of material events under its respective Continuing Disclosure Certificate has ever failed to comply, in all material respects, with any previous undertaking by it to provide annual or semi-annual reports, as applicable, and notices of material events set forth in a written contract or agreement specified in the Rule. The Developer has never before been obligated to provide such an undertaking under the Rule.


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MISCELLANEOUS

The foregoing summaries or descriptions of provisions of the Bonds, the Bond Resolution, and all references to other materials not purporting to be quoted in full are only brief outlines of some of the provisions thereof and do not purport to summarize or describe all of the provisions thereof, and reference is made to said documents for full and complete statements of their provisions. The appendices hereto are a part of this Official Statement.

Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. The Official Statement is not to be construed as a contract or agreement between the City and the purchasers or owners of any of the Bonds.

The execution and delivery of this Official Statement has been duly authorized by the City.

CITY OF BAKERSFIELD

By: /s/ Nelson K. Smith Nelson K. Smith Finance Director

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APPENDIX A

CITY OF BAKERSFIELD ECONOMIC, FINANCIAL, AND DEMOGRAPHIC INFORMATION

General

The City of Bakersfield (the “City”) is located in Kern County, California (the “County”), at the southern end of the San Joaquin Valley, approximately 110 miles north of Los Angeles and 290 miles south of San Francisco. The City includes over 135 square miles of land and an additional 183 square miles of land area is located within the City’s sphere of influence.

The City is a regional center for industry, government, transportation, retail trade, medical services, and oil field operations. Major manufacturing activities include iron and steel fabrication, plastic foam products, food products, petroleum refining, and textiles. Bakersfield is one of the leading convention centers in the state and is the commercial hub of the County. As the County seat, it is the location of many county, state, and federal offices.

The metropolitan area has expanded considerably beyond the City limits. As of January 1, 2007, the estimated population of the County was 801,648 and the estimated population of the City was 323,213, according to the California Department of Finance.

City Government

The City was incorporated on January 11, 1898, under the general laws of the State. The City is a charter city with a council/manager form of government. The City Council is comprised of seven council members, elected by ward on a staggered basis for a term of four years. The mayor is directly elected for a four-year term. The council appoints the City Attorney and the City Manager, who also serves as the Executive Director of the Bakersfield Redevelopment Agency (the “Agency”). There are approximately 1,613 permanent City employees, including 238 general governmental employees, 281 public works employees, 80 employees who work in wastewater or water services, 183 firefighters, 29 civilians who work in fire protection, 373 police officers, 144 civilians who work with the police department, 110 employees who work in refuse collection, and 175 employees who work with culture and recreation services.

Investment Policy of the City

The City Council annually adopts and approves a policy with respect to the investment activities of the City and its related entities. Idle cash in all funds is pooled for investment purposes except tax-exempt bond proceeds, which are separated for arbitrage record keeping as required by federal tax law, and the Fireman's Relief and Pension Fund, which is administered separately by the City. The investment policy is intended to provide guidelines for the prudent investment of the City’s temporary idle cash, and outline the policies for maximizing the efficiency of the City’s cash management system. The ultimate goal is to enhance the economic status of the City while protecting the safety of its financial assets. The City’s present investment policy (the “Investment Policy”), which was adopted by the City Council on December 12, 2007, pursuant to Resolution No. 270-07, as summarized below:

Introduction. The Investment Policy is intended to provide guidelines for the prudent investment of the City’s temporary idle cash, and outline the policies for maximizing the efficiency of the City’s cash management system. It is the policy of the City to invest public funds in a manner which will provide safety of principal and at least a market rate of return while meeting the daily cash flow demands of the City. Investments will conform to all statutes governing the investment of public funds.

The primary goals of this policy are:

• To assure compliance with all federal, State and local laws governing the investment of public funds under the control of the City Treasurer.

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• To maintain the principal value of financial assets and ensure ample liquidity to meet operating expenditures.

• Within the constraints of safety and liquidity, and within the parameters of the Investment Policy, generate a market rate of return.

The ultimate goal is to enhance the economic status of the City while protecting the safety of its financial assets.

Scope. The Investment Policy applies to the investment activities of the City and related entities. Idle cash in all funds is pooled for investment purposes except tax exempt bond proceeds, which are separated for arbitrage record keeping as required by federal tax law, and the Firemen’s Disability and Retirement Fund, which is administered separately under the City of Bakersfield Municipal Code Section 2.92.

Investments made on a pooled basis include moneys of the City, the Agency, and the Authority. The pooled funds are accounted for in the City’s Comprehensive Annual Financial Report (“CAFR”) and include:

0XX General Funds 1XX Special Revenue Funds 2XX Debt Service Funds 3XX Capital Project Funds 4XX Enterprise Funds 5XX Internal Service Funds 6XX Fiduciary-Agency Funds Any new fund created, unless specifically exempted.

All debt issue proceeds will be invested in accordance with the associated trust indenture, and in such a manner that facilitates arbitrage rebate calculations.

Prudence. Investments shall be made in the context of the “prudent person” standard:

Investments shall be made with judgment and care, under circumstance then prevailing that persons of prudence, discretion, and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived.

The prudent investment diversification for the City’s temporary idle cash vs. the Firemen’s Disability and Retirement Fund (“FDRF”) is different. Up to 40% of the retirement fund may be invested in securities of a single agency of the four triple-A rated United States Government Agencies authorized in this policy. This exception to investment diversification among the highest quality securities is deemed prudent and necessary in order to increase the available options for keeping retirement funds fully invested at or above the six percent actuarial rate of return.

Objective. Criteria for selecting investments and the order of priority are:

• Safety - Safety of principal is the foremost objective of the investment program. The City only operates in those investments that are considered very safe. The City shall seek to preserve principal by mitigating the two types of risk, credit risk and market risk.

• Credit Risk - Potential loss due to the failure of an issuer of a security.

• Market Risk - Potential decrease in the value of securities due to changes in the general level of interest rates.

• Liquidity - Liquidity refers to the “ability to easily sell” at any moment in time with a minimal risk of losing some portion of principal and interest. Liquidity is an important investment quality should the need for cash occur unexpectedly.

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• Yield -Yield is the potential dollar earnings an investment can provide and is sometimes described as the rate of return.

Delegation of Authority. In accordance with the City’s Charter, Municipal Code, and subsequent resolutions, the City Treasurer is authorized to invest the City’s funds in accordance with California Government Code Section 53600 et seq. The City Treasurer shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials.

Ethics and Conflicts of Interest. All officials involved with the City’s investment program shall exercise their fiduciary responsibly as custodians of the public trust. The City Treasurer, or when appropriate the Treasury Supervisor, shall avoid any transactions that might impair public confidence in the City’s ability to manage the investment of public funds in an effective manner. The City Treasurer, Treasury Supervisor, or any other official charged with the responsibility of making investment decisions, shall have no vested interest in any investment being made involving public funds of the City, and shall gain no financial benefit from such investment decisions.

Authorized Broker-Dealers and Banks. All financial institutions that desire to do business with the City shall be evaluated by the City Treasurer to determine if they are adequately capitalized, meet California Government Code requirements, and agree to abide by the conditions set forth in the Investment Policy. Whenever reasonable and in keeping with Government Code, investments are placed locally.

Broker-dealers are investigated to determine if there is pending legal action against the firm or the individual broker who would be the City’s contact and that the firm offers securities appropriate to the City’s needs. All broker-dealers, which may include “primary” dealers or regional dealers that qualify under Securities & Exchange Commission Rule 15c3-1 (Uniform Net Capital Rule), who desire to become authorized bidders for City investment transactions must supply the City Treasurer with the following:

• Current audited financial statements

• Account authorization forms

• Proof of National Association of Securities Dealers certification

• Completed broker/dealer questionnaire

• Certification of having read and agreement to abide by the City of Bakersfield Investment Policy

All banks that desire to become authorized bidders for time certificates of deposit (“TCD”) must be a qualified public depository as established by State law and supply the City Treasurer with the following:

• Current audited financial statements

• Depository contracts

• A copy of the latest Federal Deposit Insurance Corporation (“FDIC”) call report

• Certification of having read and agreement to abide by the City of Bakersfield Investment Policy

Broker-dealer account authorizations and depository contracts will be executed by the City’s Finance Director as required by City Charter. The City Treasurer will maintain a list of authorized broker-dealers and banks that are approved to do business with the City. An annual review of the financial condition of authorized financial institutions will be conducted by the City Treasurer.

Authorized and Suitable Investments. The City’s investment program is governed by California Government Code Sections 53600 et seq. Within the context of these limitations, the following investments are

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authorized, as further limited herein (Single Asterisk * denotes term or percentage imposed by State statute; Double Asterisk ** denotes term or percentage utilized by the City, which is more restrictive than statute):

United States Treasury Bills, Notes, and Bonds

United State Treasury Bills, Notes, and Bonds are securities which have the full faith and credit of the United States pledged for payment of principal and interest. Although there is no percentage limitation of the dollar amount that can be invested in these categories, the “prudent person” standard shall apply. Maturities are limited to five* years from settlement date.

Treasury Bills (“T-Bills”) are short-term debt obligations of the United States Government, issued weekly with maturities up to one year. T-Bills are considered to have virtually no credit risk and to be the most liquid short-term fixed income instrument. Prices on T-Bills are quoted on a discount basis. The difference between the discount price and the full face value paid at maturity equals the total return.

Treasury Notes (“T-Notes”) are initially issued by the auction process with two, five and ten year maturities. T-Notes like Bills have virtually no credit risk and have liquidity through an active secondary market. T-Notes are issued at Par ($1,000) with a coupon or fixed rate of interest. The price or market value will fluctuate above or below par depending on the coupon rate and whether interest rates are rising or falling. T-Notes mature at par.

Treasury Bonds (“T-Bonds”) are initially issued by the auction process with thirty year maturities and have characteristics similar to T-Notes.

United States Government Agencies

United States Government agencies include the Federal Farm Credit Bank System (“FFCB”), the Federal Home Loan Bank (“FHLB”), the Federal Home Loan Mortgage Corporation (“FHLMC”), and the Federal National Mortgage Association (“FNMA”). Government agencies issue debt in the form of discount notes, much like T-Bills, and notes and bonds similar to T-Notes and T-Bonds. While agency debt is not a direct obligation of the U.S. government, it is rated AAA, the highest rating. At the time of purchase no more than 20%** of the portfolio may be invested in any single agency name. Maturities are limited to five* years from settlement date.

Bankers Acceptance

Bankers Acceptance (“BA”) is a time draft or bill of exchange, issued from a letter of credit, and is normally used to finance international trade. When the accepting bank stamps “accepted” on the draft the bank guarantees payment of the draft at a specified future date and thereby creates an acceptance. BA’s are considered extremely safe in that there has never been a default on a BA. BA’s trade on a discount basis and may not exceed 180* days to maturity. No more than 10%** of the portfolio may be invested in BA’s issued by any one bank. No more than 40%* of the portfolio may be invested in this-category. Eligible BA’s are those issued by banks with a short term debt rating of at least A-1 ** by Standard & Poor’s Ratings Services (“S&P”) or P-1 ** by Moody’s Investors Service, Inc. (“Moody’s”).

Commercial Paper

Commercial Paper (“CP”) is a short-term promissory note. CP is sold on a discount basis. The maximum maturity is 270 days with most issued in the 30-50 day maturity range. Eligible CP is “prime” quality ranked A-1 by S&P or P-1 by Moody’s. CP is issued by domestic corporations having assets in excess of $500 million and having an A or higher rating on its debt, other than CP, as provided by S&P or Moody’s. Purchases of eligible CP may not exceed 270* days to maturity. No more than 10%* of the portfolio may be invested in CP issued by any one corporation. No more than 25%* of the portfolio may be invested in this category.

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Repurchase Agreements

Repurchase Agreements, commonly called “Repos,” consist of two simultaneous transactions. One is the purchase of securities by an investor (City) from a bank or dealer. The other is the commitment by the bank or dealer to repurchase the securities at the same price plus interest at some mutually agreed future date. Normally the securities are U.S. Treasury notes or bonds and are held by a Federal Reserve Bank. Repos can be done with banks or dealers with which the City has entered into a master repurchase contract that specifies terms and conditions of repurchase agreements. The maturity of Repos shall not exceed 90** days. No more than 30%** of the portfolio may be invested in this category.

Local Agency Investment Fund

Local Agency Investment Fund (“LAIF”) is a State-managed investment pool for local agencies within the State. Investments may be up to the maximum permitted by State law or 40%** of the portfolio whichever is less. Due diligence will be exercised in monitoring the performance of LAIF on a continual basis.

Time Certificates of Deposit

TCD’s are similar to a savings certificate that anyone can purchase at a bank where there is a fixed rate of interest and a specified maturity date. In the public funds area, TCD’s are collateralized in accordance with California Government Code and are non-negotiable. At the time of purchase no more than l0%** of the portfolio may be in TCD’s of any one institution. Maturity is limited to five* years. No more than 40%** of the portfolio may be invested in this category. Section 53652 of the California Government Code also specifies that the City will have a deposit contract with each depository.

Public Agency Savings Account - Demand Deposits

Public Agency Savings Account - Demand Deposits are similar to a savings account that anyone can open at a bank. The interest rate is specified at the time of deposit, but is subject to change. All funds can be withdrawn on demand. Like public TCD’s, public agency savings accounts are collateralized in accordance with California Government Code requirements. No more than 30%** of the portfolio may be invested in this category.

Mutual Funds

Mutual Funds are money market funds meeting criteria prescribed in California Government Code Section 53601 and related legislation. Investment in this category is limited to funds that invest in United States Government Securities and maintain a net asset value of one (daily liquidity). The purchase price of shares shall not include any commission that these companies may charge. No more than 10%* of the portfolio may be invested in the shares of any one mutual fund. No more than 20%* of the portfolio may be invested in this category. Mutual funds are used for the investment of bond proceeds subject to arbitrage reporting. Due diligence will be exercised in the selection and performance monitoring of mutual funds on a continual basis.


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City of Bakersfield Summary Of Maximum Percent and Term Limitations

By Investment Type:

Percent Term U.S. Treasury Bills, Notes and Bonds 0 to 100% 5 Years U.S. Government Agency Obligations 20% per agency 5 Years Bankers Acceptances (1) 40% (2) 180 Days Commercial Paper (3) 25% (2) 270 Days Repurchase Agreements 30% 90 Days Local Agency Investment Fund 40% N/A Time Certificates of Deposit 40% (2) 5 Years Public Agency Demand Accounts 30% N/A Mutual Funds 20% (2) N/A

__________________________________ (1) Short-term debt rating of at least A-1 by S&P or P-1 by Moody’s. (2) No more than 10% of the portfolio may be invested in any one entity from these categories. (3) A-1 S&P rating or P-1 Moody’s rating.

Should any investment percentage and portfolio limitation be exceeded due to the unexpected fluctuation in portfolio size, the affected securities may be held to avoid losses. When market values are such that no loss is indicated, the City Treasurer shall consider restructuring the portfolio basing the decision in part on the expected length of time the portfolio will be imbalanced.

Any State legislative action that further restricts allowable maturities, investment type, or percentage allocations, will be incorporated into the Investment Policy and supersede any and all previous applicable language.

Unauthorized Investments. Ineligible investments are those that are not described in the Investment Policy, including but not limited to, negotiable time certificates of deposit, non-government agency medium term corporate notes, and reverse repurchase agreements.

Collateralization. Collateralization will be required on two types of investments, time certificates of deposit and repurchase agreements. Investment in time certificates of deposit shall be insured up to $100,000 by the FDIC. Investments in time certificates of deposit in excess of $100,000 shall be properly collateralized. When a depository pledges government securities as collateral, section 53652 of the California Government Code requires the securities to have a market value of at least 10% in excess of the City’s deposit or 50% in excess of the City’s deposit when mortgages are pledged as collateral. Repo collateralization will be at least 102% of market value of principal and accrued interest.

Safekeeping and Custody. All security transactions entered into by the City shall be conducted on a delivery versus-payment (“DVP”) basis. Securities shall be delivered to the City by book entry, physical delivery or by third party custodial agreement.

Diversification. To reduce credit and market risk in the overall portfolio, the City will diversify its investments by security type, maturity date and issuer. With the exception of U.S. Treasury securities, diversification is also achieved by the portfolio percentages and maturity limitations indicated in the “Authorized and Suitable Investments” section of the Investment Policy.

Maximum Maturities. To the extent possible, and within the five year maximum maturity required by California Government Code, the City will attempt to match investment maturities with anticipated cash flow requirements.

As required by California Government Code Section 53601, any investment term longer than five years requires express authority by the City Council to make that investment. This authority must be granted no less than three months prior to making the investment. Investments with terms longer than five years will be limited to the least of $10 million or 10% of the portfolio at the time the investment is made.

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Internal Control. Investment transactions are reviewed by the City’s external auditor as part of the annual audit. This review verifies compliance with the Investment Policy and the California Government Code.

Performance Standards. The cash management system is designed to accurately monitor and forecast expenditures and revenues, thus ensuring the investment of moneys to the fullest extent possible, including the estimated float for the Active Account and the Payroll Account. The City attempts to obtain the highest interest yields possible as long as investments meet the criteria required for safety and liquidity, do not exceed a term of five years (unless otherwise authorized by the City Council) and are within portfolio percentage limitations.

The City strives to maintain the level of investment of all funds as near 100% as possible through daily and projected cash flow determinations. The basic premise underlying the Investment Policy is, and will continue to be, to ensure that the money is always safe and available when needed.

Because the investment portfolio is designed to operate on a “hold-to-maturity” premise (or passive investment style) and because of the safety, liquidity, and yield priorities, the benchmark that will be used by the City Treasurer to determine whether market yields are being achieved shall be the yield on the U.S. Treasury Bill or Note maturing closest to the weighted average maturity of the City’s overall portfolio.

Reporting. The City Treasurer shall provide the City Council monthly investment reports which provide a clear picture of the status of the current investment portfolio. The monthly investment report shall include the following:

• A listing of individual securities held at the end of the reporting period by authorized investment category

• Final maturity of all investments listed

• Coupon, discount, or earnings rate

• Par value and market value

• Transactions completed during the month

• Percentage of the portfolio represented by each investment category

Investment Policy Adoption. The Investment Policy shall be reviewed annually by City staff and adopted by resolution of the City Council.

Indemnification of Investment Officials. The standard of care to be used by investment officials shall be the “prudent person” standard and shall be applied in the context of managing the overall portfolio. The City Treasurer and his designees acting in accordance with established procedures and the Investment Policy and exercising due diligence shall be relieved of personal responsibility for an individual security’s credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments.

Tax Levies and Delinquencies; Assessed Valuation of Taxable Property

The County Tax Collector collects ad valorem property tax levies representing taxes levied for each fiscal year on taxable real and personal property that is situated in the County as of the preceding March 1. Unsecured taxes are assessed and payable on March 1 and become delinquent August 31, in the next fiscal year. Accordingly, unsecured taxes are levied at the rate applicable to the fiscal year preceding the one in which they are paid.

One half of the secured tax levy is due November 1 and becomes delinquent December 10; the second installment is due February 1 and becomes delinquent April 10. A 10% penalty is added to any late installment.

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Property owners may redeem property upon payment of delinquent taxes and penalties. Tax-delinquent properties are subject to a redemption penalty of 1.5% of the delinquent amount every month commencing on July 1 following the date on which the property became tax-delinquent. Properties may be redeemed under an installment plan by paying current taxes, plus 20% of delinquent taxes each year for five years, with interest accruing at 1.5% per month on the unpaid balance. If no payments have been made on delinquent taxes at the end of five fiscal years, the property is deeded to the State. Such property may thereafter be conveyed to the County Tax Collector as provided by law.

The table below summarizes the City’s property tax levies and total collections for fiscal years 2002-03 through 2006-07.

City of Bakersfield Property Tax Levies and Collections (1)

(Fiscal Years 2002-03through 2006-07)

Fiscal Year

Total Tax Levy

Total Tax Collections

Percent of Levy Collected

2002-03 $21,301,453 $23,523,106 110.4% 2003-04 22,792,274 23,926,768 105.0 2004-05 25,401,358 27,692,409 109.0 2005-06 29,296,719 32,631,424 111.4 2006-07 35,419,513 39,306,956 111.0

_____________________________ (1) Excludes redevelopment tax increment. Source: City of Bakersfield Comprehensive Annual Financial Report Fiscal Year Ended

June 30, 2007.

The table below summarizes the assessed value of taxable property in the City for fiscal years 2002-03 through 2006-07.

City of Bakersfield Assessed Value of Taxable Property

(Fiscal Years 2002-03 through 2006-07)

Fiscal Year

Residential - Secured

Commercial - Secured

Other - Secured

Unsecured

Less Tax-

Exempt Real Property

Total Taxable Assessed

Value 2002-03 $ 7,713,303 $2,117,283 $1,809,671 $532,842 $645,761 $11,527,338 2003-04 8,760,686 2,341,932 1,879,013 546,353 694,115 12,833,869 2004-05 9,966,804 2,463,503 1,943,657 565,311 680,115 14,259,160 2005-06 12,110,090 2,727,174 2,200,212 582,995 731,597 16,888,874 2006-07 15,371,291 3,104,110 2,655,402 631,452 816,684 20,945,571

_____________________________ Source: City of Bakersfield Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2007.


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The table below shows the taxable assessed valuations of the principal property taxpayers in the City as of June 30, 2007.

City of Bakersfield Assessed Valuation of Principal Taxpayers

(June 30, 2007)

Taxpayer Type of Business

2006-07 Taxable Assessed Value

Percentage of Total TaxableAssessed Value

Dreyers Grand Ice Cream Inc. Manufacturing $ 224,297,480 1.10% Bakersfield Mall LLC Shopping Center 148,582,342 0.73 Bakersfield Memorial Hospital Medical 107,975,711 0.53 California Water Service Company Water Service 103,549,573 0.51 Castle & Cooke Comm. Inc. Real Estate Development 84,646,553 0.42 DS Marketplace Bakersfield LLC 81,074,882 0.40 Chevron USA Inc. Oil Company 73,983,960 0.36 San Joaquin Community Hospital Medical 68,741,609 0.34 Lennar Home of California Real Estate Development 65,460,744 0.32 State Farm Insurance Company Insurance Company 57,700,000 0.28 Total taxable assessed value of ten largest taxpayers $ 1,016,012,854 4.99% Total taxable assessed value of other taxpayers 19,929,558,077 95.01 Total taxable assessed value of all taxpayers $20,945,570,931 100.00% _____________________________ Source: City of Bakersfield Comprehensive Annual Financial Report Fiscal Year ended June 30, 2007.

Demographic Statistics

The following table sets forth various demographic data regarding the City, including population, estimated median household income, elementary school enrollment, and estimated unemployment rate, from fiscal year 2002-03 through 2006-07.

City of Bakersfield Demographic Statistics


Fiscal Year

Population(1)

Per Capita Personal Income(2)

Education Level in Years

of Formal Schooling(3)

Estimated

UnemploymentRate

2002-03 266,784 $23,215 72.1% 12.0% 2003-04 279,672 24,067 72.8 12.6 2004-05 295,893 24,999 72.2 8.3 2005-06 311,824 25,748 71.9 7.3 2006-07 323,213 Not Available Not Available 8.0(4)

_____________________________ (1) Estimates are revised periodically to include data that may not have been available at the time. (2) Estimates are revised periodically to include data that may not have been available at the time. Information is for Bakersfield

Metropolitan Area. (3) Estimates for Bakersfield Metropolitan area; shows the percent of the City population 25 years and older who are high school

graduates or higher. (4) Preliminary number. Source: City of Bakersfield Comprehensive Annual Financial Report Fiscal Year ended June 30, 2007.

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Employment

The County’s total labor force, the number of persons who work or are available for work, has been estimated to be 338,400 for calendar year 2006, an increase of 2.9% over the preceding year. The number of employed workers in the labor force is estimated to be 312,800 for the same period.

The following table sets forth information regarding the size of the labor force, employment rates, and unemployment rates for the County, the State, and the United States for calendar years 2002 through 2006.

Employment – Averages Kern County, State of California, and United States

(Calendar Years 2002 – 2006)

2002 2003 2004 2005 2006 Kern County Labor Force (000s) 307.4 314.4 317.3 328.8 338.4 Employment (000s) 277.2 281.9 285.9 301.6 312.8 Unemployment Rate 9.8% 10.3% 9.9% 8.3% 7.6% State of California Labor Force (000s) 17,330.7 17,403.9 17,499.6 17,696.6 17,901.9 Employment (000s) 16,168.2 16,212.6 16,407.9 16,746.9 17,029.3 Unemployment Rate 6.7% 6.8% 6.2% 5.4% 4.9% United States Labor Force (000s) 144,863.0 146,510.0 147,401.0 149,320.0 151,428.0 Employment (000s) 136,485.0 137,736.0 139,252.0 141,730.0 144,427.0 Unemployment Rate 5.8% 6.0% 5.5% 5.1% 4.6% ___________________ Sources: California Employment Development Department; U.S. Department of Labor, Bureau of Labor Statistics


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The following table sets forth the top employers in the City for 2007. This information contained below was compiled by the Kern Economic Development Corporation.

City of Bakersfield Principal Employers(1)

(2007)

Company Business Type Number of Employees Kern County Public Schools Education 27,000 San Joaquin Community Hospital Hospital 11,000 County of Kern Government 9,339 Grimmway Enterprises Agriculture 6,300 Giumarra Vineyards Agriculture 4,000 Esparza Enterprises Agriculture Labor 3,600(2) Catholic Healthcare West Health Care 2,952 Wm. Bolthouse Farms Agriculture 2,350(2) Sunview Vineyards Agriculture 2,000(2) City of Bakersfield Government 1,420 State Farm Insurance Insurance 1,500(2) Sun World Agriculture 1,600 Bear Creek Production Company Agriculture 1,250 Paramount Citrus Agriculture 1,096(2) ChevronTexaco Oil Production 1,000(2) California State University, Bakersfield Education 1,069 Community Action Partnership of Kern Non-profit 924 Kaiser Permanente Health Care 900 Dreyer’s Grand Ice Cream Food Processing 853 Aera Energy LLC Energy 850 Sears Logistics Logistics 725 Frito Lay Food Processing 706 Target Distribution Center Retail Distribution 653(2) _____________________ Disclaimer: This is the most current information available at time of print. (1) Partial list (2) 2006 data. Source: Kern Economic Development Corporation


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Building Activity

The following table summarizes the City’s total annual building permit valuations from fiscal year 1997-98 through fiscal year 2006-07.

City of Bakersfield Property Value, Construction, and Bank Deposits(1)


Commercial Construction

Residential Construction

Other Construction

Total Construction

Fiscal Year

Number of Units

Value

Number of Units

Value

Value

Number of Units

Value

Bank Deposits

1997-98 147 $49,241 1,983 $197,773 $ 67,281 2,130 $ 314,295 $2,438,004 1998-99 213 78,199 2,088 223,576 36,958 2,301 338,733 2,464,202 1999-00 140 51,251 1,890 218,656 34,438 2,030 304,345 2,454,280 2000-01 123 38,113 2,012 261,522 48,067 2,135 347,702 2,730,107 2001-02 143 70,874 2,445 311,639 57,983 2,588 440,496 2,865,985 2002-03 141 56,694 2,981 428,534 62,112 3,122 547,340 3,179,623 2003-04 130 82,003 3,677 568,413 65,878 3,807 716,294 3,357,220 2004-05 103 62,202 4,291 675,804 115,348 4,394 853,354 4,027,043 2005-06 76 36,008 5,314 870,190 94,661 5,390 1,000,859 4,376,691 2006-07 151 69,002 3,532 564,588 101,835 3,683 735,425 4,432,920

__________________________ (1) Property values and bank deposits reported in thousands. Source: City of Bakersfield Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2007.

Commercial Activity

Consumer spending in calendar year 2005 resulted in approximately $5,447,738 in taxable sales in the City, which is approximately 14.9% above calendar year 2004. The following table sets forth information regarding taxable sales in the City for calendar years 2001 through 2005.

City of Bakersfield Taxable Retail Sales 2001 – 2005

(000s)

2001 2002 2003 2004 2005 Apparel stores $ 117,059 $ 126,267 $ 129,457 $ 171,095 $ 195,598 General merchandise stores 633,892 667,344 699,810 743,850 833,104 Food stores 181,300 196,060 215,506 234,243 254,023 Eating and drinking places 309,643 330,061 362,907 400,270 438,772 Home furnishings and appliances 126,841 142,019 154,731 169,743 191,230 Building materials and farm implmts. 256,506 286,088 340,528 442,536 516,971 Automobile dealers and auto supplies 845,904 850,364 913,717 994,342 1,120,770 Service stations 187,497 178,716 210,459 244,337 314,589 Other retail stores 384,538 413,285 464,338 534,379 620,099 Total Retail Outlets $3,043,180 $3,190,204 $3,491,453 $3,934,804 $4,485,156 All Other Outlets 701,212 637,989 672,614 807,481 962,582 Total All Outlets $3,744,392 $3,828,193 $4,164,067 $4,742,285 $5,447,738 ________________________ Source: California State Board of Equalization.

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There are three major shopping centers in the City. Major department stores with local outlets include Macy’s, Mervyns, J.C. Penney, Sears, and two Kohl’s. The retail base includes three Wal-Marts, three Targets, four Home Depots, three Lowe’s Home Improvement Stores, two Costcos, and a Sam’s Club.

The number of sales permits issued and the valuation of taxable transactions for the years 2001 through 2005 is presented in the following table.

City of Bakersfield Number of Permits and Valuation of Taxable Transactions

2001-2005

Retail Stores Total All Outlets Year No. of Permits Taxable Transactions No. of Permits Taxable Transactions 2001 3,422 $3,043,180 6,213 $3,744,392 2002 3,552 3,190,204 6,359 3,828,193 2003 3,899 3,491,453 6,709 4,164,067 2004 4,068 3,934,804 6,895 4,742,285 2005 4,140 4,485,156 7,024 5,447,738

____________________ Source: California State Board of Equalization.

Transportation

Well-developed surface and air transportation facilities are available to City residents and business firms. Main lines of both the Union Pacific and the Burlington Northern Santa Fe railroads traverse the area. Amtrak service is available.

State Highway 99, the main north-south artery serving the most populous communities along the east side of the Central Valley, runs through the center of the City. State Highway 58 provides east-west linkage between Interstate 5, 20 miles west, and Interstate 15 at Barstow, to the east, Highway 178, heading northeast, is the major route along the Kern River Valley. Highway 65, to the north, provides access to communities east of Highway 99 and to Sequoia National Park.

Interurban motor transportation is made available by Orange Belt Stages, Greyhound, and Trailways. Golden Empire Transit provides local bus transportation.

The Meadows Field Airport adjoins the City to the north. Regularly scheduled passenger and air cargo service is available, as well as charter service and general aviation services. The Meadows Field Airport includes the William M. Thomas Terminal, a 64,800 square foot, state-of-the-art terminal facility completed in November 2005 that is currently equipped with three jet-boarding bridges, but that may be expanded to accommodate up to nine gates. A second, older terminal has been converted to accommodate international flights to Mexico.

The Director of Airports is appointed by the County Board of Supervisors. The County Board of Supervisors meets at 1115 Truxtun Avenue in Bakersfield, California, on Monday and Tuesday of each week. Department of Airports agenda items are usually heard on Tuesday at 9:00 a.m.

Utilities

Electricity throughout the City is supplied by Pacific Gas and Electric Company. This company, along with Southern California Gas Company, also supplies natural gas. Telephone service is by AT&T. Fifteen private water companies serve the City. The City provides sewer and water services.

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Education

Public education in the City through the secondary grades is provided by a number of elementary school districts, including the Bakersfield City School District and Kern High School District. There are also a number of private schools, nursery schools, and pre-schools within the City.

The City lies within Kern Community College District, which administers Bakersfield College. This two-year institution is located on an approximately 150-acre site in northeast Bakersfield. Vocational and technical courses are offered as well as academic courses designed to equip the student for transfer to a four-year college or university in the third year. Bakersfield College attracts about half the local high school graduating class each year.

California State University, Bakersfield, opened in 1970 and received its university status in 1988. It is located on a 375-acre site located in the western portion of the City. Majors offered include anthropology, art, earth sciences, philosophy, mathematics, political science, business, and teaching. A graduate program offers the master’s degree in a number of fields.

The newest campus in the University of California system, UC Merced, opened in 2005. UC Merced serves the entire San Joaquin Valley, with the main campus located in the City of Merced and satellite centers located in the City and the Cities of Fresno and Modesto. The satellite centers in the City and Fresno have already opened.

Financial Services

Statewide banking systems serving the City include Bank of America, Washington Mutual Bank, Sanwa Bank California, Union Bank, Rabobank, and Wells Fargo Bank. Their services are supplemented by local and regional banks and various savings and loan associations.

Community Facilities

The City has six general hospitals with a total bed capacity of 1,075. The City is a primary medical center of a region larger than some states. Mercy Hospital and Greater Bakersfield Memorial Hospital are among the largest employers in the City. Kern Medical Center, administered by the County, is affiliated with UCLA Medical Center of Los Angeles.

The daily “Bakersfield Californian” and two weekly newspapers provide regional news coverage. Bakersfield has twenty radio stations, four television stations, two cable TV companies, and two satellite TV companies.

The City has 48 public parks, covering a total of 447 acres.

The Bakersfield Rabobank Arena, Theater, and Convention Center contains a 3,250-seat concert hall, a 9,000-seat arena, and 14 meeting rooms. County-owned golf courses and five private courses offer year-round golf, and tennis is played throughout the year at six private tennis clubs.

Cultural advantages of the City include community theater, the Bakersfield Symphony orchestra, a community concert group, and the Cunningham Art Gallery. Bakersfield College and California State University, Bakersfield, sponsor plays, concerts, lectures, and special events throughout the year.

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APPENDIX B

APPRAISAL

APPRAISAL REPORT

OF

Assessment District 07-2 Sydney Harbour

Tracts 6520 and 6611

LOCATED AT

Berkshire Road Bakersfield, California

AS OF:

February 27, 2008

PREPARED FOR:

City of Bakersfield Finance Department

1501 Truxtun Avenue Bakersfield, CA 93301

PREPARED BY:

Launer & Associates, Inc. 6613 Norris Road

Bakersfield, CA 93308 (661) 399-0819

Launer & Associates, Inc. Real Estate Appraisal Services

6613 Norris Road Bakersfield, California 93308

(661) 399-0819 FAX 399-9828

February 27, 2008

City of Bakersfield Finance Department 1501 Truxtun Avenue Bakersfield, CA 93301

ATTN: Nelson Smith, Finance Director

RE: Assessment District 07-2Sydney Harbour (Tracts 6520 and 6611) Bakersfield, California

Gentlemen,

In accordance with your request, I have inspected the real estate, specific plan documents, and other related data regarding the above real estate, in the incorporated area of the City of Bakersfield, California, as hereinafter described.

The inspection was made for the purpose and as part of the process, of providing value estimates of the subject property, as of February 27, 2008.

The hypothetical sale referred to in the definition of Market Value, and thus any values in this report are on the basis of all cash to the seller, therefore, no consideration has been given to existing or proposed financing. The definition of Market Value as herein used and the property rights appraised are set forth on Page 8 and 9, respectively, of this report.

The function of this appraisal report is to assist the client in ascertaining its collateral position that is to be secured by the herein-described property.

In accordance with our agreement, this appraisal report is a Summary Report (under Standards Rule 2-2, as defined in the Uniform Standards of Professional Appraisal Practice, USPAP) of an Appraisal performed under Standards Rule 1 of the USPAP.

Based upon the study and investigations conducted, and after careful consideration of all pertinent factors affecting value, I have formed the opinion that the values pertinent to the

subject property as defined, as of the effective date of this appraisal are as shown in the following summary table.

Summary of Values Assessment District 07-2

DESCRIPTION NET LAND AREA # OF LOTS

AS IS TTM OR RECORDED LOT VALUE WITH AD

FUNDED IMPROVEMENTS IN

PLACE

BULK VALUE OF RECORDED LOTS

OR LAND

TRACT NO. 6520 PHASE 1 (132 RESIDENTIAL LOTS) 26.97 132 $4,223,937 $5,415,554

FUTURE TRACT NO. 6520 PHASE 2 - PORTION (79 RESIDENTIAL LOTS) 15.99 79 $2,527,962 2,527,962


TOTALS FOR TRACT 6520 61.92 285 $9,119,864 $10,311,481

TRACT NO. 6611 (155 RESIDENTIAL LOTS) 31.16 155 $8,828,500 $9,014,035

TOTALS FOR TRACT 6611 31.16 155 $8,828,500 $9,014,035

ASSESSMENT DISTRICT 07-2 TOTALS 93.08 440 $17,948,364 $19,325,517

All values for the subject properties that were estimated in this report are subject to the liens imposed by Assessment District 07-2 bonded indebtedness (see the Amended Engineer’s Report prepared by Wilson & Associates dated February 26, 2008 and made a part hereof by reference). It was our finding that the Assessment District bond payments represent a minor fraction totaling in most cases less than 1/10 of 1% of the monthly sales proceeds in the various assessed areas. Moreover, the payments associated with carrying cost of bonded indebtedness imposed by Assessment District 07-2 are also covered in our estimate of variable indirect expense in the discounted cash flow analyses for each of the areas addressed in this appraisal.

The Appraisal, subject to the various limitations and assumptions set forth therein, provides an estimate of the ‘As-Is’ market value (also designated in the Appraisal as the “Bulk Value of Recorded Lots or Land” and defined herein as the “Bulk Value”) of each parcel of property within the Assessment District. It was the appraiser’s finding that the market for land in the Bakersfield area is such that the subject lots and land are marketable and could be sold within the stated reasonable exposure and marketing time stated herein.

The “Aggregate Finished Lot Value When Complete” as described in the Appraisal represents the full value of each lot. This value includes a recorded subdivision map, and the “Completion Costs,” which are defined herein as the costs associated with the developer-funded improvements necessary to develop such parcel as a finished lot available for improving with new housing units. The Completion Costs were presumed by the Appraiser to include direct and indirect costs for each lot, taxes during construction, profits, commissions, administrative and miscellaneous expenses, and other direct and indirect overlapping debt.

Our research indicates the subject properties have no natural, cultural, recreational or scientific value.

The appraiser observed no apparent environmental hazards during the visits to the site. Also, in this regard, please read the Underlying Assumptions and Limiting Conditions, and Certifications sections of this report both of which are important parts and govern the use and validity of this appraisal report.

Based on the studies and investigations conducted, and, after careful consideration of all pertinent factors affecting value, I have formed the conclusion that the 'As Is' market values of the subject properties, as defined, as of the effective date of this appraisal, are as shown above and are summarized on the Consolidated Worksheet of the Assessment District 07-2 contained in the Addenda.

This report is for the exclusive use of the City of Bakersfield, prospective bond holders and bond holders. No other parties shall have any right to rely on any service provided by Launer & Associates, Inc. without prior written consent.

The appraiser has granted permission to publish this appraisal in the Preliminary Official Statement and the Official Statement and consented for its use in marketing of the Assessment District 07-2 bonds.

Sincerely,

· Michael Launer, MAl SRA Certified General Appraiser California Certificate AG 002049 Expires 12-07-2008

TABLE OF CONTENTS Title Page Letter of Transmittal Table of Contents

Executive Summary .........................................................................................................................1Introduction......................................................................................................................................3Hypothetical Conditions ..................................................................................................................3The Appraisal Process and its Limitations.......................................................................................3Purpose of the Appraisal..................................................................................................................4Descriptions of Assessment Areas...................................................................................................4Use of the Appraisal.........................................................................................................................5Function and Objective of the Appraisal .........................................................................................6Scope of the Appraisal .....................................................................................................................6Property Identification .....................................................................................................................7Definition of Market Value..............................................................................................................8Date of Valuation.............................................................................................................................9Statement of Ownership...................................................................................................................9Property Rights Appraised...............................................................................................................9Opinion of Reasonable Exposure Time .........................................................................................10 Opinion of Reasonable Marketing Time........................................................................................10 General Area Analysis ...................................................................................................................12City Data ........................................................................................................................................21Bakersfield Metropolitan Area Housing Market Overview...........................................................33 Neighborhood Analysis .................................................................................................................46Site Descriptions ............................................................................................................................52Property History.............................................................................................................................68Assessed Value and Taxes .............................................................................................................68Highest and Best Use .....................................................................................................................69Valuation Methodology .................................................................................................................73Valuation........................................................................................................................................75Bulk Values..................................................................................................................................107Reconciliation ..............................................................................................................................109Certifications of Appraiser...........................................................................................................111

ADDENDA

Underlying Assumptions & Limiting Conditions Qualifications of Michael L. Launer, MAI, SRA Discounted Cash Flow Analysis Consolidated Spreadsheet of AD 07-2 Values

Launer & Associates, Inc. Assessment District 07-2

1

ASSESSMENT DISTRICT 07-2 BOUNDARIES

EXECUTIVE SUMMARY

Name/Identification Assessment District 07-2 - Subdivisions in the Southeast quadrant of Bakersfield, California

Owners of Record: Stuart Thomas, Inc., a Nevada Corporation dba Lenox Homes; Ricardo DeLuna & Mercedes D. Lopez, Tim & Stacy Heredia, Henry & Anabella Rubalcado, Jesus Saldivar, Leopoldo Orozco, and Donna Livingstone, all of Bakersfield, CA.

Highest & Best Use Develop with single-family residential housing

Effective Date of Appraisal February 27, 2008


Ref. File 4264 2





PLACE


OR LAND




TOTALS FOR TRACT 6520 61.92 285 $9,119,864 $10,311,481


TOTALS FOR TRACT 6611 31.16 155 $8,828,500 $9,014,035


Client Nelson Smith, Finance Director City of Bakersfield

Finance Department

Appraiser Michael Launer, MAI SRA CGREA Certification AG002049 Expires 12/07/2008


3

INTRODUCTION

This report will present the appraiser’s opinions regarding various parcels of residential entitled

land in Southeast Bakersfield as described in the succeeding pages. The reader’s attention is

directed to the following definitions and descriptions regarding this report and the properties

described herein.

HYPOTHETICAL CONDITIONS AND ASSUMPTIONS

This appraisal report is subject to hypothetical conditions and assumptions; the use of which

might have affected the assignment results.

In this case, the references to the appraiser’s opinions of lot values ‘As Complete’ is considered

Hypothetical since the improvements did not exist in that state on the effective date of the value

opinions. The ‘As Complete’ value opinions refer to a date in the future.

THE APPRAISAL PROCESS AND ITS LIMITATIONS

Appraising is not an exact science. Therefore, any reported conclusions are opinion(s). The

appraisal process involves many steps and the necessity to examine a great deal of information

including examination of the subject property.

The reported opinions and conclusions in the attached report are based on:

� Professional judgment/opinion and observations about the subject property; � Professional judgment/opinion and observations about the marketplace; � The availability of information customarily available to appraisers in the normal course

of business; and, � Facts, judgments, opinions, and observations contained in the attached report.

This report must be considered in its entirety for a complete understanding of the valuation.

This appraisal is as of the effective date stated in the report.


Ref. File 4264 4

No long-term predictions are offered. Long-term predictions are beyond the scope of this

appraisal and are beyond typical appraisal expertise. Any opinion of future market conditions is

subject to significant variance because of unforeseen economic or physical changes.

PURPOSE OF THE APPRAISAL

The purpose of this report is to present the appraiser’s opinion of the “As Is” market values of

the various properties identified and described herein, as part of Assessment District 07-2.

Assessment District 07-2 was formed for the purpose of providing financing for the on-site and

offsite improvements and infrastructure for each of the assessed areas described. The “As Is”

values also represent the “Bulk,” or discounted value of the lots as of the effective date of this

report. The bulk value of the lots and land recognize the value of the improvements financed by

the assessment district funds. A consolidated worksheet summarizing these values will be found

in the Addenda Section.

Assessment District 07-2 involves land in the Southeast quadrant of Bakersfield and consists of

two subdivisions, further described in the documentation that follows. A map depicting their

location is presented after the table of contents. The following descriptions of the various areas

were taken from the Engineer’s Report prepared by Wilson & Associates, Fresno, California

dated February 26, 2008.

DESCRIPTIONS OF ASSESSMENT AREAS

Assessment District 07-2 is a collection of two separate community areas in southeast Bakersfield

that are identified on the Assessment District 07-2 Boundary Map and in this report and

assessment as:

1. Sydney Harbour Area - portion (Tract No. 6520), generally bounded by Berkshire Road on the north and Marvin Street on the west. This portion of the Sydney Harbour Area is also identified as Tract No. 6520 (approximately 67 acres);

2. Sydney Harbour Area - portion (Tract No. 6611), generally bounded by Berkshire Road on the south, Madison Street on the east, and Arvin-Edison canal on the north. This portion of the Sydney Harbour Area is also identified as Tract No. 6611 (approximately 35 acres).


5

The two irregularly shaped community areas are located within a rectangular section of southeast

Bakersfield that has a north-to-south dimension of about three quarters of a mile as measured from

the north end of Tract No. 6611 to the south end of Tract No. 6520 and a west-to-east dimension of

about one half mile as measured from the west end of Tract No. 6520 to the east end of Tract No.

6611. Each of the two district areas is involved in various stages of the land development

entitlement and/or site development process.

A portion of the Sydney Harbour Area has been approved for subdivision into a combined total of

285 single-family residential (R-1) lots, 1 public park lot, and 1 storm drain sump lot pursuant to

Vesting Tentative Tract No. 6520. Tract No. 6520-Phase 1 with 132 R-1 lots has been recorded

with the Kern County Recorder. Lenox Homes has informed the City Director of Public Works

that no other phases of Tract No. 6520 are planned for recording with the Kern County Recorder

prior to confirmation of the Assessment District 07-2 assessment.

A portion of the Sydney Harbour Area has been approved for subdivision into a combined total of

155 R-1 lots, 1 storm drain sump lot, and several public landscape lots pursuant to Vesting

Tentative Tract No. 6611. The entire Tract No. 6611 with 155 R-1 lots, 1 storm drain sump lot, and

4 public landscape lots has been recorded with the Kern County Recorder. There are no more

phases of Tract 6611 to be recorded at a later date.

USE OF THE APPRAISAL

This report is for the exclusive use of the City of Bakersfield (the client), the bond holders and

prospective bond holders. No other parties shall have any right to rely on any services provided

by Launer & Associates, Inc. without prior written consent. The client is authorized to publish

the contents of this report for bond disclosure and marketing.


Ref. File 4264 6

FUNCTION AND OBJECTIVE OF THE APPRAISAL

It is the function of this report to provide the client with market value estimates to aid the City of

Bakersfield and potential bond holders in their analyses of bonds for issuance or purchase; City

issued bonds are to be secured by the assessment on the real property described herein.

It is the objective of this report to provide ‘As Is’ and prospective values of the herein described

residential lots and land as of February 27, 2008.

SCOPE OF THE APPRAISAL

The appraisal process reflected in this report is intended to follow the appraisal guidelines as

defined by USPAP. An appraisal is the act or process of estimating value where all appropriate

steps in the appraisal process are completed. This is a summary appraisal report as defined by

USPAP. It is delivered as a written report and prepared in accordance with Standards Rule 2-

2(b).

The scope of this appraisal assignment required collecting primary and secondary data, relative

to the subject property. The depth of the analysis was intended to be appropriate in relation to

the significance of the appraisal. The data used in this report have been analyzed and confirmed,

leading to the opinions set forth in this report. The valuation process involved the utilization of

all techniques and procedures considered appropriate to the appraisal.

The first step in the analysis involved conducting a preliminary survey of the subject properties

and surrounding areas in order to define the appraisal problem and identify the methods and

techniques necessary to provide credible value opinions. Interviews were held with City

officials, documents were examined to determine the legal land uses that apply to the subject and

surrounding neighborhood, including any proposed land use changes that might affect the use of

the appraised properties.

The general areas were personally inspected by the signing appraiser in order to define the

market areas within which we were likely find pertinent market indicators for the respective


7

parcels. During the property inspections we also sought to identify any physical conditions,

neighborhood development trends, or other factors that could affect our opinion of value. The

analysis presented will demonstrate that we have thoroughly examined the general economy of

the region and community to determine trends in population, housing, employment, financing,

and market conditions that influence the real estate described in this report. The subject

properties were inspected to ascertain physical features such as topography, access, drainage,

street improvements, utilities, and current status of the land improvements to date.

The primary valuation technique used in this report is the Sales Comparison Approach;

supplemented with a developmental analysis to estimate the value of the lots if completed and

sold in bulk to a single entity. This is a residual analysis that recognizes the time value of money

(also known as a discounted cash flow analysis, or DCF). We also estimated the cost of lot

production to bring the land from a tentative mapped state to a finished lot basis. Where

appropriate, we examined sales of single-family dwellings and sales of land planned for

subdivision development in competing market locations. These data were useful in analyzing

value ratios and value and absorption trends.

Wherever possible the data was confirmed with principals, their representatives, or agents.

Sources of data included the County Recorder’s office, various market data services, published

reports, and personal contacts. Relevant market factors were weighted and their influence on the

subject was considered in both approaches to value. The data generated from these investigations

were then analyzed for the purpose of forming market value opinions of the properties appraised.

The final step in the appraisal process entailed the organization and drafting of the appraisal

report.

PROPERTY IDENTIFICATION

The subject properties appraised for the purposes of this report are identified as follows:


Ref. File 4264 8

AD 07-2 Residential Subdivisions Tract # R-1 Lots Net Land Area

Tract 6520 Phase 1 132 26.97Tract 6520 Phase 2 N/A 34.95Tract 6611 155 31.16Totals 287 93.08

The values reported herein include the market value of the residential lots in Tract 6520 Phase 1

and Tract 6611 in an “As Complete” or finished lot basis. Both the retail and bulk discounted

values are presented. Tract 6520 Phase 2 is valued “As Is” as of the date of the value estimate.

Tract 6520 Phase 2 consists of vacant tentative mapped land and no finished lot values are

presented.

DEFINITION OF MARKET VALUE

The definition of market value, as herein used, is as follows:

“The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

A. Buyer and seller are typically motivated;

B. Both parties are well informed or well advised, and each acting in what he considers his own best interest;

C. A reasonable time is allowed for exposure in the open market;

D. Payment is made in cash in U.S. Dollars or in terms of financial arrangements comparable thereto; and

E. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.”1

1Title XI FIRREA, 32, 42 (f).


9

DATE OF VALUATION

The effective date of this appraisal, the date as of which the valuation applies, is February 27,

2008.

STATEMENT OF OWNERSHIP

To the best of my knowledge, titles to the properties appraised herein are currently vested as

follows:

Tract Lots Owner6520-1 1-132 Stuart Thomas, Inc., dba Lenox Homes, Bakersfield, CA

Stuart Thomas, Inc., dba Lenox Homes, Bakersfield, CA6611 1-102 Stuart Thomas, Inc., dba Lenox Homes, Bakersfield, CA6611 103 Ricardo DeLuna & Mercedes D. Lopez, Bakersfield, CA6611 104 Tim & Stacey Heredia, Bakersfield, CA6611 105 Henry & Anabella Rubalcado, Bakersfield, CA6611 106 Jason & Janette Jordan, Bakersfield, CA6611 107-112 Stuart Thomas, Inc., dba Lenox Homes, Bakersfield, CA6611 113 Jesus Saldivar, Bakersfield, CA6611 114 Leopoldo Orozco, Bakersfield, CA6611 115-117 Stuart Thomas, Inc., dba Lenox Homes, Bakersfield, CA6611 118 Donna Livingstone, Bakersfield, CA6611 119-156 Stuart Thomas, Inc., dba Lenox Homes, Bakersfield, CA

Future 6520-2 (2 parcels)

A full list of all the properties that are included in the Assessment District is contained in the

previously cited Engineer’s Report. In addition, full and complete details are included in the

preliminary policy of title insurance, to be forwarded to the Client by the title companies that are

currently preparing the policies. The title report is included herein by reference

PROPERTY RIGHTS APPRAISED

The property rights appraised are the fee simple estates in the subject properties, modified or

subject to the following:

1. The final values reported are on the basis of discounted and non-discounted market value; 2. The final values reported are on an “all cash” basis; and


Ref. File 4264 10

3. The value is exclusive of any furnishings, mineral rights, and subject to restrictions, reservations, easements and limitations of record including existing Community Facilities District bonded indebtedness and liens that may apply as a result of this assessment district.

A Fee Simple estate is:

“Absolute ownership unencumbered by any other interest or estate; subject only to the limitations of eminent domain, escheat, police power and taxation”.1

OPINION OF REASONABLE EXPOSURE TIME

Per USPAP, Statement on Appraisal Standards (SMT) No. 6:

“Exposure time may be defined as: the estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective opinion based upon an analysis of past events assuming a competitive and open market .”

Exposure time, defined as the length of time that a property would have been offered on the

market prior to the hypothetical consummation of a sale at market value, is a retrospective

opinion of time based on an analysis of past events and assuming a competitive and open market.

Exposure times of land sales with residential development potential in the subject’s market area,

as well as surrounding areas were found to be in the six to twelve month range. Additionally,

brokers active in the market area were contacted with regard to the exposure time that they have

experienced over the recent past for various projects. Based on these conversations, an estimated

exposure time of less than one year was determined reasonable, considering the stage of

development readiness of the subject.

OPINION OF REASONABLE MARKETING TIME

Per USPAP, Advisory Opinion (AO) 7:

"The reasonable marketing time is an opinion of the amount of time it might take to sell a real or personal property interest at the concluded market value during the period immediately after the effective date of an appraisal."

1The Dictionary of Real Estate Appraisal, American Institute of Real Estate Appraisers, Chicago, IL. 1986, pg. 123.


11

The reasonable marketing time opinion is provided in the attached appraisal report is based upon

current market conditions and assumes aggressive marketing unless otherwise stated in the

attached appraisal report. However, because market conditions change, the marketing time

opinion is not and cannot be guaranteed. A marketing time estimate is dependent upon: (1)

market conditions remaining at the level in effect as of the effective date of the attached appraisal

OR (2) forecasts of items, if such are offered in the attached report, (e.g. supply/demand, rents,

etc.) being accurate. Long-term predictions are however beyond the scope of the appraisal and

outside typical appraisal expertise.

Marketing time is an opinion of the time to sell a property interest in real estate based on the

opinion of market value during the period immediately after the effective date of value. An

opinion of reasonable marketing time is determined by comparing the recent exposure time of

similar properties and then taking into consideration current and future economic conditions and

how they may positively affect marketing of the subject property.

According to the brokerage firms involved in recent transactions, the total time on the market

varies. Some sales have consummated within six months or less of their offering others have

required nearly three years. The most recent activity involving vacant land with potential for

residential use indicated marketing times from one month to as much as a year, depending on

size, location and price. Based on the market indicators and brokers interviewed, it was our

finding that marketing time for the subject is 6 to 12 months.


Ref. File 4264 12

GENERAL AREA ANALYSIS Location and Size

The subject of this report is real property located in Kern County, California. Kern County is

located in the south central portion of California, at the southern end of the San Joaquin Valley.

In size, Kern County is third largest among the State's 58 counties, with an aggregate 8,064

square miles (5,160,960 acres). Included in the county's area are 11 incorporated cities and 32

unincorporated communities.

Population

In terms of numerical growth, Kern County had a net population increase of 121,623 residents

between the 1990 census and January 1, 2000. Current estimates show the total County

population at 779,869 persons. A breakdown of the County’s population by City is shown in the

following chart.

KERN COUNTY POPULATION BY CITY City

Arvin 15,027Bakersfield 311,824California City 12,048Delano 49,359Maricopa 1,137McFarland 12,538Ridgecrest 26,515Shafter 14,501Taft 9,147Tehachapi 12,610Wasco 24,288Unicorporated Areas 290,875Kern County 779,869

2007 Population Estimate

According to data published by the Kern County Council of Governments and the Economic

Development Department, Kern County’s population has grown 21% since the 1990 census, to

approximately 661,245 in January 2000, more than the State of California’s growth rate

(11.75%) in the same 10-year period. Kern County’s growth was the 14th largest in the state.


13

As forecast by the Kern Council of Governments (Kerncog) the projected growth for Kern

County by decade is shown below.

Kern County Growth ProjectionsYear Population2000 664,6942010 808,8082020 950,1122030 1,114,8782040 1,325,6482050 1,549,594

Economy

The economy of Kern County has historically been dependent on a combination of petroleum

and agricultural production, fluctuating with the cyclical nature of these two industries. Kern

County is number one in oil production and number three in the agriculture producing counties

in the nation. Warehousing and processing are becoming more important to the county, both in

terms of employment and diversification. We have seen evidence of emerging industrial growth

trends demonstrating movement towards a more diversified self-sustaining economy.

Oil

Kern is one of the nation’s leading petroleum-producing counties, with more than three-fourths

of the oil production in California being extracted from Kern County oil fields. Oil production

(and allied industry) provides a significant employment base to the county and is a major source

of revenue to the county. According to the Greater Bakersfield Chamber of Commerce:

“Kern County produces 77 percent of California’s crude oil, approximately 570,000 barrels of oil

per day, and 82 percent of the state’s onshore production. This represents ten percent of the

nation’s oil production and one percent of the total world’s production. 33,000 of California’s

43,000 oil-producing wells are located in Kern County.”


Ref. File 4264 14

The sale of the federal government’s 78 percent interest in the Elk Hills Naval Petroleum

Reserve to Occidental Petroleum Corp. for $3.65 billion in 1998 is the largest private acquisition

of federal property.

About 2,500 wells were drilled in Kern County in 2000, more than in any county in the nation.

Recent development in the East Lost Hills, Semi tropic and North Shafter areas signify the

potential for deep oil and gas discoveries and an economic benefit for Kern County. Five of

California’s 22 refineries are located in Kern County.

Kern County is expected to have an important role in refining and processing petroleum in the

future due to the limited potential expansion of refining capacity in Los Angeles and the Bay

Area. California’s 5 largest fields are all in Kern County.

Agriculture

Owing to the favorable climate of the San Joaquin Valley with a long frost-free growing season,

good supplies of reasonably priced irrigation water and good soil conditions, agriculture is a

major industry in the county. Farmland accounts for approximately 54% of Kern County’s land

area, or a total of 963,761 acres. Of this cropland, 736,217 acres are irrigated, according to the

Kern County Farm Bureau. Overall, there are a total of 1,995 farms averaging 1,423 acres in

size. There are 1,375 irrigated farms with a total of 736,217 acres. Kern County alone outranks

the agricultural production of 20 states.

Kern County produces over 250 different crops: over 30 types of fruits and nuts, over 40 types of

vegetables and more than 20 field crop varieties. Other notable agricultural commodities include

lumber, nursery stock, livestock, poultry and dairy products. The total value of these agricultural

products annually exceeds $1.5 billion.

Much of the irrigation water to produce these crops is transported from the north by the Federal

Central Valley Project’s Friant-Kern Canal and the State Water Project’s California Aqueduct.


15

Water districts have been established in most of the agricultural areas, in an attempt to stabilize

the irrigation water supply.

Valuation of the top ten crops in 2005 crop totaled $2,617,121,400, underscoring the importance

of agriculture to the local economy. These top ten crops, ranked according to their annual

valuation, are presented in the following table:

Kern County Top 10 Crops – 2006

Almonds, Including By-Products $494,302,000Grapes, All $492,111,000Milk, Market & Manufacturing $400,453,000Carrots, Fresh & Processing $389,735,000Citrus, Fresh & Processing $388,003,000Cattle & Calves $204,523,000Pistachios $156,027,000Hay, Alfalfa $150,692,000Cotton, Including Processed Cottonseed $118,678,000Potatoes, Fresh & Processing $116,310,000

Agriculture provides employment to a large segment of the labor force, putting millions of

dollars in the local economy. On the average about 20% of the work force is engaged in farm

work during the peak summer months and accounts for nearly 25% of the County’s jobs.

Industrial Trends

Industrial growth in the County is also being experienced. This increased industrial interest is

primarily a result of relatively inexpensive fully developed industrial sites and location of the

County midway between Los Angeles and San Francisco distribution points.

Municipalities in some of the smaller communities in Kern County have successfully lured state

and federal prisons to their domain. Delano, Taft, Tehachapi and Bakersfield have seen a

strengthening of their tax base as a result of nearby prisons. Each of the communities had

anticipated that most of the prison workers would retain domiciles and shop nearby. However,

many of the workers in the valley communities of Delano, Taft, and Bakersfield have opted to


Ref. File 4264 16

locate their families in the larger community of Bakersfield due to the diversity of its recreational

and leisure activities. Nevertheless, the presence of the prisons has had a definite net positive

effect on Kern County’s economy.

Retail Sales

Retail sales have grown at a steady pace over the past few years. According to figures published

by the California State Board of Equalization, retail sales activity has stabilized at $11.9 billion

in 2006. The increase in retail sales is attributed to inflation, increasing population and increasing

household income. Retail sales figures are typically utilized as indicators for economic growth or

decline.

Taxable Retail Sales Year Kern County Bakersfield1999 $6,324,261 $3,196,7322000 $6,938,238 $3,497,7802001 $7,626,392 $3,744,3922002 $7,565,892 $3,828,1932003 $8,021,143 $4,164,0672004 $9,129,915 $4,742,2852005 $10,651,857 $5,447,7382006 $11,927,950 $5,776,096

Retail activity within the county is concentrated at two regional malls in Bakersfield, Valley

Plaza and East Hills Mall containing a total of eight department stores and numerous assorted

specialty retail outlets. Other retail establishments in Kern County include at least one large

retailer such as Kmart or Wal-Mart in addition to locally owned retail stores.

Employment

The following table sets forth information regarding the size of the labor force, employment and

unemployment rates for the Kern County Labor Market, the State of California and the United

States based on Census data and projections.


17

Employment – Averages Calendar Years 2002 - 2006

Kern County 2002 2003 2004 2005 2006Labor Force (000s) 299.1 305.4 315.1 330.8 338.4Employment (000s) 264.0 267.9 284.5 303.0 312.8Unemployment Rate 11.7% 12.3% 9.7% 8.4% 7.6%State of CaliforniaLabor Force (000s) 17,404.6 17,629.3 17,627 17,740.4 17,901.9Employment (000s) 16,241.8 16,455.4 16,630 16,782.3 17,029.3Unemployment Rate 6.7% 6.7% 5.7% 5.4% 4.9%United StatesLabor Force (000s) 144,863 146,510 147,877 150,113 152,775Employment (000s) 136,485 137,736 140,278 142,782 145,926Unemployment Rate 5.8% 6.0% 5.1% 4.9% 4.5%

Source: California Employment Development Department.

Kern County’s unemployment rate is often higher than that of the state and the nation. This is a

result of the seasonal agricultural employment conditions. Kern County’s employment

opportunities have been bolstered however by a number of new business locations and

expansions. Approximately 2 million square feet of industrial distribution warehousing has been

constructed and occupied in the Tejon Business Park in the extreme southern part of the County.

The following table sets forth the annual average employment within the Kern County Labor

Market, for the fiscal years 2002 through 2006.

Nonagricultural Employment – Averages Employment by Industry 2002 2003 2004 2005 2006

Agriculture 40,400 41,900 39,300 44,400 44,600Natural Resources and Mining 7,900 8,000 8,200 8,500 9,300Construction 13,300 13,600 15,200 18,200 20,000Manufacturing 11,600 12,500 12,700 12,400 12,900Trade, Transportation and Utilities 39,000 39,700 40,900 43,600 46,100Information 2,500 2,500 2,600 2,500 2,600Financial Activities 8,000 8,300 8,600 8,700 9,000Professional and Business Services 22,400 21,700 21,400 23,000 25,000Education and Health Services 20,700 21,300 21,700 22,200 22,900Leisure and Hospitality 17,600 18,000 18,700 20,100 20,700Other Services 6,900 6,900 6,800 7,100 6,900Government 55,200 54,500 54,000 55,800 57,300

Industry Employment Total 245,500 248,900 250,100 266,500 277,300

Source: California Employment Development Department, as of January 2007


Ref. File 4264 18

Transportation

Two major north/south arteries traverse Kern County. Freeway 99 and Interstate 5, running

north/south, cover the entire West Coast meeting at Interstate 80 in Sacramento. Freeway 99

connects with Highway 46 that provides access to the central coast. Highway 58 traverses the

County in an East-West direction and connects with Interstate 40 and 15, providing access to

Arizona, Nevada, Utah and other major east markets. Interstate 80 and 40 are major corridors

across the United States.

13 public airports, two of which have jet runway capacity, and four private airports serve Kern

County. In addition there are two airports operated by the military, Edwards Air Force Base and

China Lake Naval Weapons Center. Major airlines presently serving the area are American

Airlines, which operates a daily jet flight schedule to Dallas-Fort Worth and United Express with

flights to San Francisco, San Diego, Las Vegas and Santa Barbara. There are several commuter

style airlines with service to various portions of the state including Los Angeles.

The Santa Fe/Burlington Northern and the Union Pacific operate mainline rail service in Kern

County with access to all parts of the United States. Amtrak provides passenger train service

north on its San Joaquin route and bus service south to Los Angeles. The county’s bus facilities

include Greyhound Bus Lines, Orange Belt Stages (a charter service), and Airport Bus of

Bakersfield, a local bus line providing daily commuting service to Los Angeles International

Airport.

Schools

Public schools are available throughout the county with an excellent system of elementary and

high schools. In addition to the numerous elementary, high schools and community colleges

there is a four-year state university, California State University Bakersfield. The colleges are

accredited and provide vocational and continuing education.


19

Future Trends

Irrespective of the natural mountainous boundary separating Los Angeles and Kern County, the

decade of the 1980s and 1990s saw the genesis of a trend destined to continue for years to come.

Los Angeles area residents are looking to the north in search of a less urbanized life style. There

are residents commuting to Los Angeles on a daily basis from Frazier Park, Rosamond and

Bakersfield. Additionally, many individuals with working situations requiring them to work

several days at a time, such as firefighters, are relocating their families to Kern County and to

what they perceive as a safer and lower cost of living. Several “new towns” are planned for

agricultural lands at the extreme south-end of the San Joaquin Valley between Bakersfield and

Frazier Park. These new towns are being planned to take advantage of Los Angeles residents

becoming disturbed with the emergence of urban problems in Southern California.

There are preliminary discussions towards the development of a high-speed rail system

connecting Northern and Southern California. The discussions have reached the point

establishing the most feasible route. Factors to be weighed include geographic limitations

(impassable mountain ranges), ability to service population centers and certainly the political

clout of the local representation. At this time there are two routes being given the most

consideration, including one in Kern County. The Kern County route would proceed north from

Los Angeles to the San Joaquin Valley after a stop in the Antelope Valley. The other route being

considered is a coastal route that somewhat approximates the current location of State Highway

101. Obviously there is anticipation that a valley route would provide a linkage to Southern

California sufficient to further the retreat from Los Angeles and spur housing demand in Kern

County.

Not all of the new residents locating in Kern County are doing so as a launching pad for a

commute to Los Angeles. Kern County has some of the lowest cost real estate in California; the

typical homeowner can achieve more of the “American Dream” in Kern County. It is not merely

individual homeowners benefiting from inexpensive property values. Beyond the County’s

location near the population center of the state and the availability of adequate labor, the primary


Ref. File 4264 20

impetus for many of the newly arriving manufacturing and distribution jobs is the low cost of

land.

Conclusion

Kern County is continuing to experience steady growth patterns from increased development of

irrigated farmland, stable petroleum production and refining, along with a steady industrial

growth trend. Kern County’s economic base is centered on these resources and should continue

to be stable. The long-term trends are diversification and urbanization. The County has made

considerable efforts to attract potential industrial and manufacturing firms in order to diversify

the region’s economic base. Some of this complements the existing agricultural base and some

have no relation to the industry. The second trend is the reclamation of farmland for urban or

suburban development in the vicinity of Bakersfield. This trend will continue for as long as the

disparity in housing costs exists between Kern County and the rest of California.


21

CITY DATA

Introduction

Bakersfield is the county seat of Kern County, California, USA. It is one of the fastest-growing,

large-population cities in the United States. As of 2007, the population was estimated at 372,320

within the city limits, making it the 11th largest municipality in California and the 59th largest

city in the nation according to U.S. Census estimates. The greater Bakersfield area has a

population of around 490,000, including unincorporated areas, according to local municipal

sources. It is California's third largest inland city, after Fresno and Sacramento. The city's

economy relies on agriculture, petroleum extraction, and refinement industries.

Location And Size

The subject properties are all located in the City of Bakersfield and within Bakersfield’s sphere

of influence. Bakersfield is located 111 miles north of the major metropolitan Los Angeles area,

108 miles south of Fresno, (the next nearest large urban area), and 290 miles south of San

Francisco. Annual annexations to the city have taken place at a mean rate of approximately 6%.

These annexations represent an average annual addition of 3,344 acres to the city's landmass.

Growth has primarily been in the southwest, northeast, and northwest quadrants. The City covers

approximately 118.5 square miles.

The following page map shows the City of Bakersfield corporate limits (shown in light orange)

and the Greater Metropolitan area of Bakersfield that shows the Bakersfield’s sphere of

influence. The Greater Bakersfield Metropolitan Area as shown below is defined by the

Bakersfield Zip Codes 93301 through 93314.


Ref. File 4264 22

Greater Bakersfield Metropolitan Area Map

Current Population and Projections�

2000 Total Population 397,161 2000 Group Quarters 7,3422007 Total Population 490,8222012 Total Population 568,133 2007 - 2012 Annual Rate 2.97%

� Demographic Information from STB-On Line ESRI Statistical Database


23

In the identified market area, the current year population is 490,822. In 2000, the Census count in

the study area was 397,161, which represents an annual rate of change of 3.37%. The five-year

projection for the population in the study area is 568,133, representing a change of 2.97%

annually from 2007 to 2012. The difference between change in population and change in

households is a result of two factors—the presence of group quarters (non-household) population

in the market area and the average number of persons per household. The group quarters

population in the market area was 7,342 in 2000, or 1.8 percent of the total population. Average

household size is 3.07 in 2007, compared to 2.98 in the year 2000. Demographic projections

indicate that the average household size will grow substantially from the Census count in 2000.

At that time the average household had a total of 2.98 persons. These demographic statistics are

summarized in the following chart.

Household Characteristics

2000 Households 130,755 2000 Average Household Size 2.98



2007 - 2012 Annual Rate 2.84%2000 Families 96,869

2000 Average Family Size 3.462007 Families 117,883

2007 Average Family Size 3.552012 Families 135,777

2012 Average Family Size 3.58 2007 - 2012 Annual Rate 2.87%

2000 Housing Units 139,724 Owner Occupied Housing Units 57.5% Renter Occupied Housing Units 36.1%

Vacant Housing Units 6.4%2007 Housing Units 168,121

Owner Occupied Housing Units 59.8% Renter Occupied Housing Units 34.0%



Vacant Housing Units 6.1%

Greater Bakersfield Metropolitan Area


Ref. File 4264 24

The household count in GBMA study area has changed from 130,755 in 2000 to 157,625 in the

current year, an increase of 20.55%.

The five-year projection of households is 181,307, a change of 2.49 percent annually from the

current year total. Average household size is currently 3.07, compared to 2.98 in the year 2000.

The number of families in the current year is 117,883 in the market area.

Housing Units

2000 Housing Units 137,732 Owner Occupied Housing Units 57.5% Renter Occupied Housing Units 36.1%





Vacant Housing Units 6.1%

GBMA Study Area

Currently, 59.8 percent of the 168,121 housing units in the Greater Bakersfield Metropolitan

Area are owner occupied; 34.0 percent are renter occupied; and 6.1 percent are vacant. In 2000,

there were 137,732 housing units of which 57.5 percent were owner occupied, 36.1 percent

renter occupied and 6.4 percent were vacant. The rate of change in housing units since 2000 is

22.06 percent.


25

Owner Occupied Housing Units by Value

Number % Number % Number %Total 80,329 100.0% 100,496 100.0% 116,034 100.0%< $10,000 1,095 1.4% 397 0.4% 352 0.3%$10,000 - $14,999 570 0.7% 242 0.2% 240 0.2%$15,000 - $19,999 515 0.6% 254 0.3% 230 0.2%$20,000 - $24,999 713 0.9% 130 0.1% 178 0.2%$25,000 - $29,999 516 0.6% 273 0.3% 240 0.2%$30,000 - $34,999 565 0.7% 203 0.2% 215 0.2%$35,000 - $39,999 764 1.0% 186 0.2% 176 0.2%$40,000 - $49,999 1,964 2.4% 412 0.4% 395 0.3%$50,000 - $59,999 3,890 4.8% 356 0.4% 336 0.3%$60,000 - $69,999 6,009 7.5% 546 0.5% 464 0.4%$70,000 - $79,999 8,648 10.8% 427 0.4% 496 0.4%$80,000 - $89,999 9,766 12.2% 370 0.4% 393 0.3%$90,000 - $99,999 8,709 10.8% 466 0.5% 447 0.4%$100,000 - $124,999 13,155 16.4% 1,434 1.4% 1,100 0.9%$125,000 - $149,999 8,995 11.2% 2,325 2.3% 1,599 1.4%$150,000 - $174,999 4,928 6.1% 4,902 4.9% 2,759 2.4%$175,000 - $199,999 3,154 3.9% 6,936 6.9% 3,724 3.2%$200,000 - $249,999 2,652 3.3% 19,597 19.5% 14,193 12.2%$250,000 - $299,999 1,656 2.1% 17,678 17.6% 16,388 14.1%$300,000 - $399,999 1,253 1.6% 21,561 21.5% 29,891 25.8%$400,000 - $499,999 448 0.6% 10,052 10.0% 19,344 16.7%$500,000 - $749,999 219 0.3% 7,501 7.5% 15,117 13.0%$750,000 - $999,999 74 0.1% 2,331 2.3% 4,069 3.5%$1,000,000 + 71 0.1% 1,917 1.9% 3,688 3.2%

Median Value $95,913 $280,524 $347,145Average Value $114,419 $330,933 $398,055

Census 2000 2007 2012

Median home value in the GBMA study area is $280,524, compared to a median home value of

$181,127 for the U.S. In five years, median home values in the study area are projected to

change by 4.75 percent annually to $347,145. From 2000 to the current year, median home value

increased by 27.5 percent annually.


Ref. File 4264 26

Households by Income – Greater Bakersfield Metropolitan Area Year

Income Bracket Number Percent Number Percent Number Percent< $15,000 25,553 19.5% 24,197 15.4% 23,419 12.9%

$15,000 - $24,999 19,569 15.0% 18,625 11.8% 18,987 10.5%$25,000 - $34,999 17,184 13.1% 17,177 10.9% 1739*5 9.6%$35,000 - $49,999 21,334 16.3% 22,844 14.5% 2,278 12.6%$50,000 - $74,999 22,749 17.4% 29,058 18.4% 34,470 19.0%$75,000 - $99,999 12,403 9.5% 19,137 12.1% 20,934 11.5%

$100,000 - $149,999 8,352 6.4% 17,554 11.1% 26,487 14.6%$150,000 - $199,999 1,785 1.4% 5,065 3.2% 8,840 4.9%

$200,000+ 1,790 1.4% 3,968 2.5% 7,997 4.4%

Median Household IncomeAverage Household IncomePer Capita Income

$48,779 $62,480 $74,966$20,344 $24,196$16,358

2000 2007 2012

$36,829 $47,059 $55,496

Income Levels

The disposable income characteristics in the Greater Bakersfield Metropolitan Area are shown in

the following table.

Disposable Income Levels Bakersfield, California 2007 Total Number of Households Percent

Disposable Income Range 157,625 100.0%< $15,000 26,545 16.8%$15,000 - $24,999 22,880 14.5%$25,000 - $34,999 20,384 12.9%$35,000 - $49,999 27,689 17.6%$50,000 - $74,999 34,692 22.0%$75,000 - $99,999 12,593 8.0%$100,000 - $149,999 9,166 5.8%$150,000 - $199,999 1,848 1.2%$200,000 + 1,828 1.2%

Median Disposable Income $38,753Average Disposable Income $49,556

The preceding demographic data becomes more meaningful when the Greater Bakersfield

Metropolitan Area is compared with the State of California. This is shown in the following chart.


27

Location / Area

5 Yr Projected Growth

Percent Owner

Occupied

Median HH

Income

Median House Value

Bakersfield 2.97% 57.50% $47,059 $280,524State of California 1.55% 55.20% $57,776 $498,615

This data shows that:

� Bakersfield is projected to grow at nearly twice the statewide rate over the next five years � Owner occupancy in Bakersfield exceeds the statewide average by more than 2% � Median housing value in Bakersfield is nearly half that of statewide housing

The relationship of Bakersfield vs. Statewide housing prices is shown on the graphic below.

Housing Price Comparisons

0.00%5.00%

10.00%15.00%20.00%25.00%30.00%35.00%40.00%

<$100

k

$100

- $12

4.9

$125-

$149.9

$150-

$174.9

$175-$

199.9

$200

- $24

9.9

$250

- $299.9

$300-

$399.9

$400-

$499.9

$500-

$749

.9

$750

- $99

9.9$1

m+

Price Range - $100k-$1M +

Perc

ent o

f Mar

ket

StateBakersfield

In reviewing the data from which the chart was compiled it was noted that 28.8% of the

statewide housing is priced above $750,000. The $750k plus has a 3% market share in

Bakersfield. Statewide, 50% of the dwellings are priced above $500,000 and in Bakersfield 50%

of the housing is priced below $250,000.


Ref. File 4264 28

Economy

Bakersfield, the marketing, business, service and transportation center of the Kern County, finds

its economy closely dependent upon the continued prosperity of the agricultural and petroleum

industries.

A city’s economic functional classification is generally based upon a city's primary economic

base activities, i.e., its reason(s) for existence. Bakersfield has two categories:

� First, the city is a commerce center; (considering it is a farming center and the major county supplier of goods and services);

� Secondly, it fits a classification commonly known as extractive, due to the large portion of economic activity created by the productions of minerals.

Manufacturing firms within the city are characteristically of small to medium size. Major

manufacturing activities include steel fabrication, plastic form products, food and kindred

products, and petroleum refining with related industries, and textiles.

From an overall point of view, the Greater Bakersfield Metropolitan Area's economy is stable.

Manufacturing activities are diversified with no single industrial classification furnishing more

than 25% of the area's jobs.

Transportation

Transportation needs of a city are essential, requiring goods as well as people be moved to-from-

and-within the urban environment. Within the Bakersfield Metropolitan Area the main lines of

the Burlington Northern/Santa Fe Railroad service freight needs. Amtrak provides passenger

travel. Scheduling by Amtrak, on its "Valley Run", is currently operated seven days a week. All

of Amtrak's northern travel on this route originates in Bakersfield, while all southern travel from

Oakland terminates in Bakersfield.

Truck transport is available from a number of truck carriers, several of which are major interstate

lines.


29

The Meadows Field Airport adjoins the City to the north. Regularly scheduled passenger and air

cargo service is available, as well as charter service and general aviation services. The Meadows

Field Airport includes the William M. Thomas Terminal, a 64,800 square foot, state-of-the-art

terminal facility completed in November 2005 that is currently equipped with three jet-boarding

bridges, but that may be expanded to accommodate up to nine gates. A second, older terminal is

currently being converted to accommodate international flights.

Inter-city bus facilities are provided by the Golden Empire Transit system. Buses currently travel

six days a week (not on Sunday), providing service from 7:00 a.m. to 6:30 p.m. The current rate

is $0.75 for a one-way travel pass and no charge for transferring. Four firms provide taxi service,

all of which are radio dispatched.

State Highway 99, the main north-south artery serving the most populous communities along the

east side of the Central Valley, runs through the center of the City. State Highway 58 provides

east-west linkage between Interstate 5, 20 miles west, and Interstate 15 at Barstow, to the east,

Highway 178, heading northeast, is the major route along the Kern River Valley. Highway 65,

to the north, provides access to communities east of Highway 99 and to Sequoia National Park.

Government and Social Services

The City of Bakersfield utilizes the City Manager form of government with an elected mayor and

a seven-person council. Professional administrators with well-supervised and well-trained staffs

manage departments within the city. All departments have a good record.

All utilities are available within most areas of the city. These include gas, electricity, water,

sewage disposal, telephone, and garbage disposal.

The City has six general hospitals with a total bed capacity of 1,075. The City is a primary

medical center of a region larger than some states. Mercy Hospital and Greater Bakersfield


Ref. File 4264 30

Memorial Hospital are among the largest employers in the City. Kern Medical Center,

administered by the County, is affiliated with UCLA Medical Center of Los Angeles.

The daily “Bakersfield Californian” and two weekly newspapers provide regional news

coverage. Bakersfield has twenty radio stations, four television stations, three cable TV

companies, and two satellite TV companies.

The City has 45 public parks, covering a total of 433.27 acres. The Bakersfield Rabobank Arena,

Theater, and Convention Center has a 3,250-seat concert hall, an 11,000-seat arena, and 14

meeting rooms. Memorial Stadium hosts more National AAU track meets than any other city in

the country. County-owned golf courses and five private courses offer year-round golf, and

tennis is played throughout the year at six private tennis clubs.

Cultural advantages of the City include a community theater, the Bakersfield Symphony

orchestra, a community concert group, and the Cunningham Art Gallery. Bakersfield College

and California State University, Bakersfield, sponsor plays, concerts, lectures, and special events

throughout the year.

Public education in the City through the secondary grades is provided by a number of elementary

school districts, including the Bakersfield City School District and Kern High School District.

There are also a number of private schools, nursery schools, and pre-schools within the City. The

City lies within Kern Community College District, which administers Bakersfield College. This

two year institution is located on a 150-acre site in northeast Bakersfield. Vocational and

technical courses are offered as well as academic courses designed to equip the student for

transfer to a four-year college or university in the third year. Bakersfield College attracts about

half the local high school graduating class each year.

California State University, Bakersfield, opened in 1970 and received its university status in

1988. It is located on a 375-acre site located in the western portion of the City. Majors offered

include anthropology, art, earth sciences, philosophy, mathematics, political science, business,

and teaching. A graduate program offers the master’s degree in a number of fields.


31

Recreational and Cultural Activities

The city, due to its central location, offers close proximity to countywide recreational activities.

Within the city itself, there are numerous parks, many of which contain public swimming pools

and tennis courts.

The community maintains a Philharmonic Orchestra, the Bakersfield Convention Center, which

seats 3,250 persons, and a community theater. Also, there are college-sponsored lectures and

artists, a wide variety of artistic, cultural, and special interest organizations, numerous movie

theaters. The new Bakersfield Centennial Garden Arena facilitates various sporting events and

trade shows.

The library system of the Bakersfield Metropolitan Area contains 10 branches and a bookmobile

service, providing access to over 570,200 volumes.

Media sources include the Bakersfield Californian, a daily newspaper, two weekly newspapers,

four television stations, three cable television companies, and twenty radio stations that are

divided between AM and FM broadcasting.

The Labor Market

There is a stable labor force of men and women with diversified skills in fields ranging from

agriculture to sophisticated equipment, assembly, and research.

Over the past two years, over 5,000 jobs have been added in Kern County each year, mostly in

the services, government, and retail, manufacturing and construction sectors. With the efforts to

attract corporate and manufacturing operations to Kern County, this growth is expected to

continue through the next decade.

Other factors influencing the county's labor market are:


Ref. File 4264 32

� A source of labor is always available to an employer whose operation permits short training phases during start-up.

� Although the labor market is not considered heavily organized, the climate between management and labor is excellent.

� The total environment employees and their families enjoy, including short driving distances to jobs and activities, results in excellent longevity records.

� Future labor requirements will be filled through coordinated training at high schools, community, and state colleges as a result of a continued evaluation of the job market.

� Bakersfield is a participant in various state and federal programs including those with the California State Department of Human Resources Development.

As reported by the California Employment Development Department, the average

unemployment rate for the Bakersfield labor market for 2003-2004 was 12.6%. This was up from

12% the preceding year. Current figures from the EDD indicate an unemployment rate of 8.4%

as of November 2007.

Bakersfield is always likely to have an unemployment rate somewhat higher than California or

the United States as a result of the seasonal characteristics of the agricultural industry. The

following table cites the unemployment rate contrasted with demographic indicators.

City of Bakersfield Demographic Statistics

Fiscal Year Population

Median Household

Income

ElementarySchool

Enrollment

Estimated Unemployment

Rate1994-95 207,472 $37,449 26,350 12.8%1995-96 212,715 $31,852 26,903 12.4%1996-97 214,554 $31,888 27,126 11.4%1997-98 221,689 $33,339 27,370 10.7%1998-99 230,771 $33,754 27,668 11.0%1999-00 237,222 $34,343 27,783 12.5%2000-01 254,368 $37,573 28,099 10.4%2001-02 257,914 $35,153 28,267 11.2%2002-03 267,023 $39,982 29,398 12.3%2003-04 279,672 $46,000 28,315 12.6%2004-05 295,893 $46,600 28,234 8.3%

The following table sets forth the principal employers in the City as of June 30, 2007.


33

Principal Employers FIRM PRODUCT/SERVICE EMPLOYEES County of Kern Government 8,400 Giumarra Vineyards Agriculture 5,000 Grimmway Enterprises Agriculture 4,000 Bakersfield City Schools Education 4,000 Kern High School District Education 3,600 Wm. Bolthouse Farms Agriculture 2,500 Catholic Healthcare West Health Care 2,500 Bakersfield Memorial Hospital Health Care 1,400 City of Bakersfield Government 1,400 ARB Inc. Metal Fabrication 1,200 Kern Medical Center Health Care 1,200 State Farm Insurance Insurance 1,400 Aera Energy Energy 1,150 Chevron Texaco Oil Production 1,000 California State University Bakersfield Education 900 Dreyers Ice Cream Co LLC. Food Processing 800 Frito Lay Food Processing 725 Target Distribution Center Retail Distribution 650 Clinica Sierra Vista Health Care 600 ACS Call Center 600 Bakersfield College Education 450

______________________Source: City of Bakersfield.

BAKERSFIELD METROPOLITAN AREA HOUSING MARKET OVERVIEW

History

The Bakersfield housing market has traditionally and historically been somewhat isolated from

the State and National price swings. Over the past twenty-five years Bakersfield has always had

a lag-time in price increases and decreases compared with other parts of the State, most notably

Southern California. Moreover, when the other market areas have had new housing market

slumps, the new housing market here has remained near static, with minor price appreciation or

declination based on location within the City.


Ref. File 4264 34

Current Market

The housing market downturn that began in other areas of California in late 2005 was not felt

here until mid-year 2006. From that point to present the local market has shown decreases in new

home permits, new starts and closings. The following chart shows the new home sales activity in

the City of Bakersfield in the last four years (year 2007 are projections based on the first 10-

months).

Year 2004 2005 2006 2007Annual Sales 4,157 4,724 4,512 2862*Monthly Sales 346 394 376 239*annualized projection from monthly sales

We saw a small decrease overall in 2006 from the 2005 year-end figures and the 2007 sales

activity is off by about 35% from last year based on actual figures and projections.

We also noted that for the first time in four years, the average selling price in the City of

Bakersfield dropped. This is demonstrated in the following chart.

Average New Home Selling Price by Year

Year 2004 2005 2006 2007Average New Home Sale Price $238,634 $325,776 $366,368 $330,091Increase/Decrease from Previous Year 30.0% 36.5% 12.5% -9.9%

Our research shows that the average new dwelling selling price is governed by the sales activity

of the type and size of dwelling sold. This is known as market segmentation. If a greater number

of smaller, less expensive dwellings make up a larger segment of the market, the average selling

price in the market taken as a whole will be down.

The reader’s attention is directed to the following graph that demonstrates this by comparing

sales volume segmented by price for the past three years.


35

Market Segmentation by Price

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

<250k 250-300k 300-350k 350-400k 400-450k 450+

Price Range

Pct o

f Mar

ket

200520062007

In 2005 the new dwellings priced below $350,000 accounted for nearly 63% of the market.

Dwellings priced under $250,000 made up 13% of the market. During 2005 we noted a shift was

beginning to build in the market’s preference for the larger, mostly custom-built dwellings priced

in excess of $450,000. These upper end dwellings had a 15% market share.

This trend toward high demand for larger upper-end dwellings continued in 2006 with 17.5% of

the market activity in the $450,000 plus price range. Meanwhile, the sales volume for the below

$250,000 dwelling dropped to about 10% of the total market. The sales volume for the sub-

$350,000 dwellings was down slightly from 2005 at about 52%.

At year-end 2006, the Bakersfield new housing market was skewed to the upper-end housing

segment, with almost 48% of the total sales in the $350,000 plus range.

By the end of the first quarter 2007, many of the builders/developers were realizing the market

for upper-end product had faded. Foot traffic in the subdivisions had been decreasing steadily


Ref. File 4264 36

and sales volume was down dramatically from what they had been experiencing in the previous

years. Most builders had neglected the entry-level market in favor of building for the higher

income demographic who were buying larger houses. The larger, more expensive dwellings

yielded much higher margins than entry-level product.

In 2007 the below $250,000 market segment captured nearly 30% of all sales. This represents

nearly double the market capture in 2006 for this segment. This degree of entry-level market

capture had not been seen since 2002-2003. This surge in entry level product construction and

sales was a result of the fact that from late 2003 on, there were only a handful of developers who

had been in the entry-level (sub $250k) market. The year 2003 marked the beginning of a period

of unprecedented increases in sales and prices and builders shifted to producing the move-up and

higher end housing. However, the builders who specialized in the lower priced housing market

and targeted the first-time home buyers continued to hold consistent high sales volume and

benefitted from the lack of competition as other builders catered to the larger houses with the

much higher profit margins.

Beginning in 2007 we saw a shift on the part of a number of builders who have traditionally

focused on producing high-end and up-scale housing product on large lots, “re-tooling” their

operation to offer product appealing to the entry-level market segment.

As can be seen in the three year historical graphic, the 2007 sales activity has dramatically

shifted to the lower priced, smaller new housing product, with more than 75% of the total market

selling for less than $350,000. To enable the reader to grasp the significance of the market

segmentation, the new home sales to date is displayed in the following graphic.


37

2007 Market Segmentation

<250k250-300k300-350k350-400k400+

Market activity for under $250k and $250k-$300k is almost evenly split; with 29% and 27%

market share, respectively. The next most active market segment is the dwellings that sold

between $300k and $350k, accounting for about 19% market share. Clearly, the market has

shifted to the lower-priced end of the spectrum with 75% of all sales below $350k and 56%

under $300,000. This is in stark contrast to 2006 when 72% of the market was captured by the

$300,000 plus market segment.

New Home Permit Activity

We have charted the new single-family permits in Bakersfield over the 2004 to 2007 time frame.

Year 2004 2005 2006 2007Permits Issued 4,222 5,216 3,368 2,457

23.54% -35.43% -27.05%

The 2006 permit activity shows a decline of 35.43% from 2005 and the year-to-date permitting

activity is down 27% from the 2006 figures. In a typical market the permitting activity serves as


Ref. File 4264 38

a predictor of new home starts and closings. This has not been the case in the Bakersfield market

in the past two years. The sales rate has exceeded the permitting rate.

It is our finding that there are at least two reasons for this. First, many of the merchant builders

built up inventory to a substantial degree by constructing houses without sale contracts. Others

constructed subdivisions on a pre-plotted basis, assuming the buyers would come. These

practices can make sense when the market is strong but it is a somewhat risky strategy because

the market can turn suddenly.

Developers who have embarked on subdivision construction projects often plan to build the

subdivision over a relatively short time frame. Once started however, the momentum cannot be

stopped quickly. This inertia can cause housing inventories to build up when the foot traffic to

the models slows because the building construction activity does not have time to react.

Another reason the sales activity has exceeded the permit rate is a result of the credit tightening

of the lenders. The sub-prime market extended credit to less than credit worthy borrowers and

the default rate is now at historic highs. When the credit qualification standards were raised

suddenly, many of those who had sale contracts in hand no longer met the qualifications to

purchase and the developers were forced to re-sell the dwellings they already had under

construction and under contract. This has added to the oversupply situation.

In order to reduce their standing inventory, builders have cut profit margins by offering

concessions and incentives in the form of price reductions, interest rate buy-downs or various

other programs.

What Does the Future Hold?

The key to forecasting new residential demand is a study of the demographics, population

increase projections, and the overall economy of an area. The Bakersfield economy remains

relatively strong overall, with the agriculture and oil industries thriving at this time. Moreover,


39

we are seeing expansion in the industrial sector, with small and large firms constructing facilities

here.

Population growth results in housing demand. Therefore, a study of the demand side of the

housing market is the first step in analyzing the relative strength of the housing market and it

provides necessary data in studying the interaction of the supply and demand characteristics of

the market, and it forms the basis for forecasting future housing needs. The demand side analysis

of the residential housing market involves researching characteristics of population growth;

occupancy and vacancy rates of single family housing stock; pricing levels; and market

segmentation. In the following paragraphs we discuss the various elements of the demand side of

the single family housing market. The sources utilized in our analyses are from the California

Department of Finance E-5 Report, National Decision Systems, ESRI, Kern Council of

Governments, California Department of Finance-Demographic Research Unit, City of

Bakersfield and Kern County Planning Departments.

In examining the historical and projected growth rates for Bakersfield, we studied the zip codes

93301 through 93314. These zip codes include unincorporated areas of Bakersfield but all have

Bakersfield mailing addresses. The corporate limits of the City have lower totals than the

metropolitan area covering all zip codes. It was noted that in the period from January 2000 to

January 2007, the Metropolitan area population increased 24%, or 3.37% per year. Projections

from 2007 to 2012 indicate a further population increase of 15.75% as shown in the following

chart.

Bakersfield Metropolitan Area Population�

Year 2000 2007 2012Population 397,161 490,822 568,133

The projected population growth rate from 2007 to 2012 is 77,311 persons, a projected increase

of 3.15% per year. The projected growth is based on data from ESRI, a nationally recognized

demography publisher.

� The population figures include Zip Codes 93301 through 93314, some of which are unincorporated areas.


Ref. File 4264 40

Bakersfield Population and Housing 2007-2012 - Demand Characteristics

Using the published statistics and projections from the sources cited previously, the population

and housing in the Greater Bakersfield Metropolitan area are forecast as follows:

5 Year Housing Demand Forecast Year 2007 2012

Bakersfield Metropolitan Area 490,822 568,133Total Housing Units 168,121 193,000Owner Occupied 100,536 117,730Renter Occupied 57,161 65,234Vacant 10,424 10,036

Using the foregoing actual and projected population figures, an estimate of annual housing

demand for the next five years is calculated as follows:

Bakersfield Metro Detached Housing Demand Forecast 2012 Housing Units 193,000Less 2007 Housing Units 168,121Five Year Demand 24,879Total Annual Housing Demand 4,976Percentage of Owner Detached 60.1%Annual Detached Housing Demand 2,990

Based on the growth projections from the demographics and census studies we perceive there is

a demand for approximately 2,990 new detached single-family housing units per year in the

Metropolitan Bakersfield area.

The next step is to compare the demographic demand indicators with what is actually taking

place in the City.

City of Bakersfield Permit Activity Comparison Year Permits Issued % Change from Previous2005 5,2162006 3,368 -35.43%2007 2,457 -27.05%


41

Ticor Title reports a that total of 1,843 permits have been issued in the Greater Bakersfield

Metropolitan Area to date. This represents an annualized figure of 2,457 as shown above and

includes the unincorporated areas with Bakersfield addresses/zip codes.

As discussed previously, the new single-family closings within the Metropolitan area attained a

total of 2,862 new units thus far in 2007 (on an annualized basis). Comparison of the sales and

permitting activity demonstrates there is a remaining standing inventory of finished unsold

housing.

Supply Side Considerations

We checked with the Bakersfield Planning Department to obtain their estimates of potential

supply. They compile data on active tentative tract maps and recorded maps. We reviewed their

published figures as of November 11, 2007 and have reproduced them in the following chart.

City of Bakersfield Active Subdivision Tract Activity Map Type No. Tracts Remaining Lots

Active Tentative Mapped 184 28,027Active/Recorded 26 3,308Pending 19 4,334Totals 229 35,669

Based on the data provided by the City Planning Department, there are a total of 35,669 lots in

229 developments that could be completed. Sources at the City and our figures are projecting

that about 70% of the active, active/recorded and pending tentative maps will reach the approved

stage and ultimately become final mapped subdivisions. A more realistic number of pending

maps would therefore be 24,968 lots with a potential for being completed. Using this figure for

the total number of lots with a potential for development represents an annual supply of 4,993

lots over the next five years.

Because the developers in Bakersfield have resumed the practice of constructing new housing on

a pre-sold basis however, the total potential lot supply is not a concern. Moreover, it has been our

finding that over the past five years, developers do not have their tentative maps recorded unless


Ref. File 4264 42

they intend to begin housing construction immediately thereafter. Therefore the Active/Recorded

mapped lot inventory of 3,308 units is considered to be a better guide in estimating the one year

supply side.

Demand and Supply Conclusions:

At this juncture it appears the forecast population growth will require nearly 3,000 new housing

units per year. Sales activity of 2,862 new units to date tends to support the appraiser’s opinion

that the demand and supply conditions are nearly in a state of equilibrium. It was noted that we

still have standing inventory; measured by the fact that sales are outpacing the permits at this

time.

Appraiser’s Conclusion

The Bakersfield housing market has traditionally and historically been somewhat isolated from

the State and National price swings. In the past twenty-five years Bakersfield has always had a

lag-time in price increases and decreases compared with other parts of the State, most notably

Southern California. Moreover, when the other market areas have had new housing market

slumps, the new housing market here has remained near static, with minor price appreciation or

declination based on location within the City. The reader’s attention is directed to the following

housing comparison chart.

Housing Price Comparisons

0.00%5.00%

10.00%15.00%20.00%25.00%30.00%35.00%40.00%

<$100

k

$100

- $12

4.9

$125-

$149.9

$150-

$174.9

$175-$

199.9

$200

- $24

9.9

$250

- $299.9

$300-

$399.9

$400-

$499.9

$500-

$749

.9

$750

- $99

9.9$1

m+

Price Range - $100k-$1M +

Perc

ent o

f Mar

ket

StateBakersfield


43

In reviewing the data from which the chart was compiled it was noted that 28.8% of the

statewide housing is priced above $750,000. The $750k plus has a only a fraction of a percent of

market share in Bakersfield. Statewide, 50% of the dwellings are priced above $500,000 and in

Bakersfield nearly 60% of the housing is priced below $300,000.

We are anticipating new housing sales volume through the remainder of 2007 and much of 2008

as our demographic forecasts anticipate. Natural population growth within the City and the

steady in-migration of out of the area buyers will continue to create demand for new housing as

forecast because the Bakersfield new housing product is still priced below most other areas of

the State and Bakersfield has a good reputation for a quality life style and affordable housing.

The Kern County economic market fundamentals are strong. This, coupled with favorable

interest rates, quality of housing product being produced by local builders, the abundance of

relatively inexpensive land and the continued strength of the oil and agriculture industries will

continue to insulate the Bakersfield market from the more dramatic market fluctuations in other

metropolitan areas. Expansion of the industrial sector and Bakersfield’s location along major

transportation routes will be factors in sustaining and expansion of the local economy.

It should be remembered that the past several years of appreciation represents an unprecedented

spike in appreciation, which created wealth among the local homeowner population. This wealth,

created by equity and enhanced by historically low mortgage interest rates enabled a large

segment of the population to ‘move up’ to new, larger and higher price units as was

demonstrated in the market segmentation discussion. Although we expect to see some decline in

new home pricing and sales volumes this is a perspective based on historically unprecedented

market peaks. The average and median new dwelling pricing will continue to decline owing to

the re-emergence of the entry-level market segment.

We expect to see a number of the national builders using advertising directed statewide to attract

potential buyers to their projects in Bakersfield. Already priced below most other areas of the

State, these builders will likely continue to offer various concessions/incentives such as

financing options, interest rate buy downs, delayed payment programs, and consumer goods


Ref. File 4264 44

incentives. These are not reported in the selling prices so it is difficult to make a precise measure

of the fluctuation (if any) of the selling prices we will be seeing in the upcoming months.

We perceive there is a continued demand for entry-level product in Bakersfield. Although we are

seeing strong sales activity for entry level product in the Delano, McFarland and Arvin areas, the

Bakersfield market has long been dominated by move up to up-scale housing; both custom and

tract built dwellings. We have noted that the builders have recognized the lack of entry-level

priced/sized product and have begun to construct the smaller/cheaper houses to better appeal to

the Metropolitan Bakersfield area’s income demographic.

We anticipate the Northeast and Southeast Bakersfield market sectors will capture more market

share in 2008 than in the past, owing to the lower cost of land which availability of entry-level

housing and heavy national advertising campaigns.

We expect that a number of national builders will be completing finished lot subdivisions during

2007 and 2008 and bring these to the market for sale to local merchant builders to improve with

new housing. Small lots have not been available for sale in Bakersfield for six or seven years.

We also are anticipating a trend toward smaller lot subdivisions, PUD and zero-lot-line or patio

homes; these may well become a force in the market as developers recognize and seek to capture

the pent up demand for lower cost housing product.

The fundamentals are still in place in the local market to attract new housing buyers. Interest

rates are below 6.25% and there are a number of programs available to assist the first time

homebuyer.

Builders who have long histories in Bakersfield and other areas of the Central Valley are aware

that the entry-level sales activity and volume has historically fueled the move-up and other

market segments in Bakersfield. There has not been much entry-level housing production

because the builders have targeted the second move-up and higher priced segments during the

past two years.


45

The builders who are producing high-quality lower-price dwelling units located in the northwest

and southwest quadrants are likely to achieve good sales volume in spite of growing competition,

since there continues to be equity wealth in the general population and these areas have

traditionally held appeal to the move-up housing market.

Housing product in the $350k to $450k range is plentiful throughout the City however, and we

expect continued weakness in this market segment and price reductions and general softening is

anticipated.

Sales of the high-end housing product is expected to slow significantly since there are a growing

number of up-scale and executive type housing areas in the City and there is a large inventory of

large lot subdivisions available for new custom-built housing product.

In general, the Bakersfield housing market is returning to what we expect in a ‘normal’ market.

Building and new home sales activity are likely to mirror the housing needs created by the

population growth.


Ref. File 4264 46

NEIGHBORHOOD ANALYSIS

Neighborhood Boundaries

The subject neighborhood is located in the south portion of the City of Bakersfield, within the

City limits. The neighborhood covers roughly a three square mile area, bounded by the major

streets as follows:

Location Border Street Description

North Side Boundary State Route 58 East-West Freeway South Side Boundary E. Panama Road East-West Arterial East Side Boundary Oswell Street North-South Arterial West Side Boundary So. H Street North-South Arterial

The physical boundaries of the neighborhood were selected because of the land use patterns in

the area as shown on the neighborhood map below.

NEIGHBORHOOD MAP


47

General Neighborhood Description

The neighborhood is located in the southeasterly sector of Bakersfield, approximately 6 miles

southeast of the downtown civic center area. Large portions of the area in the eastern portion of

the neighborhood consist of grazing land or unimproved underdeveloped land with natural

vegetation cover. The neighborhood is lightly improved with low cost farm houses and modest

cottages and bungalows of various sizes and ages. The existing residences are in small clusters

located throughout the described neighborhood boundaries. Although this area has long been

considered to be an economically depressed location, the overall character of the neighborhood is

showing signs of transition from fallow agricultural land and older single family to more modern

urban uses. The improved portions of the land in the north and northeast quadrants of the

neighborhood are characterized as being in the later stages of decline and the revitalization stage

of the neighborhood life cycle seems to now be emerging.

New subdivisions are being mapped and built just east and west of Union Avenue, most notably

along East Hosking and Berkshire Roads. Builders opening new tracts in the neighborhood

include Lennar, McMillin, Lenox and Moreland Corporation.

Access/Linkages

The neighborhood has good access to all parts of the City via Freeway 99 and the north-south

arterials, at Union Avenue, Cottonwood Road, Mt. Vernon and Oswell. Freeway 99 provides

access to the commercial district in east Bakersfield and to the downtown central business

district. Freeway 58 handles east-west traffic to the Interstate Highway system in Barstow and

connects to Interstate 5 about 20-miles west of Bakersfield. Union Avenue, a major north-south

arterial, also provides access to Freeway 58.

Area Demographics

We used a one, three and five mile radius to filter the demographic characteristics of this portion

of Bakersfield. These characteristics are summarized in the tables that follow.


Ref. File 4264 48

Southeast Bakersfield Area Demographics 1-Mile 3-Mile 5-Mile

1990 Population 2,208 65,500 196,9522000 Population 2,773 74,177 221,3332007 Population 3,677 84,760 253,1352012 Population 4,305 93,894 281,772

Median HH Income $17,422 $31,573 $35,152Per Capita Income $6,251 $11,388 $14,482Average HH Income $22,861 $39,556 $46,368

Total Households 1,059 23,922 77,257Average Household Size 3.46 3.52 3.231990-2000 Annual Rate 1.69% 0.38% 0.48%

Owner Occupied Housing Units 45.70% 51.10% 50.30%Renter Occupied Housing Units 44.20% 41.00% 42.30%Vacant Housing Units 10.00% 7.90% 7.40%

1990 Median HH Income $14,531 $22,301 $25,2302000 Median HH Income $15,556 $26,975 $29,3402007 Median HH Income $17,422 $31,573 $35,1522012 Median HH Income $19,559 $35,500 $40,2381990-2000 Annual Rate 0.68% 1.92% 1.52%2000-2007 Annual Rate 1.83% 2.55% 2.93%2007-2012 Annual Rate 2.34% 2.37% 2.74%

1990 Per Capita Income $5,662 $8,759 $10,6482000 Per Capita Income $5,798 $9,850 $12,2122007 Per Capita Income $6,251 $11,388 $14,4822012 Per Capita Income $6,906 $12,816 $16,5941990-2000 Annual Rate 0.24% 1.18% 1.38%2000-2007 Annual Rate 1.21% 2.35% 2.77%2007-2012 Annual Rate 2.01% 2.39% 2.76%

1990 Average Household Income $18,450 $27,427 $31,2612000 Average Household Income $19,850 $33,228 $38,1242007 Average HH Income $22,861 $39,556 $46,3682012 Average HH Income $25,413 $44,819 $53,6031990-2000 Annual Rate 0.73% 1.94% 2%2000-2007 Annual Rate 2.29% 2.83% 3.18%2007-2012 Annual Rate 2.14% 2.53% 2.94%

Per Capita Income

Average Household Income

2007 Income

2007 Households

2007 Housing

Median Household Income


49

Population Summary

In the identified market area, the current year population is 253,135. In 2000, the Census count in

the market area was 221,333 demonstrating a rate of change since 2000 of 2.17 percent annually.

The five-year projection for the population in the market area is 281,772, representing a change

of 2.17 percent annually from 2007 to 2012. Currently, the population is 49.4 percent male and

50.6 percent female.

Households

The household count in this market area has changed from 69,205 in 2000 to 77,257 in the

current year, a change of 1.78 percent annually. The five-year projection of households is

85,383, a change of 2.02 percent annually from the current year total. Average household size is

currently 3.23, compared to 3.14 in the year 2000. The number of families in the current year is

56,835 in the market area.

Housing Units

At the present time, 50.3 percent of the 83,423 housing units in the market area are owner

occupied; 42.3 percent, are renter occupied; and 7.4 percent are vacant. In 2000, there were

74,737 housing units of which 50.0 percent owner occupied, 42.5 percent renter occupied and

7.5 percent vacant. The rate of change in housing units since 2000 is 1.77 percent. Median home

value in the market area is $231,998, compared to a median home value of $181,127 in the U.S.

In five years, median home value is projected to change by 3.66 percent annually to $277,736.

From 2000 to the current year, median home value changed by 18.18 percent annually.

Households by Income

Current median household income is $35,152 in the market area, compared to $51,546 for all

U.S. households. Median household income is projected to be $40,238 in five years. In 2000,

median household income was $29,340, compared to $25,230 in 1990.


Ref. File 4264 50

Current average household income is $46,368 in this market area, compared to $71,092 for all

U.S. households. Average household income is projected to be $53,603 in five years. In 2000,

average household income was $38,124, compared to $31,261 in 1990. Current per capita

income is $14,482 in the market area, compared to the U.S. per capita income of $27,084. The

per capita income is projected to be $16,594 in five years. In 2000, the per capita income was

$12,212, compared to $10,648 in 1990.

Population by Employment Business 1-Mile 3-Mile 5-Mile

Total Businesses 41 1,245 7,860Total Employees 447 9,267 49,602

Currently, 88.0 percent of the civilian labor force in the identified market area is employed and

12.0 percent are unemployed. In comparison, 93.4 percent of the U.S. civilian labor force is

employed and 6.6 percent are unemployed. In five years the rate of employment in the market

area is projected to be 88.6 percent of the civilian labor force, and unemployment is projected to

be 11.4 percent. The percentage of the U.S. civilian labor force that is projected to be employed

in five years is 93.8 percent and 6.2 percent is projected to be unemployed. In 2000, 57.7 percent

of the population aged 16 years or older in the market area participated in the labor force, and 0.1

percent were in the Armed Forces.

In the current year, the occupational distribution of the employed population is: � 46.1 percent in white collar jobs (compared to 60.5 percent of U.S. employment) · � 22.7 percent in service jobs (compared to 16.4 percent of U.S. employment) · � 31.2 percent in blue collar jobs (compared to 23.1 percent of U.S. employment) ·

The 2000 census shows 70.6 percent of the market area population drove alone to work, and 2.6

percent worked at home. The average travel time to work in 2000 was 23.1 minutes in the market

area, compared to the U.S. average of 25.5 minutes.

Population by Education

According to the 2000 census, the educational attainment of the population aged 25 years or

older in the market area was distributed as follows:


51

� 39.4 percent had not earned a high school diploma (19.6 percent in the U.S.) � 24.8 percent were high school graduates only (28.6 percent in the U.S.) � 5.1 percent had completed an Associate Degree (6.3 percent in the U.S.) � 6.2 percent had a Bachelor’s Degree (15.5 percent in the U.S.) � 2.7 percent had earned a Master’s/Professional/Doctorate Degree (8.9 percent in the U.S.)

Community Services

The Bakersfield Police and Fire Departments serve the neighborhood. A fire department

substation serving the subject neighborhood is three and a half miles southwest on Taft Highway.

Golden Empire Transportation Inc. provides public transportation, with numerous stops

throughout the neighborhood. Convenience stores are located at the intersections of the major

commercial arterials throughout the neighborhood.

Convenience shopping is available at major intersections throughout the neighborhood. The

nearest supermarket is two and a half miles just southwest of Freeway 99 on Panama Lane and

Wible Road. There is another neighborhood shopping center on White Lane and South H Street

two miles west. A regional mall is located on Ming Avenue at Freeway 99 that serves the entire

Bakersfield area. Bakersfield City and Kern County Administrative services are in the downtown

central business district, approximately 4 miles northwest of the general neighborhood.

Conclusion

The neighborhood is considered to have an average location in the southeasterly sector of the

Greater Bakersfield Metropolitan area. The overall character of the neighborhood is in the late

stages of decline and the early stages of revitalization cycle as we are beginning to see new

residential developments coming on line and in planning stages. Owing to the good linkages

connecting to all areas of the City and to Freeway 99, the neighborhood is considered to be a

viable residential location in the City.


Ref. File 4264 52

SITE DESCRIPTIONS

Location and Access

The appraised properties are located approximately four miles south of Freeway 58. Access to

the freeway is from Union Avenue, where there are four-way access ramps in all directions.

There is also full freeway access to 58 from Cottonwood Road about one mile east. North-South

freeway access is from Panama Lane, about ½ mile north at Freeway 99, 2 miles west.

Tract 6520 is accessed from its north boundary along the south line of Berkshire Road about 665

feet east of South Union Avenue (State Route 204). Tract 6611 is accessed along its southerly

boundary from the north line of Berkshire Road about ¼-mile east of South Union Avenue.


53

Berkshire Road is an east-west residential street that currently terminates at the southeast corner

of the subdivision. Planz Road provides access to Cottonwood Road, South Chester Avenue and

South Union Avenue, Chester Avenue and South Union are north-south arterials that connect

with the more urbanized areas of the City of Bakersfield to the north.

Size - Shape - Topography

Tract Map 6520 Phase 1, a recorded subdivision, is 28.39-acres, gross. The Assessment

Engineer’s calculations show a net land area of 26.97-acres. Phase 2 of Tract 6520 does not have

recorded maps. Phase 2 covers 39.21-gross acres and 34.95-net acres per Assessment District 07-

2 Engineer’s calculations. Tract 6611 is a recorded subdivision containing 35.05-gross acres and

31.16-net acres.

Tract 6520 is described as an irregular rectangle and Tract 6611 is nearly square. Both parcels

have nearly level natural topography that has a gradual fall from north to south.

Surrounding Area Improvements

Improvements west of the subject consist of small conclaves of older low-cost residences. Many

of these appear to be nearing the end of their economic lives. There are some newer dwellings on

the south line of Planz Road across from the subject. It was noted that a number of formerly

vacant lots throughout the surrounding neighborhood have been improved with smaller modest

dwellings in the past three years.

To the north of the subject north of Planz Road is fallow open farm land and scattered single

family dwellings and farmhouses on the north line of Planz Road west of the subject. East of the

subject is a municipal sewer processing plant.

East and south of the subject is agricultural field and row cropland that is considered an interim

or transitional use that is likely to be developed with single-family residential dwellings in the

near future.


Ref. File 4264 54

General background development is single-family residential, with the major intersections

improved with commercial and service uses.

Street Improvements

Berkshire Road is a publicly maintained two-lane east-west residential street. It is currently being

improved to full width as a four-lane road. Berkshire Road separates Tracts 6520 and 6611. It


55

stretches from South Union Avenue eastward to Monitor Street where it terminates.. The interior

streets planned within the tract are to be asphalt paved 60-feet wide streets.

Zoning

According to the City of Bakersfield the subdivisions are zoned R-1, a single-family residential

zone. This zoning requires a minimum lot size of 6,000 square feet per dwelling unit. The

proposed lot sizes in both tracts, each with one unit per lot, are in compliance with the zoning

ordinance.

Flood and Earthquake Zones

According to the Federal Emergency Management Agency Federal Insurance Administration

panel 060075-1020 B, dated September 29, 1986, the subject property is located in a flood plain

area Zone C. This designation signifies areas of minimal flood risk. Flood insurance is not

required.

According to Special Publication 42 of the California Department of Conservation, Division of

Mines and Geology, revised edition, 1990, entitled Fault-Rupture Hazard Zones in California;

the subject property is not located within a Special Studies Zone, as defined in the Alquist-Priolo

Special Studies Zones Act.

Easements and Encroachments

The appraiser was not provided with a title report for review. During the inspection of the

properties the appraiser noted no adverse easements or encroachments on the site or on the plat

and it is assumed that none exist; however, the appraiser makes no warranty to that effect.

Utilities

Electricity, natural gas, water, telephone, sewer and TV cabling is available to both subdivisions

in the street on Berkshire Road.


Ref. File 4264 56

Lot Sizes

Listings of the lot sizes in the subdivisions are summarized as follows.

Lot Sizes –Tract 6520 Phase 1 Lot Size Lot Size Lot Size Lot Size Lot Size

1 7,299 28 6,503 55 6,160 82 6,160 109 6,1602 7,079 29 6,517 56 6,160 83 6,160 110 6,1603 7,098 30 6,160 57 6,160 84 6,503 111 6,1604 7,105 31 6,160 58 6,160 85 6,517 112 6,1605 7,105 32 6,513 59 6,160 86 6,160 113 6,1606 7,105 33 8,551 60 6,160 87 6,160 114 6,1607 7,105 34 8,826 61 6,160 88 6,160 115 6,1608 7,105 35 8,567 62 6,160 89 6,160 116 6,5039 7,105 36 7,127 63 6,160 90 6,160 117 6,517

10 7,105 37 6,520 64 6,160 91 6,160 118 6,16011 7,339 38 6,160 65 6,160 92 6,160 119 6,16012 7,339 39 6,160 66 6,160 93 6,160 120 6,16013 7,105 40 6,503 67 6,160 94 6,160 121 6,16014 7,105 41 6,517 68 6,503 95 6,160 122 6,16015 7,105 42 6,160 69 6,517 96 6,160 123 6,16016 7,105 43 6,160 70 6,160 97 6,160 124 6,16017 7,105 44 7,149 71 6,160 98 6,160 125 6,16018 7,105 45 7,360 72 6,160 99 6,160 126 6,16019 7,105 46 8,180 73 6,160 100 6,503 127 6,16020 7,269 47 8,818 74 6,160 101 6,517 128 6,16021 10,294 48 7,341 75 6,160 102 6,160 129 6,16022 9,742 49 7,151 76 6,160 103 6,160 130 6,16023 8,827 50 6,160 77 6,160 104 6,160 131 6,16024 8,560 51 6,160 78 6,160 105 6,160 132 6,50325 6,520 52 6,503 79 6,160 106 6,16026 6,160 53 6,517 80 6,160 107 6,16027 6,160 54 6,160 81 6,160 108 6,160

There are a total of 132 lots in Tract 6520 Phase 1. They range in size from 6,160 to 10,294

square feet. The median lot size is 6,160 and the average lot is 6,586 square feet.

Tract 6611 has a total of 155 lots. These range in size from 6,013 square feet to 12,470 square

feet. The median and average lot sizes are 6,050 and 6,523 square feet, respectively. A listing of

the lot sizes in Tract 6611 is shown in the following summary chart.


57

Lot Sizes – Tract 6611

Lot Size Lot Size Lot Size Lot Size1 6,400 40 7,150 79 6,050 118 6,6162 6,050 41 6,050 80 6,050 119 6,6153 6,050 42 6,050 81 6,050 120 6,6154 6,050 43 6,050 82 6,050 121 6,6145 6,050 44 6,400 83 7,343 122 6,6146 6,435 45 6,466 84 8,138 123 6,6137 6,352 46 6,050 85 8,104 124 6,6138 Sump 47 6,050 86 7,343 125 6,7269 6,400 48 6,050 87 6,050 126 6,795

10 6,050 49 6,705 88 6,050 127 6,05011 6,050 50 8,701 89 6,050 128 6,05012 6,050 51 9,530 90 6,050 129 6,05013 6,705 52 7,384 91 6,050 130 6,05014 8,701 53 6,618 92 6,050 131 6,05015 8,701 54 6,613 93 6,400 132 6,05016 6,705 55 6,607 94 6,400 133 6,05017 6,050 56 6,647 95 6,050 134 6,05018 6,050 57 9,353 96 6,050 135 6,05019 6,400 58 12,470 97 6,050 136 6,05020 6,400 59 8,350 98 6,050 137 6,40021 6,400 60 6,013 99 6,050 138 6,40022 6,050 61 6,050 100 6,050 139 6,05023 6,050 62 6,050 101 7,334 140 6,05024 6,050 63 6,050 102 8,092 141 6,05025 6,705 64 6,050 103 6,806 142 6,05026 8,701 65 6,050 104 6,059 143 6,05027 8,701 66 6,050 105 6,620 144 6,05028 6,705 67 6,050 106 6,620 145 6,05029 6,050 68 6,050 107 6,620 146 6,05030 6,050 69 6,050 108 6,619 147 6,05031 6,050 70 6,400 109 6,619 148 6,04132 6,400 71 6,400 110 6,618 149 6,73833 6,400 72 6,050 111 6,618 150 6,71234 6,050 73 6,050 112 6,617 151 6,04135 6,050 74 6,050 113 6,617 152 6,05036 6,050 75 6,050 114 6,617 153 6,05037 7,150 76 6,050 115 6,617 154 6,05038 8,155 77 6,050 116 6,616 155 6,05039 8,155 78 6,050 117 6,616 156 6,400


Ref. File 4264 58

Tract 6520 Phase 1

Tract 6611


59

Environmental Characteristics

The appraiser has no knowledge concerning the presence or absence of any hazardous materials

or wastes within, or in proximity to the subject property. A physical inspection of the subject

property revealed no atypical conditions that might contribute to a toxic hazard. The appraiser is

not an expert in the field of hazardous materials, and this appraisal report should not be relied

upon to determine whether environmental hazards exist on the property. The value presented in

this report is predicated on the assumption that the site is free of any hazardous materials,

existing or past soil contamination. If there is any question regarding the presence of any

contaminants, the appraiser recommends that the client obtain an environmental assessment to

determine the potential environmental risks associated with ownership of the subject property. If

such toxic conditions do exist, the property value may be adversely affected.

Tract Improvements by Developer

At the time of the appraiser’s inspection, Tract 6520 Phase 1 was in a graded state, streets have

been cut to grade and the lots have been surveyed and are staked. Trenching for electricity, gas

service, telephone and cable TV is nearly complete. Tract 6520 Phase 2 is cleared and graded.

The developer reports a total of $1,485,788 has been expended to date in Tract 6520. This sum

includes the above costs as well as engineering, planning, permits, fees and miscellaneous site

work. None of the above expenditures are to be reimbursed with Assessment District funds.

Tract 6611 consists of finished lots. Ten lots have been improved with sales models: Lots 33-36

and 39-44. Some housing units have been sold and are occupied by their new owners, and there

are 11 housing units unsold and under construction. Please note we are only appraising the

underlying finished lots. No finished dwelling units are valued or included in this report.

Assessment District 07-2 Funded Improvements

The following paragraphs describe the improvements that will be funded by the Assessment

District proceeds from bond sales. These excerpts were taken from the previously cited

Engineer’s Report by the Assessment Engineering firm Wilson & Associates.


Ref. File 4264 60

SYDNEY HARBOUR AREA - PORTION (TRACT NO. 6520)

The boundaries of this portion of the Sydney Harbour Area encompass an approximately 67-acre block of land that is planned for subdivision into a combined total of 285 R-1 lots, 1 public park lot, and 1 storm drain sump lot pursuant to Ten. TR 6520. Lenox Homes, the District Proponent is the subdivider of TR 6520. Accordingly, all of the Improvement Acquisitions for this portion of the Sydney Harbour Area are improvements related to the development of that subdivision and are generally described as TR 6520 on-site sewer, water, storm drain, and street improvements, and as subdivision block wall improvements along Berkshire Road that are required to be constructed, or are expected by the District Proponent to be required to be constructed, as conditions of approval for that subdivision.

Tract No. 6520 On-site Sewer:

Construction of a complete on-site (in-tract) sewer system for TR 6520, including 6- and 8-inch diameter sewer mains, 4-inch diameter services for each residential lot, manholes, and cleanouts.

Tract No. 6520 On-site Water:

Construction of a complete on-site (in-tract) water system for TR 6520, including 8-inch diameter water mains with gate valves, fire hydrants, 2-inch diameter blow-off, 2-inch diameter landscape service, tie-in to an existing water line, and 1-inch diameter services for each residential lot.-

Tract No. 6520 On-site Storm Drain:

Construction of a complete on-site (in-tract) storm drain system for TR 6520, including 18-, 24- and 30-inch diameter pipelines with manholes, catch basins, and an outlet structure, and around the sump a 6-foot high chain-link fence with slats and curb, together with a 12-foot wide double drive gate.

Tract No. 6520 On-site Street:

Construction of a complete on-site (in-tract) street system for TR 6520, including paving, curb, gutter, sidewalk, cross gutters, street signs, street lights, and monument encasements.

Berkshire Road (south side):

Construction of subdivision block wall on the south side of Berkshire Road along the frontage of TR 6520 (between Marvin Street and the easterly boundary of TR 6520).


61


The boundaries of this portion of the Sydney Harbour Area encompass an approximately 35-acre block of land that is planned for subdivision into a combined total of 155 R-1 lots, 1 storm drain sump lot, and several public landscape lots pursuant to Ten. TR 6611. The District Proponent is the subdivider of TR 6611. Accordingly, all of the Improvement Acquisitions for this portion of the Sydney Harbour Area are improvements related to the development of that subdivision and are generally described as improvements in and along Berkshire Road and Madison Street, and as TR 6611 on-site street and storm drain improvements that are required to be constructed, or are expected by the District Proponent to be required to be constructed, as conditions of approval for that subdivision.

Tract No. 6611 On-site Street:

Construction of a complete on-site (in-tract) street system for TR 6611, including grading, paving, curb, gutter, sidewalk, and driveway approaches, handicap ramps, and cross gutters.

Tract No. 6611 On-site Storm Drain:

Construction of a complete on-site (in-tract) storm drain system for TR 6611, including 18-, 24-, 30-, and 36-inch diameter pipelines with manholes, catch basins, and an outlet structure.

Berkshire Road (north side):

Construction of the north side of Berkshire Road along the frontage of TR 6611 (between Madison Street and the westerly boundary of TR 6611), including grading, paving, curb, gutter, sidewalk, handicap ramps, saw cut, AC dike, 18-inch diameter storm drain pipeline, and subdivision block wall.

Madison Street (west side):

Construction of the west side of Madison Street along the frontage of TR 6611 (between Berkshire Road and the northerly boundary of TR 6611), including grading, paving, curb, gutter, sidewalk, handicap ramps, and subdivision block wall.


Ref. File 4264 62

Subject Photographs

View to the North along Cottonwood Road from the Southwest Corner.

View to the East along Planz Road from the Southwest Corner


63

Subject Photographs

Tract 6520 Phase 2 view to East from the Southwest Corner

Tract 6520 Phase 2 View to the South from the Westerly Boundary


Ref. File 4264 64

SUBJECT PHOTOGRAPHS

Berkshire Road – View to East from NWC Tract 6520 Phase 2

Berkshire Road – Viewed E-W from terminus of Berkshire


65

SUBJECT PHOTOGRAPHS

Madison Street – View to North from Berkshire

New Zealand Avenue – Viewed E-W from Madison Street


Ref. File 4264 66

SUBJECT PHOTOGRAPHS

Tract 6611 – Bora Bora Lane view to East from westerly terminus

Tract 6611 Model Home cluster on Espiritu Santo Drive


67

SUBJECT PHOTOGRAPHS

Entrance to Tract 6611 Model Homes from Berkshire and Espiritu Canto

Conclusions:

Except as noted previously, no detrimental influences contiguous to any individual parcels in the

subject property or in the general area of the subject tract were observed. The proposed

subdivisions are consistent with the existing General Plan. Its design does not cause substantial

environmental damage or substantially and avoidably injure fish or wildlife or their habitat, nor

is it likely to cause any serious health problems. The design of these projects do not conflict with

easements, acquired by the public at large, for access through or use of property within the

subdivision.

The subject tract is physically suitable for the type and density of development proposed, and is

well located with reference to schools, shopping and other social/economic establishments. Since

the tracts are located in an emerging area of Southeast Bakersfield and there is demand for

affordable housing, this project should be successful. The growth trends toward this area are a

positive factor that will serve to enhance and maintain property values in this area.


Ref. File 4264 68

The demand for housing and residential lots throughout the area and the general development

trends in the Southeast Bakersfield area should assist in the marketing of the finished lots with or

without housing units and demand/growth trends should aid in maintaining values into the future.

PROPERTY HISTORY

Uniform Standards of Professional Appraisal Practice and the Standards of Professional Practice

of the Appraisal Institute require that an appraisal report must contain an analysis of any prior

sales of the property that occurred within a three-year period prior to the date of value.

The subject land was acquired by Stuart Thomas, Inc., dba Lenox Homes in two transactions.

Tract 6611 was purchased July 14, 2006 for a purchase price of $5,945,000. Tract 6520 was

purchased on February 1, 2006 for the sum of $13,583,000.

ASSESSED VALUE AND TAXES

Because it is the purpose of this report to determine market value, (which by definition presumes

a ready, willing and able buyer), it becomes necessary to allow for an increased or decreased tax

liability for the subject property, based upon the valuation reported in this appraisal report.

In our review of title reports for the subject properties, we found that there are Deeds of Trust on

the property owned by Lenox Homes within Assessment District 07-2. Such property serves as

security for certain loans obtained and promissory notes delivered by Lenox Homes, the

proceeds of which are expected to be used for the development of such property. Such liens are

subordinate to the lien of the assessments.

As of the date of this report it was confirmed that none of the properties in Assessment District

07-2 are within the existing boundaries of any special tax districts formed pursuant to the Mello-

Roos Community Facilities Act of 1982, being Chapter 2.5, Part 1, Division 2, Title 5 of the

Government Code of the State of California.


69

HIGHEST AND BEST USE Definition

“The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity.”1

Alternatively, the highest and best use of land or a site as though vacant:

"Among all reasonable, alternative uses, the use that yields the highest present land value, after payments are made for labor, capital, and coordination. The use of a property based on the assumption that the parcel of land is vacant or can be made vacant by demolishing any improvements."2

Introduction

The following highest and best use discussion will focus on the primary factors examined in

determining highest and best use.

1. What uses are legally allowable? 2. What uses are physically possible (what can the site support)? 3. What uses are financially feasible (and appropriately supported)?

A. What is the existing/future neighborhood land use pattern? B. What is the subject site's most probable use "as if vacant"? 4. What uses are maximally productive? 5. Conclusions

Throughout the analysis, the valuation theories and principles of anticipation, balance,

conformity, surplus productivity, and externalities are examined. These theories or value

influences are defined on the facing page. The highest and best use analysis considers these

principles as they apply to the site, first, "as if vacant," and then, "as improved."

1 The Dictionary of Real Estate Appraisal Fourth Edition. Appraisal Institute, 2002, Chicago, IL. Pg 135. 2 Ibid.; Page 135


Ref. File 4264 70

What Uses Are Legally Allowable?

The zoning for the subject is R-1. This zoning allows development for single-family residential

uses, with a minimum lot size of 6,000 square feet per dwelling unit. Therefore, the only legal

permissible use possibility for the subject site under the zoning is for one dwelling on a

minimum 6,000 square foot lot.

What Uses Are Physically Possible?

From among the legally allowable land uses, the appraiser must determine the physically

possible uses. Under the zoning code, the development of this parcel must consist of single

family residences meeting the front, side and rear yard setback requirements set forth under the

zoning code. It is thus physically possible and legally permissible to develop this site exclusively

with residential lots with one housing unit on each lot.

What is The Most Financially Feasible Use of the Site?

Financial feasibility deals with the returns expected on an investment. Return implies that the

idea proposed is marketable, 'rentable' or 'saleable', and is therefore capable of generating a cash

flow, thus allowing for a return on, as well as return of, the dollar invested. Developments that

were developed to their legally permissible and physically possible uses as single-family

residential resulted in the most financially feasible use for the respective properties. Thus,

development of the subject for single-family residential purposes is considered the most

financially feasible use.

Determining the highest and best use of the site as if vacant from the possible uses also requires

examination of the existing and future land use patterns in the neighborhood. Historical and

recent additions and proposed and under construction projects in the immediate area consist

almost exclusively of residential uses. The latest surveys indicate strong market demand for

single-family housing in the area. No evidence is available to suggest that the remaining vacant

land in the immediate neighborhood should not develop to single-family residential uses in

keeping with the General Plan. Likewise there is no reason to believe the land use pattern or


71

character of the area should deviate from the uses described previously in the future. It was our

finding that multi-family housing finds most market acceptance in areas proximate to entry-level

housing and along arterials where these developments form buffers for single-family residential

subdivisions. Therefore, it was my determination that the use that is most financially feasible and

maximally productive while conforming to the character of the neighborhood is for single-family

residential use. This use would be in harmony with the principle of balance and conformity with

the historical and existing land use patterns in the neighborhood. The supply/demand

characteristics were analyzed in a prior section of this report. It was concluded that there is

sufficient demand existing to warrant development of single family housing in the general area.

It was the appraiser’s conclusion that, given the on-going development in the subject’s general

and immediate vicinity and the rapid absorption rates being experienced for the finished lots and

finished house lot combinations, there is immediate demand for the subject’s development.

Maximally Productive

The proposed use meets all criteria in the foregoing analysis as the highest and best use. The

proposed use is therefore the maximally productive use.

Conclusion

The process of determining highest and best use relied upon examining zoning, surrounding land

use patterns and a cursory investigation using observation of the growth of residential

supply/demand in the subject area. The general neighborhood appears to be steadily improving

with single-family residential developments.

An examination of the residential housing market in Bakersfield indicates the demand and

supply forces are nearly at a point of equilibrium. Because of the developer’s intent to begin

construction of individual house/lot combinations on a pre-sold basis, we do not expect to see

additional standing inventory when this housing project comes on line. Moreover, builders using


Ref. File 4264 72

the pre-sold contracting program have less financial exposure due to holding costs and can

immediately adjust to changes in the demand side of the market.

It is the appraiser’s opinion that the Highest and Best Use for the subject property is its current

proposed use, for single-family residential housing.


73

VALUATION METHODOLOGY

In the appraisal of real estate there are three traditional approaches to value. These are the Cost,

Direct Sales Comparison, and Income Approaches. The Subdivision Development Method is a

form of an Income Approach and is used in place of the Income Approach in this appraisal.

Methods Applied to the Subject Developments

In appraising Tract 6520 Phases 1 and 2, which consist of unimproved recorded lots in Phase 1

and tentative mapped land in Phase 2, the Sales Comparison and Cost approaches are useful

value indicators. These approaches are considered as pertinent value indicators for this portion of

the Assessment District. Since the lots in Tract 6520 Phase 1 are recorded, the Subdivision

Development Method is also a pertinent value indicator.

With regard to Tract 6611, consisting of finished lots, the Sales Comparison approach is the

preferred methodology. However, in an extensive search of our data sources, we found no sales

of smaller finished lots. Although we found some finished lots offered for sale, these have not

sold and are used solely as indicators. The Cost Approach is pertinent in the sense that the land

has been improved to the finished lot stage and the costs incurred to develop the lots to their

current state could theoretically be recaptured in the event of resale. Therefore, the Cost

Approach is considered in support of the value conclusions reached in the Subdivision

Development Method.

Cost Approach Defined

The cost approach is defined as:

"A set of procedures through which a value indication is derived for the fee simple interest in a property by estimating the current cost to construct a reproduction of (or replacement for) the existing structure, including an entrepreneurial incentive, deducting depreciation from the total cost, and adding the estimated land value. Adjustments may then be made to the indicated fee simple value of the subject property to reflect the value of the property interest being appraised.” 1

1 The Dictionary of Real Estate Appraisal, 4th Edition, Appraisal Institute, Chicago, IL, 2002, Page 67.


Ref. File 4264 74

The cost approach involves analysis of land sale data, engineering costs, the cost of city planning

studies/approvals, in addition to the direct land improvement costs. Improvement costs are

estimated and added to the land value estimate for a value indication for the subject.

Sales Comparison Approach Defined

The sales comparison approach is defined as:

"A set of procedures in which a value indication is derived by comparing the property being appraised to similar properties that have been sold recently, then applying appropriate units of comparison and making adjustments to the sale prices of the comparables based on the elements of comparison. The sales comparison approach may be used to value improved properties, vacant land, or land being considered as though vacant; it is the most common and preferred method of land valuation when an adequate supply of comparable sales are available."2

Application of the sales comparison approach involves gathering information on sales

transactions involving properties with similar physical and locational characteristics. Since no

two properties are exactly alike, adjustments are made to the comparable sales to reflect the

characteristics of the subject property. After making the adjustments, a range of value is

indicated for the subject that is reflective of the current local market conditions.

Subdivision Development Method

The Subdivision Development Method is a method of estimating land value when subdivision

and development are the highest and best use of the parcel of land being appraised. When all

direct and indirect costs and entrepreneurial incentive are deducted from an estimate of the

anticipated gross sales price of the finished lots, the resultant net sales proceeds are then

discounted to present value at a market-derived rate over the development and absorption period

to indicate the value of the raw land.

This method uses a process known as a residual cash flow analysis. This methodology is based

upon the principle of anticipation that affirms that value is created by the anticipation of future

2 Ibid, Page 255.


75

benefits. After concluding the value of the finished lots using the approaches described

previously, deductions are made from the estimated periodic sales revenues. These deductions

are estimates of the costs of sale, absorption, construction and profit to indicate net cash flow

revenues to the developer. These periodic cash flows are discounted to indicate a net present

value that represents the subject’s value during the holding period. This approach recognizes the

time value of money and it applies to those areas identified in this report as having final mapped

or finished lots.

Methods Applied to the Subject

All three approaches are pertinent to the appraisal of the subject property. Each approach will be

independently applied in the following analysis. The values applicable to the subject and the

method used are presented in the following chart.

Appraised Area Status Methodology Value ReportedTract 6520-1 Unimproved Recorded Lots Subdivision Method 'As Is'Tract 6520-2 Tentative Mapped Lots Cost/Sales Comparison 'As Is'Tract 6611 Recorded Lots Subdivision Method 'As Complete'

Because Tract 6520-1 is further along in the development process with recorded lots, both the

Cost/Sales Comparison and the Subdivision Development Methods will be used in the valuation

analysis.

VALUATION

Value of the Unimproved Residential Land; Tract 6520 Phases 1 and 2

The first step in the valuation process involves analysis of tentative mapped land sales that have

characteristics similar to those of the subject. The sales found are presented on individual data

sheets that follow.


Ref. File 4264 76

Land Sale No. 1

Property IdentificationRecord ID 423 Property Type Residential Land Property Name Vacant Land Subdivision Acreage Address SEC Panama & Buena Vista Road, Bakersfield, Kern County,

California 93312 Location 2511 C-2 User 1 497-031-46

Sale DataGrantor ASI Reverse Exchange Company, Inc. Grantee Lennar Homes of California, Inc. Sale Date February 24, 2006 Property Rights Fee Simple Financing Cash to Seller

Sale Price $4,814,250 Cash Equivalent $4,814,250 Adjusted Price $4,814,250

Land DataZoning R-1, Single Family Topography LevelUtilities Electricity, Gas, Sewer, & Water Shape Square


77

Land Sale No. 1 (Cont.)

Land Size InformationGross Land Size 43.960 Acres or 1,914,898 SF Useable Land Size 43.960 Acres or 1,914,898 SF , 100.00% Planned Units 172 Front Footage 1290 ft Buena Vista Road;1482 ft Panama Lane

IndicatorsSale Price/Gross Acre $109,514 Actual or $109,514 Adjusted Sale Price/Gross SF $2.51 Actual or $2.51 Adjusted Sale Price/Useable Acre $109,514 Actual or $109,514 Adjusted Sale Price/Useable SF $2.51 Actual or $2.51 Adjusted Sale Price/Planned Units $27,990 Actual or $27,990 Adjusted

RemarksThe property has a corner orientation on two arterial streets in a developing area of Southwest Bakersfield. It was purchased for development of single-family residential subdivision. The buyer paid for a tentative tract map 6652 with 172 lots that was approved by the City prior to close of escrow. The price included a surface rights waiver. The price was based upon a unit value of $105,000 per gross acre.


Ref. File 4264 78

Land Sale No. 2

Property IdentificationRecord ID 520 Property Type Residential Subdivision Land Property Name SEC Panama Land & Mountain Ridge Dr Address Bakersfield, Kern County, California 93313 User 1 497-020-22

Sale DataGrantor Old River Land Co. Grantee Beazer Homes Holdings Corporation Sale Date April 07, 2006 Property Rights Fee Simple Financing N/AVerification MB Appraisals; November 28, 2007; Confirmed by Michael Launer,

MAI SRA


Land DataZoning R-1 Topography LevelUtilities Available Shape Rectangular


79


Land Size InformationGross Land Size 54.520 Acres or 2,374,891 SF Actual Units 225

IndicatorsSale Price/Gross Acre $173,331 Sale Price/Gross SF $3.98 Sale Price/Actual Units $42,000

RemarksThis sale is located at the Southeast corner of Panama Lane and Mountain Ridge Drive, in Southwest Bakersfield. This parcel is proposed for development to Tentative Tract 6387, containing 225 lots. Sale price equates to $42,000/paper lot. This sale was under contract for one year.


Ref. File 4264 80

Land Sale No. 3

Property IdentificationRecord ID 405 Property Type Residential Land Property Name Vacant Land, Subdivision Acreage Address NWC Paladino Drive and Valley Lane, Bakersfield, Kern County,

California Location 2404 B-6 User 1 386-040-18, 19 & 20

Sale DataGrantor Monarch Affiliates, LLC. Grantee McCraken & Murray, et.al Sale Date June 07, 2006 Deed Book/Page 0206165547 Property Rights Fee Simple Financing Cash to seller Sale History Prior sale 10-2005 $3,331,000 Verification David Crabtree, Broker; 805-459-9261, June 05, 2006; Robin- Alliance

Title, 852-3721, June 11, 2006; Other sources: Sales Contract, Confirmed by Michael Launer, MAI SRA



81


Sale Data

Land DataZoning R-1, Single Family Topography Rolling, undulating Utilities Electricity, Gas, Water, Sewer Shape Irregular

Land Size InformationGross Land Size 34.982 Acres or 1,523,816 SF Useable Land Size 34.982 Acres or 1,523,816 SF , 100.00% Actual Units 137 Front Footage 1320 ft Total Frontage: 1320 ft Paladino Drive

IndicatorsSale Price/Gross Acre $139,214 Actual or $139,214 Adjusted Sale Price/Gross SF $3.20 Actual or $3.20 Adjusted Sale Price/Useable Acre $139,214 Actual or $139,214 Adjusted Sale Price/Useable SF $3.20 Actual or $3.20 Adjusted Sale Price/Actual Units $35,547 Actual or $35,547 Adjusted Sale Price/Front Foot $3,689 Actual or $3,689 Adjusted

RemarksThis sale closed in July 2006. The 34-acre parcel was in the process of obtaining maps for 137 single-family residential lots, pursuant to Tentative Tract 6622. According to a spokesman for the purchaser, the lots will be improved to a finished lot state and the finished lots will be sold to merchant builders for construction of entry-level housing. The lots afford no view amenity. The lot sizes in the subdivision range from 6,125 to 13,179 square feet. The average and median lot sizes are 7,399 and 6,820 square feet, respectively.


Ref. File 4264 82

Land Sale No. 4

Property IdentificationRecord ID 406 Property Name Residential Subdivision Land Address SEC McKee & Hughes Lane, California 93312 Location 2512 D-5 User 1 514-060-01

Sale DataGrantor AWS Realcor & HMA Development Grantee Moreland Corporation Sale Date June 16, 2006 Property Rights Fee Simple Financing Cash to Seller Verification Moreland Corporation; 322-1080, June 01, 2006

Sale Price $7,900,000 Cash Equivalent $7,900,000 Upward Adjustment $314,000 Adjusted Price $8,214,000

Land DataZoning R-1 Topography Level


83


Land DataUtilities Electricity, Gas, Water, Sewer Dimensions See Plat Shape Square

Land Size InformationGross Land Size 39.130 Acres or 1,704,503 SF Useable Land Size 39.130 Acres or 1,704,503 SF , 100.00% Actual Units 157 Front Footage 1320 ft McKee Road

IndicatorsSale Price/Gross Acre $201,891 Actual or $209,916 Adjusted Sale Price/Gross SF $4.63 Actual or $4.82 Adjusted Sale Price/Useable Acre $201,891 Actual or $209,916 Adjusted Sale Price/Useable SF $4.63 Actual or $4.82 Adjusted Sale Price/Actual Units $50,318 Actual or $52,318 Adjusted

RemarksThis is a parcel of unimproved land located on the Southeast corner of McKee Road and Hughes Lane. The property is accessed along its northerly boundary from McKee Road, a two-lane east-west residential street. The parcel also fronts on the east line of Hughes Lane and along the west line of the future Ellashosh Street. The sale price included an approved tentative map for 157 buildable lots pursuant to TT 6362. The lots range from 6,720 to 14,293 SF, with an average lot size of 7,513 SF. A canal at the SWC of the parcel has to be relocated at a cost estimated at $314,000 ($2,000/Lot).


Ref. File 4264 84

Land Sale No. 5

Property IdentificationRecord ID 485 Property Type Residential Property Name Pacific Place Address NWC Hageman & Renfro Roads, Bakersfield, Kern County, California

93314 Location 2440 G-1 User 1 463-03, 04, 06, 14 & 24

Sale DataGrantor Inland Valley LLC Grantee Correctional Institution LLC/JLJ Bakersfield, LLC Sale Date October 10, 2006 Deed Book/Page 251181 Property Rights Fee Simple Financing Cash to Seller Verification Moreland Corporation; 661-322-1081, January 04, 2007; Closing

Statement



85


Land DataZoning R-1, Single Family Topography LevelUtilities Electricity, Gas, Water, Sewer Dimensions Irregular Shape Irregular

Land Size InformationGross Land Size 66.150 Acres or 2,881,494 SF Useable Land Size 66.150 Acres or 2,881,494 SF , 100.00% Planned Units 212 Front Footage 927 ft Total Frontage: 927 ft Hageman W/O Renfro

IndicatorsSale Price/Gross Acre $128,798 Actual or $128,798 Adjusted Sale Price/Gross SF $2.96 Actual or $2.96 Adjusted Sale Price/Useable Acre $128,798 Actual or $128,798 Adjusted Sale Price/Useable SF $2.96 Actual or $2.96 Adjusted Sale Price/Planned Units $40,189 Actual or $40,189 Adjusted Sale Price/Front Foot $9,191 Actual or $9,191 Adjusted

RemarksThis data represents the October 2006 sale of an irregular shaped parcel of land located along the north line of Hageman and the west line of Renfro in Northwest Bakersfield. It involved the southerly portion of recorded Tentative Tract 6252; 212 buildable lots. The remainder of the tract’s 241 lots adjacent to the north is offered for sale. At the time of sale the land was fully graded and ready to commence with the installation of utilities. The lots range from 8,280 to nearly 18,000 square feet, with an average lot size of 9,600 square feet. The seller has agreed to take the lots from its rough graded state to a finished lot state for the sum not to exceed $33,000 per lot. The purchaser intends to develop the lots with detached single-family residences ranging in size from 1,600 to 2,200 square feet in size.


Ref. File 4264 86

Land Sale No. 6

Property IdentificationRecord ID 460 Property Type Residential Subdivision Land Property Name Residential Acreage Address SEC Glenn Street & Calloway Drive, Bakersfield, Kern County,

California 93312 Location 2401-E4 User 1 368-010-13

Sale DataGrantor El Toro Viejo LLC Grantee John Balfanz Development LLC Sale Date October 27, 2006 Deed Book/Page 267513 Property Rights Fee Simple Financing Cash to seller Verification John Balfanz Homes


Land DataZoning R-1, Single Family Topography Level at street grade Utilities Electricity, sewer, water, gas


87


Land DataDimensions See plat map Shape Flag shape Landscaping Natural vegetation Parking None Rail Service None

Land Size InformationGross Land Size 51.320 Acres or 2,235,499 SF Useable Land Size 51.320 Acres or 2,235,499 SF , 100.00% Actual Units 200 Front Footage 345 ft Calloway Frontage

IndicatorsSale Price/Gross Acre $150,273 Actual or $150,273 Adjusted Sale Price/Gross SF $3.45 Actual or $3.45 Adjusted Sale Price/Useable Acre $150,273 Actual or $150,273 Adjusted Sale Price/Useable SF $3.45 Actual or $3.45 Adjusted Sale Price/Actual Units $38,560 Actual or $38,560 Adjusted

RemarksWe were provided a copy of a sale/purchase agreement dated December 16, 2005 for the subject property. The seller is identified as El Toro Viejo, LLC. According to the escrow instructions, the seller entered into a purchase agreement with John Balfanz Development, LLC. The terms of the sale were a down payment of $1,000,000 to the seller (non-refundable) and the buyer loaned the seller $3,500,000 for the seller to complete acquisition from Nancy Lea Jackson Trust (former owner). John Balfanz recorded a First Trust Deed to perfect and secure his interest. The sales agreement stipulated the seller obtain a General Plan Amendment changing the designation from ER to LR, a zone change from A to R-1 and an approved tentative map for at least 200 lots. The total purchase price was agreed to be the sum of $7,712,000. The closing date was agreed to be not later than January 10, 2007.We were unable to confirm the details of the sale between Nancy Lea Jackson Trust and El Toro Viejo.


Ref. File 4264 88

Land Sale No. 7

Property IdentificationRecord ID 484 Property Type Residential Subdivision Land Property Name Lenox Homes Address East Panama Lane E/O S. Union Avenue, Bakersfield, Kern County,

California 93307 Location 2512 H-1 User 1 518-030-15 & 518-030-03 & 518-030-04

Sale DataGrantor Annette & Arthur Davis Grantee Union Berk, LLC Sale Date January 26, 2007 Property Rights Fee Simple Financing Cash to Seller Verification David Cates; 665-1282


Land DataZoning R-1, Single Family Topography LevelUtilities Electricity, Gas, Water, Sewer Dimensions Irregular Shape Trapezoidal


89


Land Size InformationGross Land Size 55.980 Acres or 2,438,489 SF Useable Land Size 48.010 Acres or 2,091,316 SF , 85.76% Planned Units 190 Front Footage 1294 ft Total Frontage: 1294 ft Panama Lane

Land Size Information

IndicatorsSale Price/Gross Acre $136,227 Actual or $136,227 Adjusted Sale Price/Gross SF $3.13 Actual or $3.13 Adjusted Sale Price/Useable Acre $158,842 Actual or $158,842 Adjusted Sale Price/Useable SF $3.65 Actual or $3.65 Adjusted Sale Price/Planned Units $40,137 Actual or $40,137 Adjusted Sale Price/Front Foot $5,893 Actual or $5,893 Adjusted

RemarksThis data describes the January 2007 sale of an approximately 55.98 gross-acre parcel of land according to the Agreement of Sale. It is located just east of South Union Avenue on the south line of Panama Lane. The Tentative Map No. 6712 upon which the sale was negotiated is a tentative map prepared by Smithtech USA, Inc. dated 11-11-2005. It shows a gross and net acreage of 48.01 and 36.01-acres, respectively, with a total of 190 buildable lots and one retention basin.

The planned subdivision will consist of primarily 6,000 to 6,500 SF lots that will be finished in preparation for improving with single-family dwellings. The ultimate development will be comprised of mostly entry-level housing product that will appeal to the first time homebuyer.


Ref. File 4264 90

COMPARABLE LAND SALES SUMMARY TABLE

No. Location Sale Date Price Size in SF SP/Unit1 SEC Panama & Buena Vista Road 2/24/2006 $4,814,250 1,914,898 $27,9902 SEC Panama Lane & Mountain Ridge Dr 4/7/2006 $9,450,000 2,374,891 $42,0003 NWC Paladino Drive and Valley Lane 6/7/2006 $4,870,000 1,523,816 $35,5474 SEC McKee & Hughes Lane 6/16/2006 $8,214,000 1,704,503 $50,3185 NWC Hageman & Renfro Roads 10/10/2006 $8,520,000 2,881,494 $40,1896 SEC Glenn Street & Calloway Drive 10/27/2006 $7,712,000 2,235,499 $38,5607 East Panama Lane E/O S. Union Avenue 1/26/2007 $7,626,000 2,438,489 $40,137

The sales cited on the land sale data sheets are summarized above. These are the most current

available and represent current market conditions for residential acreage parcels. Overall, the

sales cited show values from about $100,000 to $150,000 per acre. The selling price per unit

ranges from around $28,000 to over $50,000 per unit.

Sale Data items 1, 2, 4 and 7 are from areas that directly compete for the same market segment

as the subject. Sale 3 is from the Northeast sector and Sales 5 and 6 are from Northwest

Bakersfield. It should be noted that the market was active in 2006 but we were not able to find

records of any sales of tentative mapped land in 2007.

Analysis

To set a background for the following analysis, the reader should be aware that the Bakersfield

residential housing market had been experiencing appreciation rates of around 30% per year for

several years. June 2005 marked the peak of the market. Since that time the market for land has

stabilized and showed signs of declination. This is not unique to Bakersfield; the entire San

Joaquin Valley residential market has slowed significantly during the past two years according to

published sources. In general, it was the consensus of the real estate professionals interviewed

that all the major developers still have plenty of land available to continue their respective

developments and will proceed when the market rebounds. Those developers who have sizeable

land holdings and who entered the market while prices were lower can afford to hold and wait

until demand catches up with land inventory. As a result of the wait-and-see attitude prevailing,

there is no activity on the part of either buyers or sellers.


91

Those developers who purchased land at peak values in late 2005 through 2006 may find

themselves in an untenable position. Having paid high prices for the land and with new housing

sales sluggish and a plentiful supply of tentative mapped land and highly competitive housing

product, their projects will have considerably less profit and higher risks with the potential of

downside market shifts. Therefore, both buyers and sellers continue sitting on the sidelines

waiting to see what direction the market is taking.

During my investigation I learned that many of the builders who had options to purchase land in

the Fresno and Bakersfield market areas are not closing their deals and are forfeiting their

deposits. It is my understanding that DR Horton has abandoned considerable sums in deposits.

Centex Homes, Ennis Homes, Beazer Homes, Lafferty, Dunmore Homes and others were also

mentioned in this regard.

The consensus from developers, appraisers, and brokers is that land values may have

significantly declined. Unfortunately, as a result of the decline in sales activity, there are neither

participants nor sale transactions that can be relied on to quantify exactly where the market is.

Those interviewed opined that in the next two years the market is likely to experience price

reductions with many major land holders unloading lot and land inventory. Potential buyers who

deal in large scale future projects are not willing to pay peak value for land since there is so

much developer owned entitled land and tentative mapped land that is available for immediate

development. They realize that any large acreage parcels with or without tentative maps face the

prospect of a long term hold.

Given the conditions prevailing, it is the appraiser’s conclusion that the most probable selling

price of the tentative mapped portion of the subject will be at the lower end of the range

indicated by the closed sales.

We researched land listings throughout the Bakersfield Metropolitan Area. The tentative mapped

land offerings indicate a wide range of asking prices per acre and per mapped lot. Prices varied

based on location, topography (view amenity), lot size, etc. These ranged from around $17,000


Ref. File 4264 92

for smaller lots in areas noted for entry level housing to $40,000 per tentative mapped lot in areas

trending to the larger lots with move-up and up-scale housing.

The listings we found to be most pertinent to the subject were the smaller lot subdivisions that

are most suited to development with entry-level housing product.

Listing 1 is a tentative mapped parcel located at the southeast corner of Cottonwood Road and

Watts Drive in Southeast Bakersfield (APN 170-270-08). The parcel consists of approximately

60.6-acres and has a tentative map in place for 248 lots. Typical lot size in the subdivision is

6,000 square feet. The list price of $4,464,000 equates to $18,000 per paper lot or $73,663 per

acre.

Listing 2 is an approximately 147-acre parcel being developed as Tentative Map No. 6876

(APN’s: 436-062-03,16,18,21). It was approved for the first 371 lots in November 2006 and the

second phase of 90-lots is in the final approval stage. This subdivision is located in Northeast

Bakersfield at the northwest corner of Morning Drive and Paladino Drive. Bakersfield City

Schools recently purchased a 40-acre parcel directly across Morning Drive to the east as a site

for an elementary and junior-high school location. The lots in this subdivision are approximately

6,500 square feet. The offering price equates to $20,119 per paper lot or $63,095 per acre.

Listing 3 is an approximately 98.24-acre parcel located on the south line of Panama Lane about

¼ mile east of Cottonwood Road in Southeast Bakersfield. It backs to the Arvin-Edison Canal. It

has a tentative map (No. 7003) for 406 lots (APN’s: 518-010-07 through 11). The lots are in the

6,000 square foot range. The subdivision engineer, Pinnacle Engineering has estimated finishing

costs for these paper lots at $26,265 per lot. The asking price equates to $17,241 per paper lot or

$71,254 per acre.

Since listings represent the most current market and demonstrate what is immediately available

and competitive with the subject, these are often viewed as setting the upper limit of value. In the

appraiser’s opinion, the subject is superior to the tentative mapped offerings currently available.

It is in an area that is beginning to attract foot traffic to sales models and is in an area that is


93

capturing a good portion of the entry-level housing market. The listings are helpful in bracketing

the value for the subject land and tend to set the lower bracket of value for the subject.

In analyzing the current market we find that there are a large number of tentative mapped

subdivisions that have not begun construction. Builders are holding these for future development

when the residential market improves to the point they can achieve their desired profit margins.

The laws of supply and demand dictate that when the supply of a commodity is up, the demand

(and price) is down. In the appraiser’s opinion, the lower end of the closed sales at around

$18,000 per paper lot and the upper end of the listings of tentative lots at $27,000 per lot, bracket

the subject’s value. In consideration of the market trends to the entry-level product and the

tightening of profit margins being experienced, it is the appraiser’s opinion the paper lots in the

tentative mapped portion of the subject have a value of $18,000 each. Application of this unit

value to the number of tentative mapped lots in Tracts 6520 Phases 1 and 2 yields unimproved

tentative mapped land values as shown in the following chart.

DEVELOPMENT AREA DESCRIPTIONNET LAND

AREA EDU

PRESENT VALUE PER PAPER LOT

UNIMPROVED LAND VALUE

518-040-08 AND PORTION OF 518-040-09 (PARCEL I OF PARCEL MAP WAIVER NO.

300 AND PORTION OF PARCEL II OF PARCEL MAP WAIVER NO. 300)

26.97 132 $18,000 $2,376,000

FUTURE TRACT NO. 6520 PHASE 2 - PORTION (79 RESIDENTIAL LOTS) 15.99 79 $18,000 $1,422,000

FUTURE TRACT NO. 6520 PHASE 2 - PORTION (74 RESIDENTIAL LOTS) 18.96 74 $18,000 $1,332,000

Since acquisition, the developer has made improvements to the land. It has been our finding that

the improvements to the land can be recaptured at resale and it is therefore appropriate to include

the costs of the improvements to date in order to form an opinion of the ‘As Is’ value of the land.

At our most recent visit to the site we found that Tract 6520 has been cleared and graded, streets

are cut and the lots have been surveyed and staked. The developer has also incurred costs for the

engineering work, permits and approvals necessary to bring this phase to its current state. The


Ref. File 4264 94

developer reports its out-of-pocket expenditures total $797,633 for this phase, or approximately

$5,213 per lot. These costs do not include any work that has commenced that will be reimbursed

from assessment district funds.

Based on the foregoing analysis, the appraiser formed ‘As Is’ value conclusions for this portion

of the Assessment District 07-2 as follows:

DEVELOPMENT AREA DESCRIPTION

NET LAND AREA EDU

PRESENT VALUE PER PAPER LOT


DEVELOPER'S IMPROVEMENTS TO LAND NOT SUBJECT TO REIMBURSEMENT

'AS IS' VALUE OPINION

FUTURE TRACT NO. 6520 PHASE 2 - PORTION (79

RESIDENTIAL LOTS)15.99 79 $18,000 $1,422,000 $411,850 $1,833,850

FUTURE TRACT NO. 6520 PHASE 2 - PORTION (74

RESIDENTIAL LOTS)18.96 74 $18,000 $1,332,000 $385,783 $1,717,783

TOTALS FOR FUTURE TRACT NO. 6520 34.95 153 $18,000 $2,754,000 $797,633 $3,551,633

Value of the Final Mapped Residential Land; Tracts 6520 Phase 1 and 6611

We made an exhaustive search of the Kern County Recorder’s data, spoke with brokers and

others who deal with residential land, and consulted our office files and resources. We did not

find any sales of finished smaller lots. We did find listings of finished lots that are available for

sale and determined it is appropriate to report and analyze them in this section.

The first listing involves a 6.58 acre tentative mapped parcel with 22 partially finished residential

lots, located at South Union Avenue south of McKee in Southeast Bakersfield. The lots are

10,000 square feet in size. Improvements in place include fees and permits, grading, roads and

curb & gutter are in place. The owners’ asking price is $55,000 per lot. The appraiser’s estimated

completion cost is $26,000 per lot, resulting in a finished lot price of $81,000. (APN 517-040-

13)


95

In Northeast Bakersfield we found that Tract 6421, consisting of 59 lots, is listed for sale for

$5,310,000. The tract is located on Auburn Street between Fairfax Road and Morning Drive.

(APN: 438-010-15). The asking price equates to $90,000 per finished lot. The lots average 7,200

square feet in size.

Keller Williams brokerage has the listing of a 166-lot subdivision in South Bakersfield. It is

located along the south line of McKee Road and is bordered at the east by Hughes Lane. This

subdivision covers approximately 39.11-acres. The lots are nearly complete and the final map

(Tract 6369) is in place. House construction could start immediately. Adjacent at the west is the

Val Verde development by Moreland Development. They have sold 15 dwelling units since

August. The asking price of $13,280,000 represents a finished lot price of $80,000. (APN: 514-

040-05)

The appraiser formed the opinion that the lots at Auburn are superior to the subject. The tract on

South Union is inferior to the subject from the standpoint of size and location. The subdivision at

McKee and Hughes Lane is slightly inferior to the subject. The asking prices of these tracts

bracket the subject between $80,000 and $90,000.

Because the offerings/listings have not sold, we consider these to represent the top of the market

and typically discount about 10% to represent negotiations on the part of buyers and sellers to a

final selling price. This method yields an indicated selling price of $72,000 per lot.

Another method that we often use as a rule of thumb is the allocation method. Since this type of

real estate consists of two components, land and improvements, we can estimate the land

contribution to sale prices of dwellings that were recently built on lots that have a known sale

price. These are typically custom built dwellings that were constructed by merchant builders who

purchased finished buildable lots in groups of 4 or more then constructed and sold finished

house/lot combinations. Data on file in our office indicates the land portion of the total selling

price generally ranges from 22% to 35%, depending on the size of lot, dwelling quality and other

factors. In general, the land component is represented at the lower end of the range for the larger

lot-upper end housing. In this instance, an allocation of 35% to the land is a reasonable estimate.


Ref. File 4264 96

With an average selling price in the subject subdivision of about $210,000, the allocation method

indicates a value for the finished lots of about $73,500.

We also considered the cost to produce the finished house and subtracted this along with profit

and selling cost to arrive at a residual that represents the finished lot value. In the case of the

subject, we used the developer’s costs averaging $97,000 per unit and subtracted these costs

along with 6% selling cost and a 15% entrepreneurial profit from the average selling price to

yield a finished lot value. This technique resulted in a finished lot indication of $69,000

(210,000-97,000-12,600-31,500 = $68,900).

After consideration of the data and techniques available, we concluded a finished lot value for

the subject of $72,000 each.

In forming a bulk value opinion for Tracts 6520 Phase 1 and Tract 6611, which consist of

recorded lots and recorded finished lots respectively, we determined the subdivision method of

valuation is appropriate. The first step in applying this technique is the formation of value

opinions for each of the finished house/lot combination in the respective subdivisions.

It was the appraiser’s finding that the most recent sales activity and offerings in competing

subdivisions will provide the most reliable indicators for the subject. In the following pages the

appraiser discusses the various subdivisions that are considered to be direct competitors with the

subject. Later, the characteristics of these house/lot combinations are compared to those of the

subject from the perspective of the typical purchaser and conclusions are drawn as to the subject

dwellings’ value position in the market.


97

SUBDIVISION SURVEY DATA ONE Project Name Tyner Ranch Builder ADH Open Date June-07Location Oswell S. of Hwy 58 Survey Date 1/31/2008Plan Name/No. Pine Spruce Cypress Sequoia RedwoodBase Price $169,950 $186,950 $197,950 $199,950 $279,950Size SF 1,053 1,317 1,592 1,580 2,095$/SF $161.40 $141.95 $124.34 $126.55 $133.63Stories 1 1 1 1 1# Br/Den 2 3 3 4 4Baths 1.0 2.0 2.0 2.0 2.0Family 0 0 0 0 0Dining Area Area Area Area AreaGarage 2 2 2 2 2

Floor Coverings Carpet/Sheet Vinyl Foundation Concr SlabRange General Electric/Gas Garage Opener 1/3 HP - 2 controlsOven General Electric/Gas HVAC CentralDishwasher Standard Bath Surr Fiberglass Microwave Option Driveway ConcreteCompactor Option Fencing Side/RearKitchen Tops Polished Granite Slab Landscape Front Roof Mat. Tile

Interior Features

Comments:

Tyner Ranch has been open and selling in various tracts for about three years. Their projects

have consistently been a top seller in the Bakersfield area. This is the fourth phase of this

development, located south of Freeway 58 at Oswell. At completion, there will be 360 lots in the

subdivision. The units offer cedar board rear and side yard fencing and front yard. There are a

total of 5 basic plans offered.

Since January 2007 they have sold 73 units in Tract 6332, with selling prices ranging from

$205,000 to $308,000. The average selling price was $245,000. The current phase, Tract 6297

has sold 18 units since July, an average rate of 6 per month. Through 2007 Tyner Ranch (ADH)

has sold at a rate of 8.27 units per month.

Mary Cruz, sales manager (661-201-9434)


Ref. File 4264 98

SUBDIVISION SURVEY DATA TWO

Project Name Arlington Park Builder McMillin Open Date Aug-07Location Union Ave. & E. Hosking Survey Date 1/31/2008Plan Name/No. Galino Milan Sevana Adagio KelsoBase Price $216,990 $224,990 $232,990 $242,990 $246,990Size SF 1,243 1,452 1,594 1,846 2,073$/SF $174.57 $154.95 $146.17 $131.63 $119.15Stories 1 1 1 1 2# Br/Den 3 3 3 4 5/7Baths 2.0 2.0 2.0 2.5 2.5Family 0 0 0 0 0Dining Area Area Area Area AreaGarage 2 2 2 2/3 2/3

Floor Coverings Carpet/Sheet Vinyl Foundation Concrete Perimeter Slab FloorRange General Electric/Gas Roof Mat. Composition ShingleOven General Electric/Gas Ceilings Volume Ceiling in Living RoomDishwasher StandardMicrowave Option Bath Surr Fiberglass Tub & Stall ShowerCompactor Option Driveway ConcreteKitchen Tops Polished Granite Slab Fencing Side/RearGarage Opener 1/3 HP - 2 controls Landscape Front - with Automatic SprinklersHVAC Central

Interior Features

This subdivision opened recently and the models are open six days a week. The office reports

good foot traffic on weekends and a total of eight sales since opening.

Maricela, sales agent (661-833-1393)


99

SUBDIVISION SURVEY DATA THREE Project Name Casa Bella II Builder Lennar Homes Open Date Jun-07Location S. Union & Panama Ln. Survey Date 1/31/2008Plan Name/No. Residence 1 Residence 2 Residence 3 Residence 4Base Price $218,990 $224,990 $229,990 $245,990Size SF 1,269 1,479 1,610 1,838$/SF $172.57 $152.12 $142.85 $133.84Stories 1 1 1 1# Br/Den 3 3 4 4Baths 2.0 2.0 2.0 2.0Family 0 0 0 0Dining Area Area Area AreaGarage 2 2 2 2

Floor Coverings Carpet/Sheet Vinyl Foundation Concrete Perimeter Slab FloorRange General Electric/Gas Roof Mat. Composition ShingleOven General Electric/Gas Ceilings Volume Ceiling in Living RoomDishwasher StandardMicrowave Option Bath Surr Fiberglass Tub & Stall ShowerCompactor Option Driveway ConcreteKitchen Tops Ceramic Tile Fencing Side/RearGarage Opener 1/3 HP - 2 controls Landscape Front - with Automatic SprinklersHVAC Central

Interior Features

The sales office reports good foot traffic on weekends. Our research with the County Recorder

indicates this subdivision has sold 82 units since January 2007 in the current and previous phases

(Tract 6333). This equates to 7.45 sales per month. The sales staff indicates they are having good

response to the smaller units and the 1,479 plan is their best seller. Overall, the average selling

price for the tract is $236,500.

Arlene Jones, Sales Manager (866-852-7307)


Ref. File 4264 100

SUBDIVISION SURVEY DATA FOURProject Name Sydney Harbour Builder Lenox Homes Open Date Aug-07Location E. Berkshire & Union Survey Date 1/31/2008Plan Name/No. 1000 1104 1351 1418 1490 1540 1586

Base Price $199,990 $219,990 $245,990 $249,990 $255,990 $262,990 $265,990Size SF 1,000 1,104 1,351 1,418 1,490 1,540 1,586$/SF $199.99 $199.27 $182.08 $176.30 $171.81 $170.77 $167.71Stories 1 1 1 1 1 1 1# Br/Den 3 3 4 4 3 3 5Baths 2.0 2.0 2.0 2.0 2.0 2.0 2.0Family 0 0 0 0 0 0 0Dining Area Area Area Area Area Area AreaGarage 2 2 2 2 2 2 2

Floor Coverings Carpet/Tile/Vinyl Foundation Concrete Perimeter Slab FloorRange General Electric/Gas Roof Mat. TileOven General Electric/Gas Ceilings Volume Ceiling in Living RoomDishwasher Standard FireplaceMicrowave Option Bath Surr Fiberglass Tub & Stall ShowerCompactor Option Driveway ConcreteKitchen Tops Polished Granite Slab Fencing Side/RearGarage Opener Prewired Landscape Front - with Automatic SprinklersHVAC Central

Interior Features

Plan Name/No. 1740 1898 2029 2305

Base Price $279,990 $288,990 $296,990 $304,990Size SF 1,740 1,898 2,029 2,305$/SF $160.91 $152.26 $146.37 $132.32Stories 1 2 2 2# Br/Den 4 4 5 6Baths 2.0 2.5 2.5 3.0Family 0 0 0 0Dining Area Area Area AreaGarage 2 2 2 2

The sales office reports good foot traffic since opening in August. The models are attractive and well decorated. The tract is plotted for a total of 267 dwellings. Sales personnel are reporting an average of 7 sales per month since opening. They are offering a $10,000 builders incentive.

Features that set the subject dwellings apart include: mahogany entry doors with leaded glass, 9’ ceilings, ceramic tile countertops, stained oak cabinetry, walk-in closet in master suite, alarm system, tile roofing, finished garage, and covered patio with stucco ceiling.


101

SUBDIVISION SURVEY DATA FIVEProject Name The Summit Builder Open Date Aug-07Location Hosking & Monitor Survey Date 1/31/2008Plan Name/No. Venice 1 Venice 2 Venice 3 Madrid Granada Lisbon

Base Price $199,900 $229,900 $239,900 $259,900 $269,900 $279,900Size SF 1,100 1,200 1,358 1,536 1,536 1,925$/SF $181.73 $191.58 $176.66 $169.21 $175.72 $145.40Stories 1 1 1 1 1 1# Br/Den 3 3 4 3 4 3Baths 1.5 2.0 2.0 2.0 2.0 2.0Family 0 0 0 0 0 0Dining Area Area Area Area Area Area Garage 2 2 2 2 2 2

Floor Coverings Carpet/Tile Foundation Concrete Perimeter Slab FloorRange General Electric/Gas Roof Mat. TileOven General Electric/Gas Ceilings Volume Ceilings Dishwasher Standard Fireplace(s) NoneMicrowave Option Bath Surr Fiberglass Tub & Stall ShowerCompactor Option Driveway ConcreteKitchen Tops Polished Granite Slab Fencing Side/RearGarage Opener 1/3 HP - 2 controls Landscape Front - with Automatic SprinklersHVAC Central

Moreland Corporation

Interior Features

Plan Name/No. Florence Barcelona Monte Carlo Monte Casita

Base Price $289,900 $309,900 $319,900 $339,900Size SF 1,925 2,016 2,292 2,725$/SF $150.60 $153.72 $139.57 $124.73Stories 1 1 1 1# Br/Den 4 4 4 4/5Baths 2.0 2.0 2.0 3.0Family 0 0 0 0Dining Area Area Area Area Garage 2 2 2 2

Features of these dwellings include 10’ ceilings, 8’ doors with brass hardware, French doors in master bedrooms, crown moldings in living, dining and kitchen, marble flooring at entry, kitchen & baths, granite countertops, solid cherry wood stained cabinetry, concrete tile roofs, finished garage with openers, electric fireplace with sandstone mantle & surround, and floor to ceiling marble in master baths.

There are four model homes nearing completion. The sales office is presently in a modular building. The developer reports 18 sales since opening about 4 weeks ago.


Ref. File 4264 102

Our survey concentrated on the developments that are generally east of Union Avenue and south

of Freeway 58. The exception to this is the Moreland development known as The Summit, which

is about one block west of Union Avenue. It is the appraiser’s opinion that all the subdivisions in

this area will directly compete with the subject. It was also noted that these all represent entry-

level size/price developments and are among the most rapidly absorbing tracts in Bakersfield.

A map depicting the location of the subject and the competing tracts is shown below.

A compilation of the tracts surveyed are summarized on the following pages.


103

Summary of Subdivisions Surveyed Tract Name Size Price $ SF

1,053 $169,950 $161.401,317 $186,950 $141.951,592 $197,950 $124.341,580 $199,950 $126.552,095 $279,950 $133.631,243 $216,990 $174.571,243 $218,490 $175.781,243 $219,490 $176.581,452 $224,990 $154.951,452 $226,990 $156.331,452 $227,990 $157.021,594 $232,990 $146.171,594 $234,990 $147.421,594 $235,990 $148.051,846 $242,990 $131.631,846 $244,990 $132.711,846 $245,990 $133.262,073 $246,990 $119.151,041 $179,990 $172.901,338 $199,990 $149.471,493 $209,990 $140.651,269 $218,990 $172.571,479 $224,990 $152.121,610 $229,990 $142.851,838 $245,990 $133.841,000 $179,990 $179.991,104 $182,990 $165.751,351 $193,990 $143.591,418 $196,990 $138.921,490 $206,990 $138.921,540 $204,990 $133.111,586 $206,990 $130.511,740 $216,990 $124.711,898 $231,990 $122.232,029 $239,990 $118.282,305 $247,990 $107.591,100 $199,900 $181.731,200 $229,900 $191.581,358 $239,900 $176.661,536 $259,900 $169.211,536 $269,900 $175.721,925 $279,900 $145.401,925 $289,900 $150.602,016 $309,900 $153.722,292 $319,900 $139.572,725 $339,900 $124.73

Sydney Harbour

The Summit

Casa Bella II & Crimson

Tyner Ranch

Arlington Ranch


Ref. File 4264 104

In order to demonstrate the sale price and size relationship, the gathered data was plotted on a

graph. The graphing procedure involved plotting the individual units in the competing tracts

according to their size and sale price. The data surveyed indicated sizes ranging from 1,000

square feet to 2,725 square feet. The houses were priced from a low of $169,950 to a high of

$319,900. The median price was $225,990 and the mean selling price was $227,899. A

mathematical algorithm was used to determine the best fit of an imaginary line through the data

set. This line is known as a best-fit regression trend line. The graph is displayed below.

SE Bakersfield Subdivision Survey Data

$100,000$150,000$200,000$250,000$300,000$350,000

900 1,150 1,400 1,650 1,900 2,150 2,400 2,650 2,900

Dwelling Size

Pric

e

CompetitionSubject

It is the appraiser’s opinion that in order to compete in this market, the pricing will need to be at

the lower end of the range indicated from the subdivisions in the area. Our research indicates the

most rapidly selling product is priced below $250,000.

As shown on the preceding graph, the subject dwelling units are priced below the trend line. In

our analysis however, we found that the subject has amenities that are superior to the competition

in all respects (with the exception of The Summit).

The subject dwellings have standard features that are superior to those offered by the other

subdivisions. Some of the superior features that set the subject dwellings apart are: mahogany


105

entry doors with leaded glass, 9’ ceilings, ceramic tile countertops, stained oak cabinetry, walk-

in closet in master suite, alarm system, tile roofing, and finished garage.

In addition, the subject dwellings have an energy package included in the sale price. The energy

package has a rating that exceeds the energy star rating by 32% over the State standard and more

than 50% above the national standard highest efficiency rating. The energy efficiency is a result

of the use of solar panels, and high ‘R’ factor insulation in walls and ceilings. Tests indicate the

typical summer utility bills will be below $75 per month. This is considered a major benefit to

the prospective home buyer who can expect to save $200 per month over the competing new

dwelling in this price and size range.

The subject compares well to the dwellings being offered in The Summit, by Moreland

Development. Features of the dwellings in The Summit include: 10’ ceilings, 8’ doors with brass

hardware, French doors in master bedrooms, crown moldings in living room dining room &

kitchen, marble flooring at entry, kitchen and baths, granite countertops, solid cherry wood

stained cabinetry, concrete tile roofs, finished garage with openers, electric fireplace with

sandstone mantle & surround, and floor to ceiling marble in master baths.

Pricing of the dwellings in The Summit are above the best fit trend line shown in the graph as are

those in the subject development. Based on the features offered, the relative comparability of the

subject with the other developments, and the sales activity experienced to date, I have formed the

opinion the subject’s pricing is market supported.

Based on this analysis, the completed house/lot combinations in Tract 6520 and 6611 have

values as shown below:

Plan No Size Price Plan No Size Price1 1,000 $179,990 7 1,586 $206,9902 1,104 $182,990 8 1,740 $216,9903 1,351 $193,990 9 1,898 $231,9904 1,418 $196,990 10 2,029 $239,9905 1,490 $206,990 11 2,305 $247,9906 1,540 $204,990


Ref. File 4264 106

In order to calculate the aggregate of the retail values of the proposed house/lot combinations, we

obtained the unit mix in each subdivision from the developer. The aggregate value of the

completed tracts is shown below.

Plan No Size Price Unit Mix Value by Model1 1,000 $179,990 7 $1,259,9302 1,104 $182,990 10 $1,829,9003 1,351 $193,990 10 $1,939,9004 1,418 $196,990 14 $2,757,8605 1,490 $206,990 15 $3,104,8506 1,540 $204,990 15 $3,074,8507 1,586 $206,990 11 $2,276,8908 1,740 $216,990 13 $2,820,8709 1,898 $231,990 13 $3,015,870

10 2,029 $239,990 11 $2,639,89011 2,305 $247,990 13 $3,223,870

Aggregate Value of 6520-1 When Complete $27,944,680

1 1,000 $179,990 8 $1,439,9202 1,104 $182,990 12 $2,195,8803 1,351 $193,990 12 $2,327,8804 1,418 $196,990 17 $3,348,8305 1,490 $206,990 17 $3,518,8306 1,540 $204,990 17 $3,484,8307 1,586 $206,990 12 $2,483,8808 1,740 $216,990 15 $3,254,8509 1,898 $231,990 16 $3,711,840

10 2,029 $239,990 13 $3,119,87011 2,305 $247,990 16 $3,967,840Aggregate Value of 6611 When Complete $32,854,450

Tract 6520 Phase 1

Tract 6611


107

BULK VALUE OF FINISHED LOTS or

PROSPECTIVE MARKET VALUE UPON COMPLETION OF CONSTRUCTION

In the previous section of this report, the appraiser estimated the value of the typical lot at

completion, ready for construction of a housing unit. The aggregate of these values reflects the

total value of the entire subdivision at completion in each assessment district area. Since it is not

possible to complete the entire subdivision and sell out on the day of completion, the discounted

cash flow analysis is used as a tool to recognize a sell-out of the lots over time.

We used a Discounted Cash Flow (DCF) analysis to estimate the prospective market value of the

lots at completion. The Market Value DCF model that follows is calculated using the income and

expense projections and assumptions described in the following paragraphs. The Market Value

models represent the Prospective Market Value upon Completion of Lot Construction (PMVCC).

The PMVCC assumes all development costs have been expended and the lots in the subdivisions

are ready for marketing and sales.

The process of providing these analyses requires the following steps:

1. Estimation of the retail value of the individual finished lots and the aggregate retail value of lots;

2. Estimation of the appropriate absorption or sell-out period required to market the finished lots;

3. Determination of the approximate selling/holding expenses incurred during the marketing of the lots;

4. Calculation of the indicated periodic cash flow from the projected sales;

5. Subtracting the costs (including selling expenses) and profit from the periodic cash flows, and

6. Determination of the present worth of the net cash flows generated during the absorption period.


Ref. File 4264 108

Absorption Analysis

It has been our experience that foot traffic and sales activity has slowed somewhat during the

month of November. This is seasonal slowing, traditional for this time of year. In our survey of

the various subdivisions that compete with the subject we found absorption rates that ranged

from less than 2 sales per month to a high of more than eight sales per month. The Lennar tract

adjacent to the north property line of Tract 6611 has had an average of 7.45 sales per month in

2007. During more typical marketing years we usually see tract sales rates of three to six units

per month. The average sales rate over all the subdivisions cited was about 4+ sales per month.

Based on the fact that more builders are realizing the demand and absorption will be for entry-

level housing in the next two years, I have formed the opinion the subject is capable of selling at

a rate of 3 units per month. This estimate assumes the developer will continue to aggressively

market the housing product priced to compete with the housing that is under construction in the

surrounding tracts.

Income

The market values of all units in the subdivision were tabulated based on the previously

estimated mix yielding aggregate values for the subdivisions.

Expenses

In our estimate of lot and dwelling construction expenses, we referenced the cost data from our

appraisals of subdivisions built by competing developers with similar lot sizes and product type.

We compared these with the costs submitted by the developer and found that the developer costs

were similar in all respects and were used in the cash flow analyses. The costs studies included

off-site costs, indirect costs and studies. Portions of the costs include the items described in prior

sections of this report to be financed by the assessment district proceeds.

Line items for profit and discount rate were selected from the lower end of the ranges we

typically see owing to the lower risks in dealing with finished lots.


109

A spreadsheet showing the monthly cash flows and expenses is contained in the Addenda section

of this report in the section designated Discounted Cash Flow Analyses.

A recapitulation of the value opinions and other pertinent information relative to the subject

properties appraised are summarized in the following chart.

Property Identification # Lots

Tentative Mapped

Lot ValueValue Premise

As Is Value w/Developer

Incurred Costs

Finished Lot Value Bulk Value

Tract 6520 Phase 1 132 $18,000 As Is Recorded Lots N/A $72,000 $6,033,344Tract 6520 Phase 2 153 $18,000 Tentative Mapped $3,551,633 N/A $5,040,275Tract 6611 155 $18,000 As Complete N/A $72,000 $8,320,000Totals 440 $19,393,620

RECONCILIATION

In the previous sections of this report we used various methodologies to arrive at the value

opinions concluded.

Our value opinion for the land in Tract 6520 Phase 2 was based on the market value of tentative

mapped land plus the value of the improvements the developer made to the land. This value

opinion was based on sales of tentatively mapped land that sold or is currently listed for sale.

In valuing Tract 6520 Phase 1 and Tract 6611 the appraiser determined that the Subdivision

Development Method is a reliable value indicator since these tracts have recorded or finished

lots, respectively. As a condition of issuance of final maps, the City requires a completion bond

be posted. This assures that the lots will be completed to a buildable state regardless of any

change in ownership. In spite of this however, the appraiser valued the recorded lots (in Tract

6520 Phase 1) 'As Is'. The reader will note that the bulk value in the DCF for Tract 6520 Phase 1

recognizes the costs of lot development and vertical construction was subtracted from the

periodic cash flows.


Ref. File 4264 110

A complete summary of the findings and conclusions cited in this report is shown on the

Consolidated Worksheet for Assessment District 07-2 in the Addenda Section of this report.





PLACE


OR LAND




TOTALS FOR TRACT 6520 61.92 285 $9,119,864 $10,311,481


TOTALS FOR TRACT 6611 31.16 155 $8,828,500 $9,014,035


*Totals may vary owing to rounding


111

CERTIFICATIONS

The undersigned appraiser certifies the following statements are true and correct with respect to this appraisal report:

That I personally inspected the subject property.

That I have no interest, past, present or contemplated, in the real estate, which is the subject of this appraisal report. Employment to make this appraisal is in no manner contingent upon the final value herein reported.

That to the best of my knowledge and belief the statements of fact contained in this report upon which the analysis, opinion and conclusions expressed herein are based, are true and correct.

That I have no personal bias with respect to the subject matter of this appraisal or the parties involved and that racial composition of the neighborhood was in no way considered.

This appraisal report is made in conformity with and is subject to the requirements of the Code of Professional Ethics and Standards of Professional Conduct of the Appraisal Institute of which I am a member.

The Appraisal Institute conducts a voluntary program of continuing education for its designated members. Members who meet the minimum standards of this program are awarded periodic educational certification. I am currently certified under this program through December 31, 2012.

I certify that the use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.

This appraisal report sets forth all the limiting conditions, imposed by the terms of the assignments or by the undersigned, affecting the analysis, opinions, and conclusions in this report.

That no one other than the undersigned prepared the analysis, conclusions, and opinions, (concerning the real estate which is the subject of this report), that are set forth in this appraisal report.

Michael Launer, MAI SRA personally inspected the subject property on January 15, 2008.

Michael Launer, MAI SRA and Stacy T. Launer have a personal inspection of the property that is the subject of this report on December 17, 2007.

This appraisal has been completed in compliance with the Uniform Standards of Professional Appraisal Practice (USPAP), as developed by the Appraisal Standards Board of the Appraisal Foundation, and the Office of the Comptroller of the Currency's (OCC) minimum appraisal standards. This appraisal was performed in compliance with RTC regulations.


Ref. File 4264 112

The appraiser has the appropriate knowledge and experience to complete this assignment competently. As of the date of this report, I have completed the requirements of the continuing education program of the Appraisal Institute.

I certify that the use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.

The compensation for appraisal services and future employment prospects are not contingent upon the reporting of a predetermined value of direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a stipulated event.

The existence of hazardous materials, which may or may not be present on the property, was not observed during the physical inspection. The appraiser, however, is not qualified to detect such substances. The presence of substances such as asbestos, urea-formaldehyde foam, radon gas, or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there are no such materials on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering required to discover them.

Based upon the study and investigations conducted, and after careful consideration of all pertinent factors affecting value, I have formed the opinion that the values pertinent to the subject property as defined, as of the effective dates of this appraisal are as shown in the following summary table.





PLACE


OR LAND




TOTALS FOR TRACT 6520 61.92 285 $9,119,864 $10,311,481


TOTALS FOR TRACT 6611 31.16 155 $8,828,500 $9,014,035



All the values developed within this report are presented on the Consolidated Worksheet that can be found in the Addenda section of this report.

Please read the underlying Assumptions and Limiting Conditions, which are an integral part of this appraisal.

Certification Date: ---=F....:::e=bru"-=ar~y~--=27-'--'''-=2"""0'--"0"""'"8

~~~~ Launer & Associates, Inc. Federal ID# 20-0317656

~ :;;?~/~ Michael Launer,~ Certified General Appraiser California Certificate AG 002049 Expires 12-07-2008

113

ADDENDA

UNDERLYING ASSUMPTIONS & LIMITING CONDITIONS

CONTINGENT AND LIMITING CONDITIONS: The certification of the Appraiser whose signature appears in this appraisal report is subject to the following conditions and to such other specific and limiting conditions as are set forth by the Appraiser in the report.

1. The Appraiser assumes no responsibility for matters of a legal nature affecting the property appraised or the title thereto, nor does the Appraiser render any opinion as to the title, which is assumed to be good and marketable. The property is appraised as though under responsible ownership.

2. Any sketch in the report may show approximate dimensions and is included to assist the reader in visualizing the property. The Appraiser has made no survey of the property.

3. The Appraiser is not required to give testimony or appear in court because of having made the appraisal with reference to the property in question, unless arrangements have been previously made therefore.

4. Any distribution of the valuation in the report between land and improvements applies only under the existing program of utilization. The separate valuations for land and building must not be used in conjunction with any other appraisal and are invalid if so used.

5. The Appraiser assumes that there are no hidden or unapparent conditions of the property, subsoil, or structures, which would render it more or less valuable. The Appraiser assumes no responsibility for such conditions, or for engineering, which might be required to discover such factors.

6. Information, estimates, and opinions furnished to the Appraiser, and contained in the report, were obtained from sources considered reliable and believed to be true and correct. However, the Appraiser can assume no responsibility for accuracy of such items furnished the Appraiser.

7. Disclosure of the contents of the appraisal report is governed by the Bylaws and Regulations of the professional appraisal organizations with which the Appraiser is affiliated.

8. Neither all, nor any part of the content of the report, or copy thereof (including conclusions as to the property value, the identity of the Appraiser, professional designations, reference to any professional appraisal organizations, or the firm with which the Appraiser is connected, shall be used for any purposes by anyone but the client specified in the report, the borrower if appraisal fee paid by same, the mortgagee or its successors and assigns, mortgage insurers, consultants, professional appraisal organizations, any state or federally approved financial institution, any department, agency, or instrumentality of the United States or any state or the District of Columbia,

without the previous written consent of the Appraiser; nor shall it be conveyed by anyone to the public through advertising, public relations, news, sales, or other media, without the written consent and approval of the Appraiser.

9. On all appraisals, subject to satisfactory completion, repairs, or alterations, the appraisal report and value conclusion are contingent upon completion of the improvements in a workmanlike manner.

10. The appraiser is not an expert in survey, soils, drainage, and geological or seismic conditions. The property is assumed to be free of such significant detrimental conditions. Unless otherwise noted in the report, the appraiser observed no noticeable problems in this regard. The client is urged to seek appropriate outside expert opinions however, if concerned about these factors.

11. The appraiser is not an expert in structural analysis. The property is assumed to be free of structural deficiencies, building code violations, and unsafe conditions. This includes the assumption that all heating, plumbing, electrical, and mechanical systems as well as the appliances and the roof are in adequate working order. Unless otherwise noted in the report, the appraiser observed no noticeable problems in this regard. The client is urged to seek appropriate outside expert opinions however, if concerned about these factors.

12. The appraiser is not an expert in the detection of potentially hazardous or toxic substances such as the presence of urea formaldehyde foam insulation, asbestos building materials fibers, radon gas, or any other harmful environmental substances. The appraiser observed no such substances and the property is assumed to be free of such substances. The client is urged to seek outside expert opinions however, if concerned about these factors.

13. This appraisal is predicated on the assumption that all improvements constructed will be of the size and materials represented in the developer supplied documentation. Any modifications or variations should be submitted to the undersigned to determine what effect, if any, the modifications will have on the final value estimate.

14. I certify that, to the best of my knowledge and belief, the reported analyses, opinions and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and the Standards of Professional Practice of the Appraisal Institute, of which I am a member.

15. I certify that the use of this report is subject to the requirements of the Appraisal Institute relating to review by its authorized representatives.

16. The hypothetical sale referred to in the definition of Market Value, and thus any values in this report are on the basis of all cash to the seller, therefore, no consideration has been given to existing or proposed financing.

17. To the best of my knowledge, all pertinent information available to the appraiser is contained within this report. If, subsequent to the date of the report, should information become available or submitted to the appraiser that could materially affect the value reported herein, the appraiser reserves the right to modify the appraisal report.

18. The values assigned reflect value for the real estate only. No value consideration has been given to the in-use value of any equipment, personal property or fixtures.

19. This appraisal report is prepared for the sole and exclusive use of the City of Bakersfield (THE CLIENT). No third parties are authorized to rely upon this report without the express written consent of the appraiser.

20. The Tentative Tract maps we reviewed are subject to change until final map approval has been granted by the City of Bakersfield. Consequently, any outstanding tentative maps and any subsequent maps may not accurately represent the final lot delineation as determined by the City.

21. The reader is cautioned that we received no floor plans, elevations, description of materials nor cost breakdowns for the developer's proposed production units. The projected selling prices of the completed house/lot combinations are those of the developer and we have not appraised the individual production models. To the best of the appraiser's knowledge however, the costs and projected selling prices are within market parameters.

Date: February 27,2008

~ Launer & Associates, Inc. Federal ID# 20-0317656

/

dUL:id. Michael Launer, MAl SRA Certified General Appraiser California Certificate AG 002049 Expires 12-07-2008

QUALIFICATIONS OF MICHAEL L. LAUNER, MAI SRA

APPRAISAL EDUCATION

SAN BERNARDINO VALLEY COLLEGE Year Completed Advanced Residential Appraising 1978 Advanced Income Property Appraising 1978

SOCIETY OF REAL ESTATE APPRAISERS

Course 101 - Intro to Appraising Real Property 1977 Course 201 - Principles of Income Property Appraising 1979 Course 202 - Applied Income Property Valuation 1984 R-2 Residential Proficiency Examination 1979 Narrative Report Writing Seminar 1979 Subdivision Analysis 1993

APPRAISAL INSTITUTE

Environmental Risk and the Real Estate Appraisal 1995 Appraising Rural Transitional Properties in S. California Seminar 1996 Litigation Loss Prevention Program for Real Estate Appraisers 1997 Federal and State Laws and Regulations 1997 The Appraiser’s Role in the Redevelopment Process 1998 Valuation Considerations in Partial Acquisition 1998 Valuation of Detrimental Considerations in Real Estate 1999 Condemnation Appraising – Basic Applications Course 710 1999 Condemnation Appraising- Advanced Topics Course 720 1999 Standards of Professional Practice Part C Course 430 1999 Real Estate Fraud & The Appraiser’s Role 2000 Highest and Best Use Applications Seminar 2002 Standards of Professional Practice Course 400 2003 Scope of Work Seminar 2004 Reappraising, Readdressing and Reassigning 2004 Advanced Cost and Sales Comparison Approaches 2004 Subdivision Analysis 2005 Appraising Unusual Properties 2005 Market Analysis and Site to do Business 2006 USPAP 7-Hour Update 2006 Scope of Work 2007 Course 420 Business Practice and Ethics 2007 Current Issues & Misconceptions in the Appraisal Process 2007 Attacking and Defending an Appraisal in Litigation 2007

PROFESSIONAL DESIGNATIONS & AFFILIATIONS

STATE OF CALIFORNIA

CERTIFIED GENERAL APPRAISER License Number AG002049 Issued 1991

APPRAISAL INSTITUTE

MAI - Member Appraisal Institute 1992 SRA - Senior Residential Appraiser 1986

Certified Administrative Instructor for:

Appraisal Institute: Course 110 Appraisal Principles Appraisal Institute: Course 120 Appraisal Procedures Appraisal Institute: Course 210 Applied Residential Appraisal Appraisal Institute: Course 310 Basic Income Capitalization Appraisal Foundation: Uniform Standards of Professional Appraisal Practice

Appraisal Institute Positions Held:

Candidate Guidance Chairman - Appraisal Institute, Bakersfield Chapter 1991-2000 Admissions Chairman - Appraisal Institute, Bakersfield Chapter 1991-1999 President, Society of Real Estate Appraisers Bakersfield Chapter 75, 1987-1989 President – Appraisal Institute, Bakersfield Chapter, 2001 President – Appraisal Institute, Bakersfield Chapter, 2002

Associates Guidance Chair - General Finance Chair, Appraisal Institute Region VII

Member, Regional Ethics and Counseling Panel

BAKERSFIELD COLLEGE

INSTRUCTOR - Real Estate 63 - Intro to RE Appraisal 1988-1998 Real Estate 68 - Advanced RE Appraisal 1993-95

PROFESSIONAL ASSIGNMENTS

Valuation appraisals, feasibility studies, depreciation analysis and investment consultations regarding: hotel, motels, office projects, residential subdivisions, mobile home parks, mobile home subdivisions, restaurants, vacant acreage, commercial lots, rehabilitation projects and a variety of commercial properties. Special purpose assignments have included: manufacturing, processing and cold storage facilities, oil refinery, quarry, winery and rock crushing facility. Other assignments have included the appraisal of livestock and agricultural properties.

APPRAISAL AND BUSINESS EXPERIENCE

Presently Principal, - Launer & Associates, Real Estate Valuation & Consulting 1986 – 1988 Senior Vice President, Chief Appraiser, Paramount Bank

1985 - 1986 Commercial Appraiser - A.L. Appraisal Company 1977 - 1985 Commercial Appraiser - Bank of America NT & SA

DISCOUNTED CASH FLOW ANALYSES

Periods Month 12Total Units 132 Plan Sq. Ft. Retail Mix Aggregate Cost AggregateUnit $211,702 1 1,000 $179,990 7 $1,259,930 $74,406 $520,842Appreciation 0.25% per month 2 1,104 $182,990 10 $1,829,900 $76,186 $761,860

0.03 per period 3 1,351 $193,990 10 $1,939,900 $83,395 $833,9504 1,418 $196,990 14 $2,757,860 $86,673 $1,213,422

Property Tax Rate 1.27% 5 1,490 $206,990 15 $3,104,850 $95,479 $1,432,185Property Taxes $3,453 per unit per year 6 1,540 $204,990 15 $3,074,850 $92,414 $1,386,210Cost of Sales 5.00% 7 1,586 $206,990 11 $2,276,890 $90,808 $998,888Overhead 5.00% 8 1,740 $216,990 13 $2,820,870 $105,723 $1,374,399Other % Expense 1.00% 9 1,898 $231,990 13 $3,015,870 $114,363 $1,486,719HOA $0 per unit per year 10 2,029 $239,990 11 $2,639,890 $119,097 $1,310,067Other "per unit" Expense $0 per unit per year 11 2,305 $247,990 13 $3,223,870 $127,299 $1,654,887Unit Construction Costs $98,284 per unit $211,702 132 $27,944,680 $12,973,429Site Development Costs $18,963 per unit $0 Lot PremiumsProfit 13.50% $0 Model UpgradesDiscount Rate 12.00% $211,702 Adjusted Retail per Unit Cost/Unit $98,283.55Absorption 36 per year

3 units per periodPresales 0Net Present Value $5,415,554

Month 0 1 2 3 4 5 6 7 8 9 10 11 12Units Available 132 132 129 126 123 120 117 114 111 108 105 102 99Absorption 0 3 3 3 3 3 3 3 3 3 3 3 3Remaining Units 132 129 126 123 120 117 114 111 108 105 102 99 96Sales 0 3 3 3 3 3 3 3 3 3 3 3 3

Beginning Inventory 132 132 129 126 123 120 117 114 111 108 105 102 99Ending Inventory 132 129 126 123 120 117 114 111 108 105 102 99 96Sales 0 3 3 3 3 3 3 3 3 3 3 3 3Unit Price $211,702 $212,231 $212,762 $213,294 $213,827 $214,362 $214,898 $215,435 $215,973 $216,513 $217,055 $217,597 $218,141Gross Sales $0 $636,694 $638,286 $639,882 $641,481 $643,085 $644,693 $646,304 $647,920 $649,540 $651,164 $652,792 $654,424Holding Costs & ExpensesProperty Taxes $3,453 $0 $37,551 $36,688 $35,825 $34,962 $34,098 $33,235 $32,372 $31,509 $30,645 $29,782 $28,919 $28,056Cost of Sales 5.00% $0 $31,835 $31,914 $31,994 $32,074 $32,154 $32,235 $32,315 $32,396 $32,477 $32,558 $32,640 $32,721Overhead 5.00% $0 $31,835 $31,914 $31,994 $32,074 $32,154 $32,235 $32,315 $32,396 $32,477 $32,558 $32,640 $32,721Other % Expense 1.00% $0 $6,367 $6,383 $6,399 $6,415 $6,431 $6,447 $6,463 $6,479 $6,495 $6,512 $6,528 $6,544HOA $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Other "per unit" Expense $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Unit Construction Costs $98,284 $0 $294,851 $294,851 $294,851 $294,851 $294,851 $294,851 $294,851 $294,851 $294,851 $294,851 $294,851 $294,851Site Development Costs $18,963 $0 $56,889 $56,889 $56,889 $56,889 $56,889 $56,889 $56,889 $56,889 $56,889 $56,889 $56,889 $56,889Total $0 $459,327 $458,639 $457,952 $457,264 $456,577 $455,891 $455,205 $454,520 $453,834 $453,150 $452,466 $451,782Net Sales $0 $177,367 $179,647 $181,930 $184,217 $186,508 $188,802 $191,099 $193,401 $195,706 $198,014 $200,326 $202,642Profit 13.50% $0 $85,954 $86,169 $86,384 $86,600 $86,816 $87,034 $87,251 $87,469 $87,688 $87,907 $88,127 $88,347Cash Flow $0 $91,413 $93,478 $95,546 $97,617 $99,691 $101,768 $103,848 $105,931 $108,018 $110,107 $112,199 $114,295Discount Rate 12.00% 1.00% per periodNet Present Value of Cash Flows $4,727,400 5126706 -8.45%Plus Value of Improvements in Place $688,154

Tract 6520 Phase 1 As Is

13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 2896 93 90 87 84 81 78 75 72 69 66 63 60 57 54 513 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3

93 90 87 84 81 78 75 72 69 66 63 60 57 54 51 483 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3

96 93 90 87 84 81 78 75 72 69 66 63 60 57 54 5193 90 87 84 81 78 75 72 69 66 63 60 57 54 51 483 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3

$218,687 $219,233 $219,781 $220,331 $220,882 $221,434 $221,987 $222,542 $223,099 $223,657 $224,216 $224,776 $225,338 $225,902 $226,466 $227,032$656,060 $657,700 $659,344 $660,993 $662,645 $664,302 $665,962 $667,627 $669,296 $670,970 $672,647 $674,329 $676,014 $677,705 $679,399 $681,097

$27,192 $26,329 $25,466 $24,603 $23,739 $22,876 $22,013 $21,150 $20,286 $19,423 $18,560 $17,697 $16,833 $15,970 $15,107 $14,244$32,803 $32,885 $32,967 $33,050 $33,132 $33,215 $33,298 $33,381 $33,465 $33,548 $33,632 $33,716 $33,801 $33,885 $33,970 $34,055$32,803 $32,885 $32,967 $33,050 $33,132 $33,215 $33,298 $33,381 $33,465 $33,548 $33,632 $33,716 $33,801 $33,885 $33,970 $34,055$6,561 $6,577 $6,593 $6,610 $6,626 $6,643 $6,660 $6,676 $6,693 $6,710 $6,726 $6,743 $6,760 $6,777 $6,794 $6,811

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

$294,851 $294,851 $294,851 $294,851 $294,851 $294,851 $294,851 $294,851 $294,851 $294,851 $294,851 $294,851 $294,851 $294,851 $294,851 $294,851$56,889 $56,889 $56,889 $56,889 $56,889 $56,889 $56,889 $56,889 $56,889 $56,889 $56,889 $56,889 $56,889 $56,889 $56,889 $56,889

$451,099 $450,416 $449,733 $449,051 $448,370 $447,689 $447,008 $446,328 $445,649 $444,969 $444,291 $443,612 $442,935 $442,257 $441,580 $440,904$204,961 $207,284 $209,611 $211,941 $214,275 $216,613 $218,954 $221,299 $223,648 $226,000 $228,356 $230,716 $233,080 $235,447 $237,818 $240,193$88,568 $88,789 $89,011 $89,234 $89,457 $89,681 $89,905 $90,130 $90,355 $90,581 $90,807 $91,034 $91,262 $91,490 $91,719 $91,948

$116,393 $118,495 $120,599 $122,707 $124,818 $126,932 $129,049 $131,169 $133,293 $135,419 $137,549 $139,682 $141,818 $143,957 $146,100 $148,245

29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 4448 45 42 39 36 33 30 27 24 21 18 15 12 9 6 33 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3

45 42 39 36 33 30 27 24 21 18 15 12 9 6 3 03 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3

48 45 42 39 36 33 30 27 24 21 18 15 12 9 6 345 42 39 36 33 30 27 24 21 18 15 12 9 6 3 03 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3

$227,600 $228,169 $228,739 $229,311 $229,885 $230,459 $231,035 $231,613 $232,192 $232,773 $233,354 $233,938 $234,523 $235,109 $235,697 $236,286$682,800 $684,507 $686,218 $687,934 $689,654 $691,378 $693,106 $694,839 $696,576 $698,318 $700,063 $701,813 $703,568 $705,327 $707,090 $708,858

$13,380 $12,517 $11,654 $10,791 $9,927 $9,064 $8,201 $7,338 $6,474 $5,611 $4,748 $3,885 $3,021 $2,158 $1,295 $432$34,140 $34,225 $34,311 $34,397 $34,483 $34,569 $34,655 $34,742 $34,829 $34,916 $35,003 $35,091 $35,178 $35,266 $35,355 $35,443$34,140 $34,225 $34,311 $34,397 $34,483 $34,569 $34,655 $34,742 $34,829 $34,916 $35,003 $35,091 $35,178 $35,266 $35,355 $35,443$6,828 $6,845 $6,862 $6,879 $6,897 $6,914 $6,931 $6,948 $6,966 $6,983 $7,001 $7,018 $7,036 $7,053 $7,071 $7,089

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

$294,851 $294,851 $294,851 $294,851 $294,851 $294,851 $294,851 $294,851 $294,851 $294,851 $294,851 $294,851 $294,851 $294,851 $294,851 $294,851$56,889 $56,889 $56,889 $56,889 $56,889 $56,889 $56,889 $56,889 $56,889 $56,889 $56,889 $56,889 $56,889 $56,889 $56,889 $56,889

$440,228 $439,553 $438,878 $438,203 $437,529 $436,855 $436,182 $435,510 $434,837 $434,166 $433,495 $432,824 $432,154 $431,484 $430,814 $430,146$242,572 $244,954 $247,341 $249,731 $252,125 $254,522 $256,924 $259,329 $261,739 $264,152 $266,569 $268,990 $271,415 $273,843 $276,276 $278,712$92,178 $92,408 $92,639 $92,871 $93,103 $93,336 $93,569 $93,803 $94,038 $94,273 $94,509 $94,745 $94,982 $95,219 $95,457 $95,696

$150,394 $152,546 $154,701 $156,860 $159,021 $161,186 $163,355 $165,526 $167,701 $169,879 $172,060 $174,245 $176,433 $178,624 $180,819 $183,017

Periods Month 12Total Units 155 Plan Sq. Ft. Retail Mix Aggregate Cost AggregateUnit $211,964 1 1,000 $179,990 8 $1,439,920 $74,406 $595,248Appreciation 0.25% per month 2 1,104 $182,990 12 $2,195,880 $76,186 $914,232

0.03 per period 3 1,351 $193,990 12 $2,327,880 $83,395 $1,000,7404 1,418 $196,990 17 $3,348,830 $86,673 $1,473,441

Property Tax Rate 1.27% 5 1,490 $206,990 17 $3,518,830 $95,479 $1,623,143Property Taxes $3,453 per unit per year 6 1,540 $204,990 17 $3,484,830 $92,414 $1,571,038Cost of Sales 6.00% 7 1,586 $206,990 12 $2,483,880 $90,808 $1,089,696Overhead 5.00% 8 1,740 $216,990 15 $3,254,850 $105,723 $1,585,845Other % Expense 1.00% 9 1,898 $231,990 16 $3,711,840 $114,363 $1,829,808HOA $0 per unit per year 10 2,029 $239,990 13 $3,119,870 $119,097 $1,548,261Other "per unit" Expense $0 per unit per year 11 2,305 $247,990 16 $3,967,840 $127,299 $2,036,784Unit Construction Costs $98,505 per unit $211,964 155 $32,854,450 $15,268,236Site Development Costs $26,072 per unit $0 Lot PremiumsProfit 12.00% $0 Model UpgradesDiscount Rate 10.00% $211,964 Adjusted Retail per Unit Cost/Unit $98,504.75Absorption 36 per year

3 units per periodPresales 0Net Present Value $9,014,035

Month 0 1 2 3 4 5 6 7 8 9 10 11 12Units Available 155 149 146 143 140 137 134 131 128 125 122 119 116Absorption 6 3 3 3 3 3 3 3 3 3 3 3 3Remaining Units 149 146 143 140 137 134 131 128 125 122 119 116 113Sales 0 3 3 3 3 3 3 3 3 3 3 3 3

Beginning Inventory 155 149 146 143 140 137 134 131 128 125 122 119 116Ending Inventory 149 146 143 140 137 134 131 128 125 122 119 116 113Sales 7 3 3 3 3 3 3 3 3 3 3 3 3Unit Price $211,964 $212,494 $213,025 $213,558 $214,092 $214,627 $215,164 $215,702 $216,241 $216,781 $217,323 $217,867 $218,411Gross Sales $1,483,749 $637,482 $639,076 $640,674 $642,275 $643,881 $645,491 $647,105 $648,722 $650,344 $651,970 $653,600 $655,234Holding Costs & ExpensesProperty Taxes $3,453 $0 $42,443 $41,580 $40,717 $39,853 $38,990 $38,127 $37,264 $36,400 $35,537 $34,674 $33,811 $32,947Cost of Sales 6.00% $89,025 $38,249 $38,345 $38,440 $38,537 $38,633 $38,729 $38,826 $38,923 $39,021 $39,118 $39,216 $39,314Overhead 5.00% $74,187 $31,874 $31,954 $32,034 $32,114 $32,194 $32,275 $32,355 $32,436 $32,517 $32,598 $32,680 $32,762Other % Expense 1.00% $14,837 $6,375 $6,391 $6,407 $6,423 $6,439 $6,455 $6,471 $6,487 $6,503 $6,520 $6,536 $6,552HOA $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Other "per unit" Expense $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Unit Construction Costs $98,505 $0 $295,514 $295,514 $295,514 $295,514 $295,514 $295,514 $295,514 $295,514 $295,514 $295,514 $295,514 $295,514Site Development Costs $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Total $178,050 $414,455 $413,783 $413,112 $412,441 $411,770 $411,100 $410,430 $409,761 $409,093 $408,425 $407,757 $407,090Net Sales $1,305,699 $223,027 $225,293 $227,562 $229,835 $232,111 $234,391 $236,674 $238,961 $241,251 $243,545 $245,843 $248,144Profit 12.00% $178,050 $76,498 $76,689 $76,881 $77,073 $77,266 $77,459 $77,653 $77,847 $78,041 $78,236 $78,432 $78,628Cash Flow $1,127,650 $146,529 $148,604 $150,681 $152,762 $154,845 $156,932 $159,022 $161,114 $163,210 $165,309 $167,411 $169,516Discount Rate 10.00% 0.83% per periodNet Present Value $9,014,035

Tract 6611 As Complete

13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28113 110 107 104 101 98 95 92 89 86 83 80 77 74 71 68

3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3110 107 104 101 98 95 92 89 86 83 80 77 74 71 68 65

3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3

113 110 107 104 101 98 95 92 89 86 83 80 77 74 71 68110 107 104 101 98 95 92 89 86 83 80 77 74 71 68 65

3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3$218,957 $219,505 $220,053 $220,604 $221,155 $221,708 $222,262 $222,818 $223,375 $223,933 $224,493 $225,054 $225,617 $226,181 $226,747 $227,313$656,872 $658,514 $660,160 $661,811 $663,465 $665,124 $666,787 $668,454 $670,125 $671,800 $673,480 $675,163 $676,851 $678,543 $680,240 $681,940

$32,084 $31,221 $30,358 $29,494 $28,631 $27,768 $26,905 $26,041 $25,178 $24,315 $23,452 $22,588 $21,725 $20,862 $19,999 $19,135$39,412 $39,511 $39,610 $39,709 $39,808 $39,907 $40,007 $40,107 $40,207 $40,308 $40,409 $40,510 $40,611 $40,713 $40,814 $40,916$32,844 $32,926 $33,008 $33,091 $33,173 $33,256 $33,339 $33,423 $33,506 $33,590 $33,674 $33,758 $33,843 $33,927 $34,012 $34,097$6,569 $6,585 $6,602 $6,618 $6,635 $6,651 $6,668 $6,685 $6,701 $6,718 $6,735 $6,752 $6,769 $6,785 $6,802 $6,819

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

$295,514 $295,514 $295,514 $295,514 $295,514 $295,514 $295,514 $295,514 $295,514 $295,514 $295,514 $295,514 $295,514 $295,514 $295,514 $295,514$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

$406,423 $405,757 $405,091 $404,426 $403,761 $403,097 $402,433 $401,770 $401,107 $400,445 $399,783 $399,122 $398,462 $397,801 $397,142 $396,482$250,449 $252,757 $255,069 $257,385 $259,704 $262,027 $264,354 $266,684 $269,018 $271,355 $273,696 $276,041 $278,390 $280,742 $283,098 $285,458$78,825 $79,022 $79,219 $79,417 $79,616 $79,815 $80,014 $80,214 $80,415 $80,616 $80,818 $81,020 $81,222 $81,425 $81,629 $81,833

$171,624 $173,736 $175,850 $177,968 $180,088 $182,212 $184,339 $186,469 $188,603 $190,739 $192,879 $195,022 $197,168 $199,317 $201,469 $203,625

29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 4465 62 59 56 53 50 47 44 41 38 35 32 29 26 23 203 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3

62 59 56 53 50 47 44 41 38 35 32 29 26 23 20 173 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3

65 62 59 56 53 50 47 44 41 38 35 32 29 26 23 2062 59 56 53 50 47 44 41 38 35 32 29 26 23 20 173 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3

$227,882 $228,451 $229,023 $229,595 $230,169 $230,745 $231,321 $231,900 $232,479 $233,061 $233,643 $234,227 $234,813 $235,400 $235,989 $236,579$683,645 $685,354 $687,068 $688,785 $690,507 $692,234 $693,964 $695,699 $697,438 $699,182 $700,930 $702,682 $704,439 $706,200 $707,966 $709,736

$18,272 $17,409 $16,546 $15,682 $14,819 $13,956 $13,093 $12,229 $11,366 $10,503 $9,640 $8,776 $7,913 $7,050 $6,187 $5,323$41,019 $41,121 $41,224 $41,327 $41,430 $41,534 $41,638 $41,742 $41,846 $41,951 $42,056 $42,161 $42,266 $42,372 $42,478 $42,584$34,182 $34,268 $34,353 $34,439 $34,525 $34,612 $34,698 $34,785 $34,872 $34,959 $35,046 $35,134 $35,222 $35,310 $35,398 $35,487$6,836 $6,854 $6,871 $6,888 $6,905 $6,922 $6,940 $6,957 $6,974 $6,992 $7,009 $7,027 $7,044 $7,062 $7,080 $7,097

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

$295,514 $295,514 $295,514 $295,514 $295,514 $295,514 $295,514 $295,514 $295,514 $295,514 $295,514 $295,514 $295,514 $295,514 $295,514 $295,514$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

$395,824 $395,166 $394,508 $393,851 $393,194 $392,538 $391,883 $391,228 $390,573 $389,919 $389,265 $388,612 $387,960 $387,308 $386,657 $386,006$287,821 $290,189 $292,560 $294,935 $297,313 $299,696 $302,082 $304,472 $306,865 $309,263 $311,665 $314,070 $316,479 $318,892 $321,309 $323,730$82,037 $82,243 $82,448 $82,654 $82,861 $83,068 $83,276 $83,484 $83,693 $83,902 $84,112 $84,322 $84,533 $84,744 $84,956 $85,168

$205,784 $207,946 $210,112 $212,280 $214,452 $216,627 $218,806 $220,988 $223,173 $225,361 $227,553 $229,748 $231,946 $234,148 $236,353 $238,561

45 46 47 48 49 5017 14 11 8 5 23 3 3 3 3 2

14 11 8 5 2 03 3 3 3 3 2

17 14 11 8 5 214 11 8 5 2 03 3 3 3 3 2

$237,170 $237,763 $238,357 $238,953 $239,551 $240,149$711,510 $713,289 $715,072 $716,860 $718,652 $480,299

$4,460 $3,597 $2,734 $1,870 $1,007 $288$42,691 $42,797 $42,904 $43,012 $43,119 $28,818$35,575 $35,664 $35,754 $35,843 $35,933 $24,015$7,115 $7,133 $7,151 $7,169 $7,187 $4,803

$0 $0 $0 $0 $0 $0$0 $0 $0 $0 $0 $0

$295,514 $295,514 $295,514 $295,514 $295,514 $197,009$0 $0 $0 $0 $0 $0

$385,356 $384,706 $384,056 $383,408 $382,760 $254,933$326,154 $328,583 $331,015 $333,452 $335,892 $225,366$85,381 $85,595 $85,809 $86,023 $86,238 $57,636

$240,773 $242,988 $245,207 $247,429 $249,654 $167,730

CONSOLIDATED WORKSHEET

ASMT NO ATN / DESCRIPTION DEVELOPMENT AREA DESCRIPTIONNET LAND

AREA EDUPRESENT VALUE PER PAPER LOT


DEVELOPER'SIMPROVEMENTS TO LAND

NOT SUBJECT TO REIMBURSEMENT

ASSESSMENTDISTRICT FUNDED

IMPROVEMENTTOTAL

AS IS LAND VALUE WITHAD FUNDED

IMPROVEMENTS IN PLACE

AVERAGEFINISHED OR RECORDEDLOT VALUE

AGGREGATEFINISHED LOT VALUE WHEN

COMPLETE


OR LANDTOTAL

ASSESSMENT LIEN

VALUE TO LIEN RATIO

1 - 132518-040-08 AND PORTION OF 518-040-09 (PARCEL I OF PARCEL MAP WAIVER NO. 300 AND PORTION OF

PARCEL II OF PARCEL MAP WAIVER NO. 300)

TRACT NO. 6520 PHASE I (132 RESIDENTIAL LOTS) 26.97 132 18,000 2,376,000 688,154 $1,159,783.03 $4,223,937 $72,000 N/A $5,415,554 $1,405,143.86 3.85

133 PORTION OF 518-040-09 (PORTION OF PARCEL II OF PARCEL MAP WAIVER NO. 300)

FUTURE TRACT NO. 6520 PHASE 2 - PORTION (79 RESIDENTIAL LOTS) 15.99 79 18,000 1,422,000 411,850 694,112.57 2,527,962 N/A N/A 2,527,962 840,957.31 3.01

134 518-040-10 (PARCEL III OF PARCEL MAP WAIVER NO. 300)

FUTURE TRACT NO. 6520 PHASE 2 - PORTION (74 RESIDENTIAL LOTS) 18.96 74 18,000 1,332,000 385,783 650,181.40 2,367,965 N/A N/A 2,367,965 787,732.17 3.01

61.92 285 $18,000.00 $5,130,000 $1,485,787.65 $2,504,077.00 $9,119,864 N/A N/A $10,311,481 $3,033,833.34 3.40

135 - 141 AND 143 -290 518-030-10 AND 518-030-11 TRACT NO. 6611 (155 RESIDENTIAL

LOTS) 31.16 155 $18,000 $2,790,000 $4,560,100 $1,478,400.00 $8,828,500 $72,000 $11,160,000 $9,014,035 $1,791,166.66 5.03

31.16 155 18,000 2,790,000 4,560,100 1,478,400.00 8,828,500 72,000 11,160,000 9,014,035 1,791,166.66 5.03

93.08 440 $18,000 $7,920,000 $6,045,888 $3,982,477.00 $17,948,364 N/A N/A $19,325,517 $4,825,000.00 4.01

Notes: The reader may note minor math discrepancies owing to rounding

2/20/2008 8:44 Revised Final

TOTALS/AVERAGES FOR ASSESSMENT DISTRICT 07-2:

TOTALS/AVERAGES FOR SYDNEY HARBOUR AREA - PORTION (TRACT NO. 6611):

ASSESSMENT DISTRICT 07-2



TOTALS/AVERAGES FOR SYDNEY HARBOUR AREA - PORTION (TRACT NO. 6520):

Page 1 AD 07-2 Spreadsheet

C-1

APPENDIX C

FORM OF OPINION OF BOND COUNSEL

Closing Date, 2008

City Council City of Bakersfield 1501 Truxtun Avenue Bakersfield, CA 93301

City of Bakersfield Assessment District No. 07-2

(Sydney Harbour) Limited Obligation Improvement Bonds

(Final Opinion)

Ladies and Gentlemen:

We have acted as bond counsel for the City of Bakersfield (the “Issuer”) in connection with the issuance of $4,825,000 aggregate principal amount of the City of Bakersfield Assessment District No. 07-2 (Sydney Harbour) Limited Obligation Improvement Bonds (the “Bonds”) pursuant to the provisions of the Municipal Improvement Act of 1913 and the Improvement Bond Act of 1915 and Resolution No. 042-08, adopted by the City Council on March 12, 2008 (the “Resolution”). Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Resolution.

In such connection, we have reviewed the Resolution, the Tax Certificate of the Issuer dated the date hereof (the “Tax Certificate”) an opinion of counsel to the Issuer, certifications of the Issuer and others and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein.

Certain agreements, requirements and procedures contained or referred to in the Resolution, the Tax Certificate and other relevant documents may be changed and certain actions (including, without limitation, defeasance of the Bonds) may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. No opinion is expressed herein as to any Bond or the interest thereon if any such change occurs or action is taken or omitted upon the advice or approval of counsel other than ourselves.

The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur. Our engagement with respect to the Bonds has concluded with their issuance, and we disclaim any obligation to update this opinion. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or copies) and the due and legal execution and delivery thereof by, and validity against, any parties other than the Issuer. We have not undertaken to verify independently, and have assumed, the accuracy of the factual matters represented, warranted or certified in the documents, and of the legal conclusions contained in the opinion, referred to in the second paragraph hereof.

Furthermore, we have assumed compliance with all covenants and agreements contained in the Resolution and the Tax Certificate, including (without limitation) covenants and agreements compliance with which is necessary to assure that future actions, omissions or events will not cause interest on the Bonds to be included in gross income for federal income tax purposes. In addition, we call attention to the fact that the rights and obligations under the Bonds, the Resolution and the Tax Certificate may be subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other similar laws relating to or affecting creditors’ rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against cities in the State of California.

C-2

We express no opinion on the plans, specifications, maps and other engineering details of the proceedings, or upon the validity of the individual separate assessments securing the Bonds which validity depends, in addition to the legal steps required, upon the accuracy of certain of the engineering details. Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Bonds and express no opinion with respect thereto.

Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions:

1. The Bonds constitute valid and binding special assessment obligations of the Issuer, payable solely from and secured by the unpaid assessments and certain funds held under the Resolution.

2. The Resolution has been duly adopted and constitutes a valid and binding obligation of the Issuer.

3. Interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of California personal income taxes. Interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although we observe that it is included in adjusted current earnings in calculating corporate alternative minimum taxable income. We express no opinion regarding other tax consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the Bonds.

Faithfully yours, ORRICK, HERRINGTON & SUTCLIFFE LLC per

D-1

APPENDIX D

ASSESSMENT DIAGRAM

/ 56•

NORTH NO SCALE

BAKERSFIELD

NOTE:

for a detailed description of the Hnes and dimensions of the lots, pieces, parcels ond subdivisions of londs shown on thts Assessment Diagram, reference. is mode to the following listed Book and Page Numbers of Mops of the Assessor, on file in the Office of the County

ASSESSMENT DIAGRAM OF

~~t~~!fi~!d,f ~~~fo~~~0~ty of Kern, 1115 Truxtun Avenue,


County of Kern, State of California 518-03 and 518-04

~ SHEETNO. ~

1 Assessment District LOCQtion Mop, Vicinity Map, and Oiogram <Mtificates Index Mop of ~sessment Diagram Sheets 3 and 4

Assassm"nt O!OJgn::tm of Assessments 1 through 132 in Tract No. 6520-Phos-e 1. Assessment 1.33 as a Remainder Parcel of Pore~ Map Wolver No. 300 Parcel II per Tract No. 6520-Phose 1, and Assessment 1J4 a~ Porcet Mop Waiver No. 300 Parcel Ill In the. Sydney Horbour Areo-Portton {Troet No. 6520) of Assessment District No. 07-2

t;ss~:~~~e~fa.t~~u~f .t::%~~~s d~~tth~~g~612f)4 ~r 1;:!.~~-nt6611 District No. 07-2

SYDNEY HARBOUR AREA OF ASSESSMENT DISTRICT NO. 07-2

PREPARED BY: WILSON & ASSOCIATES fresno, CoHfornl~ C\ (\ .-r · APPROVED BY: -~~--' r}~_ DATE: -~~t>_:?_L

Edward J. Wilson R.C.E. 23269 (Expires 12-31-09) Assessment Engineer

BY• Cl....Ltf. ll'V ~ PAMELA A. McCAR!HY, CMC CITY CLERK OF THE CITY Of BAKERSFIELD, CAUFORNIA

~.*:R~~D ~U~~~N\{.F'ii.~s o~z~-S~n>~;E~~~~~. T~g,~.ITY OF BAAB<SFIELO.

BY>--~~---RAUL ~. ROJAS SUPERINTENDENT OF STREETS OF IHE CITY OF BAKERSFlELD, CAUFORNO\

AN ASSESSMENT WAS LEVIED BY THE CllY COUNCIL OF THE CITY OF BAKERSFIELD ON THE LOTS, PIECES, AND PARCELS OF lAN.Q. ~WN ON T~ASSESS~ DIAGRAM. THE ASSESSMENT WAS LEVIED ON THE ...::::t) __ DAY OF ~M .u!........ , 2008, BY SAID COUNCIL'S ADOPTION OF ITS RESOLUTION NO. ~· HE ASSESSMENT DIAGRAM

~~~~}~ :sf~t~ Roo,uT~t~l~'le.~ 6~ ~~~:_.s~bgfNr~~f~Ng~ IS MADE TO THE ASSESSMENT ROLL RECORDED IN THE OFtlCI; OF THE SUPERINTENDENT OF STREETS FOR THE EXACT AMOUNT OF EACH ASSESSMENT LEVIED AGAJNST EACH PARCEL Of LAND SHOWN ON THIS ASSESSMENT DIAGRAM.

BY:~6~ PAMELA A. UcCARTHY, CMC C~TY CLERK OF THE CITY OF 8AI<ERSFIELD, CALIFORNIA

FjLEO THIS _I/ DAY OF *".ty~rs, , 2008, AT THE HOUR OF f.~ o'CLOCK

tr·~AG~S B~u?iH ~-?~N AS~~~~~~'%'? T~~M~~~~t F~6~~5iRD~ffi~~~ COU~TY OF KERN, STATE OF CALIFORNIA. RECORDED AT THE R:OYJ~-~C~ OF BAKERSFIELD.

DOCUMENT N0.~8p..i.B.8._.r:..__ BY~ 0,7 >

JAMES W. FITCH

CROSS INDEX TO BOUNDARY MAP:

COUNTY ASSESSOR-RECORDER COUNTY OF KERN. CAUFORNIA

ON THE JJ:.."" DAY OF ~~~. 200], THE CITY" OF BAKERSFIELD DID FILE ITS MAP

~6ciKR~~fj,O J,WsN~~R~~:S5~~T CfNoBAt5~~~::g. ~~~fc¥,~EN);~~Tc~~T A~0PA8~s2 ,\)I THROUGH 1,1,_, IN THE OFFICE OF THE COUNTY RECORDER OF THE COUNTY OF KERN -STATE OF CAJJFORNIA. • /) r:-/J _ ' '

~=~~~ JAMES W. FITCH - (/ COUNTY ASSESSOR-RECORDER COUNTY Of KERN, CALIFORNIA

ASSESSMENT DIAGRAM OF LOCATION MAP OF

ASSESSMENT DISTRICT NO. 07-2

WILSON & ASSOCIATES

7600 N. INGRAM AVENUE, SUITE 202 fRESNO, CAUFORNIA 9371 1

(559) 436 6<144

OR. BY .!!:!f.__ DATE .!J.::Z:i!L PROJECT~ REVISION .QQ.__ FILE ~ APPRIM!J ~


County of Kern, State of California SHEET __1__ OF _4 _ SHEETS

' ----------L..............--~--------

23

26

I I

24

~--+ McK£[ ROAD 35

IQ

~~ :~

______ l~---------1 I

I

19

PACHECO ROAD ------------·-

20 21

28

INDEX MAP OF ASSESSMENT DIAGRAM SHEETS 3 AND 4

T 30 S, R 28 E

31

K.C.R.

ASSESSMENT DISTRICT NO. 07-2 EXISTING BOUNDARY

SECTION UN£

REFE-RENCE TO TOWNSHIP 30 SOUTH, RANGE 28 EAST. MOUNT DIABLO BASE AND MERIDIAN

SECTION NUMBER

KERN COUNTY RECORDS

OFFICIAL RECORDS

REFERENCES MOUNT DIABLO BASE AND MERIDIAN

INDICATES LAND AREAS WITHIN EXISTING BOUNDARIES OF ASSESSMENT DlsYRJCT NO. 07-2

NOTE'

1. ALl PROPERTIES JN ASSESSMENT DISTRICT NO. 07-2 ARE LOCATED WITHIN THE EXISTING CORPORATE BOUNDARIES OF THE CITY OF BIAKERSnELD.

WILSON &: ASSOCIATES

7600 N, INGRAM AVENUE, SUIT£ 202 FRESNO, CAUfORNIA 93711

(559) 436 6644

OR. BY..!.!!-- OAT£ l.1.:=Z:;QL PROJECT .2ill£L RE'i!SiON .QQ._ mE ~ APPROVED ~

NORTH ;;;;; a· tooo' 2()(J()' 4000'

ASSESSMENT DIAGRAM OF CITY OF BAKERSFIELD ASSESSMENT DISTRICT NO. 07-2

(SYDNEY HARBOUR)

County of Kern, State of California SHEET _ _z__ OF _ _i__ SHEETS

r--------------------------------------------------------------------------------------------------------------------------------------------------~ ASSESSMENT DIAGRAM OF ASSESSMENTS 1 THROUGH 132 IN TRACT NO. 6520-PHASE 1, ASSESSMENT 133 AS A REMAINDER PARCEL OF

PARCEL MAP WAIVER NO. 300 PARCEL II PER TRACT NO. 6520-PHASE 1, AND ASSESSMENT 134 AS PARCEL MAP WAIVER NO. 300 PARCEL III IN THE SYDNEY HARBOUR AREA-PORTION (TRACT NO. 6520) OF ASSESSMENT DISTRICT NO. 07-2

REMAINDER PARCEL OF PARCEL MAP WAIVER NO. 300

PARCEL II [ill]

PORTION OF

518-040- @l


-- - - -- SECTION U/'IE

518-040- tj_?; KERN COUNTY ASSESSOR'S TAX NUMBER (ATN)

PARCEL NUMBER

PAGE/BLOCK NUMBER

BOOK NUMBER

I12Q} NEW .ASSESSMENT NUMBER, ASSESSMENT DJSTRIGr NO. 07-2

W 1/4 CCR, SEC 29

T 30 S, R 28 E

K.C.R.

REFERENCE TO SECTION OR FRACTIONAL SECTION CORNER

REFERENCE TO TOWNSHIP 30 SOUTH, RANGE 28 EAST, MOUNT DIABLO BASE AND MER!OIAN

kERN COUNTf RECORDS

OR. OFFICIAL RECORDS

MOB & M

t ® 6

REFERENCES MOUNT DIABLO BASE N>£> MERIDIAN

CENTER LINE Of ROAD RIGHT -OF-WAY

NUMBER OF ADJACENT DIA.GRMI SJ.£ET

LOT Nl..IMBER IN TRACT NO. 6520-PHASE 1

NORTH SCALE 1" = 150' l k - ~.-- ----- • - --- J oe;- 75' t!IJ1 j()()'

I

I I

I I

I .

PARCEL MAP WAIVER NO. 300 PARCEL Ill

liE]

518-040- ([0

SYDNEY HARBOUR AREA-PORTION (TRACT NO. 6520)

NOT(:

1. THIE SYDNEY HARBOUR AREA OF ASSESSMENT OISTRICT NO. 07-2 IS LOCATED IN PORTIONS OF SECTION 29, T 30 S, R 28 E. MOB & M, WITHIN THE CORPORATE BOUNDARIES OF THE CITY OF BAKERSFIELD.

~AP AND DOCUMENT REFERENCES:

1. TRACT NO, 6520-PHASE 1 RECOROED JUNE 26, 2007, IN BOOK 58 OF MAPS, AT PAGES 44 THROUGH 46, K.C.R.

2. CERTIFJCATE OF COMPUANCE FOR PARCEL MAP WANER NO. 300 RECORDED NOVEMBER 13. 198 !, IN BOOK 5418, AT PAGE 915, O.R.

3. PARCEL MAP NO. 3913 RECORDED SEPTEMBER 6, 1977, IN BOOK 19 OF PARCEL ~APS, AT PAGE 40, K.C.R.

4. KERN COUNTY ASSESSOr($ MAP FILED IN ASSESSOR'S MAP BOOK 518 AT PAGE 04.

WILSON & ASSOCIATES

7500 H. INGRAM AVENUE, SU!lt 202 FRESNO, ~U<ORN~ 93711

(559) 436 6644


(SYDNEY HARBOUR)

County of Kern, State of California SHEET 3 OF 4 SHEETS

ASSESSMENT DIAGRAM OF ASSESSMENTS 135 THROUGH 294 IN TRACT NO. 6611 IN THE SYDNEY HARBOUR AREA-PORTION (TRACT NO. 6611) OF ASSESSMENT DISTRICT NO. 07-2

-- - - - - - - - - - - - . - - - - - - - -_ ...................... .AR~~ :E~saN: cA~Ac : : : : · · · · · · · · · · · · - · · · · · · · · · · · · · -- - - - - - - - - - - - - - - - . - - - - - - ... - - - - - . - - - - - - ~ ~- - ~ ~ ~ ~ ~ ~ ~ ~ ~ - ~ - ~ - - - - ~ ~ ~ - ~ ~ -

SYDNEY HARBOUR AREA-PORTION (TRACT NO. 6611)

NOTE:


-- - - -- SECTION LINE

518-().30- Q:J) KERN COUNTY ASSESSOR'S TAX NUMBER (ATN)

T L____ PARCEL NUMBER

L PAGE/BLDCK NUMBER

BOOK NUMBER

~ NEW ASSESSMENT NUMBER. ASSESSMENT DISTRICT NO. 07-2

N 1/4 COR, SEC 29 REfERENCE TO SECTION OR FRACTIONAL SECTION CORNER

T30S,R28E

K.C.R. Q.R.

MOB & M

~ Q) 6

REFERENCE TO TOWNSHIP 30 SOUTH, RANGE 28 EAST, MOUNT DIABLO BASE AND MERIDIAN

KERN COUNTY RECORDS

OFFICIAL RECORDS

REFERENCES MOUNT DIABLO BASE AND MERIDIAN

CENTER UNE OF ROAD RIGHT-OF-WAY

NUMBER OF ADJACENT DIAGRAM SHEET

LOT NUMBER IN TRACT NO. 6611

NORTH SCALE J" = 1150'

1. THE SYDNEY HARBOUR AREA OF ASSESSMENT DfSTiiiCT NO. 07-2 IS LOCATED IN PORTIONS OF SECTION 29, T 30 S, R 28 E, MOB &: M, WITHIN THE CORPORATE BOUNDARIES OF THE CllY OF BAKERSFIELD.

MAP AND DOCUMENT REFERENCES:

1. TRACT NO. 6611 RECORDED APRIL 17, 2007, IN BOOK 57 OF MAPS, AT PAGES 153 THROUGH 156, K.C.R.

2. KERN COUNlY ASSESSOR'S MAP FILED IN ASSESSOR'S MAP BOOK 518 AT PAGE 03

WILSON &: ASSOCIATES

7600 N, INGRAM AVENUE, SUITE 2{)2 FRESNO. CALIFORNIA 9.3711

(559) 436 6644

OR. 81'~ DATE 11-7-07 PROJECT ..2:2.W.. REVISION !1Q___

FilE ~ APPROVED _k.


{SYDNEY HARBOUR)

County of Kern, State of California SHE£T __ 4__ OF _.±__ SHEETS

E-1

APPENDIX E

ASSESSMENT ROLL AND VALUE-TO-LIEN DATA

AD 07-2 ASSESSOR'S TAX '""~<'<' .~ .. T

0~UMBERj~f'!)N NUMBER OWNER'S NAME

APPENDIXE

CITY OF BAKERSFIELD ASSESSMENT DISTRICT NO. 07-2 ASSESSMENT ROLL AND VALUE-TO-LIEN DATA

01 ~IGINAL. BONI •SALE 04/2008 ·s ,.,:~.,~7~~NT APPRAISED

VALUE (1) VALUE(2) AMOUNT(3) LIEN (4) OLUMN OLUMN 2 OLUMN 3 .UMN 4

I SYDNEY HARROIII~ AREA · PORTION (TRACT NO. 6520) IRAC . NC 51 UARl THOMAS, INC , dba LENOX HOMES i41 02i ,645.03 3.85 IRAC 'Ni 0-P 2 UARl THOMAS, INC , dba LENOX HOME: i41 02~ ,645.03 3.85 IRAC 'Ni 1-P 3 UARl THOMAS. INC . dba LENOX HOME: i41 02~ ,645.03 3.80 IRAC 'NI 4 UARl THOMAS, INC , dba LENOX HOME: i41 02i ' 45.03 3.85 IRA( 'NI 5 UARl rHOMAS, INC , dba LENOX HOME: i41 02~ ' 45.13 3.85 IKA{ Nl ti UARl rHOMAS, INC . dba LENOX HOME: i41 02~ ' 45.13 3.85 IRA I Nl UARl [HOMAS , INC , dba LENOX HOME: i41 02i ' 45.03 3.85 RAI 8 UARl fHOMAS , INC , dba LENOX HOMES i41 02i ' 45.03 3.85 RAI '65 9 UARl rHO MAS , INC , dba LENOX HOME: i41 02~ 45.03 3.85

~· UARl fHOMAS . INC . dba LENC : HOME: i41 u~. ' 45.13 3.85 RAI UARl THOMAS , INC , dba LENOX HOME: i41 027 ' 45.03 3.85

12 RAI . 65: 0-PHA:)E 12 JARl THOMAS , INC , dba LENOX HOME: i41 02~ .645.13 3.85 13 ~· 13 JAR THOMAS. INC . dba LENOX HOME: i41 02~ .645.13 3.85 14 RA• 14 >ME UAR1 [HOMAS, INC., dba LENOX HC ;41 02< ,645.03 3.85 15 rRAC 'N• 15 >ME UARl rHO MAS, INC., dba LENOX HC i41 02~ ,645.03 3.85 16 IKAt N• 16 )ME UARl THOMAS. INC .. dba LENOX HC i41 02~ .645. )3 3.85

IRAC . N• UARl fHOMAS, INC., dba LENOX HOME: ;41 02< ,645.03 3.85 18 rRAC . N• 18 UARl THOMAS, INC., dba oNOXHOME: i41 02~ ,645. )3 3.85 19 rRAC 'N• 19 UARl rHOMAS, INC .. dba oNOXHOME: i41 02~ ,645. )3 3.85 20 IRAC . Nl fPHo )E 2[ UARl THQIIIIt<§" LNC . ,_g_ba oNOXHOME 02< ,645.03 _3~85 2 rRAC 0-PH. )E 2' UARl THOMAS, INC , dba :NOXHOME: ;41 02< 3.85

rRAC 22 JARl THOMAS, INC., dba 'NOXHOME: 3.85 rRAC 23 JARl THOMAS, INC , dba oNOXHOME: 3.85 I RAt 24 JMAS JARl THC . INC . dba oNC :HOME: 3.85 IRAC 25 )MAS JARl THC , INC , dba oNOX HOME: 3.85 rRAC . N• 26 JMAS JARl THC , INC , dba LENOX HOMES ,645.03 3.85 rRAC . N• . 65 PHA: 2~ )MAS UARl THC , INC , dba LENOX HOMES N/A ,645.13 3.85 IKAt .N, 28 )MAS UARl TH( , INC , dba LENC : HOMES N/A ,645. )3 3.85 fRAC . Nl 29 JMAS UARl THC , INC , dba LENOX HOMES Nh ,645.03 3.85 rRAC . N• UARl THOMAS , INC , dba LENOX HOMES N/A ,645.03 rRAC . N1 JMA: INC .. dba LENOX HOMES UAR' fHC N/A fRAC ·N· JMA: UAR' fHC INC .. dba LENOX HOMES N/A ,645.03 rRAC . N< )MA: 5~ UAR' fHC INC .. dba LENOX HOMES N/A ,645.03 rRAC

:~:{i 51 JAR~ fHC )MA: INC .. dba LENOX HOMES N/A ,645.03

fRAC 51 JAR' fHC )_f;1A: INC., dba LENOX HOMES N/A ,645.03 rRA 36 JAR1 fHC )MA: INC., dba LENOX HOMES N/A 02 ,645.03 IRA N• 3' JAR1 fHOMAS. INC .. dba LENOX HOMES N/A 02 ,ti45. )3 rRA ·N· 38 JAR1 fHOMAS, INC., dba LENOX HOMES N/A 02 ,645.03

39 rRA• 'N• 39 UAR1 fHOMAS, INC., dba LENOX HOMES N/A 02, ,645.03 40 IKA• N• 40 UARl rHO MAS. INC .. dba LENOX HOMES 02, .645.03 41 rRA• ·N· 4' UARl fHOMAS, INC., dba LENOX HOMES 02< ,645.03 42 rRAC . N• 42 UARl rHO MAS, INC., dba LENOX HOME ;41 02, ,645.03 3.l5 43 IKAt N• 43 UARl fHOMAS INC .. dba LENOX HI :JME 041 02' .645. )3 3.l5 44 fRAC . N• 44 UARl THOMAS :JME , INC., dba LENOX HI ;41 02< ,645.03 3.l5

rRAC . N• 45 UARl fHOMAS :JME , INC., dba LENOX HI i41 02~ ,645.03 3.85 rRA•

-~:~>E 46 UAR THOMAS INC , dba LENOX HI >ME N/A i41 02~ ,645. 3.85

rRA• 4< UARl THOMAS . INC .. dba LEN< :HI >ME Nh i41 02< ,645. 3.85 rRA• 48 UARl THOMAS , INC., dba LEN< JXHI >ME N/A i41 02i ,645. 3.85 ~ >TUAR' fHOMAS , dba oNilXH >ME N/A w .021 3.85 ~ JAR' rHOMAS I ba .H>MES <A JAR' fHOMA: ba .H•>MES '.A JAR~ fHOMA: ba :HI >MES ~ JAR1 fHOMA: I ba .H>MES ~( 'NI 54 JAR1 fHOMA: I ba .E~ )X HOMES ,645.03

55 rRA< 'NI 55 UARl fHOMA: IN< ., dba .E~ JXHOMES N/A ;41 ,645.03 3.85 56 fRAI 'NI 56 UAK IHOMA: IN< ., dba .E~ JXHOMES N/A ;41 ,b4o.U;j 3.85

'&VJ >LUE DATA FOR FUTURE TAX YEARS

i"""t:";)UK'" ,., TOTALV~~D

<<'<'~<'<'U~•<T '" f1M~~~~7s~N VALUECSl I+ I BALANCE (1/1/ LIEN (6)

.UMN 5 OLUMN 6 COLUMN OLUMN 8 COLUMN 9

APPENDIXE


AD07-2

NUMBER

ASSESSOR'S TAX

NUMBER_!~:!:.~. OR Ut:::St;Kit-' II UN

57 TRACT NC ~0-PHAI >E 1, LOT 57 58 59

RAC 0-PHAI iE • 58 RAC ; 59

60 RAC 0-PHAI iE · 60 61 62 63

'AC 0-P 61 'A( 62 'Al 63

64

!AC RAC

'2 RAC '3 !AC '4 !AC

~A•

~· 90 fRAC 'NC 91 fRAC Nl 92 IKAI - Nl

. 6520-PHAI >E

PHA

93 TRAI 'NC-94 TRAI . Nl

l---9;o,;.-5--+.oT~RAI~-N~l \:St:

96 IRAI - Nl 97 TRAI . Nl

'Uii !A 'Uii 'Uii ~

l-PHAiiE

;a

8( 81 82 83 84 85 86 8: 88 89 9( 91 92 93 94 9b 96 9: 98 99 10 101 102

OWNER'S NAME

s· UAR" fHOMAI • INC • dba LENOX HOMEI s· UAR" fHOMAI INC .• dba LENOX HOMEI s· UAR" fHOMAI INC .. dba LENOX HOME s· UAR. fHOMAI INC .• dba LENOX HOME s· UAR" fHOMAI INC .• dba LENOX HOME s· UAR" fHOMAI . INI .. dba LENOX HOME s· UAR" fH JMAI • INI . dba LENC , HOME STUAR" fH lMAI • INI , dba LENOX HOME Sl UAR" TH >MAl , INI • dba LENOX HOME

UAR' TH lMAI , INI . dba LENI lX H >ME UAR" TH lMAI , INI . dba LENI : H· lME UAR' TH lMAS, INI , dba LEN! lX H lME UART THOMAS. INC . dba LEN! )X H >ME JAR" THOMAS. INC . dba .ENI : H lME

UAR" THOMAS, INC , dba LENOX H IME UAR' TH lMAI , INI . dba LENI lX HOME UAR" TH lMAI , INI . dba LENOX HOME UAR" TH lMAI , INI , dba LENOX HOME

STUAR' TH lMAI . INI . dba LENOX HOMEI JAR' TH lMAI , INI lba lX HOMEI JAR" TH lMAI , INI lba , HOMEI JAR" TH lMA: , INI , lba : HOMEI JAR' TH lMAI . INI lba JX HOMEI JARl TH >MP> . INI , lba JX HOMEI

Sl JARl JMAI . JNI , lba ENOX OMEI Sl JAR" lMA: . INI , lba :NOX JMEI Sl UARl JMA: , IN• , lba :NOX OME: Sl UAR1 lMA: . IN• , dba .ENOX )ME: Sl UAI . IN• . dba .EN• )X >ME: Sl UARl lMP> , IN• , dba .EN• JX >ME: Sl UARl TH JMA , IN• . dba .EN• JX HI >MEl Sl JARl TH lMAI , INI , dba .EN• JX HI JMEI Sl UAR' TH lMAI . JNI . dba .ENI JX HI lMEI Sl UARl TH lMA: . INI . dba .ENI lX HI

JARl TH JMA: . INI , dba .ENI )X HI JARl TH lMA: , INI , dba .ENI JX HI JARl TH >MAS, INC , dba .EN• )X HI JARl THOMA: , IN• . dba .EN• )X HI JAI . IN• dba .EN• JX HI JARl TH ::JM1 , IN• , dba .EN• JX HI JARl TH )MA , IN• , dba .ENOX HC•ME

UARl TH JMA . IN• . dba ~ENOX HOME: UARl TH )MA , IN• , dba LENOX HOME: UARl TH JMA . IN• . dba .EN• JX HOME UARl TH JM1 ,_IN• . dba .EN• JX HOME· UARl TH JMA . iN' , dba .EN• JX HOME UARl JMA . iN' , dba .EN• )X ::>MI JARl TH JM1 . iN' . dba .EN• JX JMI JARl JM1 . iN' . dba .EN• JMI JARl TH lMA: , IN• , dba :N• lX JME JARl TH lMA , IN• , dba )X •MI JARl TH lMA >a ::>X •MI

'Uii ji UARl TH JMA >a JX

r-~~--~~'UI/~Hm~ ~~~~~~f.H--~U~A\~IRT~HJ~MA~~~>~a~~~~ !A UARl TH JM1 >a )X !A . 6520- UARl TH ::JMA >a JX •ME: -<A . 6520-PHAiiE -13 Sl UARl THOMA , dba LENOX HI JMES

.v

VALUE11l COLUMN 1

N/A N/A 1/A

N/i N/A N/A N/i Nh

NIA N/A Nh N/A N/A N/A N/A N/A N/A N/A N/A N/A

/A /A /A /A /A /A

N/A N/A N/A N/A N/A N/A N/A

/A /A /A /A /A 1/A IIA

N/A

. BOND SALE 04/2008 AD 07-2 "v~~

APPRAISED VALUE (2) AMOUNL{3l COLUMN 2 COLUMN 3

2

i41 .027 >10.645.03 ,02: ,645.03

i41 ,027 ,645. )3 i41,02 i10.645. )3

i41 >10,645.03 i41 i41 i41 i10.645.03

i41 i41 i41

;.41 )27 >41 02j S41 02< >41 027 >41 02j S41 02< >4' 02< >41 02< S4' 02< ;.41 027 >41 027 S41 02• S41 027 S41 027 >41 02j 041 oz; w 02< >41 02j >41 02j w 02< >41 S4' S4' >41 S4' S4' S41

>10,645.03

i10 645.03

>10 645.03

i10.645.

1.6• 1,6•

ilO 64~ >10,645. ;1o 645!

;1a 645.• ;10,645.03 ~1064503

i10,645.03

641 03 641 .D3

64: ;1a 645.'

;1a 645.' ;10,645.0: >10.645.0: o10,645.m ;10,6< ;1o.6•

1.6' i10,6< i10,6<

LIEN(4) OLUMN 4

3.85 3.85

.85

.85

.85

.85

.85

.85

.85

.85

.85

3.85 3.85 3.85 3.85 3.85 3.85 3.85

.85

.85

.85

.85

.85

.85 3.85 3.85 3.85 3.85 3.85 3.85 3.85

3

3

3.85

. & VALUE DATA FOR FUTURE TAX YEARS

•K':sjiMP'RO\/EMIE:-~:sfll TOTAL VALUES "'' , v

V~UE 15) VALUE !5l I+ I • :LAND I BALANCE (111/_ LIEN (6) COLUMN 5 COLUMN 6_ .UMN COLUMN 8 COLUMN 9

AD07-2

NUMBER

114 115 11B

118

131 132

133

134

I SYDNEY 135 136 137 138 139 140 141 142 143

149 150 151 152 153 154 155

161 162 163 1B4 1Bi:>

APPENDIXE


ASSESSOR'S TAX

0~UMBERJ~INJ. OWNER'S NAME

rRAI :T Ni . "' LOT 114 STUART THOMAS. INC., dba LENOX HOME! rRAI Ni . 115 s· UAR' fH JMAS. INC dba .ENOX HOME!

s· UAR. TH JMAS, INC , dba .ENOX HOME:! STUAR' TH JMAS, INC , dba .ENOX HOME! STUAR' TH JMA: , INC , dl!a JX HOME!

IKAI N1.6520-PHAi)E 116 fRAI 'NI fRAI "NI rRAI rRA• fRAI fRAI rRAI fRAI

tAC

. 6520-PHA: ;E

. 6!

. o: 'HA:

'61

. 6520-P~

118 119 120 12'

JT 122 123 124

s· UAR' TH JMA: , INC dba )X HOMES s· UAR" TH JMA: , INC . dba : HOMES STUAR' THJMA: , INC , dba >X HOMES Sl UAR' THOMA , INC , dba )X HOMES

JARl THOMA: , INC , dba JX HOMES JAR' THOMA , INC , dba JX HOMES JARl TH:>MAS,INC, dba OMES JAR" TH:>MAS, INC , dba JMES JAR1 TH )MAl , INC , dba OMES

s· UAR' TH >MAl , INC , dba OMES STUAR' TH >MAl , INC , dba OMES STUAR' TH >MAl , INC , dba .ENI JX HOMES

rRA< . NC . 6520-PHASE rRAC . NC

s· UAR' TH >MAl , INC , dba .ENOX HOMES s· UAR' TH >MAl , INC , dba .ENOX HOMES

PORTION OF 518-040-09 (PORTION OF II OF PARCEL MAP STUART THOMAS, INC., dba LENOX HOMES

WAIVER NO. 300)

518-04~;g ~~~~~L ~~~~:o~CEL STUART THOMAS, INC, dba LENOX HOMES

SYDNEY :AREA - PORTIO! TRACT NO. 6520)

t AREA · PORTION (TRACT NO. 6611) fRAC . N< . 661 Sl UAR" THOMAS, IN , dba cEN• )X HOMES rRAC . N< . 661 2 Sl UARl THOMAS, IN• , dba LEN• JX HOMES rRA• . N( . 661 3 Sl JARl THOMAS. IN• , dba LEN• )X HOMES IRA• . Nl . 661 4 S1 JAR" THOMAS, IN- . dba LEN• )X HOMES IRA• . Nl . 661 5 Sl UAR1 THOMA , IN• , dba LEN• )X HOMES fRAI . N( . 661 · 6 STUAR' THI JMA: , IN• , dba .ENI )X HOMES rRAI . N( , 661 s· UAR' THI JMA: , IN• , dba .ENI . HOMES I RAI . N< , 66' 8 STUAR. THI >MA: , IN• , dba .ENI JX HOMES rRAC . N< . 66' 9 S1 UAR' THI JMA: , IN• , dba :NOX HOMES rRAC . N( , 661 10 s· UAR' THI JMA: , IN• , dba :N1 >X HOMES fRAC . N< . 66' STUAR' THI JMA: , IN• , dba :N• )X HOMES

lAC 12 UAR' TH >a :N• )X HOME! tAl JAR" TH >a :N• : HOMEI tAC 14 UAR' TH >a :N• JX HOME! tAC 15 UAR' TH >a .EN• >X HOME: tAC 16 JAR. TH >a .EN• )X HOMEI

rRAC . N• 17 UAR' TH:>MAS INC , dba cEN• )X HOME: rRAC . N• 18 JAR1 TH:>MAS jba )X HOME! I KAl N• 19 JARl THJMAS jba JX HOME: fRAC . N• ; 20 JAR" TH :>MAS jba : HOMEI ~AC z· JAR1 TH jba )X HOME: ~ . 6E ; JAR1 TH jba >X HOME (AI . tit JAR' jba JX HOME (AI . 6! JAR" jba JX HOME ~~ . 61 JAR" jba :HOME

. 66" JAR' JMA: , IN( , dba JX HOME tAC . 661 JAR' JMA: , INI , dba JX H )M tAC . 661 UAR1 THOMA: , IN( , dba )X H• )M :Al . 661 UARl THOMA , INI dba ~EN• JX HOM :AC . 661 JAR" TH:>MA ,IN( , db8.EN1 JX_HJM

IRAC . NC. 661 UAR" THOMAS, INC , dba ~EN• JX HOM

ORIGIN.A . BOND SALE 04/2008 . & VALUE DATA FOR FUTURE TAX YEARS , ~ AD 07-2 nr <V'II<:>t:U I ASSESSOR'S un""'"'""::, TOTAL VALUES

VALUE (1) A~:~~~~ AMOUNT (3) LIEN (4) VALUE (5) l"'"vALUE,CSl" ; LAND BALANCE (1/11_ LIEN (6) COLUMN .UMN .UMN OLUMN 4 OLUMN 5 COLUMN 6 COLUMN COLUMN 8 COLUMN 9

N/A N/A N/A IIA IIA 1/A 1/A 1/A

N/A N/i N/A N/A N/i N/A N/A N/A N/A N/A N/A

N/A

i41 027 i41 027 i41 027

i41 )27 i-41 02< i-41 027

i41 )27 i41 027 i-41

$2,527,962

i10,645.03

;10,645.03 ;10,645.03 ;10,645.03

>10,044.93

$840,957.31

85 85 65 85 85 85

1.8! 3.6! 3.8! 3.8: 3.6! 3.8!

3.01

$4,154,052 $2,367,965 $787,732.17 3.01

N/A $1 0,3' 1,481 3.40

N/A ;sa 155 555.9~ 5.03 N/A ;sa 155 555.91 5.03 N/A )58 15~ 5i:>:i.91 5.03 N/A ;sa 155 5.03 N/A S58 155 555.9' 5. N/A >58 1.91 5. N/A •.91 5. N/A 1.00 N N/A >58 1.91

>1:>.~1

N/A )56 i5.91

5. 5. 5. 5.03

155 555.91 5.03 1i:>b 5.03 155 555 5.03 155 555.

N/A N/A 1/A

N/i N/i N/A N/A N/A N/i N/A 5.03

3

AD 07-2

NUMBER

166 167 16a 169 170

rz 173 174 175 176

17a 179 180 181 182

2C 2C 2C 2C 20 2C 2C 20 20a 209 210

221 222

ASSESSOR'S TAX NUMBER_(~!"!>.

OR I

TRACT NO. 6611; LOl 32 TRAC . NC. 661 33 TRAC . NC. 6611 34 fRAC NC. 661 35 ~AC NC. 661' 36 tAC NC. 661' 3; (AC NC. 661 38

NC. 6E NC. 6E NC .6E

. 6E

. 6E

. 6E

. 6E TRAI Nl . 6 46 lt~AI Nl . 6 4; fRAI Nl . 6 48 TRAI Nl . 6 49 IKAI Nl . 6 5C fRAI - Nl . 6 5' rRAI N .6

AAI N .6 AAI 'N ~AI N .6 AAI N .6

RA AA AA

TRA . Nl . 661' TRA Nl . 6611 IKA Nl 66' IRA 'NI .66' IRA . Nl . 6611 fRA Nl 66' rRA .6 rRA rRA .6

AA

AA AA

rRAC Nl . 661' a; IRAC . Nl 66' aa

APPENDIXE


OWNER'S NAME

STUART THOMA , INC., dba LENOX HOMES 51 UAI , INC , dba LENOX HOMES S' JARl THI JM1 . IN• . dba LENOX HI JME 51 UARl rHI JMA , IN· , dba LENOX HI JME 51 UARl THI JMA . IN· , dba LENOX HI JME 51 JARl THI JM1 . IN . dba LENOX HI JME 51 UAR1 rHI JMA , IN· , dba LENOX HI JME 51 UAR1 rHOMAS, INC , dba LENOX HOMES

UARl THOMA~ • INI . dba LENOX HOMES UAR1 rHOMA~ . INI . dba LENI ~ HOMES UAR1 rHOMAi , INI , dba LENOX HOMES JAR1 rHOMAi • INI . dba LENOX HOMES JAR1 rHOMAi INI . dba LENI ~ HOMES

UAR1 rHOMAi , INI , dba LENOX HOMES JAR1 rHOMAi INI . dba LENOX HOME JAR1 rHOMAi , INI .. dba LENI ~ HOM_E. JAR1 rHOMAi , INI ., dba LENOX HOME

UAR1 rHOMAi INI . dba LENOX HOME JAR1 rHOMAi INI . dba LENI ~ HOME

UARl rHOMAi INI , dba LENOX HOME JARl rHOMAi INI , dba LENOX HOME JARl rHI JMAi INI .. dba LENOX HI JME JARl rH• JMAi INI . dba LENI ~ HI JME-JARl rH• JMAi INI .. dba LENI ~ HI )ME JARl rHI JMAi INI , dba LENOX HI JME

Sl JARl rHI JMAi INI ., dba LENOX HI JME JARl rHOMA . INI .. dba NOX HI JM JARl rHOMA INI .. dba NC ~ HI JM JARl rHOMA INI .. dba NC ~ HI )M JARl rHOMA INI .. dba NOX HI JM JARl rHOMA INI ., dba NOX HI JM JARl rHOMA INC .. dba LENOX HI JM JARi IHOMA INC., dba LENOX HI JM

UARl rHOMA! INC., dba LENOX HI Sl UARl rH< JMAi INI .. dba LENOX HI Sl UARl rH< JMA! INI ., dba LENOX HI Sl UARi JMA INI ., dba LENOX JME 51 UARl JMA INI .. dba LENO)( JME Sl UAR1 JMA INI ., dba LENOX OME~ Sl UARl HOMA INC .. dba LENOX OME~

Sl UARl HOMA INC., dba LENOX DME~

Sl UARl rHOMAS, INC., dba LENOX HOMES UARl rHOMA! INC .. dba LENOX HOMES UA)'li rHOMA! INC.,dba LENOX HOMES UARi rH<)MA! INI ., dba LENOX HOMES JARl rH< JMA INI .. dba LENOX HI JARl IH• JMA INI .. dba LENI ~HI

JP.Ri rl:i• JMA INI .. dba LENI ~HI

JARi rHOMA INI ., dba LENOX HI JME JAR rH< JMA INI . ba ENOX HI JME

ba ENOX ba ENOX ba ENI ba ENI ba ENOX

JARl IMA . INI ., dba LENOX HI JMI JARl IMA . INI ., dba LENOX HI JMI

ASSESSOR'S LAND

VALUE(!) COLUMN

NIA NIA N/A NIA N/A NIA NIA NIA NIA NIA ~/A ~/A ~/A

~lA

Nl Nl N/ NIA

/A /A /A /A /A

NIA NIA N/A N/A NIA NIA N/A N/A NIA NIA NIA

lA /A /A /A /A

NIA NIA NIA

/A /A /A /A /A

/A NIA NIA

l1t::1N41 . BOND SALE 04/20118 AD07-2

APPRAISED ASSESSMENT VALUE (2) AMOUNT (3) LIEN (4) COLUMN 2

;sa.155

;sa 155 ;sa.155 i58,155 ;sa,15 ;sa. II i58,15 ;sa,15 ;58,11 i58,15 ;sa 155 ;58,155 i58,155

155 1,155 1,155 ,155 ,155

i5 i5

' ib ' i5 ' i5

i5a, 155 ;sa,155 i58,155 osa.1ss

osa. 1ss S5a 155 osa 155 ssa 155 pbS, lb5 o5a 155 ssa 155 ssa 155 i58, 155 i5a 155 ;sa 155

4

COLUMN 3

;11,555.91 55l 55 55 ,55 55 ,55 ,555.9' ,555.9' ,555.9' ,555 ,555 .555 ,555 ,555 ,555 ,555 ,555 ,555 ,555 ,555

,555 ,555

,555 ,555.91 .555 ,555

,555.9' .55b.9' ,555.9' ,555.91 .555.9' ,555.9' ,555.91 ,555.91 .555.9' ,555.9' 555

,555. ,555. ,555.

COLUMN 4

5.03 )3

)3

)3

.)3

5.0: 5.0: 5.0: 5.0:

5.03 5.03 5.0< 5.03

5.03 5.03 5.03 5.03 5.0< 5.03 5.03 5.03 5.· 5.03 5.03

. & VALUE DATA FOR FUTURE TAX YEARS ASSESSOR'S A! :;:, TOTAL VALUES

VALUE (5) VALUE (5) I ~~~~~~~v~.; LAND I BALANCE (1/1;~ LIEN (6)

OLUMN 5 OLUMN 6 .UMN COLUMN 8 COLUMN 9

AD 07-2 ASSESSOR'S TAX ASSESSMEN NUMBER (ATN)

NUMBER OR DESCRIPTION

223 TRACT NO. 6611· LOT 89 224 TRACT NO. 6611; LOT 90 225 TRACT NO. 6611; LOT 91 226 TRACT NO. 6611; LOT 92 227 TRACT NO. 6611· LOT 93 228 TRACT NO. 6611; LOT 94 229 TRACT NO. 6611; LOT 95 230 TRACT NO. 6611; LOT 96 231 TRACT NO. 6611; LOT 97 232 TRACT NO. 6611; LOT 98 233 TRACT NO. 6611; LOT 99 234 TRACT NO. 6611; LOT 100 235 TRACT NO. 6611; LOT 101 236 TRACT NO. 6611; LOT 102 237 TRACT NO. 6611; LOT 103 238 TRACT NO. 6611; LOT 104 239 TRACT NO. 6611; LOT 105 240 TRACT NO. 6611; LOT 106 241 TRACT NO. 6611; LOT 107 242 TRACT NO. 6611; LOT 108 243 TRACT NO. 6611; LOT 109 244 TRACT NO. 6611; LOT 110 245 TRACT NO. 6611; LOT 111 246 TRACT NO. 6611; LOT 112 247 TRACT NO. 6611; LOT 113 248 TRACT NO. 6611; LOT 114 249 TRACT NO. 6611; LOT 115 250 TRACT NO. 6611; LOT 116 251 TRACT NO. 6611; LOT 117 252 TRACT NO. 6611; LOT 118 253 TRACT NO. 6611; LOT 119 254 TRACT NO. 6611; LOT 120 255 TRACT NO. 6611; LOT 121 256 TRACT NO. 6611; LOT 122 257 TRACT NO. 6611; LOT 123 258 TRACT NO. 6611; LOT 124 259 TRACT NO. 6611; LOT 125 260 TRACT NO. 6611· LOT 126 261 TRACT NO. 6611; LOT 127 262 TRACT NO. 6611· LOT 128 263 TRACT NO. 6611; LOT 129 264 TRACT NO. 6611; LOT 130 265 TRACT NO. 6611· LOT 131 266 TRACT NO. 6611; LOT 132 267 TRACT NO. 6611; LOT 133 268 TRACT NO. 6611; LOT 134 269 TRACT NO. 6611; LOT 135 270 TRACT NO. 6611; LOT 136 271 TRACT NO. 6611; LOT 137 272 TRACT NO. 6611; LOT 138 273 TRACT NO. 6611; LOT 139 274 TRACT NO. 6611; LOT 140 275 TRACT NO. 6611; LOT 141 276 TRACT NO. 6611· LOT 142 277 TRACT NO. 6611; LOT 143 278 TRACT NO. 6611; LOT 144 2~ 9 fRAC NC. 66' 1; L 145

APPENDIXE

CITY OF BAKERSFIELD ASSESSMENT DISTRICT NO. 07·2 ASSESSMENT ROLL AND VALUE-TO-LIEN DATA

ORIGINAL BOND SALE 04/2008 ASSESSOR'S AD07-2 APPRAISED

LAND APPRAISED ASSESSMENT VALUE/ VALUE(1) VALUE(2) AMOUNT(3) LIEN (4)

OWNER'S NAME COLUMN 1 COLUMN 2 COLUMN 3 COLUMN 4

STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58 155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC. dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 RICARDO DeLUNA & MERCEDES D. LOPEZ N/A $58,155 $11,555.91 5.03

TIM & STACEY HEREDIA N/A $58,155 $11,555.91 5.03 HENRY & ANABELLA RUBALCADO N/A $58155 $11,555.91 5.03

JASON & JANETTE JORDAN N/A $58,155 $11 555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES NIA $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03

JESUS SALDIVAR N/A $58,155 $11,555.91 5.03 LEOPOLDO OROZCO N/A $58,155 $11,555.91 5.03

STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03

DONNA LIVINGSTONE N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11.555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS INC., dba LENOX HOMES N/A $58155 $11,555.91 5.03 STUART THOMAS, INC. dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC. dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 STUART THOMAS, INC., dba LENOX HOMES N/A ili58,155 iii11,555.91 5.03

5

ASSESSMENT & VALUE DATA FOR FUTURE TAX YEARS ASSESSOR'S ASSESSOR'S TOTAL VALUES REMAINING ASSESSOR'S

LAND IMPROVEMENT (ASSESSOR'S LAND ASSESSMENT VALUE/ VALUE(5) VALUE(5) + IMPROVEMENT)(5 BALANCE (111/ LIEN (6\ COLUMN 5 COLUMN 6 COLUMN 7 COLUMN 8 COLUMN 9

APPENDIXE


ORIGINAL BOND SALE 04/2008 ASSESSMENT & VALUE DATA FOR FUTURE TAX YEARS ASSESSOR'S AD07-2 APPRAISED ASSESSOR'S ASSESSOR'S TOTAL VALUES REMAINING ASSESSOR'S

AD 07-2 ASSESSOR'S TAX LAND APPRAISED ASSESSMENT VALUE/ LAND IMPROVEMEN (ASSESSOR'S LAND ASSESSMENT VALUE/ ASSESSMEN NUMBER (ATN) VALUE!1l VALUEC2l AMOUNTC3l LIEN !4) VALUEC5l VALUEC5l + IMPROVEMENT)(5 BALANCE (1/1/ LIEN (6)

NUMBER OR DESCRIPTION OWNER'S NAME COLUMN 1 COLUMN 2 COLUMN 3 COLUMN 4 COLUMN 5 COLUMN 6 COLUMN 7 COLUMN 8 COLUMN 9

280 TRACT NO. 6611; LOT 146 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 281 TRACT NO. 6611; LOT 147 STUART THOMAS, INC. dba LENOX HOMES N/A $58,155 $11,555.91 5.03 282 TRACT NO. 6611; LOT 148 STUART THOMAS INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 283 TRACT NO. 6611; LOT 149 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 284 TRACT NO. 6611; LOT 150 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 285 TRACT NO. 6611; LOT 151 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 286 TRACT NO. 6611; LOT 152 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 287 TRACT NO. 6611; LOT 153 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 288 TRACT NO. 6611; LOT 154 STUART THOMAS, INC., dba LENOX HOMES N/A $58,155 $11,555.91 5.03 289 TRACT NO. 6611; LOT 155 STUART THOMAS, INC. dba LENOX HOMES N/A $58,155 $11,555.91 5.03 290 TRACT NO. 6611; LOT 156 STUART THOMAS INC. dba LENOX HOMES N/A $58,165 $11,556.52 5.03 291 TRACT NO. 6611; LOT A STUART THOMAS INC., dba LENOX HOMES N/A $0 $0.00 N/A 292 TRACT NO. 6611; LOT B STUART THOMAS, INC., dba LENOX HOMES N/A $0 $0.00 N/A 293 TRACT NO. 6611· LOT c STUART THOMAS, INC., dba LENOX HOMES N/A $0 $0.00 N/A 294 TRACT NO. 6611· LOT D STUART THOMAS, INC., dba LENOX HOMES N/A $0 $0.00 N/A

SYDNEY HARBOUR AREA- PORTION (TRACT NO. 6611) TOTALS/OVERALL: N/A $9,014,035 $1,791,166.66 5.03

SUMMARY OF ASSESSMENT DISTRICT TOTALS STUART THOMAS, INC., dba LENOX HOMES, TOTALS/OVERALL: I N/A $18,918,431 $4,744,108.63 I 3.991 I I OWNED BY OTHERS TOTALS/OVERALL: I N/A $407,085 $80,891.37 I 5.031 I I ASSESSMENT DISTRICT TOTALS/OVERALL: N/A $19,325,517 $4,825,000.00 4.01

NOTES AND REFERENCES: (1) COLUMN 1 SHOULD SHOW KERN COUNTY ASSESSOR'S LAND VALUES FOR THE ASSESSOR'S ROLL FOR KERN COUNTY USED TO BILL THE 200712008 REGULAR PROPERTY TAXES. THE ASSESSOR'S VALUES

PLANNED TO BE SHOWN IN COLUMN 1 ARE NOT USED TO CALCULATE THE COLUMN 4 VALUE-TO-LIEN RATIO. THEY WERE PLANED TO BE PROVIDED ONLY FOR REFERENCE, AS BASELINE ASSESSOR'S LAND VALUES AT THE TIME OF AD 07-2 BOND SALE. HOWEVER, THE AMOUNTS FOR ASSESSMENTS 1 THROUGH 294 (EXCEPT FOR ASSESSMENT 134) WERE NOT AVAILABLE AT THE TIME OF PREPARATION OF THIS APPENDIX E TABLE, SINCE THOSE ASSESSMENTS WERE STILL PARTS OF UNSUBDIVIDED KERN COUNTY ASSESSOR'S TAX NUMBERS (ATNs) ASSIGNED TO THE PARCELS THAT WERE SUBDIVIDED BY VARIOUS SUBDIVISION TRACT MAPS RECORDED IN 2007 (TRACT NO. 6520-PHASE 11N THE SYDNEY HARBOUR AREA- PORTION (TRACT NO. 6520) AND TRACT NO. 66111N THE SYDNEY HARBOUR AREA- PORTION (TRACT NO. 6611)). CONSEQUENTLY, AT THE TIME THIS APPENDIX E WAS PREPARED THERE WERE NO LAND VALUES AVAILABLE FROM THE KERN COUNTY ASSESSOR FOR ASSESSMENTS 1 THROUGH 294 (EXCEPT FOR ASSESSMENT 134).

(2) THE AMOUNTS SHOWN IN COLUMN 2 ARE "BULK VALUE OF RECORDED LOTS OR LAND" FOR ALL RESIDENTIAL LOTS IN TRACT MAPS THAT HAD BEEN RECORDED PRIOR TO THE TIME THIS APPENDIX E WAS PREPARED AND FOR THE TWO STILL UNSUBDIVIDED PARCELS (ASSESSMENT NUMBERS 133 AND 134), ALL AS PRESENTED IN THE APPRAISAL REPORT FOR ASSESSMENT DISTRICT NO. 07-2 PREPARED BY LAUNER & ASSOCIATES, INC., BAKERSFIELD, CALIFORNIA, DATED FEBRUARY 27, 2008 (DATE OF VALUE AS OF FEBRUARY 27, 2008). THE VALUE OF EACH ASSESSED RESIDENTIAL LOT IS COMPUTED BY DIVIDING SAID "BULK VALUE OF RECORDED LOTS OR LAND" FOR EACH TRACT WITHIN EACH DEVELOPMENT AREA IN AD 07-2 BY THE NUMBER OF ASSESSED LOTS WITHIN EACH TRACT.

(3) THE AMOUNTS SHOWN ARE THE AMOUNTS OF THE AD 07-2 ASSESSMENTS (AS AMENDED ON MARCH 12, 2008, AFTER THE ORIGINAL ASSESSMENTS WERE CONFIRMED ON JANUARY 30, 2008). THE 30 DAY CASH PAYMENT PERIOD HAS BEEN WAIVED.

(4) RATIO OF APPRAISED VALUES (COLUMN 2) DIVIDED BY THE AD 07-2 AMENDED ASSESSMENT AMOUNT (COLUMN 3). (5) ASSESSOR'S VALUES IN COLUMNS 5, 6, AND 7 WILL BE PROVIDED IN FUTURE YEARS FROM THE EQUALIZED ASSESSOR'S ROLL FOR THE THEN CURRENT TAX YEAR. ACCORDINGLY, THESE COLUMNS AND

COLUMNS 8 AND 9 ARE BLANK IN THIS APPENDIX E TABLE. (6) COLUMN 9 WILL SHOW THE RATIO OF TOTAL ASSESSOR'S VALUE (COLUMN 7) DIVIDED BY THE AD 07-2 REMAINING ASSESSMENT BALANCE (COLUMN 8). (7) TRACT NO. 6520-PHASE 1 RECORDED JUNE 26, 2007,1N BOOK 58 OF MAPS, AT PAGES 44 THROUGH 46, K.C.R. (8) TRACT NO. 6611 RECORDED APRIL 17, 2007, IN BOOK 57 OF MAPS, AT PAGES 153 THROUGH 156, K.C.R. (9) CERTIFICATE OF COMPLIANCE FOR PARCEL MAP WAIVER NO. 300 RECORDED NOVEMBER 13, 1981, IN BOOK 5418, AT PAGE 915, O.R.

6

F-1

APPENDIX F

FORMS OF CONTINUING DISCLOSURE CERTIFICATES

(CITY FORM)

This Continuing Disclosure Certificate (the “Disclosure Certificate”) is executed and delivered by the City of Bakersfield (the “City”) in connection with the issuance by the City of $4,825,000 in aggregate principal amount of the City of Bakersfield Assessment District No. 07-2 (Sydney Harbour) Limited Obligation Improvement Bonds (the “Bonds”) for Assessment District No. 07-2 (Sydney Harbour) (the “Assessment District”). The Bonds are being issued pursuant to a resolution authorizing issuance of the Bonds, being Resolution No. 042-08 (the “Resolution”), adopted by the City Council of the City on March 12, 2008. The City covenants and agrees as follows:

Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the City for the benefit of the Holders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5), as amended.

Section 2. Definitions. In addition to the definitions set forth above and in the Resolution, which apply to any capitalized term used in this Disclosure Certificate, unless otherwise defined in this section, the following capitalized terms shall have the following meanings:

“Annual Report” shall mean any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.

“Beneficial Owner” shall mean any person who 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).

“Central Post Office” shall mean any organization or method approved by the staff or members of the Securities and Exchange Commission as an intermediary through which issuers may, in compliance with the Rule, make filings required by this Disclosure Certificate, including, but not limited to, the Texas Municipal Advisory Council’s (the “MAC”) internet website that, as of the date hereof, is located at http://www.DisclosureUSA.org, unless the Securities and Exchange Commission has withdrawn the interpretive advice in its letter to the MAC, dated September 7, 2004.

“Dissemination Agent” shall mean the City, or any successor Dissemination Agent designated in writing by the City and that has filed with the City a written acceptance of such designation.

“Fiscal Year” shall mean the 12-month period beginning on July 1 and ending on the next following June 30, unless and until changed by the City.

“Holder” shall mean either the registered owner of any Bond, or, if the Bonds are registered in the name of DTC or another recognized depository, any Beneficial Owner or applicable participant in its depository system.

“Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure Certificate.

“National Repository” shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. The current National Repositories are listed on the Securities and Exchange Commission website at http://www.sec.gov/info/municipal/nrmsir.htm.

“Official Statement” shall mean the final Official Statement, dated April 9, 2008, pertaining to the Bonds.

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“Participating Underwriter” shall mean RBC Capital Markets Corporation, and any other original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds.

“Repository” shall mean each National Repository and each State Repository.

“Rule” shall mean 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.

“State Repository” shall mean any public or private repository or entity designated by the State of California as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of this Disclosure Certificate, there is no State Repository.

Section 3. Provision of Annual Reports.

(a) The City shall, or shall cause the Dissemination Agent to, not later than nine (9) months after the end of the City’s Fiscal Year (i.e., currently not later than April 1 of each year), commencing with the report for the 2007-08 Fiscal Year, provide to each Repository an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Certificate. 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 Certificate; provided that the audited financial statements of the City may be submitted separately from the balance of the Annual Report, and later than the date required above for the filing of the Annual Report if not available by that date. The Annual Report may be filed using the services of a Central Post Office. If the City’s Fiscal Year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c).

(b) Not later than fifteen (15) Business Days prior to the date required in subsection (a), the City shall provide the Annual Report to the Dissemination Agent (if other than the City). If the City is unable to provide to each Repository an Annual Report by the date required in subsection (a), the City shall send to each Repository a notice in substantially the form attached hereto as Exhibit A.

(c) The Dissemination Agent shall:

(i) determine each year, prior to the date for providing the Annual Report, the name and address of each Repository, and file the Annual Report with each Repository, and

(ii) if the Dissemination Agent is other than the City, file a report with the City certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided and listing all the Repositories to which it was provided.

Section 4. Content of Annual Reports. The City’s Annual Report shall contain or incorporate by reference the following:

(a) The audited financial statements of the City for the prior Fiscal Year, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the City’s audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. Notwithstanding the foregoing, each Annual Report or other filing containing the City’s financial statements may include the following or other similar statement:

THE FOLLOWING FINANCIAL STATEMENTS ARE PROVIDED SOLELY TO COMPLY WITH THE SECURITIES AND EXCHANGE COMMISSION STAFF’S INTERPRETATION OF RULE 15c2-12. NO FUNDS OR ASSETS OF THE CITY OF BAKERSFIELD (OTHER THAN THE ASSESSMENTS LEVIED IN THE ASSESSMENT DISTRICT) ARE REQUIRED TO BE USED TO PAY DEBT SERVICE ON THE BONDS, AND THE CITY IS NOT

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OBLIGATED TO ADVANCE AVAILABLE FUNDS FROM THE CITY TREASURY TO COVER ANY DELINQUENCIES. INVESTORS SHOULD NOT RELY ON THE FINANCIAL CONDITION OF THE CITY IN EVALUATING WHETHER TO BUY, HOLD, OR SELL THE BONDS.

(b) The following information with respect to the City for the Fiscal Year to which the Annual Report relates, which information may be provided by its inclusion in the audited financial statements of the City for the prior Fiscal Year described in subsection (a) above:

(i) The principal amount of Bonds outstanding, including principal amounts and years of maturity of Bonds, if any, called for redemption in advance of maturity.

(ii) The balances as of the end of such Fiscal Year in each of the following funds established pursuant to the Resolution: (A) the Improvement Fund; (B) the Redemption Fund; and (C) the Special Reserve Fund.

(iii) Identification of each parcel for which any installment of the unpaid assessment is delinquent, together with the following information respecting each such parcel: (A) the amount delinquent (exclusive of late charges and monthly penalties for reinstatement); (B) the date (December 10 or April 10) of the first delinquency; (C) in the event a foreclosure complaint has been filed respecting such delinquent parcel and such complaint has not yet been dismissed, the date on which the complaint was filed in the Kern County Superior Court; and (D) in the event a foreclosure sale has occurred respecting such delinquent parcel, a summary of the results of such foreclosure sale.

(iv) A current statement of the status of completion or progress toward completion of the public improvements described in the Official Statement under the subheading “THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS – Description of the Community Areas and the Improvements.”

(v) A current statement of the land-secured public financing information summarized in the Official Statement under the subheading “THE BONDS – Priority of Lien.”

(vi) A current statement of the parcel information set forth in Columns 5 through 9, inclusive, of APPENDIX E to the Official Statement, for both existing and future parcels for which a subdivision map has not been recorded.

(c) In addition to any of the information expressly required to be provided under paragraphs (a) and (b) of this Section, the City shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading.

Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the City or related public entities, which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The City shall clearly identify each such other document so included by reference.

Section 5. Reporting of Significant Events.

(a) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given, notice of the occurrence of any of the following events (each, a “Listed Event”) with respect to the Bonds, if material:

(i) principal and interest payment delinquencies;

(ii) non-payment related defaults;

(iii) modifications to rights of Bond Holders;

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(iv) optional, contingent, or unscheduled Bond calls;

(v) defeasances;

(vi) rating changes;

(vii) adverse tax opinions or events adversely affecting the tax-exempt status of the Bonds;

(viii) unscheduled draws on the debt service reserves reflecting financial difficulties;

(ix) unscheduled draws on credit enhancements reflecting financial difficulties;

(x) substitution of credit or liquidity providers, or their failure to perform; or

(xi) release, substitution, or sale of property securing repayment of the Bonds.

(b) Whenever the City obtains knowledge of the occurrence of a Listed Event, the City shall as soon as possible determine if such event would be material under applicable federal securities law.

(c) If the City determines that knowledge of the occurrence of a Listed Event would be material under applicable federal securities law, the City shall promptly file a notice of such occurrence with the Repositories. Such notice may be filed using the services of a Central Post Office. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(iv) and (v) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to Holders of affected Bonds pursuant to the Resolution.

Section 6. Termination of Reporting Obligation. The City’s obligations under this Disclosure Certificate 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 City shall give notice of such termination in the same manner as for a Listed Event under Section 5(c).

Section 7. Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent.

Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied:

(a) if the amendment or waiver relates to the provisions of Section 3(a), 4, or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted;

(b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and

(c) the proposed amendment or waiver either (i) is approved by Holders of the Bonds in the manner provided in the Resolution for amendments to the Resolution with the consent of Holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Holders or Beneficial Owners of the Bonds.

If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended

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operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided.

In the event of any amendment or waiver of a provision of this Disclosure Certificate, the City shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the City. If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information 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. The comparison shall include a 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, in order to provide information to investors to enable them to evaluate the ability of the City to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to the Repositories in the same manner as for a Listed Event under Section 5(c).

Section 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the City shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

Section 10. Default. In the event of a failure of the City to comply with any provision of this Disclosure Certificate any Holder or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Resolution, and the sole remedy under this Disclosure Certificate in the event of any failure of the City to comply with this Disclosure Certificate 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 Certificate, and the City agrees to indemnify and save the Dissemination Agent, its officers, directors, employees, and agents, harmless against any losses, expenses, and liabilities that it 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 City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.

Section 12. Notices. Any notice or communication to or among any of the following parties shall be given to such parties as follows:

If to the Assessment District: City of Bakersfield 1501 Truxtun Avenue Bakersfield, California 93301 Attention: Finance Director Telephone: (661) 326-3740 Facsimile: (661) 326-3760

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If to the Participating Underwriter: RBC Capital Markets Corporation 345 California Street, Suite 2800 San Francisco, California 94104 Attention: Robert L. Williams, Jr. Managing Director Telephone: (415) 445-8674 Facsimile: (415) 445-8679

Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Dissemination Agent, the Participating Underwriter, and Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity.

Date: [Closing Date]

CITY OF BAKERSFIELD

By: Finance Director

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EXHIBIT A

NOTICE OF FAILURE TO FILE ANNUAL REPORT

Name of Issuer: City of Bakersfield, California

Name of Bond Issue: City of Bakersfield Assessment District No. 07-2 (Sydney Harbour) Limited Obligation Improvement Bonds

Date of Issuance: [Closing Date]

NOTICE IS HEREBY GIVEN that the City of Bakersfield, California (the “City), has not provided an Annual Report with respect to the above-named Bonds as required Section 4(a) of the Continuing Disclosure Certificate executed by the City on [Closing Date]. The City anticipates that the Annual Report will be filed by __________.

Dated: ______________________

CITY OF BAKERSFIELD, as Dissemination Agent

By: Finance Director

cc: The City

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(DEVELOPER FORM)

This Continuing Disclosure Certificate (the “Disclosure Certificate”) is executed and delivered by Stuart Thomas, Inc., a Nevada corporation, doing business as Lenox Homes (the “Developer”), in connection with the issuance by the City of Bakersfield (the “City”) of $4,825,000 in aggregate principal amount of the City of Bakersfield Assessment District No. 07-2 (Sydney Harbour) Limited Obligation Improvement Bonds (the “Bonds”) for the City of Bakersfield Assessment District No. 07-2 (Sydney Harbour) (the “Assessment District”). The Bonds are being issued pursuant to a resolution authorizing issuance of the Bonds, being Resolution No. 042-08 (the “Resolution”), adopted by the City Council of the City on March 12, 2008. The Developer covenants and agrees as follows:

Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Developer for the benefit of the City, RBC Capital Markets Corporation, as the underwriter of the Bonds (the “Participating Underwriter”), and the Holders and Beneficial Owners (each as defined below) of the Bonds in order to assist the Participating Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5), as amended.

Section 2. Definitions. In addition to the definitions set forth above and in the Resolution, which apply to any capitalized term used in this Disclosure Certificate, unless otherwise defined in this section, the following capitalized terms shall have the following meanings:

“Affiliate” of another Person shall mean (a) a Person directly or indirectly owning, controlling, or holding with power to vote, 5% or more of the outstanding voting securities of such other Person, (b) any Person 5% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote by such other Person, or (c) any Person directly or indirectly controlling, controlled by, or under common control with, such other Person. For purposes hereof, “control” means the power to exercise a controlling influence over the management or policies of a Person, unless such power is solely the result of an official position with such Person.

“Assumption Agreement” means an agreement or certificate by a Successor Landowner or Land Bank, as applicable, containing terms substantially similar to this Disclosure Certificate, whereby such Successor Landowner or Land Bank, as applicable, shall agree to provide Semi-Annual Reports and notices of Listed Events with respect to the property in the Assessment District owned by such Successor Landowner and its Affiliates, if any, or Land Bank, as applicable.

“Beneficial Owner” shall mean any person who has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bond or Bonds, including persons holding Bonds through nominees, depositories, or other intermediaries.

“Central Post Office” shall mean any organization or method approved by the staff or members of the Securities and Exchange Commission as an intermediary through which issuers may, in compliance with the Rule, make filings required by this Disclosure Certificate, including, but not limited to, the Texas Municipal Advisory Council’s (the “MAC”) internet website that, as of the date hereof, is located at http://www.DisclosureUSA.org, unless the Securities and Exchange Commission has withdrawn the interpretive advice in its letter to the MAC, dated September 7, 2004.

“Development Plan” shall mean the specific improvements the Developer intends to make, or cause to be made, in order for the Property to reach the Planned Development Stage, the time frame in which such improvements are intended to be made, and the estimated costs of such improvements. The Developer’s Development Plan, as of the date hereof, is described in the Official Statement under the heading “OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT.”

“Disclosure Period” shall mean the six-month period beginning on January 1 or July 1 and ending on the next following June 30 or December 31, as applicable.

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“Dissemination Agent” shall mean the Developer, or any successor Dissemination Agent designated in writing by the Developer and which has filed with the Developer and the City a written acceptance of such designation.

“Event of Bankruptcy” shall mean, with respect to a Person, that such Person files a petition or institutes a proceeding under any act or acts, state or federal, dealing with or relating to the subject or subjects of bankruptcy or insolvency, or under any amendment of such act or acts, either as a bankrupt or as an insolvent, or as a debtor, or in any similar capacity, wherein or whereby such Person asks, seeks, or prays to be adjudicated a bankrupt, or is to be discharged from any or all of such Person’s debts or obligations, or offers to such Person’s creditors to effect a composition or extension of time to pay such Person’s debts or obligations, or asks, seeks, or prays for reorganization or to effect a plan of reorganization, or for a readjustment of such Person’s debts, or for any other similar relief, or if any such petition or any such proceedings of the same or similar kind or character is filed or instituted or taken against such Person and the same shall remain undismissed for a period of 60 days, or if a receiver of the business, property, or assets of such Person is appointed by any court, or if such Person makes a general assignment for the benefit of such Person’s creditors.

“Financing Plan” shall mean the method by which the Developer intends to finance its Development Plan, including specific sources of funding for such Development Plan. The Developer’s Financing Plan, as of the date hereof, is described in the Official Statement under the heading “OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT.”

“Financial Statements” shall mean the full financial statements, special purpose financial statements, project operating statements, or other reports reflecting the financial position of the Developer’s parent company or, if such financial statements are prepared separately for the Developer, reflecting the financial position of the Developer; provided that, if such financial statements or reports are otherwise prepared as audited financial statements or reports, then “Financial Statements” means such audited financial statements or reports. The Financial Statements for the Developer or its parent company shall consist of a balance sheet, an income statement, and a statement of cash flows, all prepared in accordance with generally accepted accounting principles.

“Holders” shall mean either the registered owners of the Bonds, or, if the Bonds are registered in the name of The Depository Trust Company or another recognized depository, any Beneficial Owner or applicable participant in its depository system.

“Land Bank” shall mean a separate entity that has entered into a transaction with the Developer in which the Developer has caused any Property to be transferred to such separate entity but maintains an option to purchase such Property pursuant to an option or other similar agreement. As of the date of this Disclosure Certificate, there is no Land Bank.

“Listed Event” shall have the meaning given to such term in Section 5 of this Disclosure Certificate.

“National Repository” shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. The current National Repositories are listed on the Securities and Exchange Commission website at http://www.sec.gov/info/municipal/nrmsir.htm.

“Official Statement” shall mean the final Official Statement, dated April 9, 2008, pertaining to the Bonds.

“Person” means an individual, a corporation, a partnership, an association, a joint stock company, a limited liability company, a trust, any unincorporated organization, or a government or a political subdivision thereof.

“Planned Development Stage” shall mean, with respect to the Property, the stage of development to which the Developer or its Affiliates intends to develop the Property, as described in the Official Statement under the heading “OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT.”

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“Property” shall mean the property within the Assessment District that, as of the date hereof, is owned by or under option to be purchased by the Developer exclusive of property that, subsequent to the date hereof, is transferred to (i) a Successor Landowner that, along with its Affiliates, if any, owns property in the Assessment District that, when aggregated with all other property in the Assessment District then-owned by such Successor Landowner and its Affiliates, if any, is subject to the lien of not more than twenty percent (20%) of the annual assessment securing payment of the Bonds, (ii) a Successor Landowner that, along with its Affiliates, if any, owns property in the Assessment District that, when aggregated with all other property in the Assessment District then-owned by such Successor Landowner and its Affiliates, if any, is subject to the lien of greater than twenty percent (20%) of the annual assessment securing payment of the Bonds and for which property such Successor Landowner has entered into an Assumption Agreement, (iii) a Land Bank that owns property in the Assessment District for which property such Land Bank has entered into an Assumption Agreement, or (iv) a homeowner or other end user.

“Repository” shall mean each National Repository and each State Repository.

“Rule” shall mean 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.

“Semi-Annual Report” shall mean any Semi-Annual Report provided by the Developer pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.

“State Repository” shall mean any public or private repository or entity designated by the State of California as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of this Disclosure Certificate, there is no State Repository.

“Successor Landowner” shall mean any property owner, other than the Developer or its Affiliates and any Land Bank, who purchases property in the Assessment District for the purpose of developing such property and not merely as an end-user.

Section 3. Provision of Semi-Annual Reports.

(a) So long as the Developer is obligated hereunder and said obligation has not been terminated pursuant to Section 6 of this Disclosure Certificate, the Developer shall provide, or shall cause the Dissemination Agent to provide, not later than three (3) months after the end of each Disclosure Period (i.e., not later than September 30 or March 31 of each year, as applicable), commencing with the report for the Disclosure Period ending June 30, 2008, to each Repository a Semi-Annual Report relating to the immediately preceding Disclosure Period that is consistent with the requirements of Section 4 of this Disclosure Certificate. The Semi-Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Certificate; provided, however, that if audited Financial Statements are required to be provided, such audited Financial Statements may be submitted separately from the balance of the Semi-Annual Report, and later than the date required above for the filing of the Semi-Annual Report, if not available by that date. The Semi-Annual Report may be filed using the SEC-Approved Electronic Transmission Facilities provided by the Texas Municipal Advisory Council at website http://www.disclosureusa.org.

(b) So long as the Developer is obligated hereunder and said obligation has not been terminated pursuant to Section 6 of this Disclosure Certificate, not later than fifteen (15) calendar days prior to the date required in subsection (a) hereof, the Developer shall provide the Semi-Annual Report to the Dissemination Agent. If the Developer is unable to provide, or cause to be provided, to each Repository a Semi-Annual Report by the date required in subsection (a) hereof, the Dissemination Agent shall, first, confirm that the Developer’s obligation hereunder has not been terminated pursuant to Section 6 of this Disclosure Certificate, and, if the Developer is still obligated hereunder, the Dissemination Agent shall send to each Repository a notice in substantially the form attached hereto as Exhibit A.

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(c) The Dissemination Agent shall:

(i) determine each year, prior to the date for providing the Semi-Annual Report, the name and address of each Repository, and file the Semi-Annual Report with each Repository, and

(ii) following the filing of the Semi-Annual Report with each Repository, file a certificate with the City and the Developer certifying that the Semi-Annual Report has been filed with each Repository pursuant to this Disclosure Certificate, stating the date on which the Semi-Annual Report was filed, and listing each Repository (by name and address) with which it was filed.

Section 4. Content of Semi-Annual Reports. So long as the Developer is obligated hereunder and said obligation has not been terminated pursuant to Section 6 of this Disclosure Certificate, the Developer shall provide a Semi-Annual Report for the preceding Disclosure Period with respect to the Property, which Semi-Annual Report shall contain or incorporate by reference the following:

(a) The Developer shall provide a general description of progress made in the Development Plan of the Developer and any significant changes in the Development Plan, the Financing Plan, or zoning since the date of the Official Statement (with respect to the first Semi-Annual Report only) or the prior Disclosure Period, as applicable. The Developer shall track actual absorption relative to projected absorption described in the Official Statement under the heading “OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT – Development and Financing Plans – The Development Plan.” The Developer shall identify any material deviations in actual versus expected sale prices, and identify zoning changes, if any. The Developer shall also include information concerning the recordation of final maps, if applicable, and information concerning the sale or transfer of Property to Persons that are not Affiliates of the Developer, including the sale or transfer of Property to a Land Bank.

(b) The Developer shall describe any material changes in the Financing Plan for its development project including, without limitation, changes in status of the Developer’s credit line (or the credit line of any Affiliates of the Developer that owns property within the Assessment District), if applicable.

(c) The Developer shall describe any material change in the legal structure of the Developer or of any of its Affiliates that owns or holds an option to purchase property within the Assessment District.

(d) Each fiscal year, one Semi-Annual Report shall make reference to the quarterly and annual Financial Statements of the Developer’s parent company or the Developer, as applicable, on file with the Securities and Exchange Commission (if applicable). All such references may contain the following caveat:

The quarterly or annual reports provided with this Semi-Annual Report are referred to for informational purposes only. In the event of a failure to pay any installment of assessments, and after depletion of the Special Reserve Fund, the real property in the Assessment District is the sole security for the Bonds. The obligation of the Developer to pay the unpaid assessment installments does not constitute a personal indebtedness of the Developer for which the funds or assets (other than the property in the Assessment District) of the Developer may be required, by operation of law or otherwise, to be used to pay debt service on the Bonds. It should not be inferred from the reference to the quarterly or annual reports provided with this Semi-Annual Report that such funds or assets (other than the property in the Assessment District) are available to cure any delinquencies in the payment of assessments.

(e) To the extent that Financial Statements are prepared separately for the Developer, Financial Statements prepared in accordance with generally accepted accounting principles, as in effect from time to time, shall be provided. To the extent that audited Financial Statements are prepared separately for the Developer, if audited Financial Statements are required to be provided and such audited Financial Statements are not available by the time the applicable Semi-Annual Report is required to be provided pursuant to Section 3(a) of this Disclosure Certificate, the applicable Semi-Annual Report shall contain unaudited Financial Statements, and the audited Financial Statements shall be filed in the same manner as the applicable Semi-Annual Report when they become available. Such Financial Statements shall be for the most recently ended fiscal year for the entity covered thereby. To the extent that audited Financial Statements of the Developer are prepared, the Developer shall include such

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audited Financial Statements in the applicable Semi-Annual Report. To the extent that the provisions of this subsection (e) become applicable, the provisions of subsection (d) above shall cease to be applicable. All such audited Financial Statements of the Developer, if any, may contain the following caveat:

The audited financial statements of the Developer are included for informational purposes only. In the event of a failure to pay any installment of assessments, and after depletion of the Special Reserve Fund, the real property in the Assessment District is the sole security for the Bonds. The obligation of the Developer to pay the unpaid assessment installments does not constitute a personal indebtedness of the Developer for which the funds or assets (other than the property in the Assessment District) of the Developer may be required, by operation of law or otherwise, to be used to pay debt service on the Bonds. It should not be inferred from audited financial statements of the Developer that such funds or assets (other than the property in the Assessment District) are available to cure any delinquencies in the payment of assessments.

(f) The Developer shall provide information regarding any Assumption Agreement entered into by a Successor Landowner pursuant to Section 6 below, including the title and effective date of such Assumption Agreement, the parties thereto and their respective contact information, and a description of the property in the Assessment District covered by such Assumption Agreement.

(g) In addition to any of the information expressly required to be provided under this Section, the Developer shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading.

Any or all of the items listed above may be included by specific reference to other documents that have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The Developer shall clearly identify each such other document so included by reference.

Section 5. Developer’s Report of Listed Events.

(a) So long as the Developer is obligated hereunder and said obligation has not been terminated pursuant to Section 6 of this Disclosure Certificate, pursuant to the provisions of this Section 5, the Developer shall promptly give, or cause to be given notice of the occurrence of any of the following events (each, a “Listed Event”) with respect to the Developer or any of its Affiliates that owns or holds an option to purchase property within the Assessment District:

(i) Any conveyance by the Developer or any of its Affiliates to (A) a Land Bank of any property in the District or (B) a Successor Landowner or its Affiliates, if any, of property in the Assessment District that, when aggregated with all other property in the Assessment District then-owned by such Successor Landowner and its Affiliates, if any, is subject, in the aggregate, to the lien of greater than twenty percent (20%) of the annual assessment securing payment of the Bonds. The purchase of lots within the Assessment District by the Developer or any of its Affiliates pursuant to an option agreement with a Land Bank shall not require the Developer to report such event as a Listed Event; however, the Developer shall include information regarding such purchase as part of its next Semi-Annual Report.

(ii) Any failure of the Developer or any of its Affiliates or any Land Bank to pay prior to delinquency general property taxes, special taxes, or assessments with respect to the Property.

(iii) Any termination of, or uncured material default under, any line of credit or loan, or any other loss of a source of funds that could have a material adverse effect on the most recently disclosed Financing Plan or Development Plan, if any, of the Developer or on the ability of the Developer or any of its Affiliates or any Land Bank to pay prior to delinquency assessment installments with respect to the Property.

(iv) The occurrence of an Event of Bankruptcy with respect to the Developer or any of its Affiliates or any Land Bank that could have a material adverse effect on the most recently disclosed Financing Plan

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or Development Plan, if any, of the Developer or on the ability of the Developer or any of its Affiliates or any Land Bank to pay prior to delinquency assessment installments with respect to the Property.

(v) Any amendments to land use entitlements or environmental conditions or other governmental conditions that are necessary to complete the development of the Property.

(vi) Any previously undisclosed governmentally-imposed preconditions to commencement or continuation of development on the Property, if material.

(vii) Any previously undisclosed legislative, administrative, or judicial challenges to development of the Property, if material.

(viii) Any changes in the alignment, design, or likelihood of completion of significant public improvements within or serving the property in the Assessment District, including major thoroughfares, sewers, water conveyance systems, and similar facilities that could have a material adverse effect on the ability to complete the development of the Property.

(ix) The assumption of any obligations by a Successor Landowner pursuant to Section 6 of this Disclosure Certificate. In addition, if the Successor Landowner has entered into an Assumption Agreement, a copy of the fully executed Assumption Agreement shall be attached to the notice.

(x) Any entering into of, default under, amendment to, or termination of, any agreement under which the Developer holds an exercisable option to purchase property within the Assessment District or under which the Developer has granted another entity the option to purchase property owned by the Developer or any of its Affiliates within the Assessment District.

(b) Whenever the Developer obtains knowledge of the occurrence of a Listed Event, the Developer shall promptly notify the City and the Dissemination Agent (if the Dissemination Agent is not the Developer) in writing. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to subsection (c) below.

(c) If the Dissemination Agent has been instructed by the Developer to report the occurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence with the Repositories, with a copy to the Participating Underwriter. Such notice may be filed using the services of a Central Post Office.

Section 6. Termination of Developer’s Reporting Obligation. The Developer’s continuing obligation to provide a Semi-Annual Report and notices of material Listed Events will terminate upon the earlier of (1) the legal defeasance, prior redemption, or payment in full of all of the Bonds, or (2) the date upon which the Developer and its Affiliates, if any, cease to own property in the Assessment District that, when aggregated with all other property in the Assessment District then-owned by the Developer and its Affiliates, if any, is subject to the lien of greater than twenty percent (20%) of the annual assessment securing payment of the Bonds; provided, however, for purposes of determining the Developer’s ownership of property in the Assessment District, it shall be assumed that the Developer owns (A) all property in the Assessment District for which the Developer and its Affiliates, if any, hold an exercisable option to purchase such property, whether or not such option has been exercised, (B) and all property owned by a Land Bank, unless such Land Bank has signed an Assumption Agreement, or (3) when the Developer’s property (determined in accordance with clause (2) above) within the Assessment District has reached the Planned Development Stage; provided, however, that if such obligation to provide a Semi-Annual Report and notices of material Listed Events is terminated pursuant to clause (2) or (3) above, the Developer shall provide a final Semi-Annual Report for the preceding Disclosure Period in which such obligation was terminated, which Semi-Annual Report shall also state the reason for such termination. If the Developer conveys to a Successor Landowner property in the Assessment District prior to the time at which such property reaches the Planned Development Stage, and such property conveyed, when aggregated with all other property in the Assessment District then-owned by such Successor Landowner and its Affiliates, if any, is subject to the lien of greater than twenty percent (20%) of the annual assessment securing payment of the Bonds, or if the Developer conveys any Property to a Land Bank, then the Developer may require such Successor Landowner or Land Bank, as applicable,

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to enter into an Assumption Agreement, but only to the extent and upon the terms, if any, required by the Rule. If no such Assumption Agreement is entered into by such Successor Landowner or Land Bank, as applicable, the Developer will remain liable for all continuing disclosure obligations applicable to the property conveyed and the owner thereof pursuant to Sections 3 and 4 above, notwithstanding the Developer does not own such property.

Section 7. Dissemination Agent. The Developer may, from time to time, appoint or engage a Dissemination Agent to assist the Developer in carrying out its obligations under this Disclosure Certificate, and the Developer may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. As of the date of this Disclosure Certificate, the Dissemination Agent is the Developer.

Section 8. Amendment: Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Developer may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the City agrees in writing and the following conditions are satisfied:

(a) if the amendment or waiver relates to the provisions of Section 3(a), 4, or 5, it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted;

(b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and

(c) the proposed amendment or waiver either (i) is approved by Holders of the Bonds in the manner provided in the Resolution for amendments to the Resolution with the consent of Holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Holders or Beneficial Owners of the Bonds.

If the annual financial information or operating data to be provided in the Semi-Annual Report is amended pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided.

In the event of any amendment or waiver of a provision of this Disclosure Certificate, the Developer shall describe such amendment in the next Semi-Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the Developer. If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information 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. The comparison shall include a 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, in order to provide information to investors to enable them to evaluate the ability of the Developer to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to the Repositories in the same manner as for a Listed Event under Section 5.

Section 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Developer from disseminating any other information using the means of dissemination set forth in this Disclosure Certificate or any other means of communication or including any other information in any Semi-Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Developer chooses to include any information in any Semi-Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Developer shall have no obligation under this Disclosure Certificate to update such information or include it in any future Semi-Annual Report or notice of occurrence of a Listed Event.

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Section 10. Default. In the event of a failure of the Developer to comply with any provision of this Disclosure Certificate, the Participating Underwriter, the City, or any Holder or Beneficial Owner of outstanding Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Developer to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed to be an event of default under the Resolution, and the sole remedy under this Disclosure Certificate in the event of any failure of the Developer to comply with this Disclosure Certificate 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 Certificate, and the Developer agrees to indemnify and save the City, the Dissemination Agent, and their respective officers, directors, employees, and agents, harmless against any losses, expenses, and liabilities which either or both of them may incur arising out of or in the exercise or performance of the Developer’s 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 City’s or the Dissemination Agent’s negligence or willful misconduct. The obligations of the Developer under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.

Section 12. Notices. Any notice or communication to or among any of the following parties shall be given to such parties as follows:

If to the Assessment District: City of Bakersfield 1501 Truxtun Avenue Bakersfield, California 93301 Attention: Finance Director Telephone: (661) 326-3740 Facsimile: (661) 326-3760

If to the Developer: Stuart Thomas, Inc., doing business as Lenox Homes 1502 Mill Rock Way, Suite 200 Bakersfield, California 93311 Attention: David A. Cates, President/ Warren Albert, Vice President of Operations Telephone: (661) 665-1282 Facsimile: (661) 665-1292

If to the Participating Underwriter: RBC Capital Markets Corporation 345 California Street, Suite 2800 San Francisco, California 94104 Attention: Robert L. Williams, Jr. Managing Director Telephone: (415) 445-8674 Facsimile: (415) 445-8679


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Section 13. Beneficiaries. This Disclosure Certificate shall be binding upon the Developer and shall inure solely to the benefit of the Developer, the Dissemination Agent, the Participating Underwriter, the City, and the Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity.

Date: [Closing Date]

STUART THOMAS, INC., a Nevada corporation, doing business as Lenox Homes

By: David A. Cates President

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EXHIBIT A

NOTICE TO REPOSITORIES OF FAILURE TO FILE SEMI-ANNUAL REPORT

Name of Developer: Stuart Thomas, Inc., a Nevada corporation, doing business as Lenox Homes

Name of Bond Issue: City of Bakersfield Assessment District No. 07-2 (Sydney Harbour) Limited Obligation Improvement Bonds

Date of Issuance: [Closing Date]

NOTICE IS HEREBY GIVEN that Stuart Thomas, Inc., a Nevada corporation, doing business as Lenox Homes (the “Developer”), has not provided a Semi-Annual Report with respect to the above-named Bonds as required by Section 3 of the Developer Continuing Disclosure Certificate, dated [Closing Date]. The Developer anticipates that the Semi-Annual Report will be filed by _______________.

Date: ________________

STUART THOMAS, INC., a Nevada corporation, as Dissemination Agent

By: David A. Cates President

cc: The Developer

FOR ADDITIONAL BOOKS: ELABRA.COM OR (888) 935-2272

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