NEW ISSUE - Book-Entry Only RATING: See CONCLUDING …cdiacdocs.sto.ca.gov/2008-0528.pdf ·...

NEW ISSUE - Book-Entry Only RATING: Standard and Poor's: "BBB+"

See "CONCLUDING INFORMATION - Rating" herein,

In the opinion of Jones Hall, A ProfCssional Law Corporation, San Francisco, Ca!i(ornia, Bond Counsel, subject, ho,vet·er. to certain qual(fications described herein, under existing law, the interest 011 the Series A Bonds is excludedfrom gross inco1r1eforfederal inco111e tax puq,oses and is not an ite,n of tax preference for purposes r~f!hefederal alternative mi11i11H11n tax imposed 011 individuals and corporations; prot·ided, howeve1; that for the purposes <~f co111puti11g the alternath,e 111ini1n11111 tax i111posed on certain corporations such interest is required to he taken into account in deten11i11ing certain inco111e and earnings. In the ji1rther opinion (~/'Bond Counsel, interest on the Series A Bonds and the Series B Bonds is exen1p1 .fiv,n Cal~fornia personal inco,ne taxation. Interest on the Series B Bonds is included in gross inco1ne for federal income tax purposes. See "Cl)NCLUDING INFORMATION-Tax Matters" herein.

08-oS.18 $18 900 000 , ' BREA PUBLIC FINANCING AUTHORITY

2008 TAX ALLOCATION REVENUE BONDS

SERIES A

Dated: Date of Delivery

O f-O-So>'i $2,025,000 BREA PUBLIC FINANCING AUTHORITY

2008 TAXABLE TAX ALLOCATION REVENUE BONDS

SERIES B

Due: September 1, as shown on inside cover

The Brea Public Financing Authority (the "Authority") is issuing its 2008 Tax Allocation Revenue Bonds, Series A (the '·Series A Bonds") and its 2008 Taxable Tax Allocation Revenue Bonds, Series B (the "Series B Bonds," and together with the Series A Bonds, the ''Bonds") to tnake three separate loans (collectively, the "Loans") to the Brea Redevelopn1en1 Agency (the "Agency") pursuant to three Loan Agreements, each dated as of November l, 2008 (eollecfively, the "Loan Agree1nents"), by and between the Authority and the Agency. The Agency will apply the proceeds of the Loans to: (i) refund the Agency's outstanding Redevelopment Project Arca C l 997 Senior Lien Tax Allocation Bonds and Redevelopment Project Arca C 1997 Subordinate Lien Tax Allocation Bonds, (ii) finance additional projects benefiting the Agency's Redevelopn1ent Project Arca C (the "Project Arca"), including projects in furtherance of the Agency's low and moderate incon1e housing program, (iii) fund deposits into the Reserve Accounts relating to the respective series of Bonds, and (iv) pay costs of issuance of the Bonds. Each series of Bonds v.·ill he issued under the term~ of an Indenture of Trust (respectively, the ''Series A Indenture" and the "Series B Indenture," and together, the "Indentures"), each dated as of Novctnbcr I, 2008, hy and hetv.•een the Authority and The Bank of New York Mellon Trust Con1pany, N.A., as trustee (the "Trustee").

The Bonds arc special ohligations of the Authority and are payahle from and secured hy Revenues (as defined in the respective Indentures), consisting pritnarily of rep;:tyments n1ade by the Agency pursuant to the Loan Agreen1ents. Repay1nents to he made hy the Agency under the Loan Agreen1ents are payable from Tax Revenues or Housing Tax Revenues, as applicable (as such tern1s arc defined in the related Loan Agreetnent), each consisting of a portion of the tax incrcn1cnt allocated to the Agency with respect to the Project Area pursuant to the California Co1nn1unity Redevelopn1ent Law, constituting Part I, Division 24 (com1nencing with Section 33000) of the California Health and Safety Code.

The Bonds are subject to optional and mandatory sinking fund redemption prior to their maturity.

The Bonds are being issued in fully registered forn1, and when issued, will be registered in the nan1c of Cede & Co., as nominee of The Dcposilory Trus\ Coinpany {"OTC"), New York, New York. OTC will ac\ as securities depository for \he Bonds. Individual purchases of the Bonds n1ay he 1nadc in hook-entry fonn only in integral multiples of $5,000. Purchasers of interests in the Bonds will not receive certificates representing their interest in the Bonds purchased. Interest on the Bonds will he payable sen1iannually on March I and Septetnher 1 of each year, co1nn1encing March I, 2009. Payments of principal, prcmiu1n, if any, and interest on the Bonds will he payable hy the Trustee, to DTC, which is obligated in turn to re1nil such principal, prc,nium, if any, and interest to the DTC Participants for subsequent disbursement to the Beneficial Ov.·ncrs of the Bonds.

THE BONDS ARE NOT A [)EBT. LIABILITY OR OBLIGATION OF THE CITY OF BREA. THE STATE OF CALIFORNIA (THE "STATE"), OR ANY OF ITS POLITICAL SUBDIVISIONS OTHER THAN THE AUTHORITY, AND NONE OF THE CITY, THE STATE NOR ANY OF ITS POLITICAL SUBDIVISIONS, OTHER THAN THE AUTHORITY, IS LIABLE THEREFOR. THE LOANS ARE NOT DEBTS OF THE AUTHORITY OR THE STATE OR ANY OF ITS POLITICAL SUBDIVISIONS. AND NONE OF THE AUTHORITY, THE STATE NOR ANY OF ITS POLITICAL SUBDIVISIONS, OTHER THAN THE AGENCY, IS LIABLE FOR THE LOANS. NONE OF THE MEMBERS OF THE AUTHORITY, THE CITY, THE AGENCY NOR ANY PERSONS EXECUTING THE BONDS, THE INDENTURES OR THE LOAN AGREEMENTS ARE LIABLE PERSONALLY WITH RESPECT TO THE BONDS OR THE LOANS. THE OBLIGATIONS OF THE AGENCY WITH RESPECT TO THE LOANS ARE PAYABLE SOLELY FROM TAX REVENUES OR HOUSING TAX REVENUES AS SET FORTH IN THE LOAN AGREEMENTS. NEITHER THE AUTHORITY NOR THE AGENCY HAS TAXING POWER.

This cover page contains cerw.in information for general reference only. It is not intended to he a summary of all factors relating to an invcstJnent in the Bonds. Investors arc advised to read the entire Official State1nent to obtain information essential to the tnaking of an informed invcstJncnt decision. Capitali;:ed tern1s used and not defined on this cover page have the meanings set forth in this Official Statetnent. For a discussion of sotne of the risks associated with a purchase of the Bonds, sec "RISK FACTORS."

STONE & YOUNGBERG LLC

The Ronds are offered when, c1s and if issued and accepted by the Underwriter, subject to the approval as to their legality by Jones Hall, A Professional 1..£.nv Corporatfrn1, San Francisco, Cal(f'ornia, Bond Counsel .. Certain legal ,natters will also be passed 011 for the Authority and the Agency hy Richards, \M:lfson & Gershon, A Pn~f'essionaf Corpora/ion, as Disclosure Counsel. Authorit,v Counsel and Agency Counsel. It is a111icipa1ed that the Bonds will be arailable for delivery in book-entry fonn through the facilities (~/' DTC on or about Noven1ber 6, 200?5.

Dated: October 22, 2008

Ci:i ~;? \··~I N :;;;-1::i 2: 0 ::> i:...:i o.::

BREA PUBLIC FINANCING AUTHORITY

MATURITY SCHEDULE

$18,900,000 2008 Tax Allocation Revenue Bonds, Series A

$9,715,000 Serial Bonds (Base CUSIP1: 106282)

Maturity Date Principal Interest CUSIP (September 1) Amount Rate Yield Suffix1

2009 $ 885,000 4.250% 4.250% DFO 2010 710,000 4.500 4.625 DGS 2011 740,000 4.750 4.875 DH6 2012 775,000 5.000 5.125 DJ2 2013 815,000 5.250 5.375 DK9 2014 855,000 5.500 5.625 DL7 2015 905,000 5.625 5.875 DM5 2016 955,000 5.875 6.125 DN3 2017 1,010,000 6.125 6.375 DPS 2018 1,070,000 6.375 6.600 DQ6 2019 995,000 6.500 6.750 EH5

$4,710,000 7.000% Term Bonds due September 1, 2023; Yield 7.150%; CUSIP1 106282 DS2 $4,475,000 7.125% Term Bonds due September I, 2026; Yield 7.300%; CUSIP1 106282 OTO

$2,025,000 2008 Taxable Tax Allocation Revenue Bonds, Series B

$330,000 7.250% Tenn Bonds due September I, 2013; Yield 7.250%; CUSIP1 106282 DY9 $445,000 8.375% Term Bonds due September 1, 2018; Yield 8.500%; CUSIP1 106282 ED4

$1,250,000 9.000% Tenn Bonds due September I, 2026; Yield 9.250%; CUSIP1 106282 EG7

t CUSIP Copyright 2008, American Bankers' Association. CUSIP data herein is provided by Standard & Poor"s CUSIP Service Bureau, a division of The McGra,v-Hill Companies, Inc. The Agency does not guarantee the accuracy of the CUSIP data.

BREA PUBLIC FINANCING AUTHORITY BREA REDEVELOPMENT AGENCY

Orange County, California

AUTHORITY AND AGENCY BOARDS/CITY COUNCIL

Don Schweitzer, Chair/Chair/Mayor John Beauman, Vice Chair/Vice Chair/Mayor Pro Tern

Ron Garcia, Memher/Mernher/Council Mernher Roy Moore, Mernher/Member/Council Member

Marty Simonoft'. Memher/Mernber/Council Member

AGENCY/CITY STAFF

Tim O'Donnell, Executive Director/City Manager Terry Matz. Assistant City Manager

Bill Gallardo, Treasurer/Financial Services Director Eric Nicoll, Deputy Executive Director/Economic Development Director

Glenn G. Parker, City Treasurer Lucinda Williams, Agency Clerk/City Clerk

Lee Squire, Financial Services Manager -Accounting

SPECIAL SERVICES

Bond Counsel Jones Hall,

A Professional Law Corporation San Francisco, California

Disclosure Counsel Richards, Watson & Gershon,

A Professional Corporation Los Angeles, California

Trustee The Bank ofNew York MellonTrust Company, N.A.

Los Angeles, California

Fiscal Consultant Keyser Marston Associates, Inc.

Los Angeles, California

Verification Agent Causey Demgcn & Moore Inc.

GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT

Use of Official Statement. This Official Statement is submitted in connection with the offer and sale of the Bonds and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not lo be construed as a contract with the purchasers of the Bonds.

Esthnates and Forecasts. Certain statements included or incorporated by reference in this Official Statement and in any continuing disclosure by the Agency, any press release and in any oral statement made with the approval ofan authorized officer of the Agency or any other entity described or referenced herein, constitute "fotward-looking statements." Such statements are generally identifiable by the terminology used such as "plan," "expect," "'anticipate," "estimate," "budget," or other similar words and include, but are not limited to, statements under the captions "PROJECT AREA" and "TAX REVENUES AND DEBT SERVICE COVERAGE." The achievement of certain results or other expectations contained in such forward-looking statements involves known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forwardlooking statements. While the Agency has undertaken to provide certain on-going financial and other data pursuant to a Continuing Disclosure Agreement (see "Introduction - Continuing Disclosure"), the Agency does not plan to issue any updates or revisions to those forward-looking statements if or when their expectations or events, conditions or circumstances on which such statements are based change.

Preparation al this Official Statement. The information contained in this Official Statement has been obtained from sources that are believed to be reliable, but is not guaranteed as to accuracy or completeness.

The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the infonnation in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the ±'acts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.

limit of Offering. No dealer, broker, salesperson or other person has been authorized by the Agency to give any information or to make any representations in connection with the offer or sale of the Bonds other than those contained in this Official Statement and if given or made, such other information or representation must not be relied upon as having been authorized by the Agency or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sa1e.

lnf<Jrmation as of·· Dated Date of' Qfficial Statement. The information and expressions of opinions in this Official Statement are subject to change without notice and neither delivery of this Official Statement nor any sale made of the Bonds shall, under any circumstances, create any implication that there has been no change in the affairs of the Agency or any other entity described or referenced in this Otlicial Statement since the dated date shown on the front cover. All summaries of the documents referred to in this Official Statement are 1nade subject to the provisions of such documents, respectively, and do not purport to be complete statements of any or all of such provisions.

Stahi!ization of'Prices. In connection with this offering, the Underwriter may overallot or effect transactions which stabilize or maintain the market price of the Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The Underwriter may offer and sell the Bonds to certain dealers and others at prices lower than the public offering prices set forth on the inside front cover and said public offering prices may be changed from time to time by the Underwriter.

THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXCEPTION FROM THE REGISTRATION REQUIREMENTS CONTAINED IN SUCH ACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAW OF ANY STATE.

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TABLE OF CONTENTS

INTRODUCTION ........................................... I General.. ........................................................ I The City and the Agency .............................. 2 Project Arca .................................................. 3 · Tax Allocation Financing ............................. 4 Security for the Bonds .................................. 4 Continuing Disclosure .................................. 5 Other Information ......................................... 5

PLAN OF FINANCING .................................. 6 Refunding of 1997 Bonds ............................. 6 Financing of Projects .................................... 7 Sources and Uses or Funds ........................... 7

THE BONDS ................................................... 8 Description .................................................... 8 Redemption ................................................... 9 Book-Entry Only System ............................ 12 Annual Debt Service Schedule ................... 13

SECURJTY FOR THE BONDS .................... 13 General. ....................................................... 13 Tax Allocation Financing ........................... 14 Allocation of Taxes ..................................... 14 Reserve Accounts ....................................... 17 Jncurrcncc of Parity Debt.. .......................... 18

THE AUTHORITY ....................................... 19 THE AGENCY .............................................. 19

General ........................................................ I 9 Agency Administration and Personnel ....... 19 Audited Financial Statements ..................... 20 Filing of Statement of Indebtedness ........... 20 Other Project Arca ...................................... 21

PROJECT AREA ........................................... 21 General Description .................................... 21 Redevelopment Plan; Plan Limitations ....... 23 Tax Sharing Agreements ............................ 23 Tax Sharing Statutes ................................... 25 Land Use ..................................................... 25 Top Property Tax Asscssccs ....................... 26

TAX REVENUES AND DEBT SERVICE COVERAGE ............................. 30 Historical Assessed Valuation and Tax

Increment Revenues ............................. 30 Teeter Plan .................................................. 33 Appeals of Assessed Values ....................... 33 Projected Tax Revenues ............................. 35 Coverage Projections .................................. 37

RISK FACTORS ........................................... 38 Limited Obligations of the Authority and

the Agency ........................................... 3 8 Concentration of Ownership ....................... 38

Reduction in Taxable Value ........................ 39 Levy and Collection ................................... .40 State Budget; ERAF ................................... .40 Natural Disasters ........................................ .41 Hazardous Substances ................................ .42 Bankruptcy Risks; Enforceability of

Remcdics ............................................... 42 Secondary Market. ...................................... .42 Loss of Tax Exemption with Respect to

Series A Bonds ..................................... .42 LIMITATIONS ON TAX REVENUES ........ .43

Article XlIIA of the California Constitution ........................................... 43

Property Tax Collection Procedure ............. 44 Unitary Property ......................................... .45 Article XIIIB of the California

Constitution ........................................... 46 Proposition 87 ........................................... ..46 Proposition 2 I 8 ........................................... .46 AB 1290 and SB 211 .................................. .47 SB 1045 and SB 1096 ................................ .47 Future Initiatives ......................................... .48

CONCLUDING INFORMATION ................ .48 Absence of Litigation ................................. .48 Certain Legal Matters ................................. .48 Tax Matters ................................................ .48 Continuing Disclosure ................................. 50 Rating .......................................................... 50 Underwriting ............................................... 50 Miscellaneous .............................................. 51

APPENDIX A - CITY OF BREA GENERAL INFORMATION ...................... A-1

APPENDIX B - FISCAL CONSULTANT'S REPORT ....................... B-1

APPENDIX C -AGENCY AUDITED FINANCIAL STATEMENTS FISCAL YEAR ENDED JUNE 30. 2007 ............................................................. C-1

APPENDIX D - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS ......... D-I

APPENDIX E - FORM OF BOND COUNSEL OPINIONS ................................ E-I

APPENDIX F - FORM OF CONTINUING DISCLOSURE AGREEMENT .............................................. F-1

APPENDIX G - DTC'S BOOK-ENTRY ONLY SYSTEM .......................................... G-1

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$18,900,000 BREA PUBLIC FINANCING AUTHORITY

2008 TAX ALLOCATION REVENUE BONDS SERIES A

$2,025,000 BREA PUBLIC FINANCING AUTHORITY

2008 TAXABLE TAX ALLOCATION REVENUE BONDS SERIES B

INTRODUCTION

This introduction does not purport to be complete, and r~ference is made to the body of this Official Statement, appendices and the actual documentsfi,r more complete infi,rmation with respect to matters concerning the Bond,. Potential investors are encouraged to read the entire Official Statement. Capitalized terms used and not defined in this Introduction shall have the meanings assigned to them elsewhere in this Official Statement.

General

This Official Statement, including the cover page, the inside front cover and appendices, is provided to furnish information in connection with the sale by the Brea Public Financing Authority (the "Authority") of its SI 8,900,000 2008 Tax Allocation Revenue Bonds, Series A (the "Series A Bonds") and its S2,025,000 2008 Taxable Tax Allocation Revenue Bonds, Series B (the "Series B Bonds," and together with the Series A Bonds, the "Bonds"). The Bonds arc being issued pursuant to the provisions relating to the joint exercise of powers found in Chapter 5 of Division 7 of Title I of the California Government Code, including the provisions of the Marks-Roos Local Bond Pooling Act of 1985, constituting Article 4 thereof (the "Bond Law") and Resolution No. A-1-2008 of the Authority adopted on January 15, 2008, as amended by Resolution No. A-5-2008 of the Authority adopted on October 7, 2008. Each series of Bonds will be issued under the terms of an Indenture of Trust (respectively, the "Series A Indenture" and the "Series B Indenture," and together, the "Indentures"), dated as of November I, 2008, by and between the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee").

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Proceeds from the sale of the Series A Bonds will be used by the Authority to make two separate loans (respectively, the "Series A Non-Housing Loan" and the "Series A Housing Loan," and together, the "Series A Loans") to the Brea Redevelopment Agency (the "Agency") pursuant to two Loan Agreements, each dated as of November I, 2008 (respectively, the "Series A Non-Housing Loan Agreement" and the "Series A Housing Loan Agreement," and together, the "Series A Loan Agreements"), by and between the Authority and the Agency. The Agency will apply the proceeds of the Series A Loans to: (i) refund the Agency's outstanding Redevelopment Project Arca C 1997 Senior Lien Tax Allocation Bonds (the "1997 Senior Bonds") and Redevelopment Project Area C 1997 Subordinate Lien Tax Allocation Bonds (the "1997 Subordinate Bonds," and together with 1997 Senior Bonds, the "1997 Bonds"), (ii) finance additional projects benefiting the Agency's Redevelopment Project Arca C (the "Project Area"), (iii) fund a portion of the Reserve Account established under the Series A Indenture, and (iv) pay costs of issuance of the Series A Bonds. The Series A Bonds are special obligations of the Authority payable from and secured by Revenues (as defined in the Series A Indenture) consisting primarily of repayment by the Agency with respect to the Series A Loans.

Proceeds from the sale of the Series B Bonds will be used by the Authority to make a loan (the "Series B Housing Loan") to the Agency pursuant to a Loan Agreement, dated as of November I, 2008 (the "Series B Loan Agreement," and together with the Series A Loan Agreements, the "Loan Agreements"), by and between the Authority and the Agency. The Agency will apply the proceeds of the Series B Housing Loan to: (i) finance additional projects in furtherance of the Agency's low and moderate income housing program, (ii) fund the Reserve Account established under the Series B Indenture, and

(iii) pay costs of issuance of the Series B Bonds. The Series B Bonds arc special obligations of the Authority payable from and secured by Revenues (as defined in the Series B Indenture) consisting primarily of repayment by the Agency with respect to the Series B Housing Loan.

Payments to be made by the Agency with respect to the Series A Non-Housing Loan arc secured by a lien on Tax Revenues (defined below, sec "Security for the Bonds") consisting of a portion of the tax increment a11ocatcd to the Agency pursuant to the Community Redevelopment Law of the State of California (the "State"), constituting Part I of Division 24 (commencing with Section 33000) of the California Health and Safety Code, as amended (the "Redevelopment Law") with respect to the Project Arca. Payments to be made by the Agency with respect to the Series A Housing Loan and the Series B Housing Loan are secured by a lien on Housing Tax Revenues ( defined below, sec "Security for the Bonds"), on a parity basis. Housing Tax Revenues consist of the portion of tax increment which the Agency is obligated to deposit into the low- and moderate-income housing fund (the "Housing Fund") established and held by the Agency with respect to the Project Arca under Section 33334.3 of the Redevelopment Law.

Interest on the Bonds will be payable scmiannua11y on March I and September I of each year, commencing March !, 2009. The Bonds of each series wi11 be initially delivered as one fu]ly registered certificate for each maturity (unless the Bonds of such maturity bear different interest rates, then one certificate for each interest rate among such maturity) and, when issued and delivered, will be registered in the name of Cede & Co., as nominee of the Depository Trust Company, New York, New York ("OTC"). OTC will act as the depository for the Bonds and all payments due on the Bonds wi11 be made to Cede & Co. Ownership interests in the Bonds may be purchased only in book-entry form. So long as the Bonds are registered in the name of Cede & Co., or any other nominee of DTC, references in this Official Statement to the registered owners, or just "Owners," of the Bonds shall mean Cede & Co. or such other nominee of DTC, and shall not mean the beneficial owners of the Bonds. See "THE BONDS- Book-Entry Only System" and "APPENDIX G - DTC'S BOOK-ENTRY ONLY SYSTEM."

The City and the Agency

The City of Brea (the "City") encompasses approximately I I .2 square miles and is located at the northern end of Orange County, California (the "County"), just south of the Los Angeles County line. The City lies about 25 miles southeast of downtown Los Angeles and I 5 miles north of the City of Santa Ana, the County scat, and 22 miles inland of the Pacific Ocean. The City's population was approximately 40,081 as of January I, 2008, according to State of California Department of Finance estimates. The City Council is composed of five members elected bi-annually at large to four-year alternating terms. The Mayor is selected by the City Council from among its members. The City Council appoints the City Manager, who is responsible for the day-to-day administration of City business and the coordination of all departments of the City. For further general information regarding the City, sec "APPENDIX A - CITY OF BREA GENERAL INFORMATION."

The Agency was activated with the adoption of Ordinance No. 465 by the City Council on April 13, 1970. As permitted by the Redevelopment Law, the City Council assumed the duties and responsibilities of the Agency at that time. The members of the City Council also serve as members of the Agency with the Mayor of the City serving as the Agency's Chair. The City Manager serves as the Agency's Executive Director. Certain other members of the City staff also serve as staff to the Agency. Sec "THE AGENCY."

The Agency is charged with the redevelopment undertakings with respect to two project areas: Redevelopment Project AB and the Project Arca. Redevelopment Project AB, encompassing 2, 192 acres primarily in the middle and southern part of the City, is significantly larger than the Project Arca.

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Project Area

On November 30, 1976, the City Council of the City adopted Ordinance No. 611 and approved a redevelopment plan (the "Original Redevelopment Plan") for the Project Arca. The Original Redevelopment Plan has been amended subsequently by the adoption of four ordinances: (i) Ordinance No. 680, adopted on October 2, 1979, (ii) Ordinance No. 787, adopted on March 18, 1986, (iii) Ordinance No. 950, adopted on March I, 1994, and (iv) Ordinance No. 1103, adopted on June 5, 2007. The Original Redevelopment Plan, as amended, is referred to in this Official Statement as the "Redevelopment Plan."

Encompassing approximately 256 acres in the northern portion of the City, the Project Arca consists primarily of four distinct development areas. These include: (a) the residential area located in the eastern-most portion of the Project Arca, (b) Olen Pointe Brea, a multi-use office, retail and residential complex ("Olen Pointe Brea"), located at the northeast intersection of State Highway 57 (commonly known as the Orange Freeway) and Lambert Road; (c) the Financial Commons commercial development ("Financial Commons") generally bounded by State Highway 57 on the cast, Birch Street on the south, State College Boulevard on the west and railroad tracks on the north; and (d) the former Brea Olinda Unified School District high school site (the "Old High School Site") which has been redeveloped into two commercial, retail and restaurant complexes known as the Brea Marketplace and the Brea Corporate Place. The Fiscal Consultant Report in Appendix B refers to (i) the residential area in the eastern part of the Project Arca and Olen Pointe Brea, together, as the "Original Arca," (ii) Financial Commons as "Arca A" and (iii) the Old High School Site as "Arca B."

Assessed valuation of taxable property within the Project Area (including secured and unsecured values) for fiscal year 2008-09 totals approximately $458 million, which is approximately $456 million greater than the base year valuation. Under the Redevelopment Plan. the tax increment allocable to the Agencv with respect to the Proiect Area in each fiscal vear will not exceed $4.5 million. Furthermore, pursuant to the terms of a pass-through agreement which is further described under the captions "SECURITY FOR THE BONDS - Allocation of Taxes - Pass-through Agreements" and "PROJECT AREA - Tax Sharing Agreements," an amount equal to a portion of' the tax increment revenues allrihutable to the Old High School Site each fiscal vear (hut not exceeding $1.82 million through fiscal vear 2017-18 and $2 million therea(ier through fiscal vear 2026-2 7/. will not he available to pav deht service on the Series A Non-Housing Loan. Assessed value of the Old High School Site, for fiscal year 2008-09 is approximately $166 million. Because the Old High School Site was owned and used as a public school facility until the early J 980's (i.e., well after the effective date of the Original Redevelopment Plan), the base year valuation fur the Old High School Site, for the purposes of calculating tax increment revenues, is SO.

Parcels currently used for residential purposes and commercial purposes account for approximately 32.1 percent and 64.5 percent, respectively, of the 2008-09 assessed value of the Project Area. Based on the County records, the top three property tax asscssccs ( ranked by total secured and unsecured assessed value), collectively, arc responsible for taxes on properties that represent approximately 60.8 percent of the assessed value of the Project Arca, for the 2008-09 fiscal year. Sec "PROJECT AREA" AND "TAX REVENUES AND DEBT SERVICE COVERAGE." Also sec "RISK FACTORS - Concentration of Ownership."

The projection.,· contained in this Official Statement and in the Fiscal Consultant's Report in Appendix B assume that the total assessed value of the Project Area will not decrease below its fiscal year 2008-09 assessed value and, therefore, tax increment allocated to the Agency with re.,pect to the Project Area will be $4.5 million each fiscal year (i.e., the annual maximum under the Redevelopment Plan) through the final maturity of the Bonds. However, no assurances can be given that will in fact

3

be the case. A future decrease in the receipt of taxes, the assessed valuation of the Project Area, the applicable lax rates or the economic stability of the Project Area could reduce the Tax Revenues and Housing Tax Revenues allocated to the Agency and correspondingly could have an adver,·e impact on the ability of the Agency to make payments under the Loan Agreement.<. See "RISK FACTORS" and "LIMITATIONS ON TAX REVENUES."

Tax Allocation Financing

The Redevelopment Law provides a means for financing redevelopment projects based upon an allocation of taxes collected within a redevelopment project area. The taxable valuation of a redevelopment project area last equalized prior to adoption of the redevelopment plan, or the base roll, is established and, except for any period during which the taxable valuation drops below the base year level, the taxing agencies thereafter receive the taxes produced by the levy of the then current tax rate upon the base roll. Taxes collected upon any increase in taxable valuation over the base roll ( except such portion generated by rates levied to pay voter-approved bonded indebtedness on or after January I, 1989 for the acquisition or improvement of real property) arc allocated to a redevelopment agency and may be pledged by a redevelopment agency to the repayment of any indebtedness incurred in financing or refinancing a redevelopment project. Redevelopment agencies have no authority to levy property taxes and must look specifically to the allocation of taxes produced under the Redevelopment Law.

The taxes (including all payments, subventions and reimbursements, if any, specifically attributable to ad valorem taxes lost by reason of tax exemptions and tax rate limitations) eligible for allocation to the Agency pursuant to the Redevelopment Law with respect to t_hc Project Arca as provided in the Redevelopment Plan arc generally referred to as tax increment revenues and are also referred to in this Official Statement as the "Gross Tax Revenues."

Sections 33334.2 and 33334.3 of the Redevelopment Law require the Agency to set aside not less than 20 percent of the Gross Tax Revenues allocated to the Agency in the Housing Fund to be expended for authorized low and moderate income housing purposes (the "Housing Set-Aside"). Amounts on deposit in the Housing Fund may be applied to pay debt service on bonds, loans or advances used to provide financing for such low and moderate income housing purposes, such as the Series A Housing Loan and the Series B Housing Loan.

Security for the Bonds

The Bonds of each series arc secured by a pledge of Revenues. "Revenues" is defined in each Indenture to mean: (a) all amounts payable by the Agency as repayment (including prepayment) of, with respect to the Series A Bonds, the Series A Loans under the Series A Non-Housing Loan Agreement and the Series A Housing Loan Agreement, and with respect to the Series B Bonds, the Series B Housing Loan under the Series B Loan Agreement; (b) any proceeds of the related series of Bonds originally deposited with the Trustee and all moneys deposited and held from time to time by the Trustee in the funds and accounts established under such Indenture; and (c) income and gains with respect to the investment of amounts on deposit in the funds and accounts established under such Indenture.

Repayment of the Series A Non-Housing Loan is made from and secured by a pledge of Tax Revenues. The Series A Non-Housing Loan Agreement defines "Tax Revenues" to include all Gross Tax Revenues allocated to the Agency following the delivery date of the Bonds (the "Closing Date"), except (a) amounts of such taxes which arc required to be paid to other public agencies under the Tax Sharing Agreements or the Tax Sharing Statutes (each defined below, sec "SECURITY FOR THE BONDS -Allocation of Taxes"), unless subordinated to the payment of debt service on the Series A Non-Housing Loan, and (b) all amounts of such taxes required to be deposited into the Housing Fund. For a more

4

precise wording of the definition of "Tax Revenues" in the Series A Non-Housing Loan Agreement, sec "APPENDIX D - SUMMARY OF PRJNCIPAL LEGAL DOCUMENTS - Definitions."

Repayment of the Series A Housing Loan and the Series B Housing Loan is payable from and secured by a pledge of Housing Tax Revenues on a parity basis. The Series A Housing Loan Agreement and the Series B Loan Agreement define "Housing Tax Revenues" to include all the Gross Tax Revenues allocated to the Agency following the Closing Date which the Agency is obligated to deposit into the Housing Fund under Section 33334.2 of the Redevelopment Law. Sec "APPENDIX D - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - Definitions."

The Bonds are not a debt, liability or obligation ol the Cily, /he S!a/e, or any ol its polilical subdivisions a/her than !he Aulhorily, and none o{ the City, the Stale nor any al its polilical subdivisions, a/her lhan !he Authorily, is liablefor !he Bonds. The loans are no/ a deb/ o{lhe Aulhority or 1he Slate or any o{ils political subdivisions, and none o{lhe Aulhorily or the Slate or any o{ils polilical subdivisions, olher !hem !he Agenc:v. is liahlefor !he loans. None ol the members o{ lhe Aulhorily, !he Cily, the Agency nor any persons executing /he Bonds or the loan Agreemen/s are liable personal~v with respec/ lo the Bonds or !he loans. The ob/igalions o{ lhe Agency with respect to the loans are payable sole~vfrom /he Tax Revenues or Housing Tax Revenues as set forlh in the loan Agreements. Neither !he Aulhority nor the Agenc~y has taxing po,ver.

Sec "SECURITY FOR THE BONDS."

Continuing Disclosure

In connection with the sale of the Bonds, the Agency will enter into a Continuing Disclosure Agreement, covenanting to prepare and deliver an annual report to certain national and state repositories and to provide certain nthcr information. Sec "CONCLUDING INFORMATION - Continuing Disclosure" and "APPENDIX F - FORM OF CONTINUING DISCLOSURE AGREEMENT."

Other Information

There follows in this Official Statement brief descriptions of the Bonds, security for the Bonds, certain risk factors, the Indentures, the Loan Agreements, the Authority, the Agency, the Project Arca and certain other documents and information relevant to the issuance of the Bonds. All references to the Bonds, the Indentures, the Loan Agreements or other documents arc qualified in their entirety by reference to such documents. Unless context clearly requires otherwise, capitalized terms used but not otherwise defined in this Official Statement have the meanings assigned to them in the Indentures, and if not in the Indentures, the Loan Agreements. Sec "APPENDIX D - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS- Definitions."

This Official Statement speaks only as of its date as set forth on the cover hereof, and the information and expressions of opinion in this Official Statement arc subject to change without notice, and neither the delivery of this Official Statement nor any sale made with respect to the Bonds shall under any circumstances create any implication that there has been no change in the affairs of the Authority or the Agency since the date of this Official Statement.

Unless otherwise expressly noted, references to Internet websites in this Official Statement arc shown for reference and convenience only, and none of their content is incorporated by reference. The information contained within such websites has not been reviewed by the Authority and the Agency. The Authority and the Agency make no representation regarding the information presented on such websites.

5

PLAN OF FINANCING

Proceeds of the Bonds will be used to fund the Series A Loans and the Series B Housing Loan, which will be used to refund all of the remaining outstanding 1997 Bonds and to finance additional projects benefiting the Project Arca, including projects in furtherance of the Agency's low and moderate income housing program.

Refunding of 1997 Bonds

The Agency issued the 1997 Bonds to fund low and moderate income housing projects for the benefit of the Project Arca (the "1997 Housing Projects") and to effect a partial refunding of certain prior debt obligations. Such prior obligations included: (i) a loan payable to the City which was incurred in 1992, and (ii) loans incurred in connection with bonds that were issued by the Authority in 1988 (the "1988 Authority Bonds"). Sec "PROJECT AREA - Tax Sharing Agreements - Financial Commons Tax Sharing Agreement" for further description of the 1988 Authority Bonds.

Proceeds from the sale of both of the 1997 Senior Bonds and the 1997 Subordinate Bonds were used for refunding purposes, but only proceeds of the 1997 Senior Bonds were used for the financing of the 1997 Housing Projects. Net proceeds of the Series A Housing Loan will be used to refund a portion of the 1997 Senior Bonds that is allocable to the financing of the 1997 Housing Projects. A portion of the net proceeds of the Series A Non-Housing Loan will be used to refund the remaining balance of the 1997 Senior Bonds and the 1997 Subordinate Bonds.

Pursuant to the Irrevocable Refunding Instructions (the "Rcti.mding Instructions") to be given by the Agency concurrently with the issuance of the Bonds, a portion of the proceeds of the Series A Loans, together with certain moneys released from funds relating to the 1997 Bonds, will be set-aside and held by The Bank of New York Mellon Trust Company, N.A., as successor to BNY Western Trust Company, trustee for the I 997 Bonds (the "1997 Bond Trustee"), in two escrow funds (the "Escrow Funds"). A portion of the moneys deposited into the Escrow Funds will be used to buy direct obligations of the United States of America (the "Escrow Securities"). The 1997 Bond Trustee will apply the Escrow Securities and cash held in the Escrow Funds pursuant to the Refunding Instructions and the indentures for the 1997 Bonds, for the sole benefit of the holders of the 1997 Bonds. Neither the Escrow Securities nor other moneys held in the Escrow Funds will serve as security or be available for payment of principal of or interest or premium, if any, on the Bonds. The Agency will irrevocably direct the 1997 Bond Trustee to redeem and pay all of the 1997 Senior Bonds on January 5, 2009, and the 1997 Subordinate Bonds on December I, 2008. On such dates, moneys deposited in the Escrow Funds will be used to pay the principal and interest payments then due and the redemption price for the I 997 Bonds. As a result of the deposit and application of funds under the Refunding Instructions, the 1997 Bonds will be deemed to be paid and defeased as of the date of issuance of the Bonds, and will no longer be secured by the Tax Revenues or the Housing Tax Revenues.

Causey Dcmgcn & Moore Inc., certified public accountants (the "Verification Agent"), will verify the mathematical accuracy of certain computations included in the schedules provided on behalf of the Agency relating to the computation of forccastcd receipts of principal and interest earnings on the moneys and securities deposited in the Escrow Funds and the forccastcd payments of principal, interest, and premium in connection with the redemption and payment of the 1997 Bonds. The report of the Verification Agent will include the statement that the scope of its engagement was limited to verifying the arithmetical accuracy of computations contained in the schedules provided to the Verification Agent and the Verification Agent has no obligation to update its report because of events occurring, or data or information coming to the Verification Agent's attention, subsequent to the date of its report.

6

Financing of Projects

A portion of the net proceeds of the Series A Non-Housing Loan will be used to finance projects for the benefit of the Project Arca. Such projects arc expected to include: (i) the acquisition and construction of a walking and bicycle trail along Union Pacific Railroad right of way, (ii) the widening of the northbound State Highway 57 on-ramp at Lambert Road, (iii) the enhancement of Birch Street median landscape, and (iv) further redevelopment relating to the Brea Marketplace and Financial Commons.

The net proceeds of the Series B Housing Loan will be used to finance various projects and activities in furtherance of the Agency's low and moderate income housing program.

The above-described projects reflect the Agency's current expectations. The Agency may use the proceeds of the Loans for other permitted redevelopment and low and moderate income housing purposes. None of the projects financed with proceeds of the Loans will constitute security for the Bonds.

Sources and Uses of Funds

The following is a summary of the anticipated sources and uses of funds relating to the Series A Bonds (and the Series A Loans) and certain moneys to be released from funds relating to the 1997 Bonds:

Sources:

Principal Amount of Series A Bonds (Series A Loans) Less: Original Issue Discount Less: Underwriter's Discount Release from funds relating to 1997 Senior Bonds Release from funds relating to 1997 Subordinate Bonds

Total Sources

Uses:

Refunding of 1997 Senior Bonds Refunding of 1997 Subordinate Bonds Redevelopment Fund Reserve Account Costs of Issuance <

1l

Total Uses

$18,900,000.00 (240,459. I OJ (189,000.00)

2,301,029.45 540,370.71

.$21 311 941.06

$10,223,605.88 2,303, 758.00 6,741,848.95 1,855,968. 78

186,759.45 $21,311.941.06

(ll To pay fees and expenses of Bond Counsel, Disclosure Counsel, Trustee and Fiscal Consultant. rating fees, costs of printing this Official Statement and other costs of issuance.

7

The anticipated sources and uses of funds relating to the Series B Bonds (and the Series B Housing Loan) arc as follows:

Sources:

Principal Amount of Series B Bonds (Series B Housing Loan) Less: Original Issue Discount Less: Underwriter's Discount

Total Sources

Uses:

Housing Fund Reserve Account Costs of Issuance t

I l

Total Uses

$2,025,000.00 (3 1,084.40) (20,250.00)

SI 973 665 60

$1,718,716.80 202,500.00

52,448.80

S 1.973.665.60

fn To pay fees and expenses of Bond C~unscl. Disclosure Counsel, Trustee and Fiscal Consultant. rating fees. costs of printing this Official Statc1ncnt and other costs of issuance.

THE BONDS

Description

The Bonds will be issued as fully registered bonds, and will bear interest at the rates, and mature on September I on the dates and in the amounts all as set forth on the inside front cover of this Official Statement. The Bonds will be dated their date of delivery.

Interest on the Bonds will be payable semiannually on March I and September I of each year, commencing March I, 2009 ( each, an "Interest Payment Date"), and will be calculated on the basis of a 360-day year composed of twelve 30-day months. Each Bond will bear interest from the Interest Payment Date immediately preceding the date of authentication of such Bond, unless (i) such Bond is authenticated on or before an Interest Payment Date and after the close of business on the preceding Record Date, in which event it will bear interest from such Interest Payment Date; (ii) such Bond is authenticated on or before the first Record Date, in which event interest on such Bond will be payable from the Closing Date; or (iii) interest on such Bond is in default as of the date of authentication, in which event interest thereon will be payable from the date to which interest has been paid in full, payable on each Interest Payment Date.

The Bonds of each Series will be initially delivered as one fully registered certificate for each maturity (unless the Bonds of such maturity bear different interest rates, then one certificate for each interest rate among such maturity) and will be delivered by means of the book-entry system of OTC. While the Bonds arc held in DTC's book-entry only system, all such payments will be made to Cede & Co., as the registered owner of the Bonds. Sec "Book-Entry Only System" below.

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Redemption

Optional Redemption - Series A Bond,. The Series A Bonds maturing on or before September I, 20 l 6, arc not subject to redemption prior to maturity. The Series A Bonds maturing on or after September I, 2017 arc subject to redemption, at the option of the Authority, in whole or in part among maturities on such basis as designated by the Authority and by lot within a maturity, from any available source of funds, on September I, 2016, and on any date thereafter, at a redemption price ( expressed as a percentage of the principal amount of Series A Bonds to be redeemed) as set forth in the following table, together with accrued interest thereon to the date fixed for redemption:

Redemption Period September I, 2016 through August 31, 2017 September I, 20 I 7 through August 31, 2018 September I, 2018 and thereafter

Redemption Price 102% I 01 100

Amounts received by the Authority from an optional prepayment of either Series A Loan by the Agency will be applied to the optional redemption of a corresponding portion of the Series A Bonds.

Optional Redemption - Series B Bond,·. The Series B Bonds maturing on or before September I, 2018, arc not subject to redemption prior to maturity. The Series B Bonds maturing on September I, 2026 arc subject to redemption, at the option of the Authority, in whole or in part among maturities on such basis as designated by the Authority and by lot within a maturity, from any available source of funds, on September I, 2018, and on any date thereafter, at a redemption price equal to I 00 percent of the principal amount of Series B Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium. Amounts received by the Authority from an optional prepayment of the Series B Housing Loan by the Agency will be applied to the optional redemption of a corresponding portion of the Series B Bonds.

Mandatorv Sinking Fund Redemption - Series A Bond,. The Series A Bonds maturing on September I, 2023, and September I, 2026 (together, the "Series A Term Bonds"), arc subject to redemption prior to their stated maturity date, without a redemption premium, in part by lot, from mandatory sinking fund payments on each September I, in the principal amounts as set forth in the following tables:

Series A Term Bonds Maturing on September I, 2023

Redemption Date (September I)

2020 2021 2022 2023 (maturity)

9

Principal Amount

$1,060,000 1,135,000 1,215,000 1,300,000

Series A Term Bonds Maturing on September I. 2026

Redemption Date {September I)

2024 2025 2026 (maturity)

Principal Amount SI,390,000

1,490,000 1,595,000

If some but not all of the Series A Tenn Bonds of a maturity have been optionally redeemed, the total amount of all future sinking fund payments of such Series A Term Bonds will be reduced by the aggregate principal amount of such Series A Tenn Bonds so redeemed, to be allocated among such sinking fund payments on a pro rata basis as dctcnnincd by the Authority.

Manda/Oil' Sinking Fund Redemption - Series B Bonds. The Series B Bonds maturing on September I, 2013, September I, 2018 and September I, 2026 (collectively, the "Series B Tenn Bonds"), arc subject to redemption prior to their stated maturity date, without a redemption premium, in part by lot, from mandatory sinking fund payments on each September l, in the principal amounts as set forth in the following tables:

Series B Tenn Bonds Maturing on September I, 2013

Redemption Date {September I)

2009 2010 2011 2012 2013 (maturity)

Principal Amount $80,000

55,000 60,000 65,000 70,000



2014 2015 2016 2017 2018 (maturity)

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Principal Amount $75,000

80,000 90,000 95,000

105,000



2019 2020 2021 2022 2023 2024 2025 2026 (maturity)

Principal Amount SI 15,000

125,000 135,000 145,000 160,000 175,000 190,000 205,000

If some but not all of the Series B Term Bonds of a maturity have been optionally redeemed, the total amount of all future sinking fund payments of such Series B Tenn Bonds will be reduced by the aggregate principal amount of such Series B Tenn Bonds so redeemed, to be allocated among such sinking fund payments on a pro rata basis as determined by the Authority.

Notice of Redemption. The Trustee on behalf of the Authority will send notice of any redemption to the respective Owners of any Bonds designated for redemption at their respective addresses appearing on the Registration Books, to the Securities Depositories and to one or more Information Services, at least 30 but not more than 60 days prior to the date fixed for redemption; provided, however, that neither failure to receive any such notice so mailed nor any defect in such notice will affect the validity of the proceedings for the redemption of, or the cessation of the accrual of interest on, such Bonds.

Right to Rescission of Redemption. The Authority has the right to rescind any notice of the optional redemption of Bonds by written notice to the Trustee on or prior to the date fixed for redemption. Any notice of redemption will be cancelled and annulled if for any reason funds will not be or arc not available on the date fixed for redemption for the payment in full of the Bonds then called for redemption, and such cancellation will not constitute an Event of Default under the Indentures. The Authority and the Trustee have no liability to the Owners or any other party related to or arising from such rescission of redemption. The Trustee will mail notice of such rescission of redemption to the Bond Owners in the same manner as the original notice of redemption was sent.

Se/eel ion o(Bond,· [or Redemplion. Whenever provision is made for the redemption of less than all of the Bonds of the same series and maturity, the Trustee will select the Bonds to be redeemed by lot in any manner which the Trustee in its sole discretion deems appropriate. For purposes of such selection, all Bonds will be deemed to be comprised of separate $5,000 denominations and such separate denominations will be treated as separate Bonds which may be separately redeemed.

Partial Redemption o[Bond,. If only a portion of any Bond is called for redemption, then upon surrender of such Bond the Authority will execute and the Trustee will authenticate and deliver to the Owner thereof, at the expense of the Authority, a new Bond or Bonds of the same series and maturity date, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the Bond to be redeemed.

Effect of Redemption. From and after the date fixed for redemption, if notice of redemption has been duly mailed and funds available for the payment of the principal of and interest (and premium, if any) on the Bonds so called for redemption have been duly provided, such Bonds so called will cease to be entitled to any benefit under the related Indenture other than the right to receive payment of the

11

redemption price, and no interest will accrue on such Bonds from and after the redemption date specified in such notice.

Book-Entry Only System

The Bonds of each series will be issued as one fully registered bond without coupons for each maturity (unless the Bonds of such maturity bear different interest rates, then one certificate for each interest rate among such maturity) and, when issued, will be registered in the name of Cede & Co., as nominee ofDTC. OTC will act as securities depository of the Bonds. Individual purchases may be made in book-entry form only, in the principal amount of $5,000 or multiples thereof. Purchasers will not receive certificates representing their interest in the Bonds purchased. Principal and interest will be paid to OTC, which will in turn remit such principal and interest to its participants for subsequent disbursement to the beneficial owners of the Bonds as described in this Official Statement. So long as DTC's book-entry system is in effect with respect to the Bonds, notices to Owners by the Agency or the Trustee will be sent to OTC. Notices and communication by OTC to its participants, and then to the beneficial owners of the Bonds, will be governed by arrangements among them, subject to then effective statutory or regulatory requirements. So long as the Bonds arc registered in the name of Cede & Co., or any other nominee of OTC, references in this Official Statement to the registered owners or use of the capitalized term "Owners" mean Cede & Co. or such other nominee of OTC, and do not mean the beneficial owners of the Bonds. Sec "APPENDIX G - DTC'S BOOK-ENTRY ONLY SYSTEM."

In the event that such book-entry system is discontinued with respect to the Bonds, the Authority will execute and deliver replacements in the form of registered certificates and, thereafter, the Bonds will be transferable and exchangeable on the terms and conditions provided in the Indentures. The following provisions would then apply: The Trustee will pay interest on the Bonds by check mailed by first class mail, postage prepaid, on each Interest Payment Date to the persons in whose names the ownership of the Bonds is registered on the registration books kept by the Trustee (the "Registration Books") at the close of business on the immediately preceding Record Date (i.e., the fifteenth calendar day of the month immediately preceding such Interest Payment Date), except as provided below. Interest on any Bond which is not punctually paid or duly provided for on any Interest Payment Date is payable to the person in whose name the ownership of such Bond is registered on the Registration Books at the close of business on a special record date for the payment of such defaulted interest to be fixed by the Trustee, notice of which is given to such Owner by first-class mail not less than 10 days prior to such special record date. At the written request of the Owner of Bonds of a series in an aggregate principal amount of at least S 1,000,000, which written request is on file with the Trustee as of any Record Date, the Trustee will pay interest on such Bonds on each succeeding Interest Payment Date by wire transfer in immediately available funds to such account of a financial institution within the United States of America as specified in such written request, which written request will remain in effect until rescinded in writing by the Owner. The Trustee will pay principal of the Bonds in lawful money of the United States of America by check of the Trustee upon presentation and surrender thereof at the Office of the Trustee.

12

Annual Debt Service Schedule

Scheduled debt service on the Bonds, without regard to any optional redemption, is shown in the following table.

Series A Bonds Series B Bonds

Bond Year Ending Series A Series B Aggregate (Sept. I) Principal Interest Total Principal Interest Total Debt Service

2009 s 885,\\0\) $ 969.879.10 1.854,879.10 s 8\\,000 $ 142.332.38 S 222.332.38 $ 2.077 .2 I 1.48 2010 710.000 1.145.968. 78 1.855.968 78 55,000 167,893.76 222,893.76 2.078,862.54 2011 740,000 I. I 14.018. 78 1,854.018. 78 60.000 163.906.26 223.906.26 2,077,925.04 2012 775,000 1.078.868. 78 1,853,868. 78 65.000 159.556.26 224.556.26 2.078.425.04 2013 815,000 1.040, 118. 78 1.855.118. 78 70.000 154.843. 76 224,843.76 2,079,962.54 2014 855,000 997,331.28 1.852.331.28 75.000 149.768.76 224.768.76 2.077,100.04 2015 905.000 950,306.28 1.855,306.28 80.000 143,487.50 223,487.50 2.078.793.78 2016 955,000 899.400.02 1,854.400.02 90.000 136,787.50 226.787.50 2.081.187.52 2017 1,010.000 843.293.80 1.853.293.80 95.000 129,250.00 224,250.00 2.077.543.80 2018 1.070.000 781.431.30 1.851.431.30 I 05,000 121,293.76 226,293. 76 2,077,725.06 2019 995.000 713.218.80 1.708.2 I 8.80 115.000 112.500.00 227,500.00 1.935.718.80 2020 1.060.000 648.543.80 1.708,543.80 125.000 102.150.00 227. 150.00 1,935,693.80 2021 1,135,000 574.343.80 1.709,343.80 135,000 90.900.00 225,900.00 1.935.243.80 2022 1.215,000 494.893.80 1.709,893.80 145.000 78.750.00 223.750.00 1,933,643.80 2023 1.300.000 409.843.80 1.709,843.80 160,000 65,700.00 225.700.00 1.935,543.80 2024 1,390,000 318,84}.80 I .708.843.80 175,000 51,300.00 226,300.00 1,935,143.80 2025 1.490,000 219,806.30 1,709,806.30 190.000 35,550.00 225,550.00 l ,935,356.30 2026 1.595.000 113.643.78 1.708.643. 78 205.000 18.450.00 223.450.00 1.932.093. 78

Total S 18,900,000 $13.313,754.78 $32.213.754. 78 $2.025.000 $2,024,419.94 $4.049,419.94 $36,263.174.72

SECURITY FOR THE BONDS

General

The Bonds of each series ~re secured by a first lien on and pledge of "Revenues" as defined in the related Indenture (see "INTRODUCTION - Security for the Bonds"). Revenues, with respect to the Series A Bonds, consist primarily of amounts of repayment (including prepayments) of the Series A NonHousing Loan and the Series A Housing Loan by the Agency under the Series A Loan Agreements. Revenues, with respect to the Series B Bonds, consist primarily of amounts of repayment (including prepayments) of the Series B Housing Loan by the Agency under the Series B Loan Agreement.

Repayment of the Series A Non-Housing Loan is made from and secured by a pledge of "Tax Revenues," as defined under the Series A Non-Housing Loan Agreement. Generally, "Tax Revenues" include all Gross Tax Revenues (sec "INTRODUCTION - Tax Allocation Financing"), less (a) amounts of such taxes which are required to be paid to other public agencies under the Tax Sharing Agreements or the Tax Sharing Statutes (sec "Allocation of Taxes" below), unless subordinated to the payment of debt service on the Series A Non-Housing Loan, and (b) the Housing Set-Aside.

Repayment of the Series A Housing Loan and the Series B Housing Loan rank on a parity, and is made from and secured by a pledge of"Housing Tax Revenues," as defined in the Series A Housing Loan

\3

Agreement and the Series B Loan Agreement. Generally, "Housing Tax Revenues" refers to the Gross Tax Revenues which the Agency is obligated to deposit into the Housing Fund.

For a more precise wording of the definition of "Tax Revenues" and "Housing Tax Revenues" under the respective Loan Agreements, sec "APPENDIX D - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - Definitions."

The Bonds are no/ a debt, liabilily or obligalion o/ lhe City, the Stale, or any o/ ifs polilical subdivisions of her than the Authority, and none o/ lhe Cily, !he Slate nur any ol its polilical subdivisions. olher lhcm !he Authority. is /iahle.fi,r the Bond,·. The loans are not a debt o/the Aulhorily or !he S!a/e or any o/its political subdivisions. and none nlthe Aulhority or !he Slate or any o/ils political subdivisions. olher than the Agency, is liable.fiir lhe loans. None o/the memhers o/the Aulhority, !he City, the Agency nor any persons executing !he Bond, or the loan Agreemen/., are liable personally with respect to the Bond, or the Loans. The ohligations o/the Agenc;v with respec/ lo !he loans are payable solely.fiwn !he Tax Revenues or Housing Tax Revenues as se1,f(}r/h in the loan Agreen1ents. Neither the Authori(v nor !he Agency has taxing power. The Bond, do not constitute an indebtedness wilhin the meaning ol any constilutional or statutor.v debt !i,nit or restriction.

Tax Allocation Financing

The Redevelopment Law provides a means for financing redevelopment projects based upon an allocation of taxes collected within a project area. The taxable valuation of a project area last equalized prior to adoption of the redevelopment plan, or base roll, is established and, except for any period during which the taxable valuation drops below the base year level, the taxing agencies thereafter receive the taxes produced by the levy of the then current tax rate upon the base roll. Generally, taxes collected upon any increase in taxable valuation over the base roll ( except such portion generated by rates levied to pay bonded indebtedness approved by the voters on or after January I, 1989, for the acquisition or improvement of real property or attributable to an increase in tax rate imposed for the benefit of a taxing agency the levy of which occurs after the tax year in which the ordinance approving the project area was adopted) arc allocated to a redevelopment agency and may be pledged by a redevelopment agency to the repayment of any indebtedness incurred in financing or refinancing a redevelopment project. Redevelopment agencies have no authority to levy property taxes and must look specifically to the allocation of tax increment revenues.

Allocation of Taxes

General. Pursuant to the Redevelopment Plan, Article 6 of Chapter 6 of the Redevelopment Law (commencing with Section 33670 of the California Health and Safety Code) and Section 16 of Article XVI of the Constitution of the State of California, taxes levied upon taxable property in the Project Arca each year by or for the benefit of the State, the County, the City, any district or other public corporation ( collectively referred to as "taxing agencies" or "taxing entities") for each fiscal year beginning after the effective date of the ordinance approving the Original R~devclopment Plan (the "Effective Date"), are divided as follows:

l. That portion of the taxes which would be produced by the rate upon which the tax is levied each year by or for each of the taxing agencies upon the total sum of the assessed value of the taxable property in the Project Arca, as shown upon the assessment roll used in connection with the taxation of such property by such taxing agency, last equalized prior to the Effective Date, will be allocated to and when collected will be paid to the respective taxing agencies as taxes by or for such taxing agencies on all other property arc paid ( for the purpose of allocating taxes levied by or for any taxing agency or taxing agencies which did not include such territory on the Effective Date but to which

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such territory has been annexed or otherwise included after such Effective Date, the assessment roll of the County last equalized on the Effective Date will be used in dctcnnining the assessed valuation of the taxable property in such territory on the Effective Date); and

2. Except for the taxes which arc attributable to a tax rate levy by a taxing agency for the purpose of producing revenues to repay bonded indebtedness approved by the voters of the taxing agency on or after January I, 1989 or an increase in tax rate imposed for the benefit of a taxing agency the levy of which occurs after the tax year in which the ordinance approving the Project Arca became effective but only to the extent the taxing agency has elected in the manner required by law to receive such allocation, which will be allocated to and when collected will be paid to such taxing agency, that portion of such levied taxes each year in excess of the amount provided in paragraph ( 1) above, will be allocated to and when collected will be paid into a special fund of the Agency to pay the principal of and interest on bonds, loans, moneys advanced to, or indebtedness (whether funded, refunded, assumed, or otherwise) incurred by the Agency to finance or refinance, in whole or in part, redevelopment of the Project Arca. Unless and until the total assessed valuation of the taxable property in the Project Area exceeds the total assessed value of the taxable property therein as shown by the last equalized assessment roll referred to in paragraph ( 1) above, all of the taxes levied and collected upon the taxable property in the Project Arca will be paid into the funds of the respective taxing agencies. When such bonds, loans, advances, and indebtedness, if any, and interest thereon, have been paid, all moneys thereafter received from taxes upon the taxable property in the Project Area will be paid into the funds of the respective taxing agencies as taxes on all other property arc paid.

Generally, the Agency is authorized to make pledges of the portion of taxes allocable to the Agency mentioned in paragraph (2) above to repay specific advances, loans and indebtedness as appropriate in carrying out the Redevelopment Plan, subject to the limitations on allocation of taxes, debt creation and bonded indebtedness contained in the Redevelopment Plan.

Housing Set-Aside. Sections 33334.2 and 33334.3 of the Redevelopment Law require the Agency to set aside the Housing Set-Aside, i.e., an amount not less than 20 percent of the Gross Tax Revenues with respect to the Project Arca allocated to the Agency, in the Housing Fund to be expended for authorized low and moderate income housing purposes. Amounts on deposit in the Housing Fund may also be applied to pay debt service on bonds, loans or advances used to provide financing or refinancing for such low and moderate income housing purposes.

As described under the caption "PLAN OF FINANCING," proceeds from the Series A Housing Loan and the Series B Housing Loan will be used to finance or refinance various projects and activities in furtherance of the Agency's low and moderate income housing program. Therefore, the Agency may make repayments under the Series A Housing Loan Agreement and the Series B Loan Agreement from the Housing Set-Aside. The Series A Housing Loan and the Series B Housing Loan are secured by a first lien and pledge on the Housing Tax Revenues pursuant to the Loan Agreements.

Pass-Through Agreements. Prior to the enactment of AB 1290 (sec below under "AB 1290 Payments") in 1994, a redevelopment agency could enter into an agreement to pay tax increment revenues to any taxing agency that has territory located within a redevelopment project in an amount determined by the redevelopment agency to be appropriate to alleviate any financial burden or detriment caused by the redevelopment project. These agreements normally provide for a pass-through of tax increment revenues to the affected taxing agencies, and, therefore, arc commonly referred to as "pass-through agreements" or "tax sharing agreements."

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The Agency has entered into two such tax sharing arrangements with the Brea-Olinda Unified School District ("BOUSD") which arc incorporated in the following agreements (collectively, the "Tax Sharing Agreements"):

(i) the First Amended and Restated Agreement to Apply Tax Increment for the Acquisition and Construction of the Brea High School, dated as of August I, 1986 (the "1986 Agreement"), by and between the Agency and BOUSD, as amended and supplemented, including by the amendments incorporated in the Agreement Regarding Tax Increment Cap, and the Implementation Agreement Relating to Brea High School Tax Increment Agreement, each executed in 2008, by and among the Agency, the City, BOUSD and Brea H.O.P.E., Inc. (the 1986 Agreement, as amended and supplemented, being referred to in this Official Statement as the "Old HS Site Tax Sharing Agreement"), and

(ii) the Owner Participation Agreement No. I - Project Arca C, dated as of November 6, 1979, by and among the Agency, the City, BOUSD and The Newport Development Company, as amended (such agreement," as amended, being referred to in this Official Statement as the "Financial Commons Tax Sharing Agreement").

The Agency makes payments under the Tax Sharing Agreements (and the AB 1290 Payments described below) out of Gross Tax Revenues, after the required deposit into the Housing Fund. Therefore, these Tax Sharing Agreements do not impact the amount of Housing Set-Aside available for repayment with respect to the Series A Housing Loan and the Series B Housing Loan.

The Agency's payment obligations under the Financial Commons Tax Sharing Agreement arc subordinate to the Agency's obligations with respect to the Series A Non-Housing Loan. Sec "PROJECT AREA - Tax Sharing Agreements - Financial Commons Tat Sharing Agreement."

Pursuant to the Old HS Site Tax Sharing Agreement, the Agency pays an amount (the "Old HS Site Pass-Through Amount") to BOUSD each fiscal year and the Agency's obligation to make such payment is ranked senior to the repayment with respect to the Series A Non-Housing Loan. The Old HS Site Pass-Through Amount is equal to a portion of the tax increment revenues attributable to the Old High School Site each fiscal year, not exceeding $1,820,000 through fiscal year 2017-18 and $2,000.000 thereafter through fiscal year 2026-2027. For a more detailed summary of the terms of the Old HS Site Tax Sharing Agreement, sec "PROJECT AREA - Tax Sharing Agreements - Old HS Site Tax Sharing Agreement."

AB 1290 Pavments. California Health and Safety Code Section 33607.5 and Section 33607.7 were added to the Redevelopment Law by Assembly Bill 1290 ("AB 1290"), enacted by the State Legislature in 1994. Section 33607.7 has been further amended by SB 2\ \, Chapter 74\, Statutes 200\ ("SB 2\ \"). California Health and Safety Code Section 33607.5 and Section 33607.7, together, require that taxing entities receive an additional portion of tax increment revenues (the "AB 1290 Payments") otherwise payable to the redevelopment agency, if such taxing entities were affected by (i) the adoption on or after January l, 1994, of a new redevelopment plan for a project area or an amendment to an existing redevelopment plan that added territory to a project area, or (ii) the adoption on or after January I, l 994 of an amendment (to a redevelopment plan that was adopted before January l, 1994) which extends the time limit on incurring debt with respect to the project area, extends the time limits for the duration and effectiveness of the redevelopment plan or the time limit for establishing indebtedness or increases the dollar cap on the amount of tax increment revenues allocable to the redevelopment agency for the project area (unless a taxing entity already receives pass-throughs under an existing agreement). AB 1290 prohibits redevelopment agencies from entering into any new pass-through agreements.

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The most recent amendment to the Redevelopment Plan, pursuant to Ordinance No. 1103, adopted by the City Council on June 5, 2007, eliminated the time limit for incurring indebtedness repayable from tax increment of the Project Arca. As stated in Ordinance No. 1103, the Agency is obi igatcd to make AB 1290 Payments to affected taxing entities ( except BOUSD because of the existing Tax Sharing Agreements) beginning in fiscal year 2007-08. The Agency makes AB 1290 Payments (as well as payments under the Tax Sharing Agreements) out of Gross Tax Revenues, after the required deposit into the Housing Fund. Therefore, the AB 1290 Payments do not affect the amount of Housing Set-Aside available for repayment with respect to the Series A Housing Loan and the Series B Housing Loan.

As permitted under the Redevelopment Law, the Agency requested the affected taxing entities to agree to the subordination of their respective AB 1290 Payments to debt service on the Series A NonHousing Loan. Pursuant to Section 33607.5(c) of the Redevelopment Law, such request with respect to a taxing entity is deemed approved, unless the taxing entity disapproves the subordination within 45 days of receipt of such request based on substantial evidence that the Agency cannot pay the debt service on the Bonds and the AB 1290 Payments. All of the taxing entities, except two (the Orange County Superintendent of Schools and the North Orange County Community College District), arc deemed to have approved the respective subordination requests by allowing the 45 days to elapse. The County Superintendent and the North Orange County Community College District requested additional terms and conditions to their subordination which the Agency believes arc beyond the scope and requirements of the Redevelopment Law. For the purposes of showing debt coverage for the Bonds in this Official Statement, the Tax Revenues arc shown net of AB 1290 Payments to the Orange County Superintendent of Schools and the North Orange County Community College District.

See "PROJECT AREA- Redevelopment Plan; Plan Limitations" and "-Tax Sharing Statutes."

Reserve Accounts

The Trustee will establish and hold a separate Reserve Account for each series of Bonds (respectively, the "Series A Reserve Account" and the "Series B Reserve Account"). Each Indenture defines the related Reserve Requirement as, as of any date of calculation, an amount equal to the lesser of (i) S 1,855,968. 78 with respect to the Series A Bonds, or $202,500.00 with respect to the Series B Bonds, as applicable, or (ii) the amount of Maximum Annual Debt Service on all Bonds Outstanding under such Indenture.

Pursuant to each Indenture, the Trustee will transfer moneys from the Reserve Account to the Interest Account and the Principal Account, in that order of priority, on any day which the interest on or principal of the Bonds issued under such Indenture is due and payable, if funds in the Interest Account or Principal Account are not sufficient for such purposes. The Trustee will promptly notify the Agency at any time the amount on deposit in a Reserve Account falls below the applicable Reserve Requirement. Upon receipt of such notice with respect to the Series A Reserve Account, the Agency will promptly transfer to the Trustee for deposit in the Series A Reserve Account: (a) an amount of Tax Revenues equal to the Allocable Portion (i.e., 72.85 percent of such deficiency) pursuant to the Series A Non-Housing Loan Agreement, and (b) an amount of Housing Tax Revenues equal to the Allocable Portion (i.e., 27.15 percent of such deficiency) pursuant to the Series A Housing Loan Agreement. Upon receipt of such notice with respect to the Series B Reserve Account, the Agency will promptly transfer to the Trustee an amount of Housing Tax Revenues equal to such deficiency pursuant to the Series B Loan Agreement. So long as no Event of Default has occurred and is continuing, the Trustee will withdraw and transfer any amount in a Reserve Account that is in excess of the applicable Reserve Requirement to the related Interest Account.

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The Agency may, at any time, cause a Qualified Reserve Account Credit Instrument to be deposited with the Trustee for the credit of a Reserve Account. Upon the deposit of a Qualified Reserve Account Credit Instrument, the Trustee will withdraw from such Reserve Account and transfer to the Agency an amount equal to the amount which the Trustee is authorized to draw under the deposited Qualified Reserve Account Credit Instrument. "Qualified Reserve Account Credit Instrument" means an irrevocable standby or direct-pay letter of credit or surety bond issued by a commercial bank or insurance company and deposited with the Trustee which meets the criteria set forth in the applicable Indenture.

Sec APPENDIX D - "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - Indentures of Trust."

lncurrence of Parity Debt

The Authority has covenanted in each Indenture that it will not create any encumbrances upon the related Revenues senior to or on a parity with the Bonds issued under such Indenture.

The Series A Non-Housing Loan Agreement provides that the Agency may incur additional indebtedness ("Parity Redevelopment Debt") secured by Tax Revenues on a parity with the Series A Non-Housing Loan, if certain conditions have been satisfied. Such conditions include, among others, that Tax Revenues for the then current fiscal year, based on assessed valuation of property in the Project Area as evidenced in the written records of the County, plus at the option of the Agency, any or all of the Additional Revenues (defined below), arc at least equal to 125 percent of Maximum Annual Debt Service on the Series A Non-Housing Loan and all outstanding Parity Redevelopment Debt; provided, however, that (i) this requirement docs not apply to any proposed Parity Redevelopment Debt all of the available proceeds of which arc applied to refund the Series A Non-Housing Loan or any Parity Redevelopment Debt in whole or in part, if debt service savings arc realized as a result of such refunding, and (ii) debt service on any Parity Redevelopment Debt the proceeds of which arc deposited into an escrow fund meeting this requirement will be disregarded for purposes of computing Maximum Annual Debt Service.

Each of the Series A Housing Loan Agreement and the Series B Loan Agreement provides that the Agency may incur additional indebtedness ("Parity Housing Debt") secured by Housing Tax Revenues on a parity with the Series A Housing Loan and the Series B Housing Loan, if certain conditions have been satisfied. Such conditions include, among others, that Housing Tax Revenues for the then current fiscal year, based on assessed valuation of property in the Project Arca as evidenced in the written records of the County, plus at the option of the Agency, any or all of the Additional Revenues, arc at least equal to 125 percent of Maximum Annual Debt Service on the Series A Housing Loan, the Series B Housing Loan and all outstanding Parity Housing Debt; provided, however, that (i) this requirement docs not apply to any proposed Parity Housing Debt all of the available proceeds of which arc applied to refund the Series A Housing Loan, the Series B Housing Loan or any Parity Housing Debt in whole or in part, if debt service savings arc realized as a result of such refunding, and (ii) debt service on any Parity Housing Debt the proceeds of which arc deposited into an escrow fund meeting this requirement will be disregarded for purposes of computing Maximum Annual Debt Service.

For the purposes of the foregoing, "Additional Revenues" means, as of the date of calculation, the amount of Tax Revenues, or Housing Tax Revenues, as applicable, which, as shown in the report of an Independent Redevelopment Consultant, arc estimated to be receivable by the Agency within the fiscal year following the fiscal year in which such calculation is made as a result of increases in the assessed valuation of taxable property in the Project Arca due to either (a) construction which has been completed but which is not then reflected on the tax rolls, or (b) transfer of ownership or any other interest in real property which has been recorded but which is not then reflected on the tax rolls.

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For a more detailed summary of the conditions to the incurrence of Parity Redevelopment Debt or Parity Housing Debt, sec "APPENDIX D - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS -Loan Agreements - Issuance of Parity Debt."

THE AUTHORITY

The Authority is a joint powers authority, organized pursuant to a Joint Exercise of Powers Agreement, dated as of March 14, 1988 (the "Joint Powers Agreement") by and between the City and the Agency. The Joint Powers Agreement was entered into pursuant to the provisions of Article I of Chapter 5 of Division 7 of Title I of the California Government Code (the "Act"). The Brea-Olinda Unified School District became an associate member of the Authority pursuant to an Associate Member Agreement, dated as of March I, 1998, by and between the Authority and BOUSD. The governing body of the Authority consists of the same individuals who comprise the City Council of the City. The Authority was created for the purpose of providing financing for public capital improvements for its members through the acquisition by the Authority of such public capital improvements or the purchase by the Authority of local obligations within the meaning of the Act. Under the Act, the Authority has the power to issue bonds to finance and refinance the cost of certain public capital improvements.

THE AGENCY

General

The Agency was activated with the adoption of Ordinance No. 465 by the City Council on April 13, 1970. The Agency is charged with the authority and responsibility of redeveloping and upgrading blighted areas of the City. The Agency is a separate public body and exercises governmental functions in planning and carrying out redevelopment projects. The Agency can build public improvements, facilitate the development of on and off-site improvements for private development projects, acquire and resell property, and provide services of special benefit to the Agency's redevelopment project areas.

Agency Administration and Personnel

The members of the City Council also serve as Members of the Agency with the Mayor of the City serving as the Agency's Chair. The current Members of the Agency and their terms of office arc shown below:

Member

Don Schweitzer (Chair) John Beauman (Vice Chair) Ron Garcia Roy Moore Marty Simonoff

Term Expires

November 2008 November 20 IO November 20 IO November 20 IO November 2008

Tim O'Donnell, City Manager/Agency Executive Director. Mr. O'Donnell was appointed City Manager of the City in July 2000. Prior to such appointment, he served as the City's Assistant City Manager for IO years. Prior to working for the City, Mr. O'Donnell was the Assistant City Manager for the City of Signal Hill between 1983 and 1990. He also served the City of Garden Grove as Manager, Department of Human Resources, from 1979 to 1983, and the City of Bellflower from 1976 to 1979. Mr. O'Donnell holds a Bachelor of Arts degree from California State University, Los Angeles.

Terry Matz. Assistant City Manager. Mr. Matz was appointed as the City's Assistant City Manager in December 2001. Prior to working for the City, he served for more than 17 years as the City

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Manager and Redevelopment Agency Executive Director in the c1t1cs of Stanton, Agoura Hills and Blythe. Mr. Matz holds a Bachelor of Science degree in Physical Education from California State University, Fullerton, and a Masters degree in Public Administration from California State University, Long Beach.

Eric Nicoll, Economic Development Direc/or!Agency Depu(v Execulive Director. Mr. Nicoll was appointed as the City's Economic Development Director in March 2001. Previously, he served as the City's Redevelopment Services Manager from June 1993 to March 2001. Prior to serving the City, he served as Housing Development Manager of the City of Anaheim between 1989 and 1993 and was Redevelopment Analyst for the City of Huntington Beach from 1985 to 1989. Mr. Nicoll holds a Bachelor of Arts degree from California State University, Fullerton.

Bill Gallardo, Financial Sen•ices Director/Agency Treasurer. Mr. Gallardo was appointed Financial Services Director of the City in August 2004. Prior to such appointment, he was the Financial Services Manager - Revenue for the City for 14 years. He served the City of Walnut from 1986 to 1990 as Administrative Assistant and Senior Management Assistant. Mr. Gallardo received his Bachelor of Science Degree from California Polytechnic State University, Pomona.

lee Squire, Financial Services Manager - Accounting. Mr. Squire was appointed to his position with the City in December 1988. Previously, he served the City of South Gate from 1983 to 1988 as Accounting Manager and as Director of Finance. Prior to Mr. Squire's service to South Gate, he worked with a public accounting firm. Mr. Squire received his Bachelor of Science Degree from California State University, Los Angeles.

Audited Financial Statements

The Redevelopment Law requires redevelopment agencies to have an independent financial audit conducted each year. The financial audit is also required to include an opinion of the Agency's compliance with laws, regulations and administrative requirements governing activities of the Agency. Lance, Soll & Lunghard, LLP, Certified Public Accountants, Brea, California (the "Auditors"), audited the financial statements of the Agency for the fiscal year ended June 30, 2007. Sec "APPENDIX C -AUDITED FINANCIAL STATEMENTS OF THE AGENCY FOR FISCAL YEAR ENDED JUNE 30, 2007." The Agency has not requested nor did the Agency obtain permission from the Auditors lo include the audited financial statements as an appendix to this Official Statement. Accordingly, the Auditors have not performed any post-audit review of the financial condition or operations of the Agency.

Filing of Statement of Indebtedness

Section 33675 of the Redevelopment Law requires that the Agency file, not later than the first day of October of each year with the County Auditor, a statement of indebtedness certified by the chief financial officer of the Agency for each redevelopment project for which the redevelopment plan provides for the division of taxes pursuant to Section 33670 of the Redevelopment Law. The statement of indebtedness is required to contain, among other things, the date on which bonds payable from tax increment of the redevelopment project were delivered, the principal amount, term, purpose, interest rate and total interest of the bonds, the principal amount and the interest due in the fiscal year in which the statement of indebtedness is filed and the outstanding balance and amount due on the bonds. Similar information must be given for each loan, advance or indebtedness that the Agency has incurred or entered into which is payable from tax increment.

Section 33675(g) has been amended by AB 1290 to provide that payments of tax increment revenues from the county auditor to a redevelopment agency may not exceed the redevelopment agency's

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aggregate total outstanding debt service obligations minus the available revenues of the redevelopment agency, and establishes certain procedures under which a county auditor may, in certain cases, dispute the amount of indebtedness shown on the statement of indebtedness. Payments to a trustee under a bond resolution or indenture or payments to a public agency in connection with payments by such public agency pursuant to a bond issue may not be disputed in any action under Section 33675.

The Agency has filed its statement of indebtedness for fiscal year 2008-09 for the Project Arca, and has met all previous requirements with respect to the filing of its statements of indebtedness pursuant to Section 33675.

Other Project Area

The Agency is charged with the redevelopment undertakings with respect to two project areas: the Redevelopment Project AB and the Project Arca. Redevelopment Project AB, encompassing 2, 192 acres primarily in the middle and southern part of the City, is significantly larger than the Project Arca. The Agency has issued bonds, the repayment of which is secured by a portion of the tax increment revenues with respect to Redevelopment Project AB. None of the Redevelopment Project AB tax increment revenues is pledged as security for the Bonds.

PROJECT AREA

General Description

Encompassing approximately 256 acres in the northern portion of the City, the Project Arca consists primarily of four distinct development areas. These include: (a) the residential area located in the eastern-most portion of the Project Arca, (b) the Olen Pointe Brea development; (c) the Financial Commons development; and (d) the Old High School Site. The residential area in the eastern portion of the City and the Olen Pointe Brea development, together, is also sometimes referred to in this Official Statement and in the Fiscal Consultant Report as the "Original Arca." Sec APPENDIX B.

Residential Area. The residential area in the eastern portion of the Project Arca is generally bounded by Lambert Road on the north, the Brea Sports Park (just west of Valencia Avenue) on the cast, Birch Street on the south and Kraemer Boulevard on the west. This area encompasses approximately 92.8 acres consisting primarily of single family homes.

Olen Pointe Brea. Olen Pointe Brea is a multi-use office, retail and residential complex. It has been developed and owned by the Newport Beach, California, based Olen Properties Corporation ("Olen Properties") since I 984. It is located immediately to the cast of State Highway 57 and to the north of Lambert Road. The development is compromised of approximately 29 acres within the Project Arca. With the second phase of development completed in 2006, Olen Pointe Brea now includes seven multistory office buildings, three restaurant buildings and three parking structures. Among the tenants of Olen Pointe Brea arc Fortune 500 businesses, Smith Barney, Outback Steakhouse, El Torito, Avery Dennison, Ventura Foods, Morgan Stanley, Prudential Insurance and UBS Financial Services and other financial institutions. The site has also been approved for the development of a 260 unit luxury apartment complex and over 2,500 square feet of ancillary retail space, which is currently under construction. Based on the building valuation data available to the Agency as of December 2007, it is expected that the new apartment complex would result in an approximately S40 million increase in assessed value upon completion. As shown in Tables 2 and 3 below under the caption '"Top Property Tax Asscssccs," properties owned by Olen Pointe Brea LLC account for approximately $68,377,320, or 14.92 percent of the 2008-09 assessed value (and 15 percent of the incremental value) of the entire Project Arca, and approximately 23.42 percent of the 2008-09 assessed value (and 23.6 I percent of the incremental value)

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exclusive of the Old High School Site. Olen Properties informed the Agency that the vacancy rate at Olen Pointe Brea as of August 2008 was approximately three percent. An assessment appeal filed in fiscal year 2007-0~ resulted in a reduction of the secured value of one of the Olen Pointe Brea parcels by Sl,687,411. This reduction will be reflected on the tax roll starting in fiscal year 2009-10. Sec "TAX REVENUES AND DEBT SERVICE COVERAGE - Appeals of Assessed Values."

Financial Commons. Financial Commons is a commercial office development generally bounded by State Highway 57 on the cast, Birch Street on the south, State College Boulevard on the west and the railroad tracks on the north. Similar to the Old High School Site, Financial Commons sits on a site that was owned by BOUSD and was used for school district administrative offices. In 1980, fee title was transferred to The Newport Development Company. Since that time, there have been several changes of ownership. Most recently in April 2007, Maguire Properties, a Southern California-focused real estate investment trust ("'Maguire Properties"), purchased the Financial Commons development as part of its acquisition of a portfolio of properties in downtown Los Angeles and Orange County from The Blackstone Group. As of August 2008, the Capital Group and Countrywide Financial were the major tenants of Financial Commons, although Rathcon has recently entered into a sublease for a significant portion (approximately 78,000 square feet) of the office space. Financial Commons currently includes five multi-story office buildings and a restaurant. The site also includes a two-acre area that is vacant and could potentially be used for the future development of a hotel.

Old High School Site. The Old High School Site consists of an approximately 39-acrc area. In the early l 980's, BOUSD sold a portion of the Old High School Site to Lowe Development Corporation ("Lowe Dcveloprncnt"). BOUSD also formed a nonprofit corporation known as Brea H.O.P.E. ("HOPE") and transferred fee title of the remainder of the Old High School Site to HOPE, which in tum ground-leased the property to Lowe Development. Lowe Development agreed to pay rent and redevelop the Old High School Site for commercial uses. Since that time, the Old High School Site has been redeveloped into the Brea Marketplace shopping center (the "Brea Marketplace") and the Brea Corporate Place office complex (the "Corporate Place"). Lowe Development's interests in the Brea Marketplace and the Corporate Place, respectively, have been transferred several times over the years. Regency Centers Corporation, a Florida-based real estate investment trust ("Regency"), which· acquired such interests with respect to the Brea Marketplace in 2005, currently owns a portion of the Brea Marketplace and leases the remaining portion from HOPE. Maguire Properties acquired the leasehold interest with respect to the Corporate Place in April 2007 as part of Maguire Properties' acquisition of a portfolio of properties in downtown Los Angeles and Orange County from The Blackstone Group. Sec "Top Property Tax Asscssces" below.

The Brea Marketplace is generally bounded by State College Boulevard to the cast, Birch Street to the south, Randolph Avenue to the cast and some residential parcels on Willow Drive to the north. As of August 2008, existing retailers at the Brea Marketplace included Circuit City, Beverages and More, TGI Fridays and Anaheim Patio Supply. The Brea Marketplace is currently undergoing major renovation and upgrades. Regency has begun construction to increase the Brea Market Place's total retail and commercial space from the existing 298,000 square feet to 353,000 square feet. Of such 353,000 square feet of space, 345,000 square feet (or 97.7 percent) were leased as of September 2008. A two-story Target store, replacing the spaces that were formerly occupied by Strouds, Toys R Us and Kids R Us, is expected to open in early 2009. The Target store and the additional improvements to the Brea Marketplace were under construction as of September 2008. As shown in Table 2 below under the caption "Top Property Tax Assessccs," FW CA-Brea Marketplace LLC, a subsidiary of Regency, is the asscsscc responsible for approximately 19.1 percent of the 2008-09 assessed value (and I 9.2 percent of the incremental value) of the entire Project Arca. Based on information available to the Agency as of August 2008, the new Target store and the additional improvements, once completed, arc expected to add $41.9 million of assessed value.

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The Corporate Place sits just to the cast of the Brea Marketplace. The Corporate Place includes two six-story office buildings ( 135 and 145 State College Boulevard), a parking structure and surrounding parking areas and approximately nine acres that arc vacant but intended for mixed use, including commercial, office, retail or residential. Major tenants as of August 2008 included Chevron, Merrill Lynch, Union Bank of California and Avant-Garde, Inc.

Redevelopment Plan; Plan Limitations

On November 30, \976, the City Council of the City adopted Ordinance No. 6l l and approved the Original Redevelopment Plan. The Original Redevelopment Plan has been amended subsequently by the adoption of four ordinances: (i) Ordinance No. 680, adopted on October 2, 1979, (ii) Ordinance No. 787, adopted on March 18, 1986, (iii) Ordinance No. 950, adopted on March l, 1994, and (iv) Ordinance No. 1103, adopted on June 5, 2007 (the "Fourth Amendment").

Prior to the adoption of the Fourth Amendment, the time limit on the incurrcncc of debt repayable from tax increment of the Project Arca under the Redevelopment Plan was November 30, 1993. The Fourth Amendment eliminated such time limit for incurring debt pursuant to Section 33333.6 of the Redevelopment Law. Sec "LIMITATIONS ON TAX REVENUES - AB 1290 and SB 211." The Fourth Amendment recited the City Council's determination that, pursuant to the Redevelopment Law, the Agency would commence making AB 1290 Payments to affected taxing entities in fiscal year 2007-08 and, for the purposes of computing the AB 1290 Payments, the adjusted base year assessed value under Section 33607.7 would be the assessed value of the Project Arca in fiscal year 1993-94. At the conclusion of a validation action brought under California Civil Code Section 860 ct seq., the Orange County Superior Court issued a judgment validating the Fourth Amendment on November 19, 2007.

The table below summarizes the limitations set forth in the Redevelopment Plan, after the adoption of the Fourth Amendment:

Last Day Last Day to Max. Maximum Maximum Last Date to of Plan Receive Tax Outstanding Cumulative Annual Incur Debt Effectiveness Increment Bonded Debt Tax Increment Tax Increment

Eliminated Nov. 30, 2016 Nov. 30, 2026 $45 million None S4.5 million

Tax Sharing Agreements

As discussed under the caption "SECURITY FOR THE BONDS - Allocation of Taxes - PassThrough Agreements," the Agency is obligated to make pass-through payments to BOU SD under the Financial Commons Tax Sharing Agreement and the Old HS Site Tax Sharing Agreement. The Agency makes payments under the Tax Sharing Agreements (and the AB 1290 Payments described below) out of Gross Tax Revenues, after the required deposit into the Housing Fund. Therefore, these Tax Sharing Agreements do not impact the amount of Housing Set-Aside available for repayment with respect to the Series A Housing Loan and the Series B Housing Loan.

Financial Commons Tax Sharing Agreement. The Financial Commons Tax Sharing Agreement was originally entered into by and among the Agency, the City, BOUSD and The Newport Development Company in 1979 in connection with the then proposed development of Financial Commons. Sec ''General Description - Financial Commons." Under the Financial Commons Tax Sharing Agreement, the Agency is obligated to pay to BOUSD all tax increment revenues derived from the Financial Commons area for 35 years after the issuance date of the first series of Agency bonds relating to the Project Arca (i.e., March 2, 2018). However, when the 1988 Authority Bonds were issued (sec "PLAN

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OF FINANCING - Refunding of 1997 Bonds"'), proceeds of such bonds were used to make two loans, one to BOUSD (the "1988 BOUSD Loan") and one to the Agency (the "1988 Agency Loan"). The 1988 Authority Bonds were secured by the repayment by BOUSD and the Agency with respect to such loans. The 1988 BOUSD Loan was further secured by and repaid from the pass-through payments received by the BOUSD under the Financial Commons Tax Sharing Agreement. Subsequently, the Agency agreed to issue the 1997 Bonds and use the .proceeds to refund not only the 1988 Agency Loan but also the 1988 BOUSD Loan. In such connection, under the Agreement Relating to Refunding of 1988 District Loan, dated as of July I, 1997, as amended by the First Amendment to Agreement Relating to Refunding of 1988 District Loan, dated as of November I, 2008, the BOUSD has agreed that all tax increment revenues derived from the Financial Commons area would be used first, to pay debt service on the 1997 Bonds (and aticr the refunding of the 1997 Bonds, the Bonds) and any surplus would be applied to make other payments due to the Agency or the City, or to finance projects in the Project Arca. In effect, the payment obligations on the part the Agency under the Financial Commons Tax Sharing Agreement arc subordinate to the Series A Non-Housing Loan.

Old HS Site Tax Sharim! A ,:reement. The Agency and BOU SD entered into the Old HS Site Tax Sharing Agreement to provide for the transfer of BOUSD's old high school site for development (sec "General Description - Old High School Site") and the financing of the construction costs of a new high school (the "New School Costs"). Pursuant to the formula set forth in the Old HS Site Tax Sharing Agreement, the Agency agreed to pay BOUSD a portion of the tax increment generated from the Old High School Site for application toward debt service on certain 1986 certificates of participation and subsequent obligations issued to refund such certificates of participation (collectively, the "BOUSD Certificates") and two loans (the "HOPE Loans") to HOPE which were also incurred to finance the New School Costs. BOUSD agreed to use the amount so paid to BOUSD by the Agency, together with certain revenues received from developers under the leases relating to the Old High School Site (sec "General Description - Old High School Site"), for debt service relating to the financing or refinancing of the New School Costs.

Under the Old HS Site Tax Sharing Agreement, subject to the cap described below, the Agency pays BOUSD, for the financing or refinancing of the New School Costs, the following amounts: (i) 100 percent of the tax increment generated from the first $ I 09.1 million assessed valuation of the Old High School Site, and (ii) 80 percent of the tax increment revenues generated from the Old High School Site above $109.1 million assessed valuation of the Old High School Site. The Agency retains 20 percent of the tax increment generated from the Old High School Site above Sl09. l million assessed valuation for deposit into the Housing Fund. Amounts received by BOUSD under the Old HS Site Tax Sharing Agreement each fiscal year (including pass-through payments by the Agency, as well as certain revenues received from developers under the leases relating to the Old High School Site) in excess of the money needed for debt service on the BOU SD Certificates arc released to the Agency with half for repayment of the remaining outstanding portion of the HOPE Loans and half for any lawful use by the Agency. In 2008, the Agency and BOUSD further amended the Old HS Site Tax Sharing Agreement. Under this amendment, BOUSD and the Agency have agreed that the net amount to be received by BOUSD each fiscal year from tax increment revenues generated from the Old High School Site would not exceed $1,820,000 through fiscal year 2017-18 and $2,000,000 thereafter through fiscal year 2026-27.

The Agency's obligation to pay BOUSD under the Old HS Site Tax Sharing Agreement ranks senior to the Agency's repayment obligation with respect to the Series A Non-Housing Loan. As a practical effect of the application of the Old HS Site Tax Sharing Agreement, the Agency expects that a significant portion of the tax increment from the Old High School Site will not be available for debt service on the Series A Non-Housing Loan. See "APPENDIX B - FISCAL CONSULTANT'S REPORT - Table 7.3." Therefore, some of the tables to follow in this Official Statement will show figures exclusive of the assessed value and tax increment estimates with respect to the Old High School Site.

24

Tax Sharing Statutes

As previously discussed under "Redevelopment Plan; Plan Limitations" and "SECURITY FOR THE BONDS - Allocation of Taxes - AB 1290 Paymems," because the time limit for incurring indebtedness under the Redevelopment Plan was eliminated pursuant to the Fourth Amendment in 2007, the Agency is obligated to make AB 1290 Payments to affected taxing entities (except BOUSD because of the already existing Tax Sharing Agreements). The Agency makes AB 1290 Payments (as well as payments under the Tax Sharing Agreements) out of Gross Tax Revenues, after the required deposit into the Housing Fund. The AB 1290 Payments do not affect the amount of Housing Set-Aside available for repayment with respect to the Series A Housing Loan and the Series B Housing Loan.

As permitted under the Redevelopment Law, the Agency requested the affected taxing entities to agree to the subordination of their respective AB 1290 Payments to debt service on the Series A NonHousing Loan. All of the taxing entities, except two (the Orange County Superintendent of Schools and the North Orange County Community College District), arc deemed have approved the respective subordination requests by allowing the 45-day objection period prescribed by Section 33607.S(e) of the Redevelopment Law to elapse. The Orange County Superintendent of Schools and the North Orange County Community College District requested additional terms and conditions to their subordination which the Agency believes arc beyond the scope and requirements of the Redevelopment Law. For the purposes of showing debt coverage for the Bonds in this Official Statement, the Tax Revenues arc shown net of AB 1290 Payments to the Orange County Superintendent of Schools and the North Orange County Community College District.

Land Use

Set forth below is a summary of the 2008-09 assessed value of property, categorized by land use, (i) in the entire Project Area, and (ii) the portion of the Project Arca exclusive of the Old High School Site.

No. of Land Use Parcels

Secured: Residential 331 Co1nmercial 80 Other Uses 12 Exempt 23

Public utility

Unsecured

Total 446

Table I BREA REDEVELOPMENT AGENCY

Redevelopment Project Area C Land Use

Fiscal Year 2008-09

Entire Project Area Exclusive of Old High School Site

Assessed %of No. of Assessed o/o of Valuation Total AV Parcels Valuation Total AV

$147,261,867 32.1% 331 $147.261,867 50.4% 295.709,321 64.5 70 138, 716, 785 47.5

2,511,992 0.5 11 68,448 0.0 0.0 13 0.0

186,872 0.0 186,872 0.1

12.517,555 2.7 5,772,610 2.0

$458,187,607 100.0% 425 $292,006,582 100.0%

Source: Keyser Marston Associates, Inc.

25

Top Property Tax Assessees

The following tables provide a summary of the top ten property tax assesses with respect to (i) the entire Project Area, and (ii) the portion of the Project Arca exclusive of the Old High School Site.

Table 2 BREA REDEVELOPMENT AGENCY

Redevelopment Project Area C (Entire Project Area)

Top Ten Property Tax Assessees by Assessed Valuation Fiscal Year 2008-09

% of Total % of Total Primary No. of Assessed Incremental

Asses see Land Use Parcels Assessed Value Value111 Value C!l

Maguire Properties BOUSD/ Maguire Possessory 6 $71,849,073 15.68% 15.76%

Properties LP 131 Interest Maguire Properties-Brea (-1) Com1nercial 4 49,218,220 10.74 10.80 Maguire Properties LLC Unsecured I 132.759 0.03 0.03

Subtotal !121.200,05~ ~ ~ Regency

FW CA-Brea Marketplace'" Possessory 3 35, 108.088 7.66 7.70 Interest

FW CA-Brea Marketplace'"' Co1n1nercial 2 52.478,919 11.45 11.51

Subtotal ~7.587.00~ ~ jl9.21!

Olen Pointe Brea LLC <71 Com1nercial 12 68,377.320 14.92 15.00

Willow Columbia LLC Co1nmercial I 7,599,000 1.66 1.67

Chan. Raymond M./Claim Jumper Co1n1nercial I 6,579,489 1.44 1.44

Brea Medical Center Commercial 38 2,760,641 0.60 0.61

Chai, King Y. Tmst Co1nmercial 2.740,000 0.60 0.60

Merrill Lynch, Pierce. FE Unsecured 5 1,638,987 0.36 0.36

(Individual owner) Residential 3 1,599,167 0.35 0.35

American Funds Service Co Residential 1,238,603 0.27 0.27

Total 78 $301.320.266 65.76% 66.10%

(I) 2008-09 total assessed valuation (secured and unsecured): $458.187 .607. (2) Incremental value (i.e., 2008-09 assessed value less base year value): $455,852,246. (3) Represents parcels leased by Maguire Properties at the Corporate Place. Until fiscal year 2007-08, such interest appeared on

the County Assessor's unsecured property tax roll. Even though BOUSD, as lessor. is also listed on the tax roll with respect to these parcels, the Agency has been informed that Maguire is the responsible payee of the related property tax. See "General Description - Old High School Si1e" and "APPENDIX B - FISCAL CONSULTANT'S REPORT - 3.2. Historic Assessed Values.''

(4) Represents parcels owned by Maguire Properties at Financial Co1nmons. Sec "General Description-Fi11unciu/ Comn1ons." (5) Represents parcels leased by Regency at the Brea Marketplace. Until fiscal year 2007-08, such interest appeared on the

County Assessor's unsecured property tax roll. Sec "General Description- Old High School Site." (6) Represents parcels owned by Regency at the Brea Marketplace. Sec "General Description - Old High School Site." (7) Represents parcels owned by Olen Properties at Olen Pointe Brea. See "General Description - Olen Pointe Brea." As the

result of an assessment appeal. a $1,687,411 reduction with respect to the secured assessed value of one of the parcels will be reflected on the tax roll starting in fiscal year 2009-IO. Sec "TAX REVENUES AND DEBT SERVICE COVERAGEAppeals of Assessed Values" and "APPENDIX B - FISCAL CONSULTANT'S REPORT - 3.2. Historic Assessed Values."


26


Redevelopment Project Area C (Exclusive of Old High School Site)

Top Ten Property Tax Assessees by Assessed Valuation Fiscal Year 2008-09

Asscessee

Olen Pointe Brea LLC (Jl

Maguire Properties-Brea !4)

Willow Columbia LLC

Chan Raymond M./Claim Jumper

Brea Medical Center

Chai King Y. Trust

(individual owner)

(individual owner)

(individual owner)

(individual owner)

Total

Prin1ary Land Use

com1nercial

co1nmercial

commercial

com1nercial

co1n1nercial

commercial

residential

residential

residential

residential

No. of Parcels

12

4

I

38

3

63

Assessed Value

$68.3 77 ,320

49.218.220

7,599,000

6.579.489

2.760.641

2,740.000

l.599.167

900.000

886,108

885.000

$141.544.945

(I) 2008-09 total assessed valuation (secured and unsecured): $292,006,582. (2) Incremental value (i.e .. 2008-09 assessed value less base year value): $289.671,221.

% of Total Assessed Valueni

23.42%

16.86

2.60

2.25

0.95

0.94

0.55

0.31

0.30

0.30

48.47%

% of Total Incremental Value<:?>

23.61%

16.99

2.62

2.27

0.95

0.95

0.55

0.3 l

0.31

0.31

48.86%

(3) Represents parcels owned by Olen Properties at Olen Pointe Brea. See "General Description - Olen Pointe Brea." As the result of an assessment appeal. a S 1.687.411 reduction \\1ith respect to the secured assessed value of one of the parcels will be reflected on the tax roll starting in fiscal year 2009-10. Sec "TAX REVENUES AND DEBT SERVICE COVERAGEAppcals of Assessed Values'" and '"APPENDIX B - FISCAL CONSULTANT'S REPORT- 3.5. Assessment Appeals.'"

( 4) Represents parcels owned by Maguire Properties at Financial Commons. Sec "General Description - Financial Con1111ons."


As reflected in Tables 2 and 3 and the descriptions under "General Description," three entities account for a significant portion of the total assessed value in the Project Arca: (i) Regency, a Floridabascd real estate investment trust (''REIT"), which is the current developer of the Brea Marketplace, (ii) Maguire Properties, a southern California-based REIT, which acquired The Blackstone Group's interests in Financial Commons and the Brea Corporate Place in 2007, and (iii) Olen Properties, a southern-California based privately held company, which is the developer of Olen Pointe Brea.

In the description he/ow. the term ""Regenc;r" refers to Regency Centers Corporation and its affiliates and subsidiaries included in the consolidated financial statements that were a part of Regency's Form /0-Kji,r the year ended December 31. 2007 and Form 10-Q.fi,r the quarter ended June 30, 2()08, on .file with the Securities and Exchange Commission. The.following description of Regency is based on such Form /0-K and Form 10-Q and other publicly available materials published by Regency The Agency has not independently verified this information and makes no representation as to the accuracy thereof Regency has not reviewed the description contained in this Official Statement.

Regency Centers Corporation is headquartered in Jacksonville, Florida. It began operation as a REIT in 1993. All of Regency's operating, investing and financing activities arc performed through its operating partnership, Regency Centers, L.P. ("RCLP"), RCLP's wholly owned subsidiaries and through

27

its investments in co-investment partnership with third parties. Regency owns 99 percent of the outstanding operating partnership units of RCLP.

Regency engages in the ownership, management, leasing acquisition and development of retail shopping centers throughout the United States. At June 30, 2008, Regency directly owned 232 retail shopping centers (44 of which located in California) and held partial interest in an additional 221 retail shopping centers (29 of which located in California) through investments in joint ventures. The gross lcasablc area of the 73 shopping centers in California that Regency either directly owned or had partial interests totaled 9,556,976 square feet. Regency reports that over 91 percent of such California shopping centers were leased as of June 30, 2008.

Regency cams revenues and generates cash flow by leasing space in its shopping centers to market-leading grocers, major retail anchors, specialty side-shop retailers and restaurants, including ground-leasing or selling building pads (out-parcels) to these tenants. According to the audited financial statements accompanying Regency's Form 10-K, as of December 31, 2007, Regency had assets totaling S4.14 billion and liabilities totaling $2.19 billion. For calendar year 2007, Regency's reported revenues totaled approximately $451 million. According to the unaudited financial statements accompanying Regency's Form I 0-Q, as of June 30, 2008, Regency had assets totaling $4.28 billion and liabilities totaling $2.3 7 billion.

In the description below, the term "Maguire Properties" refers to Maguire Properties, Inc. and its affiliates and subsidiaries included in the consolidated financial statements that were a part of Maguire Properties' Form 10-Kfor the year ended December 31, 2007 and Form 10-Q.fi,r the quarter ended June 30. 2008, on.file with the Securities and Exchange Commission. The following description of Maguire Properties is based on such Form 10-K and Form 10-Q and other public(v available materials published by Maguire Properties. The Agency has not independent(v verified this information and makes no representation as to the accuracy thereof Maguire Properties has not reviewed the description contained in this Official Statement.

Maguire Properties, Inc. is headquartered in Los Angeles, California. It was formed in June 2000 and commenced operation as a REIT in June 2003, after an initial public offering. Through its controlling interest in Maguire Properties, LP. ( of which Maguire Properties, Inc. is the general partner) and the subsidiaries of Maguire Properties, LP., including Maguire Properties TRS Holdings, Inc., and Maguire Properties Services, Inc., Maguire Properties owns, manages, leases, acquires and develops real estate in: the greater Los Angeles area of California; Orange County, California; San Diego, California; and Denver, Colorado. Its portfolio is heavily concentrated in Southern California.

As of June 30, 2008, Maguire Properties owned whole or partial interest in 39 office and retail properties, a 350-room hotel, off-site parking garages and on-site structured and surface parking ("Total Portfolio"). This Total Portfolio consisted of approximately 21.1 million square feet of building space, of which 80.6 percent was leased. The "Effective Portfolio" - representing Maguire Properties' economic interest in such properties from which Maguire Properties derived its net income or loss as recognized in accordance with accounting principles generally accepted in the United States - was approximately 18.1 million square feet. As of December 31, 2007, the Orange County portion of Maguire Properties' Total Portfolio included 46 buildings, with 7. 79 million square feet of net rentablc space, 71.6 percent of which was leased.

In April 2007, Maguire Properties acquired 24 properties and 11 development sites in downtown Los Angeles and Orange County from The Blackstone Group (which included interests in the Financial Commons and the Brea Marketplace, see "General Description" above). Maguire Properties sold eight of the office properties and three of the development sites shortly after the acquisition. In August and September 2008, Maguire Properties completed the sale of two additional properties that it had acquired

28

from The Blackstone Group: the Main Plaza in the City of Irvine and City Plaza in the City of Orange. In its Form I 0-Q for the quarter ended June 30, 2008, Maguire Properties disclosed its intention to also market Park Place, another property in Irvine, and to dispose other non-strategic assets in the County, as part of a program to strengthen its short-tenn liquidity and financial position.

According to the audited financial statements accompanying Maguire Properties' Form I 0-K, as of December 31, 2007. Maguire Properties had assets totaling $5.75 billion and liabilities totaling $5.39 .billion. For calendar year 2007, Regency's reported revenues totaled $548 million. According to the unaudited financial statements accompanying Maguire Properties' Fonn 10-Q, as of June 30, 2008, Maguire Properties had assets totaling $5.59 billion and liabilities totaling $5.40 billion.

In the description below, the term "Olen Properties" refers to Olen Properties Corporation al1(/ its subsidiaries. The .fi1/lowi11g description of' Olen Properties is based 011 puhlic~v available materials published by Olen Properties. The Agencv has not independent~v verified this information and makes no representation as to the accurac:v thereo,f Olen Properties has not revielved the description contained in this Official Statement.

Olen Properties is headquartered in Newport Beach, California, and is a privately held company. It started operations in 1973. Olen Properties has developed commercial and industrial properties in Southern California. lllinois and Florida and multifamily residential properties in Nevada, Arizona and Florida. As of August 2008, Olen Properties' portfolio reportedly included over 5 million square feet of office and industrial projects located throughout Orange County.

Olen Properties' projects under development in Southern California include the following: (i) The Pointe Apartment Homes, a mixed use development, consisting of 260 luxury apartment units at Olen Pointe Brea (sec "General Description - Olen Pointe Brea" above), (ii) 135 luxury apartment homes and six live-work mixed use units in Santa Ana; and (iii) a two-story restaurant complex in Irvine. Olen Properties also has residential and commercial projects under development in Nevada and Florida.

More i1?forn1ation regarding Regenc.v ma.v be _found at its lvebsite: lvw1rv.regenc.vcenters.con1. More inf'ormation regarding Maguire Properties may he found at its website: www.maguireproperties.com. More inf'ormation regarding Olen Properties may he found at its website: lVlVlv.olenproperties.con1. In addition, Regenc~v and Maguire Properties are each required to 1nake regular .filings with the Securities and Exchange Commission. These .filings may be .found at the Securities and Exchange Cnn1mission 's lVebsite: lVlVH1.sec.gov. These website references are included for informational purposes only. The Agency makes no representation concerning, and does not take any re,ponsibility for, the accuracy or timeliness of information posted ,m such websites or the continued maintenance of such websites.

29

http://www.regencycenters.com

http://www.maguireproperties.com

http://www.olenproperties.com

http://www.sec.gov

TAX REVENUES AND DEBT SERVICE COVERAGE

The.fi,1/owing section presents a summarv of the historical and projected assessed valuation and tax increment revenues with respect lo the Project Area, hosed on information provided hy Keyser Marston Associates (the "Fiscal Consultant'). The Agency helieves the assumptions upon which the projections are based are reasonable. Hoivever, some assun1ptions ma.v not materialize and 1111a111icipa1ed events and circumstances may occur. See "RISK FACTORS." The projections do not include an allowance .fi,r property lax appeals and related refimds or delinquencies hy taxpayers. The Tax Revenues and Housing Tax Revenues availahle.f(Jr deht service cluring the./Urecasl period nlG)' va,y fi·un1 the projections and the variations n1ay be n1aterial.

Historical Assessed Valuation and Tax Increment Revenues

Generally, tax increment revenues arc generated from increases in the total assessed value of a redevelopment project area above its base year value. Each year, the County Auditor-Controller provides a report of the current year and base year values for the Project Arca. Set forth below is a summary the assessed values and increment receipts for fiscal years 2004-05 through 2008-09 for the entire Project Arca.

30


Redevelopment Project Area C (Entire Project Area)

Historical Assessed Values and Tax Increment Receipts Fiscal Years 2004-05 to 2008-09

2004-05 2005-06 2006-07 2007-08

Secured ( 1 l $251,019,264 $287,837 ,560 $336.305.752 $357.928.295

Unsecured ti l 98.197 .600 80.856,260 90,977.539 89,406,353

State assessed 99.924 93.205 76,631 0

Total $349.316,788 $368, 787 ,025 $427,359,922 $447,334,648

Percent change from prior FY 8.71% 5.57% 15.88% 4.67%

(ncre1nental value ui $346,963.437 $366.433,674 $425,006,571 $444.999,287

Tax allocation by Coun~v:

Co1nputed allocation (4) $3.668,418 $3.682.243 $4,491,924 $4.564.473

Add: Supplemental taxes 65,401 52, 158 414,004 319,036

Less: Tax refunds {Sl and Annual Tl Cap forfeiture '61 (60,205) (11,061) (405,929) (6) (383,509) (6)

Gross Tax Revenues $3,673,614 $3,723,340 $4,500,000 (6) $4,500,000 '61

Percent change from prior FY 11.96% 1.35% 20.86% 0.00%

Housing Set-Aside"' $746,002 $745,978 $900.000 $900,000

2008-09

$445,483, 180 m

12,517,555"'

186,872

$458,187,607

2.43%

$455,852,246

(I) As reported by the Orange County Auditor-Controller in August of each fiscal year. Includes home owner exemptions; net of all other exemptions.

(2) Commencing fiscal year 2008-09. the Orange County Assessor includes the leasehold interest held by Regency at the Brea Marketplace and by Maguire Properties at the Corporate Place on the secured property tax roll. Such possessory interest were previously on the unsecured property tax roll. Sec "APPENDIX B - FISCAL CONSULTANT'S REPORT - 3.2. Historic Assessed Values."

(3) Equals total assessed value less the combined base year value, which \Vas $2.353.351 for fiscal years 2004-05 through 2006-07, and then adjusted to $2,335.361 beginning in fiscal year 2007-08. Adjustment in base year value beginning in fiscal year 2007-08 was made by the Orange County Auditor-Controller to reflect acquisition of property by tax-exempt public taxing agencies. Sec "APPENDIX B - FISCAL CONSULTANT'S REPORT- 3.1. Real and Personal Property."

(4) Computed based on the actual rate applied by the County, which included the basic one percent tax rate. plus additional rates due to tax levied to repay indebtedness approved by voters before January I, 1989 (the "overrides"). Actual rate varied slightly from year to year because of the rates applicable to the overrides. Docs not include reductions for County administrative fees and pass-through payments. Sec "'SECURITY FOR THE BONDS - Allocation of Taxes" and "APPENDIX 8- FISCAL CONSULTANT'S REPORT-4. t. Tax Rates."

(5) Includes refunds due to assessment appeals or other Assessor adjustments to value. (6) Tax increment revenue for any fiscal year in excess of $4.5 million in effect forfeited by the Agency, because of the $4.5

million annual cap under the Redevelopment Plan. See further discussion in the paragraph following Table 5. (7) Equals to 20 percent of the Gross Tax Revenues.


As discussed under "PROJECT AREA - Tax Sharing Agreements - Old HS Site Tax Sharing Agreement," the Agency's obligation to pay BOUSD under the Old HS Site Tax Sharing Agreement ranks senior to the Agency's repayment obligation with respect to the Series A Loan. The Old HS Site Pass-Through Amount is calculated based on the assessed value of, and tax increment generated from, the

31

Old High School Site. The following table shows the historical assessed value and Old HS Site PassThrough Amount during fiscal years 2004-05 through 2008-09.


Redevelopment Project Area C Old High School Site Only

Historical Assessed Values and Old HS Site Pass-Through Amount Fiscal Years 2004-05 to 2008-09

2004-05 2005-06 2006-07 2007-08

Secured (I) $43, 166.271 $69,932.104 $84.185.9001" $85,869,618

Unsecured { n 89,345,407 72.571,347 78.238,317 77,312.256

Stale assessed

Total $132,511,678 $142.503.451 $162,424.217 $163,181.874

Percent change from prior FY 18.39% 7 .54o/., 13.98% 0.47%

Old High School Site Pass- Sl,311,114 $1,264.184 $1.811.973 $1,592,779 Through Amount (4l

(I) Includes home owner excn1ptions; net of all other exemptions.

2008-09

$159,436,080(3)

6.744,9451.1)

$166,181.025

1.84%

$1,620.635

(2) The assessed value increase for fiscal year 2006-07 in large part attributable to Regency Centers Corporation's acquisition of the leasehold interest in the Brea Marketplace. Sec "PROJECT AREA- General Description-Old High School Site."

(3) Commencing fiscal year 2008-09, the Orange County Assessor includes the leasehold interests held by Regency at the Brea Marketplace and by Maguire Properties at the Corporate Place on the secured property tax roll. Such possessory interest were previously on the unsecured property tax roll. Sec "APPENDIX B - FISCAL CONSULTANT'S REPORT - 3.2. Historic Assessed Values."

(4) Represents amount payable to BOUSD under the Old HS Site Pass-Through Agreement. See "SECURITY FOR THE BONDS - Allocation of Taxes- Pass-Through Agreen1en1s"" and "'PROJECT AREA -Tax Sharing Agreements."

Source; Keyser Marston Associates, Inc.; Old High School Site Pass-Through Amounts from Brea Redevelopment Agency.

The Redevelopment Plan imposes a limit of $4.5 million on the amount of tax increment allocated to the Agency each fiscal year (the "Annual Tl Cap"). The assessed value of the Project Arca for fiscal year 2008-09 is approximately $458 million, or approximately $456 million over the base value. If the Annual Tl Cap did not exist, the Gross Tax Revenues to be allocated by the Agency with respect to the Project Area would be over $4.5 million. Because of the Annual Tl Cap, the amount of Gross Tax Revenues to be received by the Agency through fiscal year 2025-26 will be $4.5 million per fiscal year and the Housing Set-Aside (which secures the debt service on the Series A Housing Loan and the Series B Housing Loan) will be $900,000 per fiscal year, absent an amendment to the Redevelopment Plan or a decrease in the assessed value of the Project Arca below its 2008-09 assessed value.

Property values, and correspondingly assessed values, arc impacted by many factors which arc beyond the Agency's control. Even though the assessed value of the Project Area steadily increased between fiscal year 2004-05 through fiscal year 2008-09 as shown in Table 4 above, the real estate market in many areas in Southern California has been experiencing a downturn since 2006. Many properties that were bought within the few years before the real estate market slow-down have fallen below their purchase prices. In addition, during the residential housing boom, lenders reportedly made mortgage loans to some borrowers whose credit profiles were such that, in prior times, these borrowers might not have qualified for the same loans (e.g., the so-called sub-prime borrowers). The credit market in 2007 and 2008 has considerably tightened relative to the preceding few years. All of these factors led to an

32

increase of the risk of defaults and foreclosures when the housing boom ended. Data Quick Information Systems, a provider of real estate market data, reported that the median home price in Orange County in July 2008 was approximately $461,000, which represented a 28 percent decrease from a year earlier. There is no guarantee that assessed value of the Project Arca will continue to increase at the rate that it has been in the past few years, or that it will not drop below the 2008-09 level during the years before the final maturity of the Bonds. Sec "RISK FACTORS- Reduction in Taxable Value." As shown in Table I under the caption "PROJECT AREA- Land Use," the aggregate 2008-09 secured assessed value of the residential parcels in the Project Arca is $147,261,867. The Fiscal Consultant reported that, based on County records, all of such parcels were for single family residential uses. Therefore, the average secured assessed value per parcel of single family residence in the Project Arca for fiscal year 2008-09 is $444,900.

Teeter Plan

The County has implemented the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the "Teeter Plan"), as provided for in Section 4701 ct seq. of the California Revenue and Taxation Code. Pursuant to the Teeter Plan, the County apportions to the participating local agencies, including the Agency, amounts equal to I 00 percent of the taxes levied regardless of the amount actually collected. The County retains all penalties and interest which are collected with delinquent taxes. The County may discontinue the Teeter Plan at any time. If the Teeter Plan is discontinued subsequent to its implementation, secured property taxes would be allocated to political subdivisions, including the Agency, for which the County acts as the tax-levying or taxcollccting agency on an actual collections basis.

Appeals of Assessed Values

Pursuant to California law, property owners may apply for a reduction of their property tax assessment by filing a written appeal. After the applicant and the assessor have presented their arguments, the applicable local appeals board makes a final decision on the proper assessed value. The appeals board may rule in the assessor's favor, rule in the applicant's favor, or set its own opinion of the proper assessed value, which may be more or less than either the assessor's opinion or the applicant's opinion. Any reduction in the assessment ultimately granted applies to the year for which the application is made and may also affect the values in subsequent years. Refunds for taxpayer overpayment of property taxes may include refunds for overpayment of taxes in years after that which was appealed. Current year values may also be adjusted as a result of a successful appeal of prior year values. Any taxpayer payment of property taxes that is based on a value that is subsequently adjusted downward will require a refund for overpayment.

Appeals for reduction in the "base year" value of an assessment, if successful, reduce the assessment for the year in which the appeal is taken and prospectively thereafter. The base year is determined by the completion date of new construction or the date of change of ownership. Any base year appeal must be made within four years of the change of ownership or new construction date. A base year assessment appeal has significant future revenue impacts because a reduced base year assess.men! will then reduce the compounded value of the property prospectively. Except for the two percent inflation factor, the value of the property cannot be increased until a change of ownership occurs or additional improvements arc added.

Section 51 of the Revenue and Taxation Code permits a reduction in the assessed value if the full cash value of the property has been reduced by damage, destruction, depreciation, obsolescence, removal of property or other factors causing a decline in value. Significant reductions have taken place in some

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counties due to declining real estate values. Reductions made under this code section may be initiated by the County Assessor or requested by the property owner.

After a roll reduction is gran_tcd under this section, the property is reviewed on an annual basis to determine its full cash value and the valuation is adjusted accordingly. This may result in further reductions or in value increases. Such increases must be in accordance with the full cash value of the property and may exceed the maximum annual inflationary growth rate allowed on other properties under Article XIIIA of the State Constitution. Once the property has regained its prior value, adjusted for inflation, it once again is subject to the annual inflationary factor growth rate allowed under Article XIIIA.

The taxable value of unitary property may be contested by utility companies and railroads to the State Board of Equalization. Generally, the impact of utility appeals is on the statewide value of a utility determined by the State Board of Equalization. As a result, the successful appeal of a utility may not impact the taxable value of a project area but could impact a project area's allocation of unitary property tax revenues.

Any assessment appeal that is pending or which may be filed in the future, if successful, will result in a reduction of the assessed value of the subject property. A reduction of assessed valuation due to appeals, if significant, and the resulting property tax refunds could adversely impact the amount of Tax Revenues available to pay debt.

For its Report dated October 7, 2008 (sec Appendix B), the Fiscal Consultant reviewed the status of assessment appeals with respect to properties in the Project Arca based on the information available from the database of the Orange County Assessment Appeals Board (the "AAB") as of September 15, 2008, the cut-off date by which the County accepted assessment appeal applications for fiscal year 2008-09. The Fiscal Consultant cautioned that the AAB's database as of September 15, 2008 may not reflect all of the fiscal year 2008-09 appeal applications, because of a potential delay between the filing of an appeal application and the input into the database by AAB's staff. Based on the information that the Fiscal Consultant reviewed, the Fiscal Consultant reported that there was one pending appeal by a singlefamily homeowner to reduce the secured value of the residence from $854,037 to $730,000. Two prior year appeals were recently resolved. An appeal filed by Olen Commercial Realty Corporation resulted in a stipulated reduction of $1,687,411 for a parcel in Olen Pointe Brea that was originally assessed at $24,655,469 in fiscal year 2006-07. An appeal filed by Claim Jumper Restaurants LLC resulted in a stipulated reduction of $750,480 for a parcel that was originally assessed at $6,450,480 in fiscal year 2007-08. The Fiscal Consultant also reported a pending appeal filed by Xerox Lease Equipment LLC in fiscal year 2007-08 for the reduction ofan unsecured assessed value by $2,734.

Assuming that, in addition to the already stipulated reductions, the pending appeals described above are resolved in favor of the applicants, the Fiscal Consultant estimated that there would be a cumulative tax refund of $25,600 for fiscal year 2008-09, a reduction of secured assessed value by $2,561,928 commencing in fiscal year 2009-10, and a reduction of unsecured assessed value by $2, 734 commencing in fiscal year 2009-10. The projections set forth in Table 6 and Table 7 below and in the Fiscal Consultant Report in Appendix B reflect such estimated reductions. However, these projections do not include an allowance for other potential future appeals. Sec "APPENDIX B - FISCAL CONSUL TANT REPORT - 3.5. Assessment Appeals."

Sec "RISK FACTORS - Reduction in Taxable Value."

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Projected Tax Revenues

Table 6 shows the projected assessed values for the Project Arca, the Housing Set-Aside (i.e .. Housing Tax Revenues securing the Series A Housing Loan and the Series B Housing Loan) and the Tax Revenues (securing the Series A Non-Housing Loan) from fiscal years 2008-09 to 2012-13, as provided by the Fiscal Consultant. The projections arc calculated based on the values for fiscal year 2008-09 (sec Table 4 above), and assume that secured assessed value in the Project Arca will increase by two percent each year, compounded annually. The projected secured assessed value in each of fiscal years 2009-10 and 20 I 0-11 also includes an additional amount from anticipated new developments in the Project Arca. Sec "APPENDIX B - FISCAL CONSULTANT'S REPORT - 5.2. New Development Value Added." In light of the assessment appeals described under "Appeals of Assessed Values" above, the Fiscal Consultant assumed a property tax refund of $25,600 for fiscal year 2008-09, a reduction of secured assessed value by $2,561,928 commencing in fiscal year 2009-10, and a reduction of unsecured assessed value by $2, 734 commencing in fiscal year 2009-10. No other property tax appeals and related refunds arc assumed in the projections. The projections in Tables 6 and 7 also do not take into account any Education Revenue Augmentation Fund transfers which might be imposed by the State, but sec "RISK FACTORS - State Budget; ERAF." While the Agency believes that these assumptions arc reasonable, the assessed values, the Housing Tax Revenues and the Tax Revenues during the forecast period may vary from the projections and the variations may be material. Sec "RISK FACTORS - Reduction in Taxable Value."

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Redevelopment Project Area C Projected Tax Revenues

Fiscal Years 2008-09 to 2012-13 (OOO's Omitted)

2008-09 2009-10 2010-11 2011-12 2012-13

Secured - two percent growth ( 1 i $445,483 $454,341 $485.877 $554,071 $565, 152

New value from development (2l 24,570 57.330

Unsecured(-'> 12,704 12,704 12,702 12,702 12,702

Reduction per appealsl.4l (2,565)

Total 5458.188 $489,051 $555,908 $566,772 $577,854

Incremental value (Sl $455,852 $486,716 $553.573 $564,437 $575,519

Gross tax increment (-6) $4,500 $4,500 $4.500 $4,500 $4,500

Less: I lousing Set-Aside Ol (900) (900) (900) (900) (900)

Less: County admin. fee (!il (31) (31) (31) (31) (31)

Less: AB 1290 Payments 191 (46) (46) (46) (46) (46)

Less: Old HS Site Pass-Thru ""' (1,621) (1,754) (1,819) (1,819) (1,819)

Tax Revenues avail. for $1,902 $1,770 $1,705 $1,705 $1,705 Series A Non-Housing Loan <11

>

(I) Assumes an increase of two percent annually after fiscal year 2008-09. ,vith a reduction based on the 2007-08 appeals (sec Footnote 4).

(2) Based on expected increases to assessed value from development of an apartment complex in Olen Pointe Brea and the construction of a Target store and other improvements at the Brea Marketplace. Sec "PROJECT AREA - General Description - Olen Pointe Brea .. and··- Old High School Sile."

(3) Based on 2008-09 value. ,.vith no further increase. \.Vith a reduction based on the 2007-08 appeals (sec Footnote 4). ( 4) Assumes a reduction of secured assessed value by $2.561,928, and a reduction of unsecured assessed value by $2.734. based

on known stipulated reductions and pending appeals. Sec "Appeals of Assessed Values" and "APPENDIX B - FISCAL CONSULT ANT REPORT- 3.5. Assessment Appeals ...

(5) Equals total assessed value less the base year value of $2.335.361. (6) Equals the Annual Tl Cap. Sec "Historical Assessed Valuation and Tax Increment Revenues." (7) Equals 20 percent of gross tax increment. (8) Assumed to be approximately 0.61 percent of gross tax increment for Financial Commons and 0.56 percent for the rest of

the Project Arca. Payable to the County pursuant to California Revenue and Taxation Code Section 95.3. Sec "LIMITATIONS ON TAX REVENUES - Property Tax Collection Procedure."

(9) Represents AB 1290 Pay,ncnts to Orange County Superintendent of Schools and North Orange County Community College District only. AB 1290 Payments to other taxing entities not included because of subordination. Sec "'SECURITY FOR THE BONDS - Allocation of Taxes - AB 1290 Payments" and "PROJECT AREA - Tax Sharing Statutes."

(JO) Represents amount payable to BOUSD under the Old High School Site Pass-Through Agreement. See "'SECURITY FOR THE BONDS - Allocation of Taxes- Pass-Through Agreements" and ''PROJECT AREA -Tax Sharing Agreements.''

( 11) Docs not equal column total because of rounding. Source: Keyser Marston Associates, Inc.

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Coverage Projections

The table below shows the projected debt service coverage by Tax Revenues on the Series A Non-Housing Loan and the projected debt service coverage by Housing Tax Revenues on the Series A Housing Loan and the Series B Housing Loan.


Redevelopment Project Area C Estimated Debt Service Coverage

Series A Series A & Series B .::iscal Rcdcv. Loan Projected Housing Housing Loans Projected Year Tax Revenues O> Debt Service(~) Covcragc 0 ) Tax RcvcnucsHl Debt Service 12

> Coverage C5l

2009 S 1.902.494 S 1.361,348 1.40 $900.000 S715.863 1.26 2010 1.769.618 1.363.621 1.30 900,000 715.241 1.26 2011 1,704,579 1,361.681 1.25 900,000 716,244 1.26 2012 1,704,579 1,361.366 1.25 900.000 717,059 1.26 2013 1.704.579 1.361.366 1.25 900.000 718.596 1.25 2014 1.704.579 1.360.394 1.25 900,000 716,706 1.26 2015 1,704,579 1.362.194 1.25 900.000 716,600 1.26 2016 1.704.579 1,362.113 1.25 900,000 719.075 1.25 2017 1.704,579 1.361.106 1.25 900,000 716,438 1.26 2018 1,704,579 1,358.80 I 1.25 900.000 718.924 1.25 2019 1.524.907 1.215.801 1.25 900.000 719.918 1.25 2020 1,524,907 1.216.781 1.25 900,000 718,913 1.25 2021 1,524,907 1.216,931 1.25 900,000 718.313 1.25 2022 1.524,907 1,218,371 1.25 900.000 715,273 1.26 2023 1.524,907 1.217.751 1.25 900,000 717.793 1.25 2024 1.524,907 1.215,93 J 1.25 900,000 719.213 1.25 2025 1,524.907 1.217,465 1.25 900.000 717,891 1.25 2026 1.524,907 l.215.869 1.25 900.000 716.225 1.26 Total S29,507,998 S23,348,892 $16.200,000 S 12,914,282

(I) Assumes tax increment received by the Agency with respect to the Project Area will be equal to the Annual Tl Cap ofS4.5 million. Sec ''Historical Assessed Valuation and Tax Increment Revenues." Net of estimated Housing Set-Aside, County administrative fees. the Old HS Site Pass-Through Amount. Net of AB 1290 Payments for Orange County Superintendent of Schools and North Orange County Community College District. Sec "SECURITY FOR THE BONDS - Allocation of Taxes - AB 1290 Pa_vrnents." No potential ER.AF payment included for any year. However, sec "RISK FACTORS -State 8\1dgct; ER.AF."

(2) Debt service dollar amounts based on those scheduled to be payable during the corresponding Bond Year, assuming no optional prepayment prior to maturity.

(3) Equals "Tax Revenues" divided by "Series A Non-Housing Loan Debt Service." (4) Equals 20 percent of the Annual Tl Cap ofS4.5 million. (5) Equals "Housing Tax Revenues" divided by "Series A & Series B Housing Loans Debt Service." Source: Projected Tax Revenues from Keyser Marston Associates, Inc.; debt service and debt service coverage from Stone & Youngberg, LLC.

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RISK FACTORS

Investment in the bonds involves elements of risk. The .following section describes certain specific riskfac/ors affecting the payment and security of the Bonds. The following discussion a.frisks is no/ mean/ lo he an exhaustive /isl c,fthe risks associated with the purchase of the Bonds and the order,,( discussion r?fsuch risks does not necessari~v re.fleet the relative in1portance qfthe various risks. Potential investors are advised to consider the following factors along with all other infi,rmalion in this Official Statement in evaluating the Bonds. There can be no assurance that other risk factors not discussed under this caption will not become material in theji,ture.

Limited Obligations of the Authority and the Agency

The Bonds are limited obligations of the Authority and each series of the Bonds is payable solely from, and secured by, a pledge of Revenues under the related Indenture. Revenues consist primarily of repayments (including prepayments) by the Agency of the loans under the related Loan Agreemcnt(s). If, for any reason, the loan repayments collected arc not sufficient to pay debt service on the related Bonds under an Indenture, the Authority will not be obligated to utilize any other of its funds, other than moneys on deposit in the related Reserve Account and certain other funds and accounts established under such Indenture, to pay debt service on such Bonds. The Authority has no taxing power.

The Loans arc limited obligations of the Agency. The Loans arc not a debt, liability or obligation of the City, the State of California, or any of its political subdivisions other than the Agency, and none of the City, the State nor any of its political subdivisions, other than the Agency, is liable therefor. The principal of, prepayment premium, if any, and interest on the Loans arc payable solely from Tax Revenues or Housing Tax Revenues, as applicable, allocated to the Agency from the Project Arca and amounts in certain funds and accounts held under the Indenture. The Agency has no power to levy and collect property taxes, and any property tax limitation, legislative measure, voter initiative or provisions of additional sources of income to taxing agencies having the effect of reducing the property tax rate, could reduce the amount of Tax Revenues and Housing Tax Revenues that would otherwise be available to pay debt service on the Loans. Sec "SECURITY FOR THE BONDS."

Concentration of Ownership

As discussed under "PROJECT AREA - General Description" and "- Top Property Tax Assessces," properties owned or leased by three entities (Regency, Maguire Properties and Olen Properties), directly or through their subsidiaries, account for a significant portion of the total assessed value of the Project Arca. Most of the properties controlled by these three entities in the Project Arca are commercial developments with multiple business tenants. The residential project being developed by Olen Properties in Olen Pointe Brea consist of multifamily apartment units. Even though there is a diversity of tenants, concentration of ownership in the Project Arca presents a risk in that, if one or more of the largest asscssecs were to successfully appeal the tax assessments on their properties within the Project Arca, or sell or dispose the properties at substantially decreased values for whatever reason, or default on their taxes and the Teeter Plan is discontinued, then a substantial decline in Tax Revenues could result. Sec "TAX REVENUES AND DEBT SERVICE COVERAGE - Appeals of Assessed Values" and "APPENDIX B - FISCAL CONSULTANT'S REPORT - 3.5. Assessment Appeals" regarding the appeals filed by Olen Commercial Realty Corporation which resulted in a stipulated reduction of $1,687,411 for a parcel in Olen Pointe Brea that was originally assessed at $24,655,469 in fiscal year 2006-07. Due to the non-residential character of a significant portion of the properties in the Project Arca, ownership of property in the Project Arca may continue to remain concentrated among a small number of asscssccs for a long period of time.

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Reduction in Taxable Value

The projected Tax Revenues and Housing Tax Revenues shown in this Official Statement are based on the assumption that until the final maturity of the Bonds, the Agency will be allocated gross tax increment revenues of $4.5 million each fiscal year, which is the Annual Tl Cap under the Redevelopment Plan. However, no assurances can be given that the assessed value of properties in the Project Arca will never fall below the values estimated by the Fiscal Consultant for the projections shown in Table 6, Table 7 and the Fiscal Consultant's Report.

A reduction of taxable value of property in the Project Arca below such level may reduce the amount of Tax Revenues and Housing Tax Revenues to be collected by the Agency. As discussed under "TAX REVENUES AND DEBT SERVICE COVERAGE - Historical Assessed Valuation and Tax Increment Revenues," the assessed value in the Project Arca increased by 31.17 percent between fiscal year 2004-05 and fiscal year 2008-09. The assessed value of property in the Project Arca continued to increase by 2.43 percent from fiscal year 2007-08 to fiscal year 2008-09. However, median home sale prices in the County decreased, in some cases significantly, during the same period as the result of a general down-turn in the region's residential real estate market. The Agency cannot predict how long the real estate down-turn will continue and the number of properties that will ultimately be affected. A loan default or foreclosure may impact the value of a given property, as well as the market value of nearby properties. A significant portion of the Project Arca is comprised of commercial developments, with a heavy ownership concentration. Sec "Concentration of Ownership" and "PROJECT AREA - General Description," "- Top Property Tax Assessccs" and "- Land Use." Often, periodic improvement and reinvestment arc required to maintain the value of commercial properties. The willingness of an owner to upgrade and maintain a commercial property, and in some circumstances make timely property tax payments, can be affected by the property's vacancy rate and rental receipts. The Agency is not aware of any significant vacancy with respect to available rental spaces in the commercial developments of the Project Arca. The Brea Marketplace is currently undergoing major renovation. However, the Agency has not undertaken to assess the financial conditions of the current owners of the commercial or residential properties within the Project Arca or to make inquiries into the means by which such owners financed their properties. Property value and development growth in the Project Arca will be subject to the fluctuation of the real estate market throughout the terrn of the Bonds.

In addition to the real estate market fluctuation discussed above, a relocation out of the Project Arca by one or more major property owners, the discovery of hazardous substances on a property within the Project Arca (sec "Hazardous Substances" below) or the complete or partial destruction of property caused by, among other possibilities, an earthquake, flood or other natural disaster (sec "Natural Disasters" below or any other event which would pcrrnit a reassessment of property at lower values), could cause a reduction in the assessed value of properties in the Project Arca. Future initiatives or legislation may be approved by the electorate or the legislature which would further limit the increase of assessed value of property or reduce the tax rate applicable to the property, could cause a reduction in the Tax Revenues and Housing Tax Revenues. Property owners may also appeal to the County Assessor for a reduction of their assessed valuations or the County Assessor could order a blanket reduction in assessed valuations based on then current economic conditions. The projections set forth in Table 6 and in the Fiscal Consultant Report in Appendix B already included an estimated reduction based on the appeals on record prior to the close of fiscal year 2007-08. Sec "TAX REVENUES AND DEBT SERVICE COVERAGE - Appeals of Assessed Values." However, the projections do not take into account any assessed value reduction or tax refund for other future appeals. A reduction of assessed valuation that causes a decline in Tax Revenues and Housing Tax Revenues or the resulting property tax refunds could have an adverse effect on the Agency's ability to make timely repayments on the Loans. Sec "LIMITATIONS ON TAX REVENUES."

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Levy and Collection

The Agency docs not have any independent power to levy and collect property taxes. Any reduction in the tax rate or the implementation of any constitutional or legislative property tax decrease could reduce the Tax Revenues. So long as the County's Teeter Plan remains in effect with respect to the Project Arca, the receipt of tax increment by the Agency with respect to the Project Arca is protected from risks relating to property tax delinquencies. Sec "TAX REVENUES AND DEBT SERVICE COVERAGE - Teeter Plan." However, the County is entitled, and under certain circumstances could be required, to terminate its Teeter Plan with respect to all or part of the local agencies, including the Agency. A termination of the Teeter Plan with respect to the Agency, coupled with significant property delinquencies, could have a material adverse effect on the amount of Tax Revenues to be collected by the Agency.

State Budget; ERAF

In connection with its approval of the State's annual budgets, the State Legislature has from time to time enacted legislation that, among other things, reallocated funds from redevelopment agencies to school districts by shifting a portion of each agency's tax increment, net of amounts due to other taxing agencies, to school districts for such fiscal years for deposit in the Education Revenue Augmentation Fund ("ERAF"). The amount required to be paid by a redevelopment agency under such legislation was apportioned among all of its rcdcvclopmcnt project areas on a collective basis, and was not allocated separately to individual project areas. The 2004-05 State Budget included a transfer by redevelopment agencies to the applicable ERAFs of $250 million in each of fiscal years 2004-05 and 2005-06. The Agency's share of the shift for fiscal year 2004-05 was $2,239,969 and the share for fiscal year 2005-06 was $2,081,969 for both Agency project areas. The Agency paid its fiscal year 2004-05 payment and its fiscal year 2005-06 payment on a timely basis. The State's budgets for fiscal years 2006-07 and 2007-08 did not require ERAF transfers of tax increment revenues by redevelopment agencies. Although the State's voters approved a constitutional amendment on the November 2004 ballot (the "Local Government Initiative"), which purports to prohibit any further transfers of non-education local government property taxes for the benefit of the State, the Local Government Initiative does not purport to change existing law with respect to the State's ability to transfer redevelopment agencies' property tax revenues.

California faces significant budget issues for fiscal year 2008-09 and beyond. On January 10, 2008, the Governor, by proclamation, declared that the State was in a fiscal emergency and called a special session of the State Legislature to trim the current year's spending. The State Department of Finance reported in January 2008 that, a combination of lowered revenue receipts and projections and increased costs resulted in a projected $3.3 billion budget shortfall for fiscal year 2007-08, which would grow to a $14.5 billion cumulative budget shortfall for fiscal year 2008-09. In May 2008, the Governor revised this estimate and warned that, if left unaddressed, the projected budget gap for fiscal year 2008-09 would grow to $24.3 billion, based on a deteriorating revenue outlook and rising program cost and expenditures.

On September 23, 2008, Governor Schwarzenegger signed the belatedly adopted State budget for fiscal year 2008-09. Included in the State budget package was Assembly Bill 1389 which, among other provisions, requires redevelopment agencies to pay approximately $350 million total statewide, into the respective county ERAFs in fiscal year 2008-09. The Agency's ERAF payment for fiscal year 2008-09 is estimated to be approximately $1.86 million. Similar to past ERAF shifts, the legislation allows the Agency to make the ERAF payment from any available source, except for low and moderate income housing funds held as of July I, 2008. The Agency currently expects to have sufficient resources to make

40

the 2008-09 ERAF payment without using fiscal year 2008-09, or any future, tax increment from the Project Arca.

The Agency cannot predict whether the State Legislature will enact further legislation in the future impacting the Agency's tax revenue receipts with respect to the Project Arca. Given the budget issues currently faced by the State, it is possible that future budgets will include additional ERAF shifts or other legislation reducing the tax revenues allocated to redevelopment agencies.

Information about the State budget and State spending is available at various State maintained websites. Text of the budget may be found at the website of the Department of Finance, www.dofca.gov. An analysis of the budget is posted by the Office of the Legislative Analyst at www.lao.ca.gov. In addition, various State official statements, many of which contain a summary of the current and past State budgets may be found at the website of the State Treasurer, www.treasurer.ca.gov. None of such websites is in any way incorporated into this Official Statement, and the Agency makes no representation whatsoever as to the accuracy or completeness of any of the information on such websites.

Natural Disasters

The value of the property in the Project Arca in the future can be adversely affected by a variety of additional factors, particularly those which may affect infrastructure and other public improvements and private improvements on property and the continued habitability and enjoyment of such private improvements. Such additional factors include, without limitation, geologic conditions such as earthquakes, topographic conditions such as earth movements, landslides, fire storms and floods and climatic conditions such as droughts. In the event that one or more of such conditions occur, such occurrence could cause damages of varying seriousness to the land and improvements and the value of property in the Project Arca could be diminished in the aftermath of such events. A substantial reduction of the value of such properties could affect the ability or willingness of the property owners to pay the property taxes.

The City, like most conununitics in California, is an area of unpredictable seismic activity, and therefore, is subject to potentially destructive earthquakes. Two major faults traverse through the City, the Whittier fault and the Elysian Park thrust fault. The Whittier fault cuts across the hills and through the eastern half of the City in a northwesterly direction. Several traces of the Whittier fault arc still active. The Elysian Park thrust fault is buried approximately six to ten miles below the ground surface of the City. The San Andreas fault lies 33 miles from the City.

Drought conditions in Southern California in recent years, combined with higher than average temperatures and Santa Ana winds, have created conditions that are from time to time conducive to wildfires. For example, between October 20 and October 22, 2007, close to 20 separate wildfires started in seven counties in Southern California (Santa Barbara County, Ventura County, Los Angeles County, San Bernardino County, Orange County, Riverside County and San Diego County). The City was not affected by the October 2007 fires. The northern edge of the City abutting the foothills is identified as an urban-open space interface area which is subject to the risk of wild fires. In these areas, additional conditions arc imposed on developments to mitigate potential fire hazard. These conditions include: fuel modification plan to a depth of 170 feet surrounding the perimeter of developments, automatic fire sprinklers in all buildings, a minimum road width of 40 feet, hydrant spacing throughout the development, hydrant marker plan to case visibility, restriction of cul-de-sac lengths, ignition resistant construction, and the proper selection of plant pallet.

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http://www.ciofca.gov

http://www.lao.ca.gov

http://www.treasurer.ca.gov

Hazardous Substances

An additional environmental condition that may result in the reduction in the assessed value of property would be the discovery of a hazardous substance that would limit the beneficial use of taxable property within the Project Area. In general, the owners and operators of property may be required by law to remedy conditions of the property relating to releases or threatened releases of hazardous substances. The owner or operator may be required to remedy a hazardous substance condition at the property whether or not the owner or operator has anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the property within the Project Area be affected by a hazardous substance, could be to reduce the marketability and value of the property by the costs of remedying the condition.

Bankruptcy Risks; Enforceability of Remedies

The enforceability of the rights and remedies of the owners of the Bonds and the obligations of the Agency may become subject to the following: the federal bankruptcy code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors' rights generally, now or hereafter in effect; usual equitable principles which may limit the specific enforcement under state law of certain remedies; the exercise by the United States of America of the powers delegated to it by the federal Constitution; and the reasonable and necessary exercise, in certain exceptional situations of the police power inherent in the sovereignty of the State of California and its governmental bodies in the interest of servicing a significant and legitimate public purpose. Bankruptcy proceedings, or the exercise of powers by the federal or state government, if initiated, could subject the owners of the Bonds to judicial discretion and interpretation of their rights in bankruptcy or otherwise and consequently may entail risks of delay, limitation, or modification of their rights.

Secondary Market

There can be no guarantee that there will be a secondary market for the Bonds, or, if a secondary market exists, that such Bonds can be sold for any particular price. Occasionally, because of general market conditions or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue arc suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon the then prevailing circumstances. Such prices could be substantially different from the original purchase price.

Loss of Tax Exemption with Respect to Series A Bonds

Compliance hv Agencv. In order to maintain the exclusion of interest on the Series A Bonds from gross income for federal income tax purposes, the Authority and the Agency have covenanted to comply with the applicable requirements of Section 148 and certain other sections of the Internal Revenue Code of 1986, as amended, relative to arbitrage and avoidance of characterization as private activity bonds, among other things. Interest on the Series A Bonds could become ineludable in gross income for purposes of federal income taxation retroactive to the date of issuance of the Series A Bonds as a result of acts or omissions of the Agency in violation of these covenants. Sec "CONCLUDING INFORMATION - Tax Matters."

Future Legislation or Court Decisions. Legislation affecting the tax exemption of interest on the Series A Bonds may be considered by the United States Congress and the State legislature. Federal and state court proceedings and the outcome of such proceedings could also affect the tax exemption of interest on the Series A Bonds. No assurance can be given that legislation enacted or proposed, or actions

42

by a court, after the date of issuance of the Series A Bonds will not have an adverse effect on the tax exemption of interest on the Series A Bonds or the market value of the Series A Bonds.

LIMITATIONS ON TAX REVENUES

Article XIHA of the California Constitution

California voters, on June 6, 1978, approved an amendment ( commonly known as both Proposition 13 and the Jarvis-Gann Initiative) to the California Constitution. This amendment, which added Article X!IIA to the California Constitution, among other things, affects the valuation of real property for the purpose of taxation in that it defines the "full cash value" of property 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 may be adjusted annually to reflect inflation at a rate not to exceed two percent per year, or any reduction in the consumer price index or comparable local data, or any reduction in the event of declining property value caused by damage, destruction or other factors. The amendment further limits the amount of any ad valorem tax on real property to one percent of the full cash value except that additional taxes may be levied to pay debt service on indebtedness approved by the voters prior to July l, 1978. In addition, an amendment to Article XIIIA was adopted in October 1986 by initiative which exempts from the one percent limitation any taxes levied to pay bonded indebtedness approved by two-thirds (55 percent in certain instances) of the votes cast by voters for the acquisition or improvement of real property.

On September 22, I 978, the California Supreme Court upheld the amendment over challenges on several state and federal constitutional grounds (Amador Valley Joint Union School District v. State Board of Equalization). The Court reserved certain constitutional issues and the validity of legislation implementing the amendment for future determination in proper cases.

In the general elections of l 986, 1988 and 1990, the voters of the State approved various measures which further amended Article X!IIA. One such amendment generally provides that the purchase or transfer of (i) real property between spouses or (ii) the principal residence and the first S 1,000,000 of the full cash value of other real property between parents and children, do not constitute a "purchase" or "change of ownership" triggering reassessment under Article XIIIA. This amendment has reduced local property tax revenues. Other amendments permitted the Legislature to allow persons over 55 years old who sell their residence on or after November 5, 1986, to buy or build another of equal or lesser value within two years in the same county, to transfer the old residence's assessed value to the new residence, and permitted the Legislature to authorize each county under certain circumstances to adopt an ordinance making such transfers of assessed value applicable to situations in which the replacement dwelling purchased or constructed after November 8, 1988, is located within the county and the original property is located in another county within California.

In the October 1990 election, the voters approved additional amendments to Article XIIIA permitting the State Legislature to extend the replacement dwelling provisions applicable to persons over 55 years old to severely disabled homeowners for replacement dwellings purchased or newly constructed on or after June 5, 1990, and to exclude from the definition of "new construction," which triggers reassessment, improvements to certain dwellings for the purpose of making the dwelling more accessible to severely disabled persons. In the November 1990 election, the voters approved the amendment of Article XIIIA to permit the State Legislature to exclude from the definition of"ncw construction" seismic retrofitting improvements or improvements utilizing earthquake hazard mitigation technologies constructed or installed in existing buildings after November 6, 1990.

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Challenges to Article XlIIA. California trial and appellate courts have upheld the constitutionality of Article XIIIA 's assessment rules in three significant cases. The United States Supreme Court in an appeal to one of these cases upheld the constitutionality of Article XIIIA's tax assessment system. The Agency cannot predict whether there will be any future challenges to California's present system of property tax assessment and cannot evaluate the ultimate effect on the Agency's receipt of Tax Revenues should a future decision hold unconstitutional the method of assessing property.

lmplementin<' legislation. Legislation enacted by the California Legislature to implement Article XlllA provides that all taxable property is shown at full assessed value as described above. In conformity with this procedure, all taxable property value included in this Official Statement ( except as noted) is shown at I 00 percent of assessed value and all general tax rates reflect the $ I per $ I 00 of taxable value. Tax rates for voter approved bonded indebtedness and pension liability arc also applied to I 00 percent of assessed value.

Future assessed valuation growth allowed under Article XIIIA (new construction, change of ownership, two percent annual value growth) is allocated on the basis of "situs" among the jurisdictions that serve the tax rate area within which the growth occurs, except for certain utility property assessed by the State Board of Equalization. Local agencies and school districts share the growth of "base" revenue from the tax rate area. Each year's growth allocation becomes part of each agency's allocation the following year. The Agency is unable to predict the nature or magnitude of future revenue sources which may be provided by the State of California to replace lost property tax revenues.. Article XIIIA effectively prohibits the levying of any other ad valurem property tax above the one percent limit except for taxes to support indebtedness approved by the voters as described above.

In 1990, the State enacted Senate Bill 2557 which allows counties to charge fees to local jurisdictions for the cost of preparing and overseeing the tax roll.

Property Tax Collection Procedure

In California, property which is subject to ad valorcm taxes is classified as "secured" or "unsecured." The secured classification includes property on which any property tax levied by a county becomes a lien on that property sufficient, in the opinion of the county assessor, to secure payment of the taxes. A tax levied on unsecured property docs not become a lien against the unsecured property, but may become a lien on certain other property owned by the taxpayer. Every tax which becomes a lien on secured property has priority over all other liens on the secured property, regardless of the time of creation of the other liens.

Secured and unsecured property arc entered on separate parts of the assessment roll maintained by the county assessor. The method of collecting delinquent taxes is substantially different for the two classifications of property. The taxing authority has four ways of collecting unsecured personal property taxes in the case of delinquency: (i) initiating a civil action against the taxpayer, (ii) filing a certificate in the office of the county clerk specifying certain facts in order to obtain a judgment lien on certain property of the taxpayer, (iii) filing a certificate of delinquency for record in the county recorder's office to obtain a lien on certain property of the taxpayer, and (iv) seizing and selling the personal property, improvements or posscssory interests belonging or assessed to the assessec. The exclusive means of enforcing the payment of delinquent taxes with respect to property on the secured roll is the sale of the property securing the taxes for the amount of taxes which arc delinquent.

A ten percent penalty is added to delinquent taxes which have been levied with respect to property on the secured roll. In addition, on or about June 30 of the fiscal year, property on the secured roll on which taxes arc delinquent is declared to be in default by operation of law and declaration of the

44

tax collector. Such property may thereafter be redeemed by payment of the delinquent taxes and a delinquency penalty, plus a redemption penalty of 1.5 percent per month to the time of redemption. If taxes arc unpaid for a period of five years or more, the property is subject to sale by the county tax collector.

The valuation of property is determined as of the January I lien date each year and equal installments of taxes levied upon secured property arc due on the following November I and February I and become delinquent on the following December IO and April IO respectively. Unsecured property taxes become delinquent if not paid by August 31.

A bill enacted in 1983, Senate Bill 813 (Statutes of 1983, Chapter 498), provides for the supplemental assessment and taxation of property upon the occurrence of a change in ownership or completion of new construction. Previously, statutes enabled the assessment of such changes only as of the next January I tax lien date following the change and thus delayed the realization of increased property taxes from the new assessments for up to 14 months. As enacted, Chapter 498 provides increased revenue to redevelopment agencies to the extent that supplemental assessments of new construction or changes of ownership occur within the boundaries of redevelopment projects subsequent to the January I lien date. To the extent such supplemental assessments occur within the Project Arca, Agency revenues may increase.

In 1990, the State Legislature enacted Senate Bill 2557 (Statutes of 1990, Chapter 466) ("SB 2557") which allows counties to charge for the cost of assessing, collecting and allocating property tax revenues to local government jurisdictions on a prorated basis. California courts have upheld the inclusion of redevelopment agencies as a local government agency which must share the cost of property tax administration. The 1992 enactment of Senate Bill 1559 (Chapter 697) and the decision of the California Court of Appeal in Arcadia Redeveluprnent Agency v. Ikemoto have clarified that redevelopment agencies, such as the Agency, arc to share in the cost of property tax administration charged by most California counties, including the County. During fiscal year 2007-08, the County withheld approximately $31,356 from the Agency for such administrative costs with respect to the Project Arca.

Unitary Property

Assembly Bill 454 (Statutes of 1987, Chapter 921) ("AB 454") provides the method of reporting and allocating property tax revenues generated from most State-assessed unitary properties. Under AB 454, the State reports to each county auditor-controller only the county-wide unitary taxable value of each utility, without an indication of the distribution of the value among tax rate areas. AB 454 provides two formulas for auditor-controllers to use in order to determine the allocation of unitary property taxes generated by the county-wide unitary value, which arc: (i) for revenue generated from the one percent tax rate, each jurisdiction is to receive up to I 02 percent of its prior year unitary property tax increment revenue; however, if county-wide revenues generated from unitary properties arc greater than I 02 percent of prior year revenues, each jurisdiction receives a percentage share of the excess unitary revenues equal to the percentage of each jurisdiction's share of secured property taxes; (ii) for revenue generated from the application of the debt service tax rate to county-wide unitary taxable value, each jurisdiction is to receive a percentage share of revenue based on the jurisdiction's annual debt service requirements and the percentage of property taxes received by each jurisdiction from unitary property taxes.

The provisions of AB 454 apply to all State-assessed property, except non-unitary properties the valuation of which will continue to be allocated to individual tax rate areas. AB 454 allows, generally, valuation growth or decline of State-assessed unitary property to be shared by all jurisdictions within a county.

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Effective January I, 2007, AB 2670 changed the method of assessing unitary railroad property. Before AB 2670, the assessed value of unitary railroad property was allocated to individual tax rate areas within a county where the property is located. AB 2670 has converted this method of assessment for railroad property to the countywidc system. The new method involves establishing a single countywidc tax rate area within each county to which the assessed value of specified unitary property of a regulated railroad cornpany would be allocated. Revenues derived from the tax on this value arc allocated among local entities in the county pursuant to a specified formula. AB 2670 also requires, with respect to a "qualified facility" as defined in Revenue and Taxation Code Section 100.11, that 80 percent of the value of the facility and the revenues derived from taxing this value be allocated on a countywide basis, while the remaining 20 percent of this value and resulting revenues be allocated exclusively to the local tax rate areas in the county in which the property is located.

The County Auditor-Controller remitted $28,800 m unitary revenues to the Agency for the Project Arca during the 2007-08 fiscal year.

Article XIIIB of the California Constitution

On November 6, 1979, California voters approved Proposition 4, which added Article XIIIB to the California Constitution which has been subsequently amended several times. The principal effect of Article XIIIB is to limit the annual appropriations of the State and any city, county, school district, authority or other political subdivision of the State to the level of appropriations for the prior fiscal year, as adjusted for changes in the cost of living, population and services rendered by the government entity. The base year for establishing such appropriation limit is fiscal year 1986-87 and the limit is to be adjusted annually to reflect changes in population, cost of living and certain increases in the cost of services provided by these public agencies.

Appropriations subject to Article XlllB include generally 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.

Effective September 30, 1980, the California Legislature added Section 33678 to the Health and Safety Code which provides that the allocation of taxes to a redevelopment agency for the purpose of paying principal of, or interest on, loans, advances, or indebtedness will not be deemed the receipt by the agency of proceeds of taxes levied by or on- behalf of the agency within the meaning of Article XIIIB or any statutory provision enacted in implementation thereof. The constitutionality of Section 33678 has been upheld by the Second and Fourth District Courts of Appeal in two decisions: Bell Community Redevelopment Agency v. Woosely and Brown v. Communi(v Redevelopment Agency of the City of Santa Ana, which cases were not accepted for review by the California Supreme Court.

Proposition 87

Under prior State law, if a taxing entity increased its tax rate to obtain revenues to repay voter approved general obligation bonds, any redevelopment project area which included property affected by the tax rate increase would realize a proportionate increase in tax increment.

Proposition 87, approved by the voters of the State on November 8, 1988, requires that all revenues produced by a tax rate increase (approved by the voters on or after January I, 1989) go directly to the taxing entity which increases the tax rate to repay the general obligation bonded indebtedness. As a result, redevelopment agencies no longer receive an increase in tax increment when taxes on property in the project area are increased to repay voter approved general obligation debt.

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Proposition 218

On November 5, 1996, California voters approved Proposition 218 - Voter Approval for Local Government Taxes - Limitation on Fees, Assessments, and Charges - Initiative Constitutional Amendment. Tax Revenues securing the Agency's obligations to make payments arc derived from property taxes and arc outside the scope of taxes, assessments and property-related fees and charges that were limited by Proposition 218.

AB 1290 and SB 211

In 1993, the California Legislature enacted AB 1290, which mandated a limitation on the period of time for incurring and repaying loans, advances and indebtedness which arc payable from tax increment revenues.

Senate Bill 21 I ("SB 211 "), which was adopted by the California Legislature in 200 I and took effect as of January I, 2002, allows redevelopment agencies, by ordinance, to eliminate the time limit on establishing indebtedness for any redevelopment plan originally adopted before January I, 1994 (meaning a redevelopment agency could incur debt up to the end of the effectiveness of its redevelopment plan), but would in turn trigger statutory pass-throughs to all taxing entities with whom the redevelopment agency docs not have a pass-through agreement at the time the ordinance is adopted. If a redevelopment agency were to eliminate a project area's existing time limit to incur indebtedness as permitted by SB 211, the statutory pass-throughs would apply starting in the year after what is now the final year to incur indebtedness.

SB 21 I also authorizes the amendment of a redevelopment plan adopted before January I, 1994, in order to extend for not more than IO years the effectiveness of the redevelopment plan and the time to receive tax increment revenues and to pay indebtedness. Any such extension must meet certain specified requirements, including the requirement that the redevelopment agency establish the existence of both physical and economic blight within a specified geographical area of the redevelopment project and that any additional tax increment revenues received by the redevelopment agency because of the extension be used solely within the designated blighted area.

As discussed under "PROJECT AREA - Redevelopment Plan; Plan Limitations," the City Council adopted Ordinance No. 1103 on June 5, 2007 under SB 211 to eliminate the time limit to incur debt under the Redevelopment Plan.

SB 1045 and SB 1096

Senate Bill I 045 ("SB I 045"), which was adopted by the California Legislature in 2003, mandated a shift of Sl35 million in tax increment revenues from California redevelopment agencies to ERAF in fiscal year 2003-04. Senate Bill I 096 ("SB I 096"), which was adopted by the California Legislature in 2004, further mandated a shift of approximately $1.3 billion over a period of two years (fiscal years 2004-05 and 2005-06) in property taxes from local agencies to ERAF. Sec "RISK FACTORS - State Budget; ERAF." SB 1045 and SB 1096 allowed redevelopment agencies to amend redevelopment plans to extend time limits on the effectiveness of the redevelopment plans, the date by which any debt incurred .under the redevelopment plan has to be repaid, and the last date on which tax increment revenues could be received by the redevelopment agency under the redevelopment plan, if the ERAF payments were made. A redevelopment agency may not adopt an SB 1096 amendment if the time limit for the effectiveness of the redevelopment plan is more than 20 years from the last day of the fiscal year in which the related ERAF payment is made. As of the date of this Official Statement, the Agency has not adopted any ordinance pursuant to SB !045 or SB I 096 with respect to the Project Arca to extend

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the duration of the effectiveness of the Redevelopment Plan, the time limit to receive tax increment revenues or the time limit to repay indebtedness.

Future Initiatives

Article XIIIA, Article XIIIB and certain other propositions affecting property tax levies were each adopted as measures which qualified for the ballot pursuant to California's initiative process. From time to time other initiative measures could be adopted, further affecting Agency revenues or the Agency's ability to expend revenues.

CONCLUDING INFORMATION

Absence of Litigation

There is no litigation pending and notice of which has been received by the Authority or the Agency or, to the Authority's or the Agency's knowledge, threatened in any way to restrain or enjoin the issuance, execution or delivery of the Bonds, to contest the validity of the Bonds, the Indentures, the Loans, the Loan Agreements or any proceedings of the Authority or the Agency with respect thereto. To the knowledge of the Agency, there arc no lawsuits or claims pending against the Agency which will materially affect the Agency's finances so as to impair the ability to pay principal of and interest on the Loans when due.

Certain Legal Matters

All of the legal proceedings in connection with the authorization and issuance of the Bonds arc subject to the approval of Jones Hall, A Professional Corporation, Bond Counsel. Bond Counsel's final approving opinions with respect to the Bonds will be substantially in the form set forth in Appendix E of this Official Statement. Certain matters with respect to this Official Statement will be considered on behalf of the Authority and the Agency by Richards, Watson & Gershon, A Professional Corporation ("Disclosure Counsel"). Certain legal matters will also be passed on for the Agency, the Authority and the City by Richards, Watson & Gershon, A Professional Corporation, as General Counsel to the Authority and the Agency. Payment of the fees of Bond Counsel and Disclosure Counsel is contingent upon issuance of the Bonds.

Tax Matters

General. In the opimon of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to the qualifications set forth below, under existing law, the interest on the Series A Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, provided, however, that, for the purpose of computing the alternative minimum tax imposed on corporations (as defined for federal income tax purposes), such interest is taken into account in determining certain income and earnings. The opinions set forth in this paragraph arc subject to the condition that the Authority and the Agency comply with all requirements of the Internal Revenue Code of 1986 (the "Tax Code") that must be satisfied subsequent to the issuance of the Series A Bonds in order that such interest be, or continue to be, excluded from gross income for federal income tax purposes. The Authority and the Agency have covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of such interest in gross income for federal income tax purposes to be retroactive to the date of issuance of the Series A Bonds.

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Interest on the Series B Bonds is not excluded from gross income for federal income tax purposes.

California Tax Status. In the opinion of Bond Counsel. interest on the Series A Bonds and the Series B Bonds is exempt from California personal income taxes.

Tax Treatment o(Original Issue Discount and Premium. If the initial offering price to the public (excluding bond houses and brokers) at which a Bond is sold is less than the amount payable at maturity thereof. then such difference constitutes "original issue discount" for purposes of federal income taxes and State of California personal income taxes. If the initial offering price to the public (excluding bond houses and brokers) at which each Bond is sold is greater than the amount payable at maturity thereof, then such difference constitutes "original issue premium" for purposes of federal income taxes and State of California personal income taxes. De minimis original issue discount is disregarded.

Under the Tax Code, original issue discount is treated as interest excluded from federal gross income and exempt from Stale of California personal income taxes to the extent properly allocable to each owner thereof subject to the limitations described in the first paragraph of this section. The original issue discount accrues over the term to maturity of the Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straightline interpolations between compounding dates). The amount of original issue discount accruing during each period is added to the adjusted basis of such Bond to determine taxable gain upon disposition (including sale, redemption, or payment on maturity) of such Bond. The Tax Code contains certain provisions relating to the accrual of original issue discount in the case of purchasers of the Bonds who purchase the Bonds after the initial offering of a substantial amount of such maturity. Owners of such Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Bonds with original issue discount, including the treatment of purchasers who do not purchase in the original offering, the allowance of a deduction for any loss on a sale or other disposition, and the treatment of accrued original issue discount on such Bonds under federal individual and corporate alternative minimum taxes.

Under the Tax Code, original issue premium is amortized on an annual basis over the term of the Bond (said term being the shorter of the Bond's maturity date or its call date). The amount of original issue premium amortized each year reduces the adjusted basis of the owner of the Bond for purposes of determining taxable gain or loss upon disposition. The amount of original issue premium on a Bond is amortized each year over the term to maturity of the Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). Amortized Bond premium is not deductible for federal income tax purposes. Owners of Premium Bonds, including purchasers who do not purchase in the original offering, should consult their own tax advisors with respect to State of California personal income tax and federal income tax consequences of owning such Bonds.

Form o(Bond Counsel Opinions. At the time of issuance of the Bonds, Bond Counsel expects to deliver a separate opinion for the Series A Bonds and the Series B Bonds in substantially the respective forms set forth in Appendix E.

Other Tax Considerations. Owners of the Bonds should also be aware that the ownership or disposition of, or the accrual or receipt of interest on, the Bonds may have federal or state tax consequences other than as described above. Bond Counsel expresses no opinion regarding any federal or state tax consequences arising with respect to the Bonds other than as expressly described above.

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To ensure compliance with the requirements imposed by the Internal Revenue Service, purchasers and Owners of the Bonds should be aware that any federal income tax advice contained in this Official Statement (including the Appendices hereto) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Tax Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

Continuing Disclosure

The Agency has undertaken for the benefit of holders and beneficial owners of the Bonds to provide certain financial infonnation relating to the Agency and other data relating to the Project Arca by not later than eight months after the close of each fiscal year, commencing with the report for the 2007-08 fiscal year (the "Annual Report"), and to provide notices of the occurrence of certain enumerated events, if material. The Annual Report will be filed by the Agency or The Bank of New York Mellon Trust Company, N.A., as the Dissemination Agent on behalf of the Agency, with each Nationally Recognized Municipal Securities Information Repository, and with the appropriate State information depository, if any. The notices of material events will be filed by the Agency, or the Dissemination Agent on behalf of the Agency, with the Municipal Securities Rulcmaking Board (and with the appropriate State information depository, if any). The specific nature of the information to be contained in the Annual Report or the notices of material events is set forth in "APPENDIX F - FORM OF CONTINUING DISCLOSURE AGREEMENT." This undertaking has been made in order to assist the Underwriter in complying with Rule I 5c2-l 2(b)(5) (the "Ruic") promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. The Agency has not failed to comply with its prior continuing disclosure undertakings under the Rule in any material respect.

A failure by the Agency to comply with the provisions of the Continuing Disclosure Agreement is not an event of default under the Indentures (although the holders and beneficial owners of the Bonds do have remedies at law and in equity). However, a failure to comply with the provisions of the Continuing Disclosure Agreement must be reported in accordance with the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the Bonds. Therefore, a failure by the Agency to comply with the provisions of the Continuing Disclosure Agreement may adversely affect the marketability of the Bonds on the secondary market.

Rating

Standard & Poor's Ratings Services, a division of The McGraw~Hill Companies, Inc. ("S&P"), has assigned a rating of "BBB+" to the Bonds based on its assessment of the Authority's ability to make payments with respect to the Bonds and the Agency's ability to make payments with respect to the Loans. This rating reflects only the views of such organization. The explanation of the significance of the rating may be obtained from S&P. There is no assurance that the rating will continue for any given period of time or that it will not be revised downward or withdrawn entirely by such rating agency, if, in the judgment of the rating agency, circumstances so warrant. Any such downward revision or withdrawal of the rating may have an adverse effect on the market price of the Bonds.

Underwriting

The Bonds are being purchased for reoffering by Stone & Youngberg LLC (the "Underwriter"). The Underwriter has agreed to purchase the Series A Bonds at a purchase price of$18,470,540.90 (being equal to the principal amount of the Series A Bonds, less an original issue discount of $240,459.10 and less an underwriter's discount of $189,000.00). The Underwriter has agreed to purchase the Series B

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Bonds for S 1,973,665.60 (being equal to the principal amount of the Series B Bonds, less an original issue discount of $31,084.40 and less an underwriter's discount of 520,250.00).

The purchase contracts pursuant to which the Underwriter is purchasing the Bonds provides that the Underwriter will purchase all of the Bonds if any arc purchased. The obligation of the Underwriter to make such purchase is subject to certain terms and conditions set forth in such purchase contracts.

The Underwriter may offer and sell the Bonds to certain dealers and others at prices different from the prices stated on the cover page of this Official Statement. The offering prices may be changed from time to time by the Underwriter.

Miscellaneous

All summaries of the Indentures, the Loan Agreements, the Redevelopment Plan, the Redevelopment Law and other applicable legislation, agreements and other documents arc made subject to the provisions of such documents respectively and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the Agency for further information in connection therewith.

This Official Statement docs not constitute a contract with the purchasers of the Bonds. Any statements made in this Official Statement involving matters of opinion or estimates, whether or not expressly stated, arc set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized.

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

BREA PUBLIC FINANCING AUTHORITY

By Isl Tim O'Donnell Executive Director

BREA REDEVELOPMENT AGENCY

By Isl Tim O'Donnell Executive Director

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APPENDIX A

CITY OF BREA GENERAL INFORMATION

The ji,llowing information concerning the City of' Brea (the "City") and surrounding areas is included.fur informational purposes only. The Bonds are limited ohligations of' the Authority payable

.fi"Oln Revenues under the Indentures and the loans are limited obligations of' the Agenc:v payable .fiwn Ta.¥ Revenues or Housing Tax Revenues JJUrsuant to the respective Loan Agreen1ents. The Bonds are not a debt of' the City, the State of" California or any of' its political subdivisions (other than the Authority), and none of' the City, the State nor any of' its political subdivisions (other than the Authorit_i) is liable therefor.

Geography

The City encompasses 11.2 square miles and is located at the northern end of Orange County (the "County"), just south of the Los Angeles County line. It is approximately 25 miles southeast of downtown Los Angeles, 15 miles north of Santa Ana, the County Scat, and 22 miles inland of the Pacific Ocean. Neighboring communities include Fullerton, Placentia, La Habra and Yorba Linda.

Municipal Government

The City, a general law city, was incorporated in 1917, the eighth city in the County. The City has a Council-Manager form of municipal government. The City Council appoints the City Manager who is responsible for the day-to-day administration of City business and the coordination of all departments of the City. The City Council is composed of five members elected bi-annually at large to four-year alternating terms. The Mayor is selected by the City Council from among its members. As of September I, 2008, the City has approximately 385 full-time employees.

Population

The following table shows the estimated population growth for the City, the County and the State of California for the years shown.

Calendar Year

1990 2000 2005 2006 2007 2008

City of Brea

32,950 35.176 39,416 39,483 39,685 40,081

CITY OF BREA Population Estimates

Calendar Years 1990, 2000 and 2005 Through 2008

o/o Change fro1n County of o/o Change fro1n State of Prior Year Orange Prior Year California

2,398.400 29.558.000 2,831,799 33, 721.583

1.17% 3,045,218 0.92% 36,675,346 0.17 3,066.483 0.70 37.114.598 0.51 3,089,707 0.76 37.559.440 1.00 3.121.251 1.02 38,049,462

Source: State of California Department of Finance estimates as of January I of each year.

A-1

% Change from Prior Year

1.31% 1.20 1.20 1.30

.City's Taxable Valuation

A summary of the City's taxable valuation for fiscal years 2004-05 through 2008-09 is set forth below. These figures arc presented for historical comparison, with reference only to the time frame of the years shown.

CITY OF BREA Assessed Valuations

Fiscal Years 2004-05 through 2008-09

Fiscal Year Local Secured 2004-05 $4,885,966,314 2005-06 5,271,472,553 2006-07 5,944, 721,908 2007-08 6,246,693,514 2008-09 6,465,015,588

Source: Orange County Auditor~Controllcr.

Construction Activity

Utility $2,738,643

2,703,295 2,616,098 2,212,942 1,085, 173

Unsecured S501,694, 748

513,610,767 547,307,118 556, 712,522 522,067,692

Total 55,390,399,705

5,787,786,615 6,494,645, 124 6,805,618,978 6,988, 168,453

The number of construction permits issued in the City and the related values during fiscal years 2003-04 through 2007-08 are shown below.

Fiscal Year

2003-04 2004-05 2005-06 2006-07 2007-08

CITY OF BREA Construction Permits

Fiscal Years 2003-04 Through 2007-08

Permits Issued

1.795 1,671 1,327 ] ,063

632

Percent Change

(15.9)% (6.9)

(20.6) (19.9) (40.5)

Estimated Valuation

$64,297,673 70,203,769 57,153,181 64,180,767 45,180,084

Source: City of Brea Development Services Department.

Percent Change

(38.8)% 9.2

( 18.6) 12.3

(29.6)

The fluctuation in building permits issued reflects large scale tract development which is cyclical and given the City's size (approximately 11 square miles) occurs intermittently. See the discussions in the forepart of this Official Statement under the caption "TAX REVENUES AND DEBT SERVICE COVERAGE - Historical Assessed Valuation and Tax Increment Revenues."

A-2

Employment

According to the State of California Employment Development Department, the July 2008 preliminary, estimated unemployment rate for the City was 3.9 percent, and that for the County was 5.7 percent. The following table shows certain employment statistics for the City and the County .for calendar years 2003 through 2007.

CITY OF BREA City and County Employment Statistics Calendar Years 2003 through 2007 <•>

Cit

Labor Unemployment Year Force Emplo:,:cd Rate

2003 21,000 20,300 3.2% 2004 21,300 20,700 2.9 2005 21,700 21,100 2.6 2006 21,900 21,400 2.3 2007 22,100 21,500 2.7

(I) Not seasonally adjtistcd. Figures represent the 12-month average for each such year. Source: State of California, Employment Development Department.

Count:,:

Unemployment Rate

4.8% 4.3 3.8 3.4 3.9

The following table lists the major employers within the City and their estimated number of employees.

Co1npany

Mercury Insurance Group Beckmans Coulter, Inc. Bank of America Albertsons Distribution Warehouse Kirkhill - TA Company Brea Olinda Unified School District Harte-Hanks Communications ITT Hartford Insurance Group Avery Dennison Administrative Capital Group

Source: Brea Chamber of Commerce.

City of Brea Top Ten Employers as of November 2007

Product or Service

insurance services manufacturing - biomedical instruments financial services retail - grocer manufacturing - air craft parts public agency marketing insurance services manufacturing - office products financial services

A-3

No. of Employees

3,000 3,000 1,500 1.200

700 500 500 450 450 400

The following table summarizes the civilian labor force in the County (for the calendar years 2003 through 2007. These figures arc county-wide statistics and may not necessarily accurately reflect employment trends in the City.

ORANGE COUNTY Annual Average Industrial Employment(ll

Calendar Years 2003-2007

Industry 2003 2004 2005 2006 2007

Pri\'ate, non-farm Good\· producing:

Natural resources and 1nining 500 600 700 600 600 Construction 83,700 92.200 99.900 106,600 103,700 Manufacturing - durable goods 127.200 127,100 128,300 128.000 126.100 Manufacturing - non-durable goods 56,700 56,400 54,600 54,700 54,200

Service Providing: Wholesale trnde 83.200 82,400 83,000 83.700 87,100 Retail trade 152,800 l 53.200 !58.100 160,800 160,700 Transport., warehousing and utilities 29.000 29.200 28,700 28,200 28.700 lnfonnation 35,200 33.800 32,800 31,900 3 l,300 Financial activities 122.200 I 32.300 138.400 138,200 128,500 Professional and business services 252,600 254,900 264.300 274,500 272,300 Educational and health services 126,300 l 31,000 133.500 137.700 141,600 Leisure and hospitality 158,600 162.900 165,000 169.600 171,600 Other services 46 700 47 400 48400 41100 41600

Subtotal 1,274.800 l,303,300 1,335,600 l,362,200 l.353,700

Government 154,200 153,400 155,300 l 56,700 159,200 Farm 7 200 6100 5 600 5 300 5,000

Total 1,436,200 l,463,400 l,496,500 1,524,300 1,518,000

(I) Employment reported by place of work; does not include persons involved in labor-management disputes. Figures are rounded to the nearest hundred. Colu1nns may not add due to rounding. Based on March 2007 benchmark. Not seasonally adjusted.

Source: State of California, Employ1nent Development Department.

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Per Capita Personal Income

The following table shows the annual per capita personal income for the County, the State and the United States from 2002 through 2006.

ORANGE COUNTY, CALIFORNIA AND UNITED STATES Per Capita Personal Income <1

>

Calendar Years 2002 through 2006

Year County State U.S.

2002 $38, 168 $32,826 $30,821 2003 39,828 33,554 31,504 2004 42,260 35,440 33, 123 2005 45,465 37,462 34,757 2006 48,209 39,626 36,714

(I) Per capita personal income is the total personal incotnc divided by the total midyear population estimates of the U.S. Bureau of the Census. Estimates reflect county population estimates available as of April 2008.

Source: U.S. Department of Commerce. Bureau of Economic Analysis

Commercial Activity

The following table summarizes the annual volume of taxable transactions within the City for calendar years 2002 through 2006.

City of Brea Taxable Transactions

Calendar Year 2002 through 2006 (in Thousands of Dollars)

2002 2003 2004 2005 2006 Retail Outlets Apparel store $144,474 $152.296 $166.169 $174,823 $181,020 General merchandise stores 307,788 310,975 332,890 339.944 317.313 Food stores 28,725 30.424 28,905 32,920 33.630 Eating & drinking places 133.772 139,581 l 5 l.403 166,334 l 74,774 Home furn. & appliances 77,019 77,437 75,322 80,577 70,601 Auto dealers & supplies 12,218 8,013 6,957 8.168 l l,186 Service stations 32,848 40,538 46,430 50,623 62,490 Other retail stores 241.643 248,433 264,961 276,093 340,364

Subtotal 978,487 l,007,697 l ,073,037 l, l 29,482 l,191,378

All Other Outlets 282,487 313.161 394.599 452,782 465,712

All Outlets $1,260,784 $ l.320,858 $1,467,636 $1,582,264 $1,657,090

Source: Compiled from data published by State of California Board of Equalization.

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Transportation

The City is well served by area transportation routes and offers access to several airports. The Orange Freeway (State Highway 57), a major north-south corridor, crosses centrally through the City. The City is also within minutes of the Pomona Freeway (State Route 60), the Riverside Freeway (State Route 91) and the Santa Ana Freeway (Interstate 5). Air cargo and passenger flight services arc provided at the John Wayne Airport (25 miles southeast), Ontario International Airport (22 miles northeast), Los Angeles International Airport (48 miles west), and the Long Beach Municipal Airport (17 miles southwest). Commercial and passenger rail services arc provided by Union Pacific, South Pacific, Atchison, Topeka and Santa Fe Railway Co., and Amtrak lines. Trucking services arc provided through numerous common and contract earners.

Public Utilities

Electrical service is provided by Southern California Edison. Southern California Gas provides natural gas.

Water services arc provided by the City's Water Department. The City's drinking water is a 50-50 blend of surface water imported by the Metropolitan Water District of Southern California and ground water imported from California Domestic Water Company in Whittier. Metropolitan's imported water sources arc the Colorado River and the State Water Project, which draws water from the San FranciscoSan Joaquin Bay Delta. California Domestic water originates from the San Gabriel Basin.

Sewer services arc provided by the City's Maintenance Services Department, which maintains over I 08 miles of sewer main lines. The sewer distribution system flows into Orange County Sanitation District trunk system until it is treated at their secondary treatment facility in Fountain Valley. Trash collection services are provided by the City through Brea Disposal, a private contractor.

Education

The City's students arc served by the Brea Olinda Unified School District presided over by a separately elected board. The system includes six elementary schools, one junior high school, one high school and one alternative high school. Brea-Olinda High School has a professional performing arts center and complete athletic facilities. The City also has several private pre-schools, two Christian schools and a Roman Catholic school serving grades K-8. Colleges, universities and a number of technical and vocational schools are located in and around Brea. California State University, Fullerton College, Pacific Christian College, Hope University, an optometry school and a law school arc located in nearby Fullerton, and the University of California at Irvine, Chapman College, and Cal Poly Pomona arc within easy freeway access.

Community Facilities

St. Jude Medical Center in Fullerton and Placentia-Linda Hospital in Placentia arc full-service hospitals that arc located within five miles of the City.

The City's Parks and Recreation Department is responsible for designing, operating and maintaining public facilities that include the City Hall Recreation Center, a community center, gymnasium, 13 parks and playgrounds, an equestrian center and ball fields, and provides a spectrum of recreation, sport, educational and equestrian programs for children, teens, adults and families.

A-6

Brea maintains 15 parks and recreation facilities within its boundaries. The Brea Community Services Department coordinates park activities and the City owns Brea Creek Golf Course, operated by the Chapman Investment Company in partnership with Billy Casper Golf.

The City has senior and family resource center operated by the City with participation by charitable, non-profit corporations.

Public Safety

Law enforcement services arc provided by the Brea Police Department which provides full services to both the City and the neighboring City of Yorba Linda. Fire services arc provided by the Brea Fire Services Department, which has three fire stations and one annex located throughout the City.

Street and highway maintenance is provided for under the supervision of the City's Maintenance Services Department.

Building inspection and code enforcement services arc provided by the City.

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APPENDIX B

FISCAL CONSULT ANT'S REPORT

FISCAL CONSUL TANT REPORT BREA REDEVELOPMENT PROJECT AREA C

Prepared for the:

REDEVELOPMENT AGENCY OF THE CITY OF BREA

1 Civic Center Circle Brea, California 92821

Prepared by:

Keyser Marston Associates, Inc. 500 South Grand Avenue, Suite 1480

Los Angeles, California 90071

October 7, 2008

1. INTRODUCTION

Keyser Marston Associates, Inc. (KMA) has been retained as Fiscal Consultant to the Brea

Redevelopment Agency to prepare a projection of tax increment revenues for Project Area C (the

Project Area). The Project Area is comprised of the Original Area, Financial Commons (Area A)

and the School Site (Area 8).

The California Community Redevelopment Law (CRL) provides for the creation of a

redevelopment agency for the purpose of eliminating blight. To achieve this purpose, the CRL,

along with Article 16, Section 16 of the California Constitution, authorizes the Agency to receive that

portion of property tax revenue generated from the increase of the current year taxable values over

the base year taxable values that existed at the time of adoption of a redevelopment project. This

portion of property tax revenue is referred to as tax increment revenue. The CRL provides that the

tax increment revenue may be pledged by the Agency for the repayment of Agency indebtedness.

This Fiscal Consultant Report has been prepared to reflect the tax increment revenues that

would be allocable in the curreni 2008-09 fiscal year, based upon reported Project Area assessed

values by the Orange County Auditor-Controller. The projected taxable values and resulting tax

increment revenues for the Project Area are based on assumptions determined by a review of the

taxable value history of the Project Area; Agency-identified new developments proposed for the

Project Area; and the property tax assessment and property tax apportionment procedures of

Orange County.

Tax increment revenues generated by Area B are expected to be nearly fully passed on

to the Brea Olinda Unified School District, under the terms of a current tax sharing agreement

(more fully described in this Report). Therefore, the tabulations included in this Report reflect

assessed values both exclusive and inclusive of values generated by Area 8, so that the Project

Area can be evaluated and reviewed for only the Original Area and Area A, as well as in its

entirety. Since the annual $4,500,000 tax revenue cap for the Project Area applies to all three

subareas, the assumed new development values (Table 6) and the resulting tax increment

revenue projections (Table 7) reflect the entire Project Area.

2. REVIEW OF THE PROJECT AREA

2.1 Redevelopment Plan Time Limits

Existing redevelopment law requires the Agency to impose specific time

limitations on the incurrence of debt, the redevelopment plan effectiveness and the collection of

tax increment revenue to repay debt. The current effectiveness date of the redevelopment plan

for the Project Area is November 30, 2016, and the Agency may continue to collect tax

increment to repay debt until November 30, 2026.

Brea Redevelopment Agency Fiscal Consultant Report

Keyser Marston Associates, Inc. Page 1

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2.2 Redevelopment Plan Dollar Limit

Under the terms of the Redevelopment Plan, the Project Area has an annual gross tax increment revenue cap of $4.5 million. Tax increment revenues in excess of this revenue cap are forfeited by the Agency as "tax increment revenues and are allocated to the

taxing agencies as property tax revenues. In FY 2006-07 this annual revenue cap was reached

with the inclusion of the Agency's receipt of supplemental taxes.

The Redevelopment Plan does not specify how the annual forfeiture of tax

increment revenue is to be shared between the Original Area, Area A and Area B once the annual revenue limit is reached. Based upon conversations with Agency staff and in

consideration of the terms and limitations imposed by the amended tax sharing agreement with the Brea Olinda Unified School District (discussed below), the revenue projection incorporated

in this Report assumes that the burden of annual revenue forfeitures ( caused by gross tax

increment revenues exceeding the $4.5 million annual limit) shall be distributed between the Original Area, Area A and Area B as follows:

o The Area B annual gross tax increment revenue is capped at $2,000,000 per year through FY 2017-18 and then capped at $2,225,000 per year thereafter.

o The combined Original Area, Area A and Area B annual gross tax increment

revenue is capped at $4,500,000 per year. Based upon the annual tax increment revenues projected in this Report, as projected on Tables 7-1 and 7-2, shall be capped at $2,500,000 (through FY 2017-18) and then capped at $2,275,000

thereafter.

o Any tax increment revenues in excess of $4,500,000 gross annual tax increment revenue will be forfeited by the Agency and allocated to the respective taxing entities.

2.3 Review of Agency Obligations

a. Low and Moderate Income Housing Set Aside Requirement

The CRL requires redevelopment agencies to annually set aside 20% of all tax increment revenues into a Low and Moderate Income Housing Set Aside Fund. The set

aside requirement could be reduced or eliminated if the redevelopment agency finds that: (1) no need exists in the community to improve or increase the supply of low and moderate income

housing; (2) that some stated percentage less than 20% of the tax increment is sufficient to meet the housing need; or (3) that other substantial efforts, including the obligation of funds

from certain local, state or federal sources for low and moderate income housing, of equivalent

impact are being provided for in the community. It is assumed that the Agency will not make any such findings and will continue to set aside 20% of annual tax increment. The annual



0809019.BRE.:GSH:gbd 10800.004.002//10/07108

Housing Set Aside has been deducted from the attached tax increment revenue projections for purposes of this analysis and is factored against ttie $4.5 million annual revenue cap.

b. Taxing Agency Pass Through Agreement

The Agency, the City and the Brea Olinda Unified School District entered into an agreement on August 1, 1986, for the sharing of tax increment revenues generated from

Area B (the School District Agreement). The School District Agreement has subsequently been

modified by multiple amendments. The tax sharing formula for Area B is as follows: (a) the District receives 100% of the increment generated from Area B annual assessed values less

than or equal to $109,100,000; and (b) the District receives 80% of the increment generated from Area B assessed values in excess of the $109,100,000 valuation threshold, with any

remaining increment deposited in the Agency's Housing Set Aside Fund. Pursuant to the latest amendment to the School District Agreement, the District share is capped at $1,820,000 per year until FY 2017-18, after which the District share is capped at $2,000,000 per year through

the final payment of the District's 2002 Refunding Certificates of Participation (August 2026).

c. Statutory Pass Through Triggered by SB 211

A statutory pass through obligation was triggered when the Agency

adopted a summary ordinance in June 2007 reflecting the Agency's election to eliminate the debt incurrence time limitations. This election was allowed under legislation enacted under SB 211 and will trigger the statutory pass through obligations (set forth under Health and Safety

Code Section 33607.5) commencing the first year following the fiscal year in which the repealed debt incurrence time limit would have taken effect for the Project Area, which in the Project

Area's case is FY 1993-94. However, under a validation judgment dated November 19, 2007, such statutory pass through payments shall commence in FY 2007-08.

Taxing agencies that have existing pass through agreements with the Agency (Brea Olinda Unified School District) continue to receive their allocations set forth by the

respective agreements. Taxing agencies, including the City, that do not have existing pass through agreements are eligible to receive their allocation of the resulting statutory pass through generated from increment following the SB 211 enactment.

As permitted by H&S Code Section 33607.5(e), the Agency has requested of the various affected taxing agencies that the Agency's obligation with regard to the triggered statutory pass through payments be subordinated to the Agency's repayment of a proposed 2008 non-housing loan to be incurred by the Agency. Among the taxing agencies contacted, only the North Orange County Community College District and the County

Superintendent of Schools elected to not subordinate their shares. Therefore, the revenue projection shown on Table 7 reflects the portion of the triggered statutory pass through

obligations that are senior and subordinate to the 2008 non-housing loan debt service.



0809019. BR E. :GSH :gbd 10800.004.0021/10!07/08

d. County Administrative Fees

Chapter 466, Statutes of 1990, (referred to as SB 2557) permits the County to withhold a portion of annual tax revenues for the recovery of County charges related to property tax administration services to cities in an amount equal to their property tax

administration costs proportionately attributable to cities. SB 2557, and subsequent legislation

under SB 1559 (Statutes of 1992), permitted counties to charge all jurisdictions, including redevelopment agencies, on a year-to-year basis. The County Auditor-Controller charged the

Agency a Project Area fee of approximately $31,400 for FY 2007 -08 and KMA assumes that the County will continue to charge this amount in subsequent fiscal years.

3. REVIEW OF PROJECT ASSESSED VALUES

3.1 Real and Personal Property

Real Property, as referred to in this Report, is defined to represent land and

improvement assessed values on both the Secured and Unsecured property tax rolls of the County

Assessor. Annual increases in the assessed value of Real Property are limited to an annual inflationary increase of up to 2%, as governed by Article XIIIA of the State Constitution. Real Property values are also permitted to increase or decrease as a result of a property's change of

ownership or new construction activity. As discussed below, the assessed value of taxable property

is subject to reduction under certain conditions.

For the 1995-96 and 1996-97 fiscal years, the County Assessor applied a state

mandated factor of 1.19% and a 1.11 % inflationary factor to Real Property values in the respective fiscal years to reflect the change in the 1994 and 1995 State Consumer Price Indices. For the 1997 -98 and 1998-99 fiscal years, the County Assessor applied the maximum 2% inflationary factor. For FY 1999-2000, the County Assessor applied a 1.8% inflationary factor and commencing with FY 2000-01, the maximum 2% inflationary factor was used. Based upon the Consumer Price Index, indices for 2003, Real Property values increased by a factor of 1.867% for FY 2004-05. A 2% inflationary factor was annually applied for FY 2005-06 to FY 2008-09. For purposes of this analysis, a 2% Real Property inflationary factor will be applied in subsequent fiscal years commencing FY 2009-10.

The assessed value of Personal Property is not subject to the maximum 2% inflationary increase and is subject to annual appraisal, either upward or downward. State

assessed Non-Unitary properties assessed by the State Board of Equalization (SBE) also may be revalued annually and such assessments are not subject to the annual 2% inflation limitation

of Article XIIIA.

The Project Area assessed values are prepared by the County Assessor and, until the 1996-97 fiscal year, have reflected the March 1st lien date. Commencing with the 1997-98

fiscal year, the property tax lien date was changed to January 1. Each property assessment is assigned a unique Assessor Parcel Number (APN) which correlates to assessment maps prepared



0809019.BRE.:GSH:gbd 10800.004 .002//10/07 /08

by the County. The corresponding assessed values for each parcel are then encoded to Tax Rate

Areas (TRAs) which are geographic subareas with common distribution of taxes and which are

contained within the Project Area boundaries.

The County Auditor-Controller is responsible for the aggregation of the assessed

values assigned by the Assessor for properties within the boundaries of the Project Area. This

results in the reported total current year assessed value and becomes the basis for determining tax

increment revenues due to the Agency.

In FY 2008-09, secured properties account for over 98% of the total assessed

value of the Original Area/Area A and unsecured properties account for approximately 2% of

assessed value. Secured Property includes property on which any property tax levied by the

County becomes a lien on that property.

Unsecured Property typically includes the value of tenant improvements, trade

fixtures, personal property and possessory interest. Unsecured Property values reflect

depreciation factors on the useful life of the tenant improvements, trade fixtures and personal

property of the assessee. Unsecured possessory interest values constitute a private right to the

possession and use of publicly owned property for a period of time less than perpetuity. The

taxes levied on Unsecured Property are levied at the previous year's Secured Property tax rate.

The reported values of the Project Area for the 2008-09 fiscal year are as follows:

2008-09 Value %of 2008-09 Value %of Orig &Area A Value All Com12onent Value

Only Areas

Secured1 $286,233,972 98.0% $445,670,052 97.3% Unsecured 5 772 610 2.0% 12 517 555 2.7% Total Reported Value $292,006,582 100.0% $458, 187,607 100.0% Base Year Value (2,335,361) (2,335,361) Incremental Value $289,671,221 $455,852,246

The Orange County Auditor Controller may annually revise the reported Base Year

assessed values to the extent that properties within the Project Area are acquired for public uses by tax-exempt public taxing agencies. The precedent for this action stems from the 1963 case of

Redevelopment Agency of the City of Sacramento vs. Malaki, 216 Cal.Appl.2d 480, and

subsequent related cases. In the Project Area, the Base Year assessed value historically remained constant until FY 2007-08, at which time the County reduced the Base Year value by

$17,990 to the amount now shown above.

1 Secured values include State-assessed utility value of $186.872.


Keyser Marston Associates. Inc. Page 5

0809019. BRE .:GSH:gbd 10800.004 .0021110/07/08

3.2 Historic Assessed Values

Aggregated historic Project Area values are summarized on Table 1 and values

only for the Original Area/Area A values are summarized on Table 1-A, covering fiscal years

2003-04 to 2008-09. When analyzed for all three component areas (Table 1) the historic

taxable values reflect an average annual increase of 8.52% for the period as reported.

Exclusive of Area B (Table 1-A) the historic taxable values reported by the County Auditor

Controller reflect an overall average annual increase of 7.89% for the period as reported.

Subarea-specific values are summarized on Tables 1.1 to 1.3.

The Secured values, comprising 98% of the total reported value. When analyzed

inclusive of Area B (Table 1 ), the respective increases are a high of 24.46% in 2008-09 and a low of

4.93% in 2004-05. Exclusive of Area B (Table 1-A), the year-to-year increases in Secured value

ranged from a high of 15.7% in 2006-07 to a low of 3.5% in 2003-04.

The Unsecured values comprise a significantly smaller share of the Project Area's

total assessed value (2%). By their nature, Unsecured values reflect declines in value as a result of

depreciation factors or tenant relocations out of the Project Area, as well as increases in value

as new tenants move into the Project Area. Unsecured values were observed to decline an

average of 6.65% over the period (exclusive of Area B), as summarized on Table 1-A, with the most

significant decline occurring in 2008-09 as a result of a change in the County Assessor's reporting

practice for Possessory Interest values.

Previously, the Possessory Interest values were enrolled by the Assessor on the

Unsecured property tax roll. In FY 2007-08, real property in Area B owned by the Brea Olinda

School District was leased by Equity Office Properties, with an Unsecured Possessory Interest

value totaling $55, 176,915. As a result of an audit and recommendation by the SBE, the Assessor

now reflects Possessory Interest assessments on the locally assessed Secured property tax roll,

commencing with Possessory Interest assessments triggered by new leases and those affected by corporate acquisitions. On the same real property owned by the Brea Olinda School District, a new

lease was signed by Maguire Properties LP with a resulting FY 2008-09 Secured Possessory

Interest value totaling $71,849,073 (and no Possessory Interest value reflected on the Unsecured

tax roll).

The result of this change in the reporting of Possessory Interest is that the Area B

Secured values increased 85% and the Unsecured values decreased by 91 %, with the total Area B

values increasing a modest 1.84% from the prior year (see Table 1-3). Had the Assessor not

changed its reporting methodology in 2008-09, then the Area B secured values would have

increased 2% and Unsecured values would have increased 1.66%.2

2 Two tenants moved out of the office building previously leased by Equity Office Properties: Capital Group Inc. ($14,428,000 in 2007-08 unsecured value) and Residential Mortgage Corporation ($2,758,000 in 2007-08 unsecured value), thereby offsetting the 2008-09 increase in Possessory Interest value from the new Maguire Properties LP lease. Brea Redevelopment Agency Fiscal Consultant Report


0809019.BRE.:GSH:gbd 10800.004.0021110/07/08

3.3 Land Use Composition

As shown on Table 2, KMA analyzed the composition of land uses vis-a-vis assessed value for the Project Area using the County Assessor's tax roll classification system. The assessed values of the Project Area are generally spread between residential and commercial uses. When analyzed with all three component areas, secured commercial property uses represented 64.5% of the total Project Area value in FY 2008-09, with residential

property uses accounting for 32.1% of the total value. Unsecured values comprised only 2.7% of the overall value.

Exclusive of Area B (Table 2-A), KMA analyzed the composition of land uses within the Original Area/Area A in FY 2008-09. Residential property values from the Secured

tax roll constitute the largest land use category and represent nearly 50.4% of the combined assessed value. Commercial properties account for approximately 47.5% of the assessed

value and Unsecured values comprise 2%.

3.4 Ten Largest Taxpayers

The ten largest property owners in the Project Area were identified by KMA based

upon a review of the 2008-09 locally assessed secured and unsecured valuations reported by the County Assessor. The aggregated secured assessed values of the identified ten largest tax payers are shown on Tables 3 and 3-A, and include the assessee name, property use, parcel count, FY

2008-09 assessed value, percentage share of the Project Area value and incremental value, and the subarea identified.

Exclusive of Area B (Table 3-A), the ten identified assesses represent 48.47%, or

$141.5 million of the total Original Area/Area A value for 2008-09. When compared against the incremental assessed value, the ten assesses represent 48.86% of the Original Area/Area A incremental value.

When analyzed for all three component areas (Table 3), the ten identified assesses represent 65. 76%, or $301.3 million, of the total Project Area value for 2008-09. When compared against the incremental assessed value, the ten assesses represent 66.1 % of the Project Area's incremental value.

3.5 Assessment Appeals

Property taxable values determined by the County Assessor may be subject to

an appeal by the property owner. Assessment appeals are annually filed with the County Assessment Appeals Board for a hearing and resolution. The resolution of an appeal may

result in a reduction to the Assessor's original taxable value and a tax refund to the property owner. The reduction in future Project taxable values and the refund of taxes affects all taxing

entities, including the Agency.



0809019.BRE.:GSH:gbd 10800.004.0021/10/07{08

KMA researched the status of assessment appeals filed by property owners in the Project Area based upon the latest information available from the County Assessment Appeals Board (AAB) database as of September 15, 2008, the cut off date by which the County accepts assessment appeal applications for the 2008-09 fiscal year. However, the appeals database KMA received from the County as of that date may only contain a partial listing of FY

2008-09 appeals depending upon County staffing availability to input the appeal applications filed. This consideration is beyond KMA's control and therefore the Table 4 projection of appeal impacts may only represent a portion of actual current year appeals in the Project Area.

One FY 2008-09 assessment appeal was identified from the current assessment

appeals database on a single family residence owned by Louis P. Gebala, with a contested value of approximately $854,000 and a projected stipulated value of $730,000 (representing an

assumed value reduction of $124,000) 3. No other FY 2008-09 appeals were found for the

Project Area.

Two prior year appeals were recently stipulated: one which was filed against the 2006-07 value by Olen Commercial Realty Corporation for a parcel assessed to Olen Pointe

Brea LLC (value reduced in stipulated judgment from $24,655,469 to $22,968,058) and another filed against the 2007-08 value by Claim Jumper Restaurants LLC for a parcel assessed to

Raymond M. Chan (value reduced in stipulated judgment from $6,450,480 to $5,700,000). Five appeals filed in FY 2007-08 by FW CA-Brea Marketplace LLC were withdrawn by the applicant.

One pending 2007-08 unsecured appeal was also identified from the County's

latest database filed by Xerox Lease Equipment LLC. Based upon a sampling of 235 resolved unsecured appeals, an average reduction of 20.4% was experienced. The one unsecured contested value was therefore factored by the same percentage reduction, as reflected on

Table 4.

The listing identifies the application number, secured parcel number or unsecured bill number, tax roll year, subarea, applicant name, contested value, applicant opinion of value, assumed resolved value, the projected value reduction and the resolution assumption incorporated by KMA. KMA has assumed that to the extent the contested values are successfully reduced over the coming year, a cumulative tax refund of approximately $25,600 would be debited from the FY 2008-09 tax increment revenues. KMA has also assumed that future tax roll values on the contested parcels will remain at their stipulated values. Secured values in the projection would therefore be reduced by $2,561,928

commencing in FY 2009-10 and unsecured values would be reduced by $2,734 commencing in

FY 2009-10.

3 The projected resolved value is the greater of either the applicant opinion of value or 82. 7% (based upon KMA's review of 16 stipulated secured appeals in the City of Brea, whose contested value was less than $1 million). Brea Redevelopment Agency Keyser Marston Associates, Inc. Fiscal Consultant Report Page 8

0809019. BRE. :GSH :gbd 10800.004.002!/10/07/08

4. TAX ALLOCATION AND DISBURSEMENT·

4.1 Tax Rates

The tax rates which are applied to incremental taxable values consist of two components: the General Tax Rate of $1.00 per $100 of taxable values and the Override Tax

Rate which is levied to pay voter approved indebtedness. The basic levy tax rate may not exceed 1 % ($1.00 of $100 taxable value) in accordance with Article XI I IA. An amendment to the Constitution prohibits redevelopment agencies from receiving taxes generated by new

Override Tax Rates, which are reflective of debt approved after December 31, 1988. Based upon the FY 2007-08 tax increment relative to the incremental assessed value of the Project

Area, KMA estimated the tax override rate to be 1.054%. This computed rate has been incorporated in the tax increment revenue forecast for subsequent fiscal years.

4.2 Allocation of Taxes

Secured taxes are due in two equal installments. Installments of taxes levied upon secured property become delinquent on December 10 and April 10. Taxes on unsecured

property are due March 1 and become delinquent August 31. The County Auditor-Controller is responsible for the aggregation of the taxable values assigned by the Assessor as of the lien date for property within the boundaries of the Project Area. This results in the reported total

current year Project Area taxable value and becomes the basis for determining tax increment revenues due to the Agency. Tax increment revenue is disbursed to the Agency based upon

actual collections within the Project TRAs. Although adjustments to taxable values for property within the Project Area may occur throughout the fiscal year, such adjustments are not assumed in the tax increment projection prepared by KMA, except where noted.

Secured tax increment revenues are typically disbursed by the County in eight monthly payments beginning in November. Approximately 50% of the total tax increment revenues due to the Agency are allocated through January, reflecting the first installment of Secured property tax collections. By the end of April, approximately 80% of the total Tax Increment Revenues are allocated to the Agency, reflecting second installment collections of Secured property taxes. l=inal reconciliation payments related to the secured increment are made in July. Approximately 90% of the annual Unsecured tax increment revenue is disbursed in September. Two additional unsecured reconciliation payments are then made in January and June.

4.3 Tax Receipts to Tax Levy

Tax increment revenues are allocated to the Agency based upon actual computed levy in the Project Area. Computed tax increment revenues are based on the actual

historic tax rates applied by the County to determine the annual tax increment revenues to the Agency. These tax rates will include the basic one percent tax levy plus any additional

"override" levies reflecting voter-approved taxing agency indebtedness approved before January Brea Redevelopment Agency Keyser Marston Associates, Inc. Fiscal Consultant Report Page 9

0809019. BRE.:GSH :gbd 1OB00.004.002/f10107/08

1, 1989. The actual computed tax rates vary slightly from year-to-year because of the rates

applicable to the overrides.

This comparison, summarized on Tables 5 and 5-A, was reviewed for FY 2003-

04 through FY 2007-08 based on the County's year end tax ledgers. For purposes of this

comparison, the total amounts shown represent total computed levies up to the annual $4.5 million tax increment revenue cap and therefore include supplemental taxes, miscellaneous revenues and net of tax refunds from appeals. The amounts, however, do not include County

administrative fees and pass through payments.

When analyzed for all three component areas (Table 5) the historic allocation

ratio during this five-year period is 100% of computed levy, before any adjustments forfeited as

a result of the annual $4.5 million tax increment revenue cap.

Exclusive of Area B (Table 5-A) the historic allocation ratio during this five-year

period is 100% of computed levy, before any adjustments forfeited as a result of the annual $4.5

million tax increment revenue cap.

5. TAX INCREMENT REVENUE PROJECTION

5.1 Tax Increment Revenues

Property tax revenues in excess of the amount resulting from the valuation

shown on the assessment roll for the base year value of the Project Area are referred to as tax

increment. The base year for a project area represents the fiscal year in which taxable property was last equalized prior to the effective date of the ordinance approving the redevelopment

plans for the respective redevelopment projects.

The projections of tax increment revenues shown on Table 7 are based upon the fiscal year 2008-09 assessed values and base year assessed values reported by the County Auditor-Controller. The application of the Proposition 13 inflationary increase to Real Property values, plus any anticipated values added from new developments identified by Agency staff and summarized on Table 6, results in the estimate of future project area values.

5.2 New Development Value Added

New developments occurring in the Project Area have been identified by Agency staff for inclusion in the tax increment revenue projection. The projects included in the tax

increment projection and their corresponding estimates of taxable value are presented on Table 6. The amount of new development values anticipated to be added to the future property tax

rolls are assumed to be as of the January 1st lien date of each year. The valuation estimates

for each project are based on cost estimates provided by Agency staff and only reflect significant Agency-identified projects anticipated to be built. Additional new development value would be added for small scale projects and transfers of ownership that may occur throughout



0809019 .BRE. :GSH :gbd 10800.004.002/{10/07108

the Project Area but not assumed in the projection. The developments assumed by Agency

staff are as follows:

New Development Olen Pointe Brea Target/Brea Marketplace Total Value Added

Value Added $40,000,000

41,900,000 $81,900,000

Tax Year Value May Appear 2009-10 & 2010-11 2009-10 & 2010-11

Olen Pointe Brea represents a 260-unit apartment development that recently

began construction. Agency staff anticipates that completion would occur by the beginning of

2010, with 30% of the construction value reflected on the 2009-10 tax roll and the balance

reflected on the 2010-11 tax roll. A new Target store is under construction at the Brea

Marketplace and recently began construction. Agency staff anticipates that the retail store will

be completed in the third quarter of 2009 with 30% of the construction value reflected on the

2009-10 tax roll and the balance reflected on the 2010-11 tax roll.

5.3 Unitary Tax Revenue

Commencing in 1988-89, the reporting of public utility values assessed by the

SBE was modified pursuant to legislation enacted in 1986 (Chapter 1457) and 1987 (Chapter

921 ). Previously, property assessed by the SBE was assessed State-wide and was allocated

according to the location of individual components of a utility in a TRA. Hence, public utility

values located within a project area were fully reflected in the Project Area's annual taxable

value. Since the County no longer included the taxable value of unitary properties as part of the

reported taxable values in a redevelopment project, base year reductions were made equal to

the amount of unitary taxable value that existed originally in the base year. The values of most

public utility properties are now assessed as a single unit on a Countywide basis (referred to as

unitary values). Railroad properties and utility owned parcels not included by SBE in the unitary

assessment are referred to as Non-Unitary assessments.

Unitary tax revenues are distributed by the County in the following manner: (1)

each taxing entity will receive the same amount as in the previous year plus an increase for

inflation of up to 2%; (2) if utility tax revenues are insufficient to provide the same amount of revenue as in the previous year, allocation of the taxes would be reduced pro-rata Countywide;

and (3) any increase in revenue above 2% would be allocated in the same proportion as the taxing entity's local secured taxable values are distributed to the local secured taxable values of

the County. According to the tax ledgers of the County Auditor-Controller, the Agency received

approximately $28,800 in Unitary tax revenues in FY 2007-08. For purposes of this projection, it

is assumed that the Unitary tax revenues will stabilize at this amount thereafter.

5.4 Supplemental Assessments

Supplemental assessments are authorized under Chapter 498 of the Statutes of

1983, which provides that property may be reassessed upon the occurrence of a change of

ownership or completion of new construction. The supplemental assessment reflects the



0809019 .BRE.: GSH :gbd 10800 .004.002//10107108

difference between the new value and old value. Prior to the enactment of Chapter 498, property reassessments occurred only on the lien date next following the change in ownership or new construction. The supplemental tax (if there is a resulting increase in value) or the supplemental refund (if there is a resulting decrease in value) is determined by applying the current year tax rate to the amount of supplemental assessment and prorating the resulting tax

based upon the number of months remaining in the current fiscal year and, in certain instances,

in the forthcoming fiscal year. 4

The tax revenues or refunds derived from supplemental assessments are allocated to redevelopment agencies on a monthly basis and incorporated in the tax payments

prepared by the County Auditor-Controller. Future new developments or property transfers occurring in the Project Area could likely result in supplemental tax revenues being allocated to

the Agency. However, due to their nature as one-time occurring revenues, supplemental taxes can be a relatively minimal revenue source to the Agency to the extent no new developments or

transfers of ownership are occurring in the Project Area. In addition, pursuant to conversations with County Tax Collector staff, the receipt of supplemental taxes by the Agency can be delayed

by as much as six to nine months after a property transfer or construction.

Supplemental taxes are prorated by the number of months that remain in the fiscal year. However, the City's projection of future new developments occurring in the Project Area did not contain specific completion months, making an annual supplemental tax estimate

difficult to project. Therefore, for purposes of the projection, KMA has not included any revenues in the tax increment projection resulting from future supplemental assessments.

Supplemental tax revenues are subject to the annual tax increment revenue limits imposed by the Redevelopment Plan.

5.5 Tax Increment Revenue Projection

The tax increment revenue projection for the Project Area is summarized on Table 7 commencing with the 2008-09 fiscal year. The projection is separated into Real Property and Personal Property values for purposes of increasing Real Property values allowed under Proposition 13. The trended percentage growth assumptions above the Proposition 13 2% inflationary increase are incorporated into the revenue projection to reflect anticipated Real Property increases resulting from new developments identified by Agency staff are included, as

detailed on Table 6.

The projected growth in Real Property taxable values has been limited to

anticipated value added from the identified new developments discussed above, the maximum annual inflationary factor allowed under Proposition 13 and additional trended growth assumptions. This projection assumes that future inflationary growth commencing in 2009-10

will be at least 2% per year. Future Personal Property values are assumed to stabilize at the

previous year level. Net tax increment revenue represents the gross tax increment revenue less

4 Two supplemental assessments would occur in instances where a change in ownership or a new construction occurs between the January 1 lien date and May 31". Brea Redevelopment Agency Keyser Marston Associates, Inc. Fiscal Consultant Report Page 12

0809019.BRE.:GSH:gbd 10800.004.002/110!07!08

the sum of the County's collection fee authorized under SB 2557, forfeiture of tax increment in excess of the annual $4.5 million cap and pass through payments to affected taxing agencies,

as identified by Agency staff.

5.6 State Budget Impact

The California State Legislature adopted Assembly Bill 1389 (Assembly Budget Committee 2008) to take $350 million from local government redevelopment funds in FY 2008-

09 and shift the tax increment funds to the Education Revenue Augmentation Fund (ERAF) to offset State deficits to K-12 schools and community college districts, similar to what was taken

in FY 2003-04, 2004-05 and 2005-06. Based upon the computation formula provided in AB 1389, KMA projects that the Project Area's share of the Agency's ERAF obligation would be

approximately $293,000 in FY 2008-095. The deadline to submit the payment will be May 10,

2009. AB 1389 provides that a redevelopment agency can allocate less than its share if all of

its revenues are already committed to debt. The Agency can make the ERAF payment from any available source, except for low and moderate income housing funds held as of July 1,

2008. Or the city can elect to make the payment on behalf of the redevelopment agency. The Agency has determined that sufficient funds are available to make the Project Area's ERAF

payment and therefore the Table 7 tax increment revenue projection does not reflect the payment to the State.

6. CAVEATS

The projection reflects assumptions based on KMA's understanding of the assessment and tax apportionment procedures employed by the County. The County procedures are

subject to change as a reflection of policy revisions or administrative, regulatory or legislative mandate. While we believe our estimates to be reasonable, taxable values resulting from actual

appraisals may vary from the amounts assumed in the projections. Assumptions have also been made that Unitary tax revenues will continue to be allocated in the manner discussed herein and that legislatively-mandated payments to the State will not be required in future fiscal

years. These assumptions are based on existing State policies and are subject to future regulatory or legislative changes.

No assurances are provided by KMA as to the certainty of the projected tax increment revenues shown on Table 7. Actual revenues may be higher or lower than what has been projected and are subject to valuation changes resulting from new developments or transfers of ownership not specifically identified herein, actual resolution of outstanding appeals, future filing of appeals, changes in assessor valuation standards, or the non-payment of taxes due. The

accuracy or completeness of assessment appeals identified in the attached table are based

solely upon information provided by the County Assessor's office as of the date of the original review of said data by KMA.

5 The amount reflects only the portion of the Agency's liability for Project Area C and does not include Project Area AB. Brea Redevelopment Agency Fiscal Consultant Report


0809019_BRE.:GSH:gbd 10800.004.002//10/07/08

Table 1 Historic Project Area Assessed Values Redevelopment Project Area C Brea Redevelopment Agency

I.

II.

Ill.

IV.

2003-04 2004-05

Secured: Land 96,788,740 104,910,518 .

Improvements 142,439,234 146,103,746

Personal Property 5,000 5,000

Exemptions 0 0 Total Secured 239,232,974 251,019,264

Utilities: Land 36,725 45,825 Improvements 27,572 34,404

Personal Property 15,784 19,695

Exemptions 0 0

Total Utilities 80,081 99,924

Unsecured: Land 12,036,391 19,534,485

Improvements 45,756,750 55,229,409

Personal Property 24,215,620 23,433,706

Exemptions 0 0

Total Unsecured 82,008,761 98,197,600

Project Value: Land 108,861,856 124,490,828

Improvements 188,223,556 201,367,559

Personal Property 24,236,404 23,458,401

Exemptions 0 0

Total Project 321,321,816 349,316,788

Source: Orange County Auditor Controller Pren::Jrerl hv KevsP.r M::irstnn Assnr:i::ifp,<:: Jnr:

% % Chg 2005-06 Chg

8.39o/o 123,872,265 18.0?o/o 2.57% 163,960,045 12.22o/o 0.00°/o 5,250 5.00o/o 0.00°/o 0 0.00°/o 4.93°/o 287,837,560 14.67%

24.78°/o 42,744 -6. 72°/o 24.78°/o 32,091 -6. 72o/o 24.78o/o 18,371 -6. 72o/o

0.00% 0 0.00°/o 24. 78o/o 93,205 -6. 72o/o

62.30°/o 15,888,504 -18.66°/o 20.70°/o 45,131,166 -18.28°/o -3.23o/o 19,836,589 -15.35o/o O.OOo/o 0 0.00%

19.74°/o 80,856,260 -17.66%

14.36% 139,803,513 12.30% 6.98°/o 209, 123,302 3.85%

-3.21% 19,860,210 -15.34o/o 0.00% 0 0.00°/o 8.71% 368,787,025 5.57°/o

Period % % % %

2006-07 Chg 2007-08 Chg 2008-09 Chg Chg

137,386,642 10.91o/o 148,349,436 7.98°/o 227,108,274 53.09o/o 26.93°/o 198,919,110 21.32o/o 209,578,859 5.36°/o 218,374,906 4.20°/o 10.66o/o

0 -100.00o/o 0 0.00°/o 0 O.OOo/o -20.00o/o 0 0.00°!,;l 0 0.00°/o 0 O.QQD/,a 0.00°/o

336,305, 752 16.84°/o 357,928,295 6.43o/o 445,483,180 24.46°/o 17.24o/o

35,143 -17.78°/o 0 -100.00o/o 186,872 O.OOo/o 81.77o/o 26,384 -17.78°/o 0 -100.00% 0 O.OOo/o -20.QQD/o

15, 104 -17. 78o/o 0 -100.00o/o 0 O.OOo/o -20.00% 0 0.00%, 0 O.OOo/o 0 0.00% 0.00°/o

76,631 -17.78°/o 0 -100.00%, 186,872 O.OOo/o 26.67o/o

11,501,629 -27.61% 12,997,218 13.00% 195,453 -98.50°/o -19.68°/o 56, 119,840 24.35°/o 50,696,944 -9.66°/o 3,913,706 -92.28°/o -18.29% 23,356,070 17.74% 25,712,191 10.09°/o 8,408,396 -67.30°/o -13.06%

0 0.00% 0 0.00°/o 0 0.00°/o 0.00% 90,977,539 12.52°/o 89,406,353 -1.73°/o 12,517,555 -86.00o/o -16.95%

148,923,414 6.52% 161,346,654 8.34% 227,490,599 40.99% 21.79°/o 255,065,334 21.97% 260,275,803 2.04% 222,288,612 -14.59% 3.62%

23,371,174 17.68% 25,712,191 10.02% 8,408,396 -67.30% -13.06% 0 0.00°/ti 0 o.00°1o 0 0.00°/o O.OOo/o

427,359,922 15.88% 447,334,648 4.67°/o 458.187,607 2.43°/o 8.52°/o

',.....,,._, I-,....

Historic Project Area Assessed Values Redevelopment Project Area C - Original and Area A only Brea Rd I tA e eve opmen ,aency

2003-04 2004-05

I. Secured: Land 75,915,201 80,649,733 Improvements 124,743,633 127, 198,260 Personal Property 5,000 5,000 Exemptions 0 0 Total Secured 200,663,834 207,852,993

II. Utilities: Land 36,725 45,825 Improvements 27,572 34,404 Personal Property 15,784 19,695 Exemptions 0 0 Total Utilities 80,081 99,924

Ill. Unsecured: Land 191,714 144, 152 Improvements 2,253,883 2,321,318 Personal Property 6,201,207 6,386,723 Exemptions 0 0 Total Unsecured 8,646,804 8,852,193

IV. Project Value: Land 76, 143,640 80,839,710 Improvements 127,025,088 129,553,982 Personal Property 6,221,991 6,411,418 Exemptions 0 0 Total Project 209,390,719 216,805,110

Source: Orange County Auditor Controller Prepared by Keyser Marston Associates, Inc.

% Chg

6.24o/o 1.97% 0.00°/o 0.00% 3.58%

24.78% 24.78% 24.78%

0.00% 24.78%

-24.81% 2.99% 2.99% 0.00% 2.38%

6.17% 1.99% 3.04°/o O.OOo/o 3.54°/o

2005-06

84,568,250 133,331,956

5,250 0

217,905,456

42,744 32,091 18,371

0 93,205

138,589 2, 156,249 5,990,074

0 8,284,913

84,749,583 135,520,296

6,013,695 0

226,283,574

Filename: Hist 2008_RP C Partial 2008-09-26.xls: HIST: 10/8/2008: GSH

Period

% % % % % Chg 2006-07 Chg 2007-08 Chg 2008-09 Chg Chg

4.86% 94,406,742 11.63% 104,509,938 10.70°/o 120,961,305 15.74% 11.87% 4.82% 157,713,110 18.29% 167,548,739 6.24% 165,085, 795 -1.47% 6.47% 5.00% 0 -100.00°/o 0 0.00% 0 0.00% -20.00°/o 0.00% 0 0.00°/o 0 o.00°1o 0 0.00°/o 0.00% 4.84% 252, 119,852 15.70°/o 272,058,677 7.91°/o 286,047, 100 5.14°/o 8.51°/o

-6.72% 35, 143 -17.78°/o 0 -100.00% 186,872 0.00°/o 81.77% -6.72°/o 26,384 -17.78°/o 0 -100.00% 0 0.00°/o -20.00o/o -6.72% 15,104 -17.78°/o 0 -100.00% 0 0.00°/o -20.00% 0.00°/o 0 0.00°/o 0 0.00% 0 0.00°/o 0.00°/o

-6. 72°/o 76,631 -17.78°/o 0 -100.00% 186,872 0.00°/o 26.67°/o

-3.86% 131,019 -5.46% 0 -100.00°/o 0 0.00% -20.00% -7.11% 5,730,255 165.75% 5,328,286 -7.01 % 1,441,793 -72.94% -7.21% -6.21% 6,877,948 14.82°/o 6,765,811 -1.63°/o 4,330,817 -35.99% -6.03°/o 0.00% 0 0.00% 0 0.00°/o 0 0.00% 0.00%

-6.41% 12,739,222 53.76% 12,094,097 -5.06°/o 5,772,610 -52.27% -6.65%

4.84% 94,572,904 11.59% 104,509,938 10.51°/o 121,148,177 15.92% 11.82% 4.61% 163,469,749 20.62% 172,877,025 5.75°/o 166,527,588 -3.67°/o 6.22%

-6.20% 6,893,052 14.62% 6,765,811 -1.85°/o 4,330,817 -35.99% -6.08°/o O.OOo/o 0 O.OOo/o 0 0.00% 0 0.00% 0.00°/o 4.37°/o 264,935,705 17.08°/o 284,152,774 7.25°/o 292,006,582 2.76°/o 7.89°/o

Table 1.1 Historic Project Area Assessed Values Original Area Redevelopment Project Area C

2003-04 2004-05

I. Secured: Land 64.682,094 69,344,537 Improvements 102,298,719 104,684,875 Personal Property 5,000 5,000 Exemptions 0 0 Total Secured 166,985,813 174,034.412

II. Utilities: Land 36,725 45,825 Improvements 27,572 34,404 Personal Property 15,784 19,695 Exemptions 0 0 Total Utilities 80,081 99,924

Ill. Unsecured: Land 191,714 120,180 Improvements 1,466,406 1,428,976 Personal Property 4, 165,924 4,317,321 Exemptions 0 0 Total Unsecured 5,824,044 5,866,477

IV. Project Value: Land 64,910,533 69,510,542 Improvements 103,792,697 106,148,255 Personal Property 4, 186,708 4,342,016 Exemptions 0 0 Total Project 172,889,938 180,000,813


% % Chg 2005-06 Chg

7.21°/o 72,810.221 5.00o/o 2.33°/o 109,916,790 5.QQ0/o 0.00%1 5,250 5.00°/o 0.00°/o 0 0.00°/o 4.22°/o 182, 732,261 5.00o/o

24. 78o/o 42,744 -6. 72o/o 24. 78o/o 32.091 -6. 72°/o 24. 78o/o 18,371 -6.72°/o

O.OOo/o 0 O.OOo/o 24.78°/o 93,205 -6.72o/o

-37.31°/o 118,522 -1.38°/o -2.550/o 1.409,262 -1.38°/o 3.63°/o 4,257,761 -1.380/o 0.00°/o 0 0.000/o 0.73°/o 5,785,545 -1.380/o

7.09% 72,971,487 4.98% 2.270/o 111,358,143 4.910/o 3.71o/o 4,281,381 -1.400/o 0.00% 0 0.000/o 4.11% 188,611,011 4.780/o

Period % % % %

2006-07 Chg 2007-08 Chg 2008-09 Chg Chg

80,949,747 11.18o/o 90,716,779 12.0?o/o 93,302,500 2.85°/o 8.85o/o 132,896,448 20.91o/o 142,088,727 6.92°/o 136,946,891 -3.62o/o 6. 77°/o

0 -100.00°/o 0 0.00°/o 0 0.00%1 -2Q.QQ0/o 0 0.00°/o 0 0.00°/o 0 0.00°/o O.OOo/o

213,846,195 17.03% 232,805,506 8.87o/o 230,249,391 -1.10%i 7.58°/o

35, 143 -17.78o/o 0 -100.00°/o 186,872 O.OOo/o 81.77°/o 26,384 -17.78o/o 0 -100.00o/o 0 0.00°/o -20.00o/o 15,104 -17.78°/o 0 -100.00o/o 0 0.00°/o -20.00%,

0 0.00°/o 0 0.00°/o 0 O.OOo/o O.OOo/o 76,631 -17.?BP/o 0 -100.00% 186,872 O.OOo/o 26.67°/o

109,986 -7.20°/o 0 -100.00% 0 0.000/o -20.000/o 4,797,633 240.440/o 4,807.744 0.21°/o 1, 143,646 -76.21%, -4.40°/o 5,467,014 28.40°/o 6,157,580 12.63°/o 4,001, 135 -35.02°/o -0.79o/o

0 0.00%, 0 0.00°/o 0 0.00°/o 0.000/o 10,374,633 79.32°/o 10,965,324 5.69% 5,144,781 -53.08°/o -2.33%

81,094,876 11.13o/o 90,716,779 11.860/o 93,489,372 3.06% 8.810/o 137,720,465 23.67°/o 146,896,471 6.66°/0 138,090,537 -5.99°/o 6.610/o

5.482, 118 28.05% 6,157,580 12.320/o 4,001,135 -35.02% -0.89% 0 0.00°/o 0 0.000/o 0 0.00% 0.000/o

224,297,459 18.92% 243,770,830 8.68°/o 235,581,044 -3.36o/o 7.25°/o

Historic Project Area Assessed Values Area A Redevelopment Project Area C

I.

IL

\IL

IV.

2003-04 2004-05

Secured: Land 11,233,107 11,305,196 Improvements 22,444,914 22,513,385 Personal Property 0 0 Exemptions 0 0 Total Secured 33,678,u21 33,818,581

Utilities: Land 0 0 Improvements 0 0 Personal Property 0 0 Exemptions 0 0 Total Utilities 0 0

Unsecured: Land 0 23,972 Improvements 787,477 892,342 Personal Property 2,035,283 2,069,402 Exemptions 0 0 Total Unsecured 2,822,760 2,985,716

Project Value: Land 11,233, 107 11,329,168 Improvements 23,232,391 23,405,727 Personal Property 2,035,283 2,069,402 Exemptions 0 0 Total Project 36,500,781 36,804,297


% Chg

0.64°/o 0.31°/o O.OOo/o 0.00°/o 0.42°/o

O.ODo/o O.OOo/o 0.00°/o O.OOo/o 0.00°/o

0.00°/o 13.32°/o

1.68°/o 0.00°/o 5.77%

0.86% 0.75°/o 1.68°/o 0.00°/o 0.83°/o

Filename: Hist 2008_RP C 2008-09-26.xls: HIST: 10/8/2008: GSH

% 2005-06 Chg

11,758,029 4.01 °/o 23,415, 166 4.01 °/o

0 0.00°/o 0 0.00°/o

35,173,195 4.01°/o

0 O.OOo/o 0 O.OOo/o 0 0.00°/o 0 0.00°/o 0 0.00%.

20,067 -16.29°/o 746,987 -16.29°/o

1,732,314 -16.29°/o 0 0.00°/o

2,499,368 -16.29°/o

11,778,096 3.96% 24,162,153 3.23%

1,732,314 -16.29°/o 0 0.00°/o

37,672,563 2.36°/o

Period % % % %

2006-07 Chg 2007-08 Chg 2008-09 Chg Chg

13,456,995 14.45o/o 13,793,159 2.50°/o 27,658,805 100.53°/o 29.25% 24,816,662 5.99o/o 25,460,012 2.59o/o 28, 138,904 10.52°/o 5.07o/o

0 O.OOo/o 0 O.OOo/o 0 O.OOo/o O.OOo/o 0 0.00% 0 O.OOo/o 0 0.00°/o O.OOo/o

38,273,657 8.81 o/o 39,253,171 2.56°/o 55,797,709 42.1 So/o 13.14o/o

0 O.OOo/o 0 0.00% 0 0.00°/o 0.00°/o 0 O.OOo/o 0 O.OOo/o 0 0.00°/o O.OOo/o 0 O.OOo/o 0 0.00°/o 0 O.OOo/o 0.00°/o 0 0.00'% 0 0.00°/o 0 0.00°/o 0.00°/o 0 O.OOo/o 0 O.OOo/o 0 0.00°/o 0.00°/o

21,033 4.81o/o 0 -100.00o/o 0 0.00% 0.00°/o 932,622 24.85% 520,542 -44.19°/o 298,147 -42.72°/o -12.43%

1,410,934 -18.55% 608,231 -56.89°/o 329,682 -45.80°/o -16.76°/o 0 0.00% 0 0.00°/o 0 O.OOo/o 0.00°/o

2,364,589 -5.39% 1,128,773 -52.26°/o 627,829 -44.38% -15.55%

13,478,028 14.43o/o 13,793,159 2.34% 27,658,805 100.53% 29.25% 25,749,284 6.57°/o 25,980,554 0.90°/o 28,437,051 9.46°/o 4.48%

1.410,934 -18.55% 608,231 -56.89°/o 329,682 -45.80o/o -16.76% 0 0.00% 0 0.00°/o 0 0.00% 0.00°/o

40,638,246 7.87% 40,381,944 -0.63o/o 56,425,538 39.73% 10.92%

Table 1.3 Historic Project Area Assessed Values Area B Redevelopment Project Area C

I.

II.

Ill.

IV.

2003-04 2004-05

Secured: Land 20,873,539 24,260,785 Improvements 17,695,601 18,905,486 Personal Property 0 0 Exemptions 0 0 Total Secured 38,569, 140 43, 166,271

Utilities: Land 0 0 Improvements 0 0 Personal Property 0 0 Exemptions 0 0 Total Utilities 0 0

Unsecured: Land 11,844,677 19,390,333 Improvements 43,502,867 52,908,091 Personal Property 18,014,413 17,046,983 Exemptions 0 0 Total unsecured 73,361,957 89,345.407

Project Value: Land 32,718,216 43,651,118 Improvements 61, 198,468 71,813,577 Personal Property 18,014,413 17,046,983

Exemptions 0 0 Total Project 111,931,097 132,511,678

Source: Orange County Auditor Controller PrP.n::irP.r! hv KP.vc:Pr M::ir<::tnn Ac:c:nf"i:::ifpc: lnr

% % Chg 2005-06 Chg

16.23o/o 39,304,014 62.01°/o 6.84o/o 30,628,090 62.01°/o O.OOo/o 0 O.OOo/o 0.00%, 0 0.00°/o

11.92°/o 69,932,104 62.01°/o

O.OOo/o 0 O.OOo/o 0.00°/o 0 o.00°1o 0.00°/o 0 o.00°1o 0.00°/o 0 O.OOo/o 0.00°/o 0 0.00o/o

63. 71 °/o 15,749,915 -18.77°/o 21.62°/o 42,974,917 -18.77o/o -5.37% 13,846,515 -18.77°/o 0.00% 0 0.00°/o

21.79°/o 72,571,347 -18.77°/o

33.42% 55,053,930 26.12°/o 17.35% 73,603,006 2.49°/o -5.37~/o 13,846,515 -18.77% 0.00°/o 0 0.00°/o

18.39% 142,503,451 7.54%

Period % % % %

2006-07 Chg 2007-08 Chg 2008-09 Chg Chg

42,979,900 9.35°/o 43,839,498 2.00o/o 106,146,969 142.13°/o 81.70°/o 41,206,000 34.54o/o 42,030,120 2.00°/o 53,289, 111 26.79o/o 40.23o/o

0 0.00% 0 O.OOo/o 0 0.00°/o 0.00°/o 0 0.00°/o 0 O.OOo/o 0 O.OOo/o O.OOo/o

84, 185,900 20.38o/o 85,869,618 2.QQ0/o 159,436,080 85.67°/o 62.68°/o

0 0.00°/o 0 0.00% 0 0.00°/o 0.00°/o 0 O.OOo/o 0 O.OOo/o 0 0.00°/o 0.00°/o 0 O.OOo/o 0 0.00°/o 0 0.00°/o 0.00°/o 0 O.OOo/o 0 0.00°/o 0 O.OOo/o O.OOo/o 0 0.00°/o 0 o.00°1o 0 0.00°/o 0.00%

11,370,610 -27.81 o/o 12,997,218 14.31°/o 195,453 -98.50ll/o -19.67°/o 50,389,585 17 .25o/l) 45,368,658 -9.96°/o 2,471,913 -94.55°/o -18.86°/o 16,478,122 19.01% 18,946,380 14.98°/o 4,077,579 -78.48% -15.47o/o

0 0.00% 0 0.00°/o 0 0.00°/o 0.00% 78,238,317 7.81% 77,312,256 -1.18o/o 6.744,945 -91 .28°/o -18.16°/o

54,350,510 -1.28% 56,836,716 4.57% 106,342.422 87.10% 45.01% 91 ,595,585 24.45% 87,398,778 -4.58°/o 55,761,024 -36.20°/o -1.78°/o 16,478,122 19.01°/o 18,946,380 14.98% 4,077,579 -78.48°/o -15.47%

0 0.00°/o 0 0.00% 0 0.00°/o 0.00°/o 162,424,217 13.98% 163,181,874 0.47% 166,181,025 1.84°/o 9.69o/o

Table 2 Assessed Values by Land Use Redevelopment Project Area C Brea Redevelopment Agency

Use Count

Residential 331 Commercial 80 Industrial Other Uses 12 Exempted 23

Secured 446 Public Utility Unsecured

Total Value 446

Source: Orange County Assessor Prepared by: Keyser Marston Associates, Inc. Filename: Brea -ALL TI Use 0809 2008-09-18.xls:T2 Use: 915107: nym

Total AV Percentage

147,261,867 32.1%

295,709,321 64.5%

0.0%

2,511,992 0.5%

0.0%

445,483, 180 97.2%

186,872 0.0% 12,517,555 2.7%

458,187,607 100.0%

Table 2-A Assessed Values by Land Use Redevelopment Project Area C - Original and Area A only Brea Redevelopment Agency

Use Count Total AV Percentage

Residential 331 147,261,867 50.4% Commercial 70 138,716,785 47.5% Industrial 0.0%

Other Uses 11 68,448 0.0% Exempted 13 0.0%

Secured 425 286,047,100 98.0% Public Utility 186,872 0.1% Unsecured 5,772,610 2.0%

Total Value 425 292,006,582 100.0%

Source: Orange Covnty Assessor Prepared by: Keyser Marston Associates, Inc. Filename; Brea - Partial TT Use 0809 2008-09-18.xls:T2 Use: 9/5/07: nym

le 3

Largest Assessees - FY 2008-09 evelopment Project Area C I Redevelopment Aaer,cv

Assessee Name

3REA-OLINDA SCHOOL/ MAGUIRE 'ROPERTIES LP (3)

IAAGUIRE PROPERTIES-BREA (4)

IAAGUIRE PROPERTIES LLC

=w CA-BREA MARKETPLACE (5)

=w CA-BREA MARKETPLACE (6)

JLEN POINTE BREA LLC (7)

NILLOW COLUMBIA LLC

:HAN, RAYMOND M/ CLAIM JUMPER (8)

3REA MEDICAL CENTER

CHAI, KING Y TR

MERRILL LYNCH, PIERCE, FE

ERWIN, F DENNIS

AMERICAN FUNDS SERVICE CO

Property Use

Possessory Interest

Commercial

Unsecured

Commercial Possessory

Interest

Commercial

Commercial

Restaurant

Commercial

Commercial

Unsecured

Residential

Residential

TOTALS

No. of 2008-09

Parcels Value

6 71,849,073

4 49,218,220

1 132,759

subtotal 121,200,052

2 52,478,919

3 35,108,088

subtotal 87,587,007

12 68,377,320

1 7,599,000

1 6,579,489

38 2,760,641

1 2,740,000

5 1,638,987

3 1,599, 167

1 1,238,603

301,320,266

ased upon reported FY Project Area secured and unsecured assessed value of $458, 187 ,607.

ased upon reported incremental assessed value of $455.852,246.

eflects the new possessory interest value from a lease with Maguire Properties LP.

, FY 2007-08, the possessory interest was assessed to Equity Office Properties.

% of Total % of Total

Project Increment

Value (1) Value (2)

15.68% 15.76%

10.74% 10.80%

0.03% 0.03%

26.45% 26.59%

11.45% 11.51 %

7.66% 7.70%

19.12% 19.21%

14.92% 15.00%

1.66% 1.67%

1.44% 1.44%

0.60% 0.61%

0.60% 0.60%

0.36% 0.36%

0.35% 0.35%

0.27% 0.27°/o

65.76% 66.10%

reviously in FY 2007-08, 3 parcels were assessed to Brea Place Associates LP and 1 parcel was assessed to Brea D Investors.

wo locally assessed secured appeals were filed for FY 2007-08 and were subsequently withdrawn.

hree possessory interest appeals were filed for FY 2007-08 and were subsequently withdrawn.

I FY 2006-07, one of the secured parcels was successfully stipulated to $22,968,058, reflecting a $1,687,411 decline.

i FY 2007-08, this parcel was successfully stipulated to $5, 700,000, reflecting a $750,480 decline.

Source: Orange County Assessor Prepared by: Keyser Marston Associates, Inc. Filename: Brea· ALL TI Use 0809 2008-09-18.xls:T1 TI: 915107: nym

Sub

Area

Sub B

Sub A

Sub B

Sub B

Sub B

Orig C

Orig C

Sub A

Orig C

Orig C

Sub B

Orig C

Sub B

Table 3-A

Ten Largest Assessees - FY 2008-09

Redevelopment Project Area C - Original and Area A Only

Brea Redevelopment 11.gency

% of iota I % of Total

No. of 2008-09 Project Increment

Assessee Name Propertv Use Parcels Value Value (1) Value 12)

1 OLEN POINTE BREA LLC (3) Commercial 12 68,377,320 23.42% 23.61%

2 MAGUIRE PROPERTIES-BREA (4) Commercial 4 49,218,220 16.86% 16.99%

3 WILLOW COLUMBIA LLC Commercial 1 7,599,000 2.60% 2.62%

4 CHAN, RAYMOND M/ CLAIM JUMPER (5) Restaurant 1 6,579,489 2.25% 2.27%

5 BREA MEDICAL CENTER Commercial 38 2,760,641 0.95% 0.95%

6 CHAI, KING Y TR Commercial 1 2,740,000 0.94% 0.95%

7 ERWIN, F DENNIS Residential 3 1,599, 167 0.55% 0.55%

8 ALCANTARA, JOSEPH ANDRES Residential . 1 900,000 0.31% 0.31%

9 SCHLACHTER, DAVID L Residential 1 886,108 0.30% 0.31%

10 GARCIA, ANGEL Residential 1 885,000 0.30% 0.31%

TOTALS 141,544,945 48.47% 48.86%

(1) Based upon rerorted FY 2008-09 Project Area secured and unsecured assessed value of $292,006,582 (Original and Area A only).

(2) Based upon rerorted FY 2008-09 incremental assessed value of $289,671,221(0riginal and Area A only).

(3) In FY 2006-07, one of the secured parcels was successfully stipulated to $22,968.058, reflecting a $1,687,411 decline.

(4) In FY 2007-08, 3 parcels were assessed to Brea Place Associates LP and 1 parcel was assessed to Brea D Investors.

(5) In FY 2007-08, this parcel was successfully stipulated to $5,700,000, reflecting a $750,480 decline.

Source: OraPQe County Assessor Prepared by; Keyser Marston Associates, Inc. Filename: Brea - Partial TT Use 0809 2008-09-18.xls:T1 TT: 9/5/07: nym

(

:

(

:

(

(

(

(

(

(

Pr0Ject1on ot Assessment Appeal impacts Redevelopment Project Area C Brea Redevelopment Agency

Appeal Number APN

SECURED APPEALS

06-001320 319-381-09.00

07-003624 319-011-53.00

07-002327 319-011-67.00

07-002328 319-233-01.00

07-002329 '.388-011-59.00

07-002330 988-011-62.00

07 -002331 988-011-68.00

08-001288 320-251-28.00

UNSECURED APPEALS

Bill Roll Number Year

NA 2006

NA 2007

NA 2007

NA 2007

NA 2007

NA 2007

NA 2007

NA 2008

RP Applicant Name

Orig OLEN COMMERCIAL REAL TY CORP

Area A CLAIM JUMPER RESTURANTS, LLC

Area B FW CA-BREA MARKETPLACE LLC

Area B FW CA·BREA MARKETPLACE LLC




Orig GEBALA, LOUIS P

07-008516 319·331-13.00 273132 2007 Area B XEROX LEASE EQUIPMENT LLC

TOTAL Total Reductions for Tax Refund Projected Tax Refund at 1°/o

Unsecured Value Reduction (unique filings) Secured Value Reduction (uniaue filings)

C ORIGINAL Total Reductions for Tax Refund Projected Tax Refund at 1 %

{1) Unsecured Value Reduction (unique filings) (2) Secured Value Reduction (unique filings)

C SUBAREAA Total Reductions for Tax Refund Projected Tax Refund at 1 %

(3) Unsecured Value Reduction (unique filings) (4) Secured Value Reduction (unique filings)

C SUBAREA B Total Reductions for Tax Refund Projected Tax Refund at 1 %

(5) Unsecured Value Reduction (unique filings) (6) Secured Value Reduction (unique filings)

Source: Orange County Clerk of the Board as of September 2008 Prepared by: Keyser Marston Associates, lnc. Filename: Brea C Appeals 2008-09-18.xls:Open: NYM

Applicant Total Contested Opinion of Estimated

Value Value Resolved Value Variance KMA Comments/Assumptions

24,655,469 18,207,558

6.450,480 5,096,300

38,901.423 15,000,000

12,548,499 5,000,000

2,041,122 800,000

2,362,983 900,000

30,015,591 13,000,000

854,037 730,000

13,906 11, 172

22,968,058

5,700,000

38,901,423

12,548,499

2,041,122

2,362,983

30,015,591

730,000

11,172

(2,564,662) (25,647)

(2,734) (2,561,928

(1,811,448) (18,114)

(1,811,448)

(750,480) (7,505)

(750,480)

(2,734) (27)

(2,734)

(1,687,411) Resolved: AV Reduced

(750,480) Resolved: AV Reduced

Resolved: Withdrawn

Resolved: Withdrawn

Resolved: Withdrawn

Resolved: Withdrawn

Resolved: Withdrawn

( 124,037) Decreased per comparable reductions in past appeals.

(2, 734) Decreased per comparable reductions in past appeals.

(2)

(4)

(6)

(6)

(6)

(6)

(6)

(2)

(5)

Table 5 Receipts to Levy Analysis Redevelopment Project Area C Brea Redevelopment Agency

2003-04 2004-05 2005-06 I. Reported Assessed Value (1 ):

Secured 239,232,974 251,019,264 287,837,560 State Assessed 80,081 99,924 93,205 UnsecL1red 82,008,761 98,197,600 80,856,260

It. Total Project Value 321,321,816 349,316,788 368,787,025 Less Bsse Value 2,353,351 2,353,351 2,353,351 Incremental Value 318,968,465 346,963,437 366,433,674

Ill. Total Computed Levy 3,331,671 3,668,418 3,682,243

IV. Tax Allocation: Secured Tax Increment (2) 2,474,418 2,622,671 2,825,559 Unsecured Tax Increment (2) 857,252 1,045,747 856,684 Total Q(iginal Charge 3,331,671 3,668,418 3,682,243

[% Allocation 100.00% 100.00% 100.00%

v. Supplemental Taxes (2) 20,178 65,401 52, 158 Refunds & Adjustments (3) (70,622) (60,205) (11,061) Annual Cap Forfeiture (3) 0 0 0 Total Annual Tax Increment 3,281,227 3,673,614 3,723,340

( 1) Amounts stiown are as reported by the Orange County Auditor-Controller in August of each fiscal year.

(2) Source: County Auditor-Controller year-end tax ledger detail. Amounts represent the annual tax increment revenues allocable to the

Agency and do not include administrative fees and pass through payments.

2006-07

336,305, 752 76,631

90,977,539

427 ,359,922 2,353,351

425,006,571 4,491,924

3,534,939 956,986

4,491,924

100.00%

414,004 (60,655)

(345,274) 4,500,000

(3) Tax refunds and taxes forfeited once the annual $4.5 million cap is reached 0.re debited from tax increment allocations made by the County Auditor-Controller

and re-allocated to the respective taxing agencies as property taxes.

Source: Orange County Auditor-Controller Remittance Advice

Average 2007-08 Collection

357,928,295 0

89,406,353

447 ,334,648 2,335,361

444,999,287 4,564,473

3,673,954 890,519

4,564,473

100.00%[ 100.00%!

319,036 (173,193) (210,316)

4,500,000

Kea~ve1opmen1 t'TOJec1 Area .., - urig1na1 ana Area "" on1y Brea Redevelopment Agency

2003-04 I. Reported Assessed Value ( 1 ):

Secured 200,663,834 State Assessed 80,081 Unsecured 8,646,804

II. Total Project Value 209,390,719 Less Base Value 2,353,351 Incremental Value 207,037,368

Ill. Total Computed Levy 2,184,325

IV. Tax Allocation: Secured Tax Increment (2) 2,097,368 Unsecured Tax Increment (2) 86,957 Total Original Charge 2, 184,325

I 0/, Allocation 100.00%

v. Supplemental Taxes (2) 20,178 Refunds & Adjustments (3) (17,678) Annual Cap Forfeiture (3) 0 Total Annual Tax Increment 2, 186,824

2004-05

207,852,993 99,924

8,852,193

216,805, 110 2,353,351

214,451,759 2,264,054

2,168,527 95,527

2,264,054

100.00%

65,401 (20,743)

0 2,308,712

(1) Amounts shown are as reported by the Orange County Auditor-Controller in August of each fiscal year.

2005-06

217 ,905,456 93,205

8,284,913

226,283,57 4 2,353,351

223,930,223 2,375,603

2,286,244 89,358

2,375,603

100.00%

52, 158 (8,616)

0 2,419,145

(2) Source: County Auditor-Controller year-end tax ledger detail. Amounts represent the annual tax increment revenues allocable to the

Agency and do not include administrative fees and pass through payments.

2006-07 2007-08

252,119,852 272,058,677 76,631 0

12,739,222 12,094,097

264,935, 705 284,152,774 2,353,351 2,335,361

262,582,354 281,817,413 2,785,285 2,866,419

2,650,579 2,771,666 134,706 94,752

2,785,285 2,866,419

100.00% 100.00%1

94,883 319,036 (23,209) (138,336)

(207,096) (140,016) 2,649,863 2,907,103

(3) Portion of tax refunds and taxes forfeited once the annual $4.5 million cap is reached are debited from tax increment allocations made by the County Auditor-Controller

anct re-allocated to the respective taxing agencies as property taxes. Since amounts shown are for only the Original and Area A component areas, the total annual tax

inctement will not total to the $4.5 million cap amount in this Table.

Source: Orange County Auditor-Controller Remittance Advice Prepared by Keyser Marston Associates, Inc. Filename; Hist 2008_RP C Partial 2008-09-26.xls: LEVY: 10/8/2008: GSH

Average Collection

100.00%1

Table 6 New Development Value Added Redevelopment Project Area C Brea Redevelopment Agency IOOO's Omitted)

Development

Original Area (Old C): Olen Pointe Brea Apartments

Area B (School Site): Target Brea Marketplace

Total Real Property Value Added

Prepared by Keyser Marston Associates, Inc. Filename: Brea_C_T1_2008-09-18.xls: New: 10/8/2008: GSH

(Less) Total Existing Value Value

40,000 0

41,900 0

81,900 0

Total Value Added 2009-10 2010-11 2011-12 2012-13

40,000 12,000 28,000 0 0

41,900 12,570 29,330 0 0

81,900 24,570 57,330 0 0

. --- ···-· -···-··-. -- - ------ - . -~---·-·· Redevelopment Project Area C Brea Redevelopment Agency OOO's Omitted

Reported 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

I. Real Property 445,483 445,483 476,350 543,207 554,071 565,152 576,455 587,984 Appeal Value Reduction (Table 4) 0 (2,562) 0 0 0 0 0 0 Real Property Growth at 2°/o 0 8,858 9,527 10,864 11,081 11,303 11,529 11,760 New Value Added (Table 6) 0 24,570 57,330 0 0 0 0 0 Total Real Property 445,483 476,350 543,207 554,071 565,152 576,455 587,984 599,744

II. Personal Property/ SBE 12,704 12,704 12,702 12,702 12,702 12,702 12,702 12,702 Appeal Value Reduction (Table 4) 0 3 0 0 0 0 0 0 Total Personal Property 12,704 12,702 12,702 12,702 12,702 12,702 12,702 12,702

Ill. Total Project Value 458, 188 489,051 555,908 566,772 577,854 589, 157 600,686 612,446 Less Base Value 12,335) 12,335) 12,335) 12,335l 12,335) 12,335) 12,335l 12,335) Incremental Value Over Base 455,852 486,716 553,573 564,437 575,519 586,822 598,351 610,110

IV. Gross Tax Increment 4,805 5,130 5,835 5,949 6,066 6,185 6,307 6,431 Unitary Tax 29 29 29 29 29 29 29 29 Est Appeal Refund 2008-09 (Table 4) 26 0 0 0 0 0 0 0 Subtotal 4,808 5,159 5,863 5,978 6,095 6,214 6,335 6,459

Annual $4.5M Cap Forfeiture (308) (659) (1,363) (1.4781 (1,595) (1,7141 (1,835) (1,9591 Total Gross Tax Increment 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500

SB 2557 County Admin Charge (31) (31) (31) (31) (31) (31) (31) (31) Brea Olinda USO Tax Share (Subarea B School Site) (1,621) (1,754) (1,819) (1,819) (1,819) (1,819) (1,819) (1,819) Statutory Pass Through (Senior) 10.6°/o 1461 146) 146) 1461 146) 146) l46l 146) Net Tax Increment Revenue 2,802 2,670 2,605 2,605 2,605 2,605 2,605 2,605

v. Redevelopment Fund After Tl Cap 1,902 1,770 1,705 1,705 1,705 1,705 1,705 1.705 Deposit to Housing Fund 900 900 900 900 900 900 900 900

Statutory Pass Through (Subordinated) 45.4°/o (196) (196) (196) (196) (196) (196) (196) (196)

VI. Statuto~ Pass Through Triggered FY 2 3 4 5 6 7 8 9

Tier 1 Tax Revenue 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 Increment Over Adj Base Revenue 2,348 2,152 2,152 2,152 2,152 2,152 2,152 2,152 2,152 Tier 1 Pass Through Allocation 25o/o 430 430 430 430 430 430 430 430 Tier 1 Pass Through (Senior) -10.6°/o (46) (46) (46) (46) (46) (46) (46) (46) Tier 1 Pass Through (Subordinated) -45.4°/o (196) (1961 (1961 (1961 (1961 1196) (1961 (1961 Total Tier 1 Pass Through (241) (241) (241) (241) (241) (241) (241) (241)

Prepared by Keyser Marston Associates, Inc. Filename: Brea_C_Tl_2008-09-18.xls: 10/8/2008: GSH: 1 of 2

Table 7 Tax Increment Revenue Projection Redevelopment Project Area C Brea Redevelopment Agency (OOO's Ornittedl

Plan term Tl receipt 11-30-2016 11-30-2026 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26

I. Real Property 599,744 611,739 623,974 636,453 649,182 662.166 675,409 688,917 702,696 716,750 Appeal Value Reduction (Table 4) 0 0 0 0 0 0 0 0 0 0 Real Property Growth at 2o/o 11,995 12,235 12,479 12,729 12,984 13,243 13,508 13,778 14,054 14,335 New Value Added (Table 6) 0 0 0 0 0 0 0 0 0 0 Total Real Property 611,739 623,974 636,453 649, 182 662, 166 675,409 688,917 702,696 716,750 731,085

II. Personal Property/ SBE 12,702 12,702 12,702 12,702 12,702 12,702 12.702 12,702 12,702 12,702 Appeal Value Reduction (Table 4) 0 0 0 0 0 0 0 0 0 0 Total Personal Property 12,702 12,702 12.702 12,702 12,702 12,702 12,702 12,702 12,702 12.702

Ill. Total Project Value 624,441 636,675 649,155 661,884 674,868 688,111 701,619 715,397 729,451 743,786 Less Base Value (2,335l \2,335) \2,335l \2,335l \2,335) \2,335) (2,335l \2,335l \2,335) \2,335) Incremental Value Over Base 622,105 634,340 646,820 659,549 672,532 685,776 699,284 713,062 727,116 741,451

IV. Gross Tax Increment 6,557 6,686 6,817 6,952 7,088 7,228 7,370 7,516 7,664 7,815 Unitary Tax 29 29 29 29 29 29 29 29 29 29 Est Appeal Refund 2008-09 (Table 4) 0 0 0 0 0 0 0 0 0 0 Subtotal 6,586 6,715 6,846 6,980 7,117 7,257 7,399 7,545 7,693 7,844

Annual $4.5M Cap Forfeiture !2,0861 \2.2151 !2,3461 !2,480l !2,617) (2.757) !2,899l !3,045) !3,1931 !3.344l Total Gross Tax Increment 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500

SB 2557 County Admin Charge (31) (31) (31) (31) (31) (31) (31) (31) (31) (31) Brea Olinda USO Tax Share (Subarea B School Site) (1,819) (1,819) (1,998) (1,998) (1,998) (1,998) (1,998) (1,998) (1,998) (1,998) Statutory Pass Through (Senior) 10.6o/o !461 !461 \46l !46l \461 !461 !461 (46l \46l !46l Net Tax Increment Revenue 2,605 2,605 2,425 2,425 2,425 2,425 2,425 2,425 2,425 2,425

V. Redevelopment Fund After Tl Cap 1,705 1,705 1,525 1,525 1,525 1,525 1,525 1,525 1,525 1,525 Deposit to Housing Funcl 900 900 900 900 900 900 900 900 900 900

Statutory Pass Through (Subordinated) 45.4o/o (196) (196) (196) (196) (196) (196) (196) (196) (196) (196)

VI. Statutoni: Pass Through Triggered FY 10 11 12 13 14 15 16 17 18 19

Tier 1 Tax Revenue 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 Increment Over Adj Base Revenue 2,348 2,152 2,152 2,152 2,152 2,152 2,152 2,152 2,152 2,152 2,152 Tier 1 Pass Through Allocation 25% 430 430 430 430 430 430 430 430 430 430 Tier 1 Pass Through {Senior) -10.Bo/o (46) (46) (46) (46) (46) (46) (46) (46) (46) (46) Tier 1 Pass Through (Subordinated) -45.4°/o \196l \1961 !196l !1961 !196l !1961 !196l !1961 !196l p96l Total Tier 1 Pass Through (241) (241) (241) (241) (241) (241) (241) (241) (241) (241)

Table 7.1 Tax Increment Revenue Projection Original Area (Old C) Brea Redevelopment Agency OOO's Omitted

Reported 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

I. Real Property 230,249 230,249 245,007 277,907 283.465 289, 134 294,917 300,815 Appeal Value Reduction (Table 4) 0 (1,811) 0 0 0 0 0 0 Real Property Growth at 2o/o 0 4,569 4,900 5,558 5,669 5,783 5,898 6,016 New Value Added (Table 6) 0 12,000 28,000 0 0 0 0 0 Total Real Property 230,249 245,007 277,907 283,465 289, 134 294,917 300,815 306,832

II. Personal Property/ SSE 5,332 5,332 5,332 5,332 5,332 5,332 5,332 5,332

Ill. Total Project Value 235,581 250,338 283,238 288,797 294,466 300,249 306, 147 312,163 Less Base Value (2,332) (2,332) (2,332) (2,332) (2,332) (2,332) (2,332) (2,332) Incremental Value Over Base 233,249 248,007 280,907 286,465 292, 134 297,917 303,815 309,831 Assumed Tax Rate 1.054o/o 1.054o/o 1.054o/o 1.054% 1.054o/o 1.054o/o 1.054o/o 1.054%


Proportionate Annual $4.SM Cap Forfeiture (249) (537) (912) (971) (1,031) p,092) (1, 154) p,217) Total Gross Tax Increment 2,218 2,104 2,075 2,075 2,075 2,075 2,075 2,075

SB 2557 County Admin Charge (17) (17) (17) (17) (17) (17) (17) (17) Pass Through 0 0 0 0 0 0 0 0 Net Tax Increment Revenue 2,201 2,087 2,058 2,058 2,058 2,058 2,058 2,058

v. Redevelopment Fund Before Tl Cap 1,528 1,436 1,413 1,413 1,413 1,413 1,413 1,413 Deposit to Housing Fund 674 651 645 645 645 645 645 645

Prepared by Keyser Marston Associates, Inc. Filename: Brea_C_ Tl_2008-09-18.xls: 10/8/'.1008:GSH :1 of 2

Table 7.1 Tax Increment Revenue Projection Original Area (Old C) Brea Redevelopment Agency (000"• Om ittedl

Plan term Tl receipt 11.30-2016 11-30-2026 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26

I. Real Property 306,832 312,968 319,228 325,612 332, 124 338,767 345,542 352,453 359,502 366,692 Appeal Value Reduction (Table 4) 0 0 0 0 0 0 0 0 0 0 Real Property Growth at 2o/o 6,137 6,259 6,385 6,512 6,642 6,775 6,911 7,049 7,190 7,334 New Value Added (Table 6) 0 0 0 0 0 0 0 0 0 0 Total Real Property 312,968 319,228 325,612 332,124 338,767 345,542 352,453 359,502 366,692 374,026

II. Personal Property/ SBE 5,332 5,332 5,332 5,332 5,332 5,332 5,332 5,332 5,332 5,332

Ill. Total Project Value 318,300 324,559 330,944 337,456 344,099 350,874 357,785 364,834 372,024 379,358 Less Base Value (2,3321 (2,332! (2,3321 (2,3321 (2,332! (2,3321 (2,3321 (2,3321 (2,3321 (2,3321 Incremental Value Over Base 315,968 322,227 328,612 335,124 341,767 348,542 355,453 362,502 369,692 377,026 Assumed Tax Rate 1.054% 1.054°/o 1.054°/o 1.054°/o 1.054%, 1.05411/o 1.054°/o 1.054°/o 1.054°/o 1.054°/o

IV. Gtoss Tax Increment 3,330 3,396 3,464 3,532 3,602 3,674 3,746 3,821 3,897 3,974 Ur'litary Tax 27 27 27 27 27 27 27 27 27 27 Est Appeal Refund 2008-09 (Table 4) 0 0 0 0 0 0 0 0 0 0 Subtotal 3,357 3,423 3,490 3,559 3,629 3,700 3,773 3,847 3,923 4,000

Proportionate Annual $4.SM Cap Forfeiture (1,2821 (1.348! (1,602! (1,670! (1,740! (1,812! (1,885! (1,959! (2,035! (2,112) Total Gross Tax Increment 2,075 2,075 1,889 1,889 1,888 1,888 1,888 1,888 1,888 1,888

SB 2557 County Admin Charge (17) (17) (17) (17) (17) (17) (17) (17) (17) (17) Pass Through 0 0 0 0 0 0 0 0 0 0 Net Tax Increment Revenue 2,058 2,058 1,871 1,871 1,871 1,871 1,871 1,871 1,871 1,871

V. Redevelopment Fund Before Tl Cap 1,413 1,413 1,264 1,264 1,264 1,264 1,264 1,264 1,264 1,264 Deposit to Housing Fund 645 645 608 608 608 608 608 608 608 608

Prepared by Keyser Marston Associates, Inc. Filename: Brea C Tl 2008-09-18.xls: 10/8/2008:GSH :2 of 2

Table 7.2 Tax Increment Revenue Projection Area A (Financial Commons) Brea Redevelopment Agency OOO's Omitted

Reported 2008--09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

I. Real Property 55,798 55,798 56,148 57,271 58,417 59,585 60,777 61,992 Appeal Value Reduction (Table 4) 0 (750) 0 0 0 0 0 0 Real Property Growth at 2% 0 1, 101 1,123 1, 145 1, 168 1, 192 1,216 1,240 New Value Added (Table 6) 0 0 0 0 0 0 0 0 Total Real Property 55,798 56, 148 57,271 58,417 59,585 60,777 61,992 63,232

II. Personal Property/ SBE 628 628 628 628 628 628 628 628

Ill. Total Project Value 56,426 56,776 57,899 59,044 60,213 61,404 62,620 63,860 Less Base Value (4) (4) (4) (4) (4) (4) (4) (4) Incremental Value Over Base 56.422 56,772 57,895 59,041 60,209 61,401 62,616 63,856 Assumed Tax Rate 1.054o/o 1.054°/o 1.054o/o 1.054o/o 1.054o/o 1.054o/o 1.054°/o 1.054°/o

IV. Gross Tax Increment 595 598 610 622 635 647 660 673 Unitary Tax 1 1 1 Est Appeal Refund 2008-09 (Table 4) 8 0 0 0 0 0 0 0 Subtotal 588 599 611 623 636 648 661 674

Proportionate Annual $4.SM Cap Forfeiture (59) (122) (187) (199) (211) (223) (236) (249) Total Gross Tax Increment 529 478 425 425 425 425 425 425

SB 2557 County Admin Charge (3) (3) (3) (3) (3) (3) (3) (3)

Pass Through 0 0 0 0 0 0 0 0 Net Tax Increment Revenue 526 475 422 422 422 422 422 422

v. Redeveloprnent Fund Before Tl Cap 420 379 337 337 337 337 337 337 Deposit to Housing Fund 106 96 85 85 85 85 85 85

Prepared by Keyser Marston Associates, Inc. Filename: Brea_C_ Tl_2008-09-18.xls: 10/8/2008: GSH :1 of 2

Table 7.2 Tax Increment Revenue Projection Area A (Financial Commons) Brea Redevelopment Agency IOOO's Omitted)

Plan term Tl receipt

11-30-2016 11-30-2026

2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26

I. Real Property 63,232 64,497 65,787 67,102 68,444 69,813 71,209 72,634 74,086 75,568 Appeal Value Reduction (Table 4) 0 0 0 0 0 0 0 0 0 0 Real Property Growth at 2°/o 1,265 1,290 1,316 1,342 1,369 1,396 1,424 1.453 1.482 1,511 New Value Added (Table 6) 0 0 0 0 0 0 0 0 0 0 Total Real Property 64,497 65,787 67, 102 68,444 69,813 71,209 72,634 74,086 75,568 77,079

II. Personal Property/ SBE 628 628 628 628 628 628 628 628 628 628

' Ill. Total Project Value 65.124 66,414 67,730 69,072 70.441 71,837 73,261 74,714 76,196 77,707 Less Base Value (41 (41 (4) (4) (4) (4) (4) (41 (41 (4) Incremental Value Over Base 65,121 66,411 67,727 69,069 70,438 71,834 73,258 74,711 76, 192 77,704 Assumed Tax Rate 1.054°/o 1.054o/o 1.054o/o 1.054°/o 1.054°/o 1.054°/o 1.054°/o 1.054o/o 1.054o/o 1.054°/o

IV. Gross Tax Increment 686 700 714 728 742 757 772 787 803 819 Unitary lax 1 1 1 1 1 1 Est Appeal Refund 2008-09 (Table 4) 0 0 0 0 0 0 0 0 0 0 Subtotal 687 701 715 729 744 758 773 789 804 820

Proportionate Annual $4.SM Cap Forfeiture (263) (276) (328) (342) (357) (371) (386) (402) (417) (433) Total Gross Tax Increment 425 425 387 387 387 387 387 387 387 387

SB 2557 County Admin Charge (3) (3) (3) (3) (3) (3) (3) (3) (3) (3) Pass Through 0 0 0 0 0 0 0 0 0 0 Net Tax Increment Revenue 422 422 384 384 384 384 384 384 384 384

v. Redevelopment Fund Before Tl Cap 337 337 307 307 307 307 307 307 307 307 Deposit to Housing Fund 85 85 77 77 77 77 77 77 77 77

Prepared by Keyser Marston Associates, Inc . .... ,.~------ .... ___ ,..., ...... "''""' ,...,.. ~.-. •-- ~,..,,..,,,..,,.,,.,,. ......... ' " .,...

I ax increment Kevenue noJecuon Area B (School Site) Brea Redevelopment Agency OOO's Omitted

Reported 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

I. Real Property 159,436 159,436 175,195 208,029 212,189 216,433 220,762 225.177 Appeal Value Reduction (Table 4) 0 0 0 0 0 0 0 0 Real Property Growth at 2o/o 0 3,189 3,504 4, 161 4,244 4,329 4,415 4,504 New Value Added (Table 6) 0 12,570 29,330 0 0 0 0 0 Total Real PropE3rty 159,436 175, 195 208.029 212,189 216,433 220,762 225, 177 229,680

II. Personal Property/ SBE 6,745 6,745 6,742 6,742 6,742 6,742 6,742 6,742 Appeal Value RE3duction (Table 4) 0 (3 0 0 0 0 0 0 Total Personal Property 6,745 6,742 6,742 6,742 6,742 6,742 6,742 6,742

Ill. Total Project Value 166,181 181,937 214,771 218,931 223,175 227,504 231,919 236,423 Less Base ValuE3 0 0 0 0 0 0 0 0 Incremental VallJe Over Base 166,181 181,937 214,771 218,931 223, 175 227,504 231,919 236,423 Assumed Tax Rate 1.054o/o 1.054o/o 1.054°/o 1.054°/o 1.054o/o 1.054°/o 1.054o/o 1.054°/o


Assumed Annual Cap Forfeiture 0 0 (265! (309! !353) !399! (446! (493) Total Gross Tax Increment 1,753 1,919 2,000 2,000 2,000 2,000 2,000 2,000

SB 2557 County Admin Charge (11) (11) (11) (11) (11) (11) (11) (11) Brea Olinda USD Tax Share (School Site) p ,621 ! p,754! (1.819! p,819! (1,819! (1,819! p,819! (1,819! Net Tax lncremE3nt Revenue 121 154 170 170 170 170 170 170

v. Redevelopment Fund Before Tl Cap 0 0 0 0 0 0 0 0 Deposit to Housing FuncJ 121 154 170 170 170 170 170 170

VI. Brea Olinda U~D Allocation: Part 1 Thresholej Value 109,100 109,100 109,100 109,100 109,100 109,100 109, 100 109,100 Assumed Tax Rate 1.054°/o 1.054°/o 1.054°/o 1.054%1 1.054°/o 1.054°/o 1.054o/o 1.054°/o Part 1 Allocation to USO (at 100°/o) 1, 150 1, 150 1, 150 1, 150 1, 150 1, 150 1, 150 1,150

Gross Tl up to Annual Cap of $2 million 1,753 1,919 2,000 2,000 2,000 2,000 2,000 2,000 Less Part 1 Allocation to USO p,150! p,150! !1,150) (1, 150! (1.150! p, 150) !1,150! (1.150! Part 2 Allocation to USO (at 80°/o) 482 615 680 680 680 680 680 680

Subtotal Part 1 and Part 2 Allocation to USO 1,632 1,765 1,830 1,830 1,830 1,830 1,830 1,830 Less Co Admin Charge (11 ! (11! (11 ! (11 ! (11 ! (11) (11 ! !11! Net Allocation t<> USO 1,621 1,754 1,819 1,819 1,819 1,819 1,819 1,819

Prepared by Keyser Marston Associates, Inc. Filename: Brea_C_ Tl_2008-09-18.xls: 10/8/2008: GSH :1 of 2

Table 7.3 Tax Increment Revenue Projection Area B (School Site) Brea Redevelopment Agency (OOO's Omitted)

Plan term Tl receipt

11-30-2016 11-30-2026

2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26

I. Real Property 229,680 234,274 238,960 243,739 248,614 253,586 258,658 263,831 269, 107 274,489 Appeal Value Reduction (Table 4) 0 0 0 0 0 0 0 0 0 0 Real Property Growth at 2°/o 4,594 4,685 4,779 4,875 4,972 5,072 5,173 5,277 5,382 5,490 New Value Added (Table 6) 0 0 0 0 0 0 0 0 0 0 Total Real Property 234,274 238,960 243,739 248,614 253,586 258,658 263,831 269, 107 274,489 279,979

II. Personal Property/ SBE 6,742 6,742 6,742 6,742 6,742 6,742 6,742 6,742 6,742 6,742 Appeal Value Reduction (Table 4) 0 0 0 0 0 0 0 0 0 0 Total Personal Property 6,742 6,742 6,742 6,742 6,742 6,742 6,742 6,742 6,742 6,742

Ill. Total Project Value 241,016 245,702 250,481 255,356 260,328 265,400 270,573 275,850 281,232 286,721 Less Base Value 0 0 0 0 0 0 0 0 0 0 Incremental Value Over Base 241,016 245,702 250,481 255,356 260,328 265,400 270,573 275,850 281,232 286,721 Assumed Tax Rate 1.054o/o 1.054°/o 1.054°/o 1.054°/o 1.054°/o 1.054°/o 1.054°/o 1.054°/o 1.054°/o 1.054%,

IV. Gross Tax Increment 2,540 2,590 2,640 2,691 2,744 2,797 2,852 2,907 2,964 3,022 Unitary Tax 1 1 1 1 1 1 1 1 1 1 Est Appeal Refund 2008-09 (Table 4) 0 0 0 0 0 0 0 0 0 0 Subtotal 2,541 2,591 2,641 2,693 2,745 2,798 2,853 2,909 2,965 3,023

Assumed Annual Cap Forfeiture (541) (5911 (4171 (468) (520) (574) (628) (684) (741) (799) Total Gross Tax Increment 2,000 2,000 2,225 2,225 2,225 2,225 2,225 2,225 2,225 2,225

SB 2557 County Admin Charge (11) (11) (11) (11) (11) (11) (11) (11) (11) (11) Brea Olinda USO Tax Share (School Site) (1,819) (1,819) (1,998) (1,998) (1,998) (1.998) !1,998) (1,998) (1,998) (1,998) Net Tax Increment Revenue 170 170 215 215 215 215 215 215 215 215

v. Redevelopment Fund Before Tl Cap 0 0 0 0 0 0 0 0 0 0 Deposit to Housing Fund 170 170 215 215 215 215 215 215 215 215

VI. Brea Olinda USD Allgcation: Part 1 Threshold Value 109,100 109, 100 109,100 109,100 109,100 109,100 109, 100 109,100 109, 100 109, 100 Assumed Tax Rate 1.054°/o 1.054°/o 1.054°/o 1.054o/o 1.054o/o 1.054°/o 1.054°/o 1.054°/o 1.054% 1.054°/o Part 1 Allocation to USO (at 100°/o) 1, 150 1, 150 1, 150 1, 150 1,150 1, 150 1, 150 1, 150 1, 150 1,150

Gross Tt up to Annual Cap of $2 million 2,000 2,000 2,225 2,225 2,225 2,225 2,225 2,225 2,225 2,225 Less Part 1 Allocation to USO (1.150) (1,150) (1,150) (1.150) (1,1501 (1,150) (1.150) (1, 150) (1, 150) (1.150) Part 2 Allocation to USO (at 80°/o) 680 680 860 860 860 860 860 860 860 860

Subtotal Part 1 and Part 2 Allocation to USO 1,830 1,830 2,010 2,010 2,010 2,010 2,010 2,010 2,010 2,010

Less Co Admin Charge (11) (11 l (11) (11 l (11 l (11) (11) (11) (11) (11) Net Allocation to USO 1,819 1,819 1,998 1,998 1,998 1,998 1,998 1,998 1,998 1,998

APPENDIX C

AUDITED FINANCIAL STATEMENTS OF THE AGENCY FOR FISCAL YEAR ENDED JUNE 30, 2007

(This page intentionally left blank.)

BREA REDEVELOPMENT AGENCY BREA, CALIFORNIA

FINANCIAL STATEMENTS

JUNE 30, 2007


JUNE 30, 2007

TABLE OF CONTENTS

INDEPENDENT AUDITORS' REPORT

Page Number

Financial Audit ............................................................................................................................... 1

Compliance Audit. ............................................................................. : ............................................ 3

BASIC FINANCIAL STATEMENTS

Government-Wide Financial Statements:

Statement of Net Assets ............................................................................................................. 6

Statement of Activities ................................................................................................................ 7

Fund Financial Statements:

Balance Sheet - Governmental Funds ....................................................................................... 8

Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets .................................................................................................. 10

Statement of Revenues, Expenditures and Changes in Fund Balances .................................. 12

Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities ............................................................................................................... 14

Budgetary Comparison Statement - Low and Moderate Housing -Project Area AB ......................................................................................................................... 15

Notes to Financial Statements ...................................................................................................... 17

COMBINING AND INDIVIDUAL FUND SCHEDULES

Combining Project Area Balance Sheet - All Debt Service, Capital Projects and Special Revenue Funds ........................................................................................... 34

Combining Project Area Statement of Revenues, Expenditures and Changes in Fund Balances - All Debt Service, Capital Projects and Special Revenue Funds ................................................................................................................ 36

Computation of Low and Moderate Income Housing Funds Excess/Surplus .............................. 38

11;:::::::::;n Lance Soll & Lung hard

LLP ti.fled Public Accountants

INDEPENDENT AUDITORS' REPORT

To the Honorable Chair and Members of the Governing Board Brea Redevelopment Agency, California

Brandon W. Burrows Donald L. Parker Michael K. Chu David E. Hale A Pra/r:Slinruzl Corporatwn Donald G. Slater Richard K. Kikuchi

Retired Robert C. Lance

)914·1994

Richard C. Soll Fred J. Lunghard, Jr.

1928-1999

We have audited the accompanying financial statements of the governmental activities, each major fund and the aggregate remaining information of the Brea Redevelopment Agency, a component unit of the City of Brea, California, as of and for the year ended June 30, 2007, which collectively comprise the Agency's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Brea Redevelopment Agency's management. Our responsibility is to express opinions on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.

The Agency has not presented a management's discussion and analysis that accounting principles generally accepted in the United States of America has determined is necessary to supplement, although not required to be part of, the basic financial statements.

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund and the aggregate remaining fund information of the Redevelopment Agency of the City of Brea as of June 30, 2007, and the respective changes in financial position thereof and the respective budgetary comparison for the Low and Moderate Housing Project Area AB Fund for the year then ended in conformity with accounting principles· generally accepted in the United States of America.

In accordance with Government Auditing Standards, issued by the Comptroller General of the United States, we have also issued our report dated December 17, 2007, on our consideration of the Brea Redevelopment Agency's internal control over financial reporting and on our tests of its compliance with certain laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

75 YEARS

91.004 ?IE~ 203 N. Brea Blvd .. Suite 203 • Brea. CA 92821-4056 • (714) 672-0022 • Fax (714) 672-0331 • www lslcpas.com

http://www.lslcpas.com

II § llEi~:Ld LLP

CERTIFIEO PU8UC ACCOl.JNTANTS


Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Agency's basic financial statements. The Combining and Individual Fund Schedules and Computation of Low and Moderate Housing Funds Excess/Surplus are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole.

~,A~~~ December 17, 2007

2

~==:I Lance Soll & Lung hard

LLP ·tijied Public Accountants

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATIERS BASED ON AN AUDIT

OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS


Brandon \\'. Burrows Donald L. Parker Michael K. Chu David E. Hale A l'roftsJUuwl Corporation Donald G. Slater Richard K. Kikuchi

Retired Robert C. Lance

1914-1994 Richard C. Soll Fred J. Lunghard, Jr.

1928-1999

We have audited the financial statements of Brea Redevelopment Agency as of and for the year ended June 30, 2007, and have issued our report thereon dated December 17, 2007. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States.

Internal Control Over Financial Reporting

In planning and performing our audit, we considered the Brea Redevelopment Agency's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements. but not for the purpose of expressing an opinion on the effectiveness of the Brea Redevelopment Agency's internal control over financial reporting. Accordingly. we do not express an opinion on the effectiveness of the Brea Redevelopment Agency's internal control over financial reporting. ·

A control deficiency exists when the design or operation of a control does not allow management or employees. in the normal course of performing their assigned functions. to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency. or combination of control deficiencies. that adversely affects the Brea Redevelopment Agency's ability to initiate. authorize. record. process. or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Brea Redevelopment Agency's financial statements that is more than inconsequential will not be prevented or detected by the Brea Redevelopment Agency's internal control.

A material weakness is a significant deficiency, or combination of significant. deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the Brea Redevelopment Agency's internal control.

Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above.

75 YEARS

r92~·004 OIE~ 203 N. Brea Blvd .. Suite 203 • Brea, CA 92821-4056 • (714) 672-0022 • Fax (714) 672-033 l • www lslcpas com

http://www.lslcpas.com

II e=il~!trd ~~LlP CERTIFJEO PIJIJUC ACCOUIITAIITS


Compliance and Other Matters

As part of obtaining reasonable assurance about whether the Brea Redevelopment Agency's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance w~h which could have a direct and materiaf effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompiiance or other matters that are required to be reported under Government Auditing Standards.

This report is intended solely for the information and use of management, the governing board, federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.

~,~~~~ December 17, 2007

4

THIS PAGE INTENTIONALLY LEFT BLANK

5


STATEMENT OF NET ASSETS JUN!: 30, 2007

Assets: Cash and investments Receivables:

Accounts Interest Loans Notes

Total Receivables Due from other governments Land held for resale (net) Deferred charges Restricted assets:

Cash and investments with trustees

Total Assets

Liablllties: Accounts payable and accrued expenses Due to other governments Deposits from others Long-term liabilities:

Due within one year Due in more than one year

Total Long-Term Liabilities

Total Liabilities

Net Asse1S: Restricted for:

Affordable housing Debi service

Unrestricted

Total Net Asse1S

See Notes to Financial Statements

$

$

6

Governmental Activities

50,485 724,929

3,208,459 8,373,300

7,343,646 199, 118,337

$ 57,469,156

12,357,173 184,028

5,211,000 2,763,122

3,327,536

81,312,015

3,908,657 1,392,972

12,721

206,461,983

211, 776,333

16,870,807 20,782,141

(168,117,266)

$ (130,464,318)

~EA REDEVELOPMENT AGENCY

rATEMENT OF ACTIVITIES lR THE FISCAL YEAR ENDED JUNE 30, 2007

1nctions/Programs ovemmental Activities: ~eneral government )evelopment services nterest on long-term debt

Total Governmental Activities

eneral Revenues: faxes (net of pass-through payments) Jse of money and property :lther

Total General Revenues

Change in Net Assets

et Assets at Beginning of Year

et Assets at End of Year


Expenses

$ 4,340,395 5,079,864 9,267,191

$ 18,687,450

Program Revenues Operating Capital

Charges for Contributions Contributions Services and Grants and Grants

$ s $

$ $ $

7

Net (Expense) Revenues and

Changes In

Net Assets Governmental

Activities

$ (4,340,395) (5,079,864) (9,267,191)

(18,687,460)

21,050.477 3,962,821 1,098,884

26,112,182

7,424,732

(137,889,050)

$ (130,464,318)

PREA REDEVELOPMENT AGENCY

PALANCE SHEET GOVERNMENiALFUNOS JUNE 30, 2007

Special Capital Debt Revenue Projects Service

Project AB Project AB Project AB Low and Moderate Tax

Housing Project Increment

Assets: Cash and investments $ 8.491,196 $ 30,071,113 $ 12,732,788 Cash and investments with trustee 1,619,257 Receivables: Accounts 4,503 44.454 Interest 554,408 Loans 3,058,306 Notes 1,965,391 1,228,130

Due from other governments Due from City 50. 17,290 Land held for resale 4,511,238 795,796 Allowance for decline in value (96,034)

Total Assets $ 18,030,684 $ 32,615,157 $ 14,352,045

Liabilities and Fund Balances: Liabilities: Accounts payable $ 13,831 $ 30,785 $ 237,435 Deposits from others 12,721 Due to City 1,217,830 Due 16 other governments Deferred revenue . 991,800

Total Liabilities 1,018,352 1,248,615 237,435

Fund Balances: Reserved:

Land held for resale 4,511,238 699,762 Loans receivable 4,031,897 1,228,130 Debt service 1,799,324 454,200

Unreserved: Designated:

Debt service 13,660,410 Continuing projects 29,438,650 Low and moderate income housing 6,669,873

Total Fund Balances 17,012,332 31,366,542 14,114,610

Total Liabilities and Fund Balances $ 18,030,684 $ 32,615,157 $ 14,352,045

See Notes to Financial Statements 8

!REA REDEVELOPMENT AGENCY

!ALANCE SHEET 30VERNMENTALFUNDS IUNE 30, 2007

Debt Service

Project C Other Total

Tax Governmental Governmental Increment Funds Funds

~ssets: ::ash and investments $ 2,870,810 $ 3,303,249 $ 57,469,156 ~ash and investments with trustee 1,708,279 3,327,536 ,eceivables: Accounts 1,528 50,485 Interest 170,521 724,929 Loans 150,153 3,208,459 Notes 5,179,779 8,373,300

)ue from other governments 166,688 166,688 )ue from City 17,340 _and held for resale 5,307,034 ~llow~nce for decline in value (96,034)

Total Assets $ 4,745,777 $ 8,805,230 $ 78,548,893

_iabilities and Fund Balances: _iabllities: ~ccounts payable $ $ 5,191 $ 287,242 )eposits from olhers 12,721 )ue to City 61,316 1,279, 146 )ue to other governments 113,826 113,826 )eferred revenue 270,674 1,262,474

Total Liabilities 113,826 337,181 2,955,409


Land held for resale 5,211,000 Loans receivable 5,229,779 10,489,806 Debt service 1,624,571 236,256 4,114,351


Debt service 3,007,380 16,667,790 Continuing projects 1,524,992 30,963,642 Low and moderate income housing 1,477,022 8,146,895

Total Fund Balances 4,631,951 8,468,049 75,593,484

Total Liablllties and Fund Balances $ 4,745,777 $ 8,805,230 $ 78,548,893



GOVERNMENTAL FUNDS RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS

TO THE STATEMENT OF NET ASSETS

JUNE 30, 2007

Fund balances of governmental funds

Amounts reported ior governmental activities in lhe statement of net assets are

different because:

Deferred revenue is present in governmental fund financial statements to indicate that receivables are not available currently; however, in the Statement of Net Assets these deferrals are eliminated.

eond issuance costs is an expendtture in the governmental funds, but it is deferred charges in the statement of net assets:

Unamortized debt issuance costs - amortized over life of new bonds

Long-tenm liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the funds

6orids payable and other long-tenm debt

Loans from City Unamortized net original issue discounts and (premiums)

Unamortized net (gain) loss on bonds defeased

Accrued interest payable for the current portion of interest due on Tax Allocation Bonds has not been reported in the governmental funds.

Net assets of governmental activities

see Notes to Financial Statements 10

$ 75,593,484

1,262,474

2,763,122

(204,036,944)

(676,462)

(1, 771,631)

227,074

(3,621,415)

$ (130,464,318)


STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2007

Special Capital Debt Revenue Projects Service

Project AB Project AB Project AB Low and Moderate Tax Housing Project Increment

Revenues: Taxes and assessments $ $ $ 19,000,000 · Use of money and property 571,950 2,244,548 761,883 Other revenue 362,555 198,769

Total Revenues 934,505 2,443,317 19,761,883

Expenditures: Current:

General government 3,882,020 187,105 Development services 606,147 888,834 1,107,287

Capital outlay 2,477,596 Debt service 15,000,207

Total Expenditures 606,147 7,248,450 16,294,599

Excess (Deficiency) of Revenues Over (Under) Expenditures 328,358 (4,805, 133) 3,467,284

Other Financing Sources (Uses): Transfers In 4,550,000 2,874,999 2,429,262 "Transfers out (3,904,261) (5,200,000) Long-term debt issued 483,580 Pass-through agreement payments (637,551)

Total Other Financing Sources (Uses): 645,739 2,874,999 (2,924,709)

Excess (Deficiency) of Revenues and Other Sources Over (Under) Expenditures and Other Uses 974,097 (1,930, 134) 542,575

Fund Balances: Beginning of Year 16,038,235 33,296,676 13,572,035

End of Year $ 17,012,332 $ 31,366,542 $ 14,114,610


IREA REDEVELOPMENT AGENCY

:TATEMENT OF REVENUES, EXPENDITURES ,ND CHANGES IN FUND BALANCES lOVERNMENTALFUNDS 'OR THE FISCAL YEAR ENDED JUNE 30, 2007

Debt Service

Project C Other Total

Tax Governmental Governmental · Increment Funds Funds

tevenues: Taxes and assessments $ 4,500,001 $ $ 23,500,001 Use of money and property 211,597 636,696 4,426,674 Other revenue 591,331 1,152,655

Total Revenues 4,711,598 1,228,027 29,079,330

,xpendltures: Current:

General government 31,818 239,452 4,340,395 Development services 2,602,268

Capital outlay 2,477,596 Debt service 1,691,838 16,692,045

Total Expenditures 1,723,656 239,452 26,112,304

Excess (Deficiency) of Revenues Over (Under) Expenditures 2,987,942 988,575 2,967,026

)ther Financing Sources (Uses): Transfers in 364,000 1,615,681 11,833,942 Transfers out (1,615,681) (1, 114,000) (11,833,942) Long-term debt issued 483,580 Pass-through agreement payments (1,811,973) (2,449,524)

Total Other Financing Sources (Uses): (3,063,654) 501,681 (1,965,944)

Excess (Deficiency) of Revenues and Other Sources Over (Under) Expenditures and Other Uses (75,712) 1,490,256 1,001,082

=und Balances: Beginning of Year 4,707,663 6,977,793 74,592,402

End of Year $ 4,631,951 $ 8,468,049 $ 75,593,484



GOVERNMENTAL FUNDS RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR Tl-IE FISCAL YEAR ENDED JUNE 30, 2007

Net ch11nge in fund balances - total governmental funds

Amounts reported for governmental activities in the statement of activities differ because:

Repayment of bond principal is an expenditure in the ~ovemmental funds, but

the repayment reduces long-term liabilities in the statement of net assets.

Bond issuance costs, unamortized premiums or discounts on bonds issued and loss on defec1sed debt are revenue or expenditures in the governmental funds, but these are spreiid to future periods over the life of the new bonds:

Amortization of loss on defeasance for current fiscal year

Amortization of premium and discounts for current fiscal year

Amortization of bond issuance costs

Collections on receivables and loan transactions offset by deferred revenue are reported as revenue and expenditures in governmental funds; however, they do not

provide revenue or expenses in the statement of activities.

Proceeds of debt is revenue in the governmental funds, but these are additions to the statement of net assets.

Revenues reported in the governmental funds which were previously deferred and meet the revenue recognition criteria currently and, therefore, are not reported as revenues in the Statement of Activity

Expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds:

Current accrual of interest due on bonds Prior year accrual of interest due on bonds

Changtl in net assets of governmental activities


$

$

1,001,082

7,312,423

(16,219)

70,346

(111,537)

(463,853)

(483,580)

(53,771)

(3,621,415) 3,791,256

7,424,732

EA REDEVELOPMENT AGENCY

DGET.ARY COMPARISON STATEMENT WAND MODERATE HOUSING OJECT AREA AB NE 30, 2007

dgetary Fund Balance, July 1 sources (Inflow): e of money and property ,er revenues scellaneous msfers from other funds

Amounts Available for Appropriation

1arges to Appropriation (Outflow): ,velopmenl services 3nsfers to other funds

Total Charges to Appropriations

1dgetary Fund Balance, June 30


Budget Amounts Ori!!inal Final

$ 16,038,235 $ 16,038,235

250,000 250,000

4,550,000 4,550,000

20,838,235 20,838,235

1,635,609 1,729,767 3,967,000 3,967,000

5,602,609 5,696,787

$ 15,235,626 $ 15,141,448

15

Variance with Final Budget

Actual Positive Amounts !Negative)

$ 16,038,235 $

571,950 321,950 362,189 362,189

366 366 4,550,000

21,522,740 684,505

606,147 1,123,640 3,904,261 62,739

4,510,408 1,186,379

$ 17,012,332 $ 1,870,884

Note 1:


NOTES TO FINANCIAL STATEMENTS JUNE 30, 2007

I. SIGNIFICANT ACCOUNTING POLICIES

Organization and Summary of Significant Accounting Policies

a. Description of the Reporting Entity

The Brea Redevelopment Agency is a component unit of a reporting entity that consists of the following primary and component units:

· Reporting Entity:

Primary Government:

City of Brea

Compo_nent Units:

Redevelopment Agency of the Ctty of Brea Ctty of Brea Public Financing Authority

The attached basic financial statements contain information relative only to the Brea Redevelopment Agency as one component untt, which is an integral part of the total reporting entity. They do not contain financial data relating to the other component units.

The Redevelopment Agency's financial activity commenced on May 24, 1971. The primary purpose of the Agency is to eliminate blighted areas by encouraging development of residential, commercial, industrial, recreational and public facilities. The City Council appoints the Agency director and has full accountability for the Agency's fiscal matters. Revenues of the Agency consist primarily of property tax allocations on the incremental increase of property values in the redevelopment area and revenues from the use of money and property.

b. Government-Wide and Fund Financial Statements

The government-wide financial statements (i.e., the statement of net assets and the statement of changes in net assets) report information on all of the non-fiduciary activtties of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activtties, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from certain legally separate component untts for which the primary government is financially accountable.

The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment.

17

Brea Redevelopment Agency Notes to Financial Statements (Continued)

Note 1: Organization and Summary of Significant Accounting Policies (Continued)

Program revenues include: 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segmen~ and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues.

Separate financial statements are provided for governmental funds and fiduciary funds even though the latter are excluded from the government-wide financial statements. Major individual governmental funds are reported as separate columns in the fund financial statements. The Agency does not have any fiduciary funds as of the date on this report.

c. Measurement Focus, Basis of Accounting and Financial Statement Presentation

The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.

Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due.

Property taxes and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the government.

The Agency reports the following major governmental funds:

Governmental Funds

Low and Moderate Housing Fund - Project Area AB

This fund is used to account for that portion of the Agency's tax increment revenue that is legally restricted for increasing or improving housing for low and moderate income households. The fund accounts for the 20% set-aside of tax

· increment revenue allocated to the Agency's Project Area AR

18



Project Funds - Project Area AB

These funds account for debt proceeds available for project improvements, interest income on invested funds and certain other income. The funds are expended primarily for redevelopment project costs and administrative expenses. Under provisions of the Health and Safety Code, these funds are referred to as "Redevelopment Funds."

Tax Increment Funds - Project Area AB and Project Area C

These funds account for tax increment revenues and related interest income. The funds are used to repay principal and interest on indebtedness of the Agency. Under provisions of the Health and Safety Code. these funds are referred to as "Special Funds."

When both restricted and unrestricted resources are available for use. tt is the government's policy to use restricted resources first, and then unrestricted resources as they are needed.

d. Assets, Liabilities and Net Assets or Equity

1. Cash and Investments

Cash includes demand deposits, certificates of deposits and savings account balances. The California Government Code and the City of Brea's investment policy permit the Brea Redevelopment Agency to invest in various instruments and pools.

Investments for the Agency are reported at fair value. The State Treasurer's Investment Pool operates in accordance with appropriate state laws and regulations. The reported value of the pool is the same as the fair value of the pool shares. Changes in fair value that occur during a fiscal year are recognized as revenues from the use of money and property reported for that fiscal year. Revenues from the use of money and property include interest earnings. changes in fair value. any gains or losses realized upon the liquidation or sale of investments and rental income.

2. Receivables and Payables

Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either "due to/from other funds" (i.e., the current portion of inter-fund loans) or "advances to/from other funds" (i.e .• the non-current portion of inter-fund loans). All other outstanding balances between funds are reported as "due to/from other funds."

Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources.

All trade and property tax receivables are shown net of an allowance for uncollectibles.

19



Property tax revenue is recognized in the fiscal year for which the taxes have been levied providing they become available. Available means then due, or past due and receivable within the current period and collected within the current period or expected to be collected soon enough thereafter (not to exceed 60 days) to be used to pay liabilities of the current period.

The County of Orange collects property taxes for the Agency. Tax liens attach annually as of 12:01 A.M. on the first day in January preceding the fiscal year for which the taxes are levied. The tax levy covers the fiscal period July 1 to June 30. All secured personal property taxes and one-half of the taxes on real property are due November 1; the second installment is due February 1. All taxes are delinquent, if unpaid, on December 1 O and April 10, respectively. Unsecured personal property taxes become due on the first of March each year and are delinquent on August 31.

3. Inventories and Prepaid Items and Land Held for Resale

All inventories are valued at cost using the first-in/first-out (FIFO) method. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased.

Certain payments to vendors reflect costs applicable to future accounting periods arid are recorded as prepaid items in both government-wide and fund financial statements.

The Brea Redevelopment Agency has acquired land as part of its primary purpose to develop blighted properties. Land purchased for resale is capitalized as inventory at lower of cost or estimated net realizable value.

4. Capital Assets

Capital assets, which include property, plant, equipment and infrastructure assets (e.g., roads, bridges, sidewalks and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the government as assets with an initial, individual cost of more than $1,500 (amount not rounded) and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation.

In accordance with GASB Statement No. 34 the Agency is required to report general infrastructure assets. The Agency does not own any capital assets as of the date on this report.

5. Long-Term Obl_igations

In the government-wide financial statements,' \ong-tenm debt and other long-tenm obligations are reported as liabilities in the governmental activities statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt.

20


Note 1:

Note 2:

Organization and Summary of Significant Accounting Policies (Continued)

In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service

. expenditures.

6. Fund Equity

In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change.

II. STEWARDSHIP

Stewardship, Compliance and Accountability

Budgetary Data

General Budget Policies

The Governing Board approves each yea~s budget submitted by the Executive Director prior to the beginning of the new fiscal year. Public hearings are conducted prior to its adoption by the Governing Board. Supplemental appropriations where required during the period are also approved by the Governing Board. The level of budgetary control (that is, the level at which expenditures cannot legally exceed the appropriated amount) is established at the fund level for all other budgeted funds, which include the total appropriated for both expenditures and other financing uses. At fiscal year-<ind all operating budget appropriations lapse except for capital project appropriations that are carried forward.

Encumbrances

Encumbrances are estimations of costs related to unperformed contracts for goods and services. These commitments are recorded for budgetary control purposes in the governmental funds. Encumbrances outstanding at year-end are reported as a reservation of fund balance. They represent the estimated amount of the expenditure ultimately to result if unperformed contracts in-process at year-<ind are completed. They do not constitute expenditures or estimated liabilities. As of June 30, 2007, the Agency had no encumbrances.

Budget Basis of Accounting

Budgets for governmental funds are adopted on a basis consistent with generally accepted accounting principles (GAAP).

21


Note 3:

Ill. DETAILED NOTES ON FUNDS

Cash and Investments

As of June 30, 2007, cash and investments were reported in the accompanying financial statements as follows:

Governmental activities $ 60,796,692

Total Cash and Investments $ 60,796,692

The Agency maintains a cash and investment pool that is available for use for all funds. Each fund type's position in the pool is reported on the combined balance sheet as cash and investments. The Agency has adopted an investment policy that authorizes it to invest in various investments. ·

Deposits

At June 30, 2007, the carrying amount of the Agency's deposits was $1,369,186, and the bank balance was $2, 509,473. The $1, 140,287 difference represents outstanding checks and other reconciling items.

The California Government Code requires California banks and savings and loan associations to secure an Agency's deposits by pledging government securities with a value of 110% of an Agency's deposits. California law also allows financial institutions to secure an Agency's deposits by pledging first trust deed mortgage notes having a value of 150% of an Agency's total deposits. The City Treasurer may waive the collateral requirement for deposits that are fully insured up to $100,000 by the FDIC. The collateral for deposits in federal and state chartered banks is held in safekeeping by an authorized Agent of Depository recognized by the State of California Department of Banking. The collateral for deposits with savings and loan associations is generally held in safekeeping by the Federal Home Loan Bank in San Francisco, California as an Agent of Deposttory. These securities are physically held in an undivided pool for all California public agency depositors. Under Government Code Section 53655, the placement of securities by a bank or savings and loan association with an "Agent of Depository" has the effect of perfecting the security interest in the name of the local governmental agency. Accordingly, all collateral held by California Agents of Depository are considered to be held for, and in the name of, the local governmental agency:

Investments

Under provision of the Agency's investment policy, and in accordance with the California Government Code, the following investments are authorized:

• U.S. Treasury Obligations (bills, notes and bonds) • U.S. Government Agency Securities and Instrumentality's of Government

Sponsored Corporations • Banker's Acceptances • Commercial paper

22


Note 3: Cash and Investments -(Continued)

• Repurchase Agreements • Certificates of deposit • Negotiable Certificates of deposit • Passbook savings account • Interest Bearing Investment Accounts • Medium term corporate notes • Bank Money market Accounts • Local Agency Investment Fund (State Pool) • County of Orange Investment Fund (County Pool) • Other investments that are, or may become, legal investments through the State

of California Government Code

Investments Authorized by Debt Agreements

The above investments do not address investment of debt proceeds held by a bond trustee. Investments of debt proceeds held by a bond trustee are governed by provisions of the debt agreements, rather than the general provisions of the California Government Code or the Agency's investment policy.

Investments in State lnvestme~t Pool

The Agency is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. LAIF is overseen by the Local Agency Investment Advisory Board, which consists of five members, in accordance with State statute. The State Treasurer's Office audits the fund annually. The fair value of the position in the investment pool is the same as the val~e of the pool shares.

GASB Statement No. 31

The Agency adopted GASB Statement No. 31, Accounting and Financial Reporting for certain investments and for External Investment Pools, as of July 1, 1997. GASS Statement No. 31 establishes fair value standards for investments in participating interest earning investment contracts, external investment pools, equity securities, option contracts, stock warrants and stock rights that have readily determinable fair values. Accordingly, the Agency reports its investments at fair value in the balance sheet. All investment income, including changes in the fair value of investments, is recognized as revenue in the operating statement.

Credit Risk

The Agency's investment policy does not limit investments in Federal Agency Securtties to ratings issued by nationally recognized statistical rating organizations. As of June 30, 2007, the Agency's investments in Federal Agency Securities consisted of investments with Federal Home Loan Bank Notes, Federal National Mortgage Assistance Notes, Federal Home Loan Mortgage Corp Notes, and Federal Farm Credit Bank. At June 30, 2007, all Federal Agency Securities were rated "AAA" by Standard & Poor's. All securities were investment grade and were legal under state and City law. As of June 30, 2007, the Agency's investments in external investmeni pools and money market mutual funds are unrated.

23


Note 3: Cash and Investments (Continued)

Custodial Credit Risk

The custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that in the event of the failure of the counterparty to a transaction a government will not be able to recover the value of investment or collateral securities that are in the possession of an outside party.

As of June 30, 2007, none of the Agency's deposits or investments was exposed to custodial credit risk Concentration of Credit Risk

Concentration of Credit Risk

The Agency's investment policy imposes restrictions for certain types of investments with any one issuer. In addition, GASB 40 requires a separate disclosure tt any single issuer comprises more than 5% of the total investments value. As of June 30, 2007, the Agency has invested $10,869,978 (18%) in Federal National Mortgage Association, $7,352,438 (12%) in Federal Farm Credit Bank, $10,562,917 (17%) in Federal Home Loan Mortgage Corporation, and $13,721,378 (23%) in Federal Home Loan Bank. Investments guaranteed by the U.S. government and· investments in mutual funds and external investment pools are excluded from this requirement

Interest Rate Risk

The Agency's investment policy limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. The Agency has elected to use the segmented time distribution method of disclosure for its interest rate risk.

As of June 30, 2007, the Agency had the following investments and remaining maturities:

Remaining Investment Maturities 6 months 6months 1 to 3 3 to 5 Fair

or less to 1 year years years Value

Federal Agency Securities $ 14,422,844 $ 8,262,813 $ 19, 142,773, $ $ 41,828.430 Money Market Mutual Funds 4,471,974 4,471,974 U.S. Treasury 3,992,820 4,645,253 8,638,073 Local Agency Investment Fund 1,341,437 1,341,437 Cash with Fiscal Agent

Money Market Mutual Funds 2,469,312 2,469,312 Federal Agency Seruri lies 120,675 454,540 103,065 678,280

$ 26,698,387 $ 13,028,741 $ 19,597,313 $ 103,065 $ 59,427,506

24


Note 4:

Note 5:

Loans Receivable

During fiscal year 1988-1989, the Agency authorized a $3,000,000 loan to the Brea Olinda Unified School District. During fiscal year 1991-1992, the Agency authorized another loan to the district in the amount of $2,500,000. The loans are reduced by two sources.

First, school fees that would have otherwise been paid to the school district on developments that have required Agency assistance will be applied first to reduce accrued interest a_nd then to reduce the loans' principal balance. Second, the loans will be further reduced by developer revenues from the prior high school site located on Birch Street. These developer revenues are also pledged to pay the debt service on the school district's Certificates of Participation. Thus, payments will be received from this latter source after the school district's Certificates of Participation are retired, which is estimated to be in the year 2026. The outstanding loan balance on June 30, 2007, was $5,049,002.

Long-Term Debt

a. A description of long-term debt outstanding (excluding defeased debt) of the Agency as of June 30, 2007, follows:

Loans Payable

The Agency has entered into a loan agreement with the Brea Public Financing Authority whereby the Agency has received the proceeds of the Brea Public Financing Authority Revenue Bonds 1991 Series A amounting to $152,961,147, with interest ranging from 6.3% to 7.0%. The proceeds were used to: 1) finance redevelopment activity in Redevelopment Project AB, 2) finance certain low and moderate income housing projects of the Agency, and 3) to advance refund the Agency's 1985 Redevelopment Project AB Tax Allocation Bonds, 1985 Redevelopment Project AB Tax Allocation Refunding Bonds and 1987 Redevelopment Project AB Tax Allocation Subordinated Bonds. In June 2001, the Agency used the proceeds of its 2001 Tax Allocation Refunding Bonds, Series A and 2001 Subordinate Tax Allocation Refunding· Bonds, Series B to repay $52, 765,000, of the outstanding loan balance with the Brea Public Financing Authority. The loan agreements provide for principal and accreted interest repayments in aggregate annual installments of $3, 740,000 from August 1, 2003, through August 1, 2006. As of June 30, 2007, the loan was repaid in full.

Reimbursement Agreements Payable

The City and the Agency entered into the Brea Civic/Cultural Center ground lease dated May 1, 1978, pursuant to which the City will lease to the Agency, for a rental of $1.00, the four acres comprising the site upon which the Civic/Cultural Center was constructed. The Agency, in an assignment agreement entered into on November 1, 1991, assigned all of its right, title, and interest under the 1978 Ground Lease and 1978 Sublease over to the Brea Public Financing Authority. The City agreed in an amended and restated sublease agreement adopted December 1, 1998, which supersedes the sublease agreement adopted November 1, 1991, to lease the completed facilities from the Authority and to make semi-annual base rental beginning June 15, 1999.

25


Note 5: Long-Term Debt (Continued)

The City also agreed, in the second supplement, to the amended and restated sublease agreement adopted April 15, 1995, to make additional semi-annual lease

· rental payments. On November 1, 2004, the City agreed in an amended and restated lease supplement made between the Authority and the City. The 2004 Lease Supplement is a supplement to the amended and restated sublease agreement adopted December 1, 1998, and supersedes the second supplement to the amended and restated sublease agreement adopted April 15, 1995.

The combined principal payments of the two leases range from $165,000 to $1,095,000 with interest rates from 3.0% to 4.7%.

Simultaneously, the City and Agency also entered into reimbursement agreements. The reimbursement agreements obligated the Agency to reimburse the City for lease payments made under the master sublease. The source of reimbursements is tax increment and other funds available to the Agency. The amount outstanding at June 30, 2007, was $16,095,000.

Tax Allocation Bonds

1997 Senior Lien Tax Allocation Bonds and Subordinated Series Bonds

In July 1997, $27,715,000 Revenue Bonds were issued by the Association of Bay Area Governments (California Redevelopment Agency Pool). The Brea Redevelopment Agency portion of the debt is $14,965,000. The proceeds were used to current refund a portion of the Brea Public Financing Authority 1988 Revenue Bonds, Series A, B, C and D.

Bonds maturing in the years 1998 to 2012 are serial bonds payable December 15 in annual installments of $210,000 to $1,040,000. Bonds maturing on December 15, 2017 and December 15, 2025, ranging from $1,505,000 to $4,765,000 are term bonds. The outstanding bonds (serial and tenn) bear interest at 4.0% to 6.25% due June 15 and December 15, of each year.

The term bonds maturing on December 15, 2017 and December 15, 2025, are subject to mandatory redemption in whole or in part by lot, without premium. commencing December 15, 2013 and December 15, 2018, respectively, from sinking fund payments made by the Agency.

The required reserve for the bonds is $1,330,648. As of June 30, 2007, the reserve amount was $1,390,982. The bonds are a special obligation of the Brea Redevelopment Agency payable from tax revenues. The amount of bonds outstanding at June 30, 2007, totaled $10,450,000.

1997 Subordinate Tax Allocation Refunding Bonds

In July 1997, $3,005,000 Subordinate Tax Allocation Refunding Bonds were issued by the Brea Redevelopment Agency. The proceeds were used to current refund the balance of the Brea Public Financing Authority 1988 Revenue Bonds, Series A, B, C, and D.

26



Bonds maturing in the years 1998 to 2012 are serial bonds payable December 1 in annual installments of $25,000 to $255,000. Bonds maturing on December 1, 2016, in the amount of $1,190,000 are term bonds. The outstanding bonds (serial and term) bear interest at 4.4% to 6.25% due June 1 and December 1, of each year.

The term bonds maturing on December 1, 2016, are subject to mandatory redemption in whole or in part by lot, without premium, commencing December 1, 2012, from sinking fund payments made by the Agency.

The required reserve for the Bonds is $300,500. As of June 30, 2007, the reserve amount was $303,304. The bonds are a special obligation of the Brea Redevelopment Agency payable from surplus tax revenues. The amount of bonds outstanding at June 30, 2007, totaled $2,380,000.

2001 Tax Allocation Refunding Bonds, Series A and 2001 Subordinate Tax Allocation Refunding Bonds, Series B

In June 2001, $56,170,000 Tax Allocation Refunding Bonds, Series A and $5,260,000 Subordinate Tax Allocation Bonds, Series B were issued by the Brea Redevelopment Agency. The proceeds were used in the aggregate: 1) to repay a portion of a loan made to the Agency by the Brea Public· Financing Authority in connection with 1991 Tax Allocation Revenue Bonds, Series A issued by lhe Authority, and 2) to repay a loan made to the Agency by the Brea Public Financing Authority in connection with the 1991 Tax Allocation Revenue Bonds, Series C issued by the Authority.

2001 Tax Allocation Refunding Bonds, Series A

The Series A bonds consist of $41,375,000 serial bonds maturing in the years 2002 to 2020, payable August 1 in annual installments of $710,000 to $3,535,000. The bonds bear interest at 4.0% to 5.5%. Bonds maturing after August 1, 2020, in the amount of $14,795,000 are term bonds and bear interest at 5.0%.

Serial bonds maturing on or after August 1, 2012, are subject to redemption, in whole or in part, at the option· of the Agency, from any available source of funds. Term bonds maturing on August 1, 2023, are subject to mandatory redemption in part by lot on August 1, 2021, August 1, 2022 and August 1, 2023, in the amounts of $3,730,000, $3,400,000 and $7,665,000, respectively, from sinking fund payments made by the Agency.

A financial guaranty insurance policy has been issued and, accordingly, no cash reserve balance is required. Bond payments are secured by a first pledge on all of the tax revenues on a parity with the non-refunded 1991 loan, and the 2003 bonds. The amount of bonds outstanding at June 30, 2007, totaled $51,685,000.

2001 Subordinate Tax Allocation Refunding Bonds, Series B

The Series B bonds consist of $3,705,000 serial bonds maturing in the years 2003 to 2018, payable March 1 in annual installments of $160,000 to $335,000. The bonds bear interest at 4.0% to 5.9%. Bonds maturing after 2018, in the amount of $1,555,000 are term bonds and bear interest at 6.0%.

27



Serial bonds maturing on or after March 1, 2012, are subject to redemption in whole or in part at the option of the Agency from any available source of funds. Term bonds are subject to mandatory redemption in part by lot on March 1, 2019, March 1, 2020, March 1, 2021 and March 1, 2022, in the amount of $355,000, $380,000, $405,000 and $415,000, respectively, from sinking fund payments made by the Agency.

The required reserve for the bonds is $454,200. As of June 30, 2007, the reserve amount was $458,307. Bond payments are secured by a pledge of and lien on all the surplus tax revenues. The amount of bonds outstanding at June 30, 2007, totaled $4,400,000.

2003 Tax Allocation Bonds

In July 2003, the Brea Redevelopment Agency issued $120,497,866 principal amount of 2003 Redevelopment Project AB Tax Allocation Bonds. The proceeds were used to: 1) current refund the Agency's Brea Redevelopment Agency 1993 Tax Allocation Refunding Bonds, 2) to pay the costs of additional redevelopment activities with respect to Project Area AB, 3) pay the cost of a reserve fund security instrument, and 4) pay costs of issuance related to the bonds.

Bonds maturing in the years 2004 to 2026, are current interest bonds payable August 1 in annual installments of $875,000 to $7,695,000, while bonds maturing in the years 2028 to 2030, are capital appreciation bonds payable August 1 in annual installments of $2, 151,714 to $1,801,707. Bonds maturing in the years 2027 to 2032, in the amount of $16,475,000 are term bonds.

The current interest bonds bear interest at 2. 00% to 4.40% due February 1 and August 1, of each year. The term bonds bear interest at 4.45% and are due August 1, 2032. The capital appreciation bonds have a face value of $22,640,000. By their nature, there are no regular interest payments associated with capital appreciation bonds. The "interest'' on the debt results from the difference between the amounts paid by the investors when the debt was issued and the significantly larger value at maturity. The $22,640,000 of face value capital appreciation bonds were initially recorded at the amount of proceeds received, $5,987,866. Each year, the outstanding balance is increased for the accretion of interest associated with the bonds. The amount of bonds outstanding at June 30, 2007, totaled $119,028,944.

City Loans

In 1992, the City of Brea advanced $2,500,000 to the Agency for redevelopment · purposes. The loan agreement provides for repayment in 24 annual installments of $140,000 commencing August 1992. The annual installments were increased to $240,000 per year commencing August 2004. The principal amount of the loan outstanding at June 30, 2007, totaled $878,482.

28



b. The following is a schedule of changes in long-term debt of the Agency for the fiscal year ended June 30. 2007:

Balance Balance D.le Within

Jull 1· 2006 Additions Re~rrents June 30, 2007 One Year . Project Area AB: Loans Payable $ 3,614,238 $ 125.762 $ 3,740,000 $ $ Reirmursement Agreerrnnts Payable 16,850,000 755,000 16,095.000 785,000 2001 Tax Allocation Refunding

Bonds Series A 52,485,000 aoo.ooo 51.685,000 1,935.000 2001 Subordinate Tax Allocation

Refunding Bonds Series B 4,585.000 185,000 4.400,000 195,000 2003 Tax Allocation Bonds 119.576, 126 357,818 905.000 119,028,944 3,445,000

To1al $ 197,110,364 $ 483,580 $ 6,385,000 $ 191,208,944 $ 6,360,000

Project Area C: 1997 Senior Lien TaxAJloc.ilion Bonds $ 11,045,000 $ $ 595,000 $ 10,450,000 $ 625,000 1997 Subordinate Tax Allocation

Refunding Bonds- 2,505,000 125,000 2,380,000 145,000 Ci1y Loans 1,085,905 207,423 878,482 213,646

Tolal $ 14,635,905 $ $ 927,423 $ 13,708,482 $ 983,646

Tola! - All Project Areas: Loans Payable $ 3,614,238 $ 125,762 $ 3,740,000 $ $ Reirmurserrent Agreerrents Payable 16,850,000 755,000 16,095,000 785,000 Bonds Payable 190,196, 126 357,818 2,610,000 187, 943,944 6,345POO City Loans 1,085,905 207,423 878,482 213,646

Tolal $ 211,7 46,269 $ 483,580 $ 7,312,423 204,917,426 $ 7,343,646

Add: Unamortized bond prerrium 1,n1,531

Less: Unamortized bond defeasance loss (227,074J

Net Long-Term Debt $ 206,461,983

29


Note 5: Long-Tenn Debt (<;ontinued)

c. The following schedule illustrates the debt service requirements to maturity for bonds outstanding as of June 30, 2007:

Reimbursement Agreements RscalYear. Pavable Bonds~able

Endin9 June 30 Rindeal Interest Princieal Interest 2006 $ 765,000 $ 705,961 $ 6,345,000 $ 7,945,627 2009 615,000 675,416 6,610,000 7,697,644 2010 645,000 642,495 6,660,000 7,455,579 2011 660,000 605,295 7,130,000 7, 156,763 2012 5,035,000 2,367, 159 7,550,000 6,824,960

2013-2017 6,295,000 1,112,246 43,205,000 26,663,694 2016-2022 1,440,000 34,706 45,965,000 16,496,445 2023-2027 40,600,000 6,014,093 2026-2032 20,688,944 17,357,903

2033 2,970,000 66,083

Totals $ 16,095,000 $ 6,163,300 $ 187 ,943, 944 $ 109,700,811

Fiscal Year City Loans Total Endina June 30 Princieal lrterest Princieal Interest

2008 $ 213,646 $ 26,354 $ 7,343,646 $ 8,677,962 2009 220,055 19,945 7,645,055 8,393,007 2010 226,656 13,343 7,931,656 8,111,417 2011 218.125 6,544 8,228.125 7,770,6[12 2012 12,585,000 9,212, 139

2013-2017 49,500,000 29,795,940 2016-2f122 47,425,000 18,531,151 2023-2[127 40,600,000 8,014,093 2026-2032 20,688.944 17,357,903

2033 2,970,000 66,063

Totals $ 878,482 $ 66,186 $ 204,917,426 $ 115,930,297

30


Note 6: Construction and Other Significant Obligations

Leases

In March 1989, the Agency entered into a ground lease with the City of Brea. T~e iease pertains to the hotel and retail court adjacent to the Brea Civic Center. The terms of the lease With the City are subject to sublease agreements with the Agency and Brea Hotel Joint Venture (tenant). The sublease states that the tenant is to pay base rent of $165,0oo and participation rents equal to 3% of the gross revenues for the first 30 years. The percentage increases to 3.5% for all subsequent years. All amounts remitted to the Agency are to be paid to the City as part of the original ground lease. In 1992 the Agency prepaid 18 years of the base rent payments of $140,000. The amount received from the tenant for base and participation rent for the year ended June 30, 2007 was $333,349. The amount paid to the City for the year ended June 30, 2007 was $193,349. The length of term is 75 years.

Owner Participation Agreements

In 1987, the Agency entered into an owner participation agreement with the owners of the Brea Mall. This agreement obligates the Agency to pay the owners 80% of the tax increment revenues generated by the Brea Mall above the 1987-1988 base year tax

. increment, plus $15,000. The agreement's Jerm is 33 years beginning fiscal year · 1989-1990. The Agency's obligation during fiscal year 2006-2007 was $1, 107,287.

In 1989, the Agency entered into an owner participation agreement with the owner of the property located at the southwest corner of Kraemer Boulevard and Imperial Highway. This agreement obligates the Agency to pay the owner 90% of the tax increment revenues generated by the site, but cannot exceed $300,000 in any fiscal year. The term of agniement is 15 years beginning fiscal year 1991-199,!. The last obligation was paid in fiscal year 2005-2006.

Construction Commitments

On June 19, 2007, the ·city awarded a contract to Park West Landscape, Inc. in the amou~t of $13,254,445. The improvements to be constructed at the 26 acre site will include fields to accommodate baseball, soccer and football. Other improvements will include trails, concession/restroom building and two storage buildings. The construction is expected to begin in August 2007 and be completed in early 2009. Due to an ongoing reimbursement agreement with the City, the Agency will reimburse the City for the entire costs of construction.

31


Note 7: lnterfund Receivable, Payable and Transfers

lnterfund Transfers

Transfers Out Low and Moderate Tax Increment Tax Increment

Housing Fund - Fund - Fund - Other Project Project Project Governmental

Funds Area AB Area AB Area C Funds Total Transfers In:

Low and Moderate Housing Fund - Project Area AB $ $ 3,800,000 $ $ 750,000 $ 4,550,000

Project Fund -Project Area AB 1,474,999 1,400,000 2,874,999

Tax Increment Fund -Project Area AB 2,429,262 2,429,262

Tax Increment Fund -Project Area C 364,000 364,000

Other Governmental Funds 1,615,681 1,615,681

Total $ 3,904,261 $ 5,200,000 $ 1,615,681 $ 1,114,000 $ 11,833,942

The interfund transfers are made for purposes of financing housing, capital improvements and the repayment of debt.

Note 8: Fund Balances Reservations and Designations

Details of fund balance reservations by fund at June 30, 2007, are as follows:

Debt Capi1al Special Service Projects Revenue

Fund Balances Reserved for. Land held for resale $ $ 699,762 $ 4,511,238 Loans, notes and advances receivable 6;277, 132 4,212,674 Legally restricted debt service 2,078,771 2,035,580

Total $ 2,078,771 $ 6,976,894 $ 10,759,492

De1ails of fund balance designations by fund at June 30, 2007 are as follows:

Debt Capital Special Service Projects Revenue

Fund Balances Unreserved Designated for: Debt service $ 16,667,790 $ $ Continuing projects 30,963,642 Low and rroderate inoomehousing 8,146.895

Total $ 16,667,790 $ 30,963,642 $ 8,146,895

32


Note 9:

Note 10:

IV. OTHER DISCLOSURES

Transactions with the City of Brea

At June 30, 2007, amounts due from and due to the City of Brea were as follows:

Due From DJeTo

Low and 11/oderate Housing Fund -Project Nea AB $ 50 $

Project Fund • Proj ed Area AB 17,290 1,217,830 Nonmajor Governmental Fund 61,316

Total $ 17,340 $ 1,279, 146

Self-Insurance Program

In May 1987, the City became a member of the California Insurance Pool Authority (CIPA). CIPA, a consortium of 12 cities in Los Angeles County and Orange County, California, was established to pool resources, share risks, purchase excess insurance, and to share costs for professional risk management and claims adl)'linistration. ·

At June 30, 2007, \he Agency, through the City, was self-insured for workers' compensation, general liability and auto liability insurance. Coverage is provided for individual wqrkers' compensation claims and general auto liability claims in excess of $500,000 and $250,000, respectively. The coverage for general and auto liability extends to $20,000,000 per occurrence with a $20,000,000 annual pooled aggregate. Member agencies may be assessed the difference between funds available and the $20,000,000 annual pooled aggregate in proportion to their annual premium. Settled claims have not exceeded this commercial coverage in the past three years.

The Governing Board is comprised of one member from each participating city and is responsible for the selection of management and for the budgeting and financial management of Clf>A.

At the termination of the risk pool agreement, and after all claims have been settled, any excess or deficit will be divided among the cities in proportion of the aggregate amount of contribution made by each.

33

BRSA REDEVELOPMENT AGENCY

COMBINING PROJECT AREA BALANCE SHEET

ALL GOVERNMENTAL FUNOS JUNE 30, 2007

Project AB ProjectC

Debt Capital Special Debt

Service Projects Revenue Service

Low and

Tax Moderate Tax

Increment Project Housing lncrement ASSETS Casri and investments $ 12,732,788 $ 30,071, 113 $ 8,491,196 $ 2,870,810 Cash and investments with trustee 1,619,257 1,708,279 Receivables:

Accounts 44,454 4,503 Interest 554,408 Loens 3,058,306 Notes 1,228,130 1,965,391

Due from other governments 166.688 Due from City 17,290 50 Land held for resale 795,796 4,511,238 Allowance for decfine in value (96,034)

Total Assets $ 14,362,045 $ 32,616,167 $ 18,030,684 $ 4,745,m

LIABILITIES AND FUND BALANCES Liabilities:

Acc:ounts payable $ 237,435 $ 30,785 $ 13,831 $ Deposits from others 12,721 Due to City 1,217,830 Due to other governments 113,826 Deferred revenue 991,800

Total Llabllltles 237,436 1,248,616 1,018,362 113,826


Land held for resale 699,762 4,511,238 Loans receivable 1,228, 130 4,031,897 Debt service 454,200 1,799,324 1,624,571


Debt service 13,660,410 3,007,3110 Continuing projects 29,438,650 Low and moderate income housing 6,669,873

Total Fund Balances 14,114,610 31,366,542 17,012,332 4,631,951

Total Liabilities and Fund Balances $ 14,352,046 $ 32,616,157 $ 18,030,684 $ 4,745,777

34

3REA REDEVELOPMENT AGENCY

:OMBINING PROJECT AREA BALANCE SHEET

~LL GOVERNMENTAL FUNDS

JUNE 30, 2007

Project c

Capita I Special

Projects Revenue TOTALS

Low and Debt Capital Special

Moderate Service Projects Revenue

Project Housing Funds Funds Funds ~SSETS :ash and investments $ 1,543,232 $ 1,760,017 $ 15,603,598 $ 31,614,345 $10,251,213 :;ash and investments with trustee 3,327,536 Receivables: Accounts 1,528 44,454 6,031_ Interest 170,521 724,929 Loans 150,153 3,208,459 Notes 5,049,002 130,777 6,277, 132 2,096,168

Due from other governments 166,688 Due from City 17,290 50 Land held for resale 795,796 4,511,238 Allowance for dedine in value (96,034)

. Total Assets $ 6,762,765 $ 2,042,475 $ 19,097,822 $ 39,377,912 $ 20,073, 169

LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 5, 191 $ $ 237,435 $ 35,976 $ 13,831 Deposits from others 12,721 Due to City 13,049 48,267 1,230,879 48,267 Due to other governments 113,826 Deferred revenue 170,521 100, 153 170,521 1,091,953

Total Liabilities 188,761 148,420 361,261 1,437,376 1,166,772


Land held for resale 699,762 4,511,238 Loans receivable 5,049,002 180,777 6,277, 132 4,212,674 Debt service 236,256 2,078,771 2,035,580


Debt service 16,667,790 Continuing projects 1,524,992 30,963,642 Low and moderate income housing 1,477,022 8, 146,895

Total Fund Balances 6,573,994 1,894,055 18,746,561 37,940,636 18,906,387

Total Liabilities and Fund Balances $ 6,762,755 S 2,042,475 $ 19,097,822 $ 39,377,912 $ 20,073, 159

35


COMBINING PROJECT AREA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES ALL GOVERNMENTAL FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2007

36

REA REDEVELOPMENT AGENCY

OMBINING PROJECT AREA STATEMENT OF REVENUES,

XPENDITURES AND CHANGES IN FUND BALANCES LL GOVERNMENTAL FUNDS OR THE FISCAL YEAR ENDED JUNE 30, 2007

37

BREA REDEVELOPM!:NT AGENCY

COMPUTATION OF LOW AND MODERATE INCOME HOUSING FUNDS EXCESS/SURPLUS

Opening Fund Balance

Less Unavailable Amounts: Land held for resale Loans and notes receivable

Available Low end Moderate Income Housing Funds

Low and Moderate Housing Funds - All Project Areas

July 1, 2006

$ 17,313,136

$ (1, 174,804) (3,451,575)

(4,626,379)

12,686,757

Limitation (greater of $1,000,000 or four years set-aside) Set-Aside for last four years:

2006 - 2007 $ 2005 - 2006 4,877,912

2004 - 2005 · 4,913,249 2003 -2004 4,685,127 2002 - 2003 4,563,687

Tomi $ 19,039,975

Base Limitation $ 1,000,000

Greater amount 19,039,975

Computed Excess/Surplus None

38

Low and Moderate Housing Funds • All Project Area!

July 1, 2007

$ 18,906,387

$ (4,511,236) (5,304,627)

(9,815,865)

9,090,522

$ 4,700,000 4,877,912

4,913,249 4,685, 127

$ 19,176,288

$ 1,000,000

19,176,288

None

APPENDIX D

SUMMARY OF PRINCIPAL LEGAL DOCUMENTS

The following is a brief summary of the provisions of the Indentures of Trust and the Loan Agreements. Such summary is not intended to be definitive, and reference is made to the documents for the complete terms thereof.

DEFINITIONS

Except as otherwise defined in this summary, the terms previously defined in this Official Statement have the respective meanings previously given. In addition, the following terms have the following meanings when used in this summary:

'"Additional Revenues" means, as of the date of calculation, the amount of Tax Revenues or Housing Tax Revenues which, as shown in the report of an Independent Redevelopment Consultant, arc estimated to be receivable by the Agency within the Fiscal Year following the Fiscal Year in which such calculation is made as a result of increases in the assessed valuation of taxable property in the Project Arca due to either (a) construction which has been completed but which is not then reflected on the tax rolls, or (b) transfer of ownership or any other interest in real property which has been recorded but which is not then reflected on the tax rolls. For purposes of this definition, the term "increases in the assessed valuation" means the amount by which the assessed valuation of taxable property in the Project Arca is estimated to increase above the assessed valuation of taxable property in the Project Area (as evidenced in the written records of the County) as of the date on which such calculation is made.

"Agency Debt" means, with respect to any Loan, such Loan and all outstanding Parity Debt relating to such Loan. For purposes of the Tax-Exempt Housing Loan and the Taxable Housing Loan, the term "Agency Debt" means the Tax-Exempt Housing Loan and the Taxable Housing Loan and all outstanding Parity Debt relating thereto.

"Bond Counsel" means (a) Jones Hall, A Professional Law Corporation, or (b) any other attorney or firm of attorneys appointed by or acceptable to the Agency of nationally-recognized experience in the issuance of obligations the interest on which is cxcludablc from gross income for federal income tax purposes under the Tax Code.

"Bond Y car" means each twelve-month period extending from September 2 in one calendar year to September I of the succeeding calendar year, both dates inclusive; except that the first Bond Y car begins on the Closing Date and ends on September I, 2009.

"Business Day" means a day of the year, other than a Saturday or Sunday, on which banks arc not closed in the city in which the principal corporate trust office of the Trustee is located.

"Closing Date" means November 6, 2008, being the date of original issuance of the Bonds.

"Costs of Issuance" means all items of expense directly or indirectly payable by or reimbursable to the Agency relating to the authorization, issuance, sale and delivery of the Bonds, including but not limited to: printing expenses; rating agency fees; filing and recording fees; initial fees, expenses and charges of the Trustee and its counsel, including the Trustee's first annual administrative fee; fees, charges and disbursements of attorneys, financial advisors, accounting firms, consultants and other

D-1

professionals; fees and charges for preparation, execution and safekeeping of the Bonds; and any other cost, charge or fee in connection with the original issuance of the Bonds.

"County" means the County of Orange, a county duly organized and existing under the laws of the State of California.

"Event of Default" means an event of default under and as defined in the Indentures.

"Federal Securities" means: (a) any direct general obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America), the payment of principal of and interest on which arc unconditionally and fully guaranteed by the United States of America; and (b) obligations of any agency, department or instrumentality of the United States of America the timely payment of principal of and interest on which arc fully guaranteed by the United States of America.

"Fiscal Year" means any twelve-month period extending from July I in one calendar year to June 30 of the succeeding calendar year, both dates inclusive, or any other twelve-month period selected and designated by the Authority as its official fiscal year period.

"Housing Fund" means the low- and moderate-income housing fund established and held by the Agency under Section 33334.3 of the Redevelopment Law.

"Housing Tax Revenues" means all of the Tax Revenues which the Agency is obligated to deposit into the Housing Fund following the Closing Date under Section 33334.2 of the Redevelopment Law.

"Independent Redevelopment Consultant" means any consultant or firm of such consultants appointed by or acceptable to the Agency, and who, or each of whom: (a) is judged by the Agency to have experience in matters relating to the collection of Tax Revenues or Housing Tax Revenues, or otherwise with respect to the financing of redevelopment projects; (b) is in fact independent and not under the domination of the Agency; (cl docs not have any substantial interest, direct or indirect, with the Agency, other than as original purchaser of the Bonds or any Parity Debt; and (d) is not connected with the Agency as an officer or employee of the Agency, but who may be regularly retained to make reports to the Agency.

"Loan" means either the Non-Housing Loan, the Tax-Exempt Housing Loan or the Taxable Housing Loan. The term "Loans" means the Non-Housing Loan, the Tax-Exempt Housing Loan and the Taxable Housing Loan, collectively.

"Loan Default Event" means, with respect to any Loan, an event of default under and as defined in the related Loan Agreement.

"Loan Repayment Date" means, with respect to any Interest Payment Date, the fifth Business Day immediately preceding such Interest Payment Date.

"Loan Repayments" means, with respect to any Loan, the amounts payable as principal of and interest on such Loan. ·

"Maximum Annual Debt Service" means, as of the date of calculation, the maximum amount obtained by totaling, for the current or any future Bond Year, the sum of: (a) the principal amount of all outstanding Bonds maturing in such Bond Year, including the principal amount of any Tenn Bonds which arc subject to mandatory sinking fund redemption in such Bond Y car; and (b) the interest which

D-2

would be due during such Bond Y car on the aggregate principal amount of Bonds which would be outstanding in such period if' the Bonds arc retired as scheduled, but deducting and excluding from such aggregate principal amount the aggregate principal amount of Bonds no longer outstanding. In the case of Maximum Annual Debt Service on Agency Debt, such term means the maximum amount of principal of and interest on all outstanding Agency Debt coming due and payable in the current or any future Bond Year.

"Non-Housing Loan" means the Loan made by the Authority to the Agency in the aggregate principal amount of $13, 768,000 from a portion of the proceeds of the Series A Bonds, the proceeds of which arc required under the related Loan Agreement to be applied to finance programs, projects and activities of the Agency relating to the Redevelopment Project.

"Owner", when used with respect to any Bond, means the person in whose name the ownership of such Bond is registered on the Bond registration books of the Trustee.

"Parity Debt" means, with respect to any Loan, any loans, bonds, notes, advances or indebtedness payable from Tax Revenues or Housing Tax Revenues on a parity with such Loan.

"Parity Debt Documents" means, with respect to any Loan, the resolution, indenture of trust, trust agreement, loan agreement or other instrument authorizing the issuance of any Parity Debt under the related Loan Agreement.

"Permitted Investments" means any of the following which at the time of investment arc legal investments under the laws of the State of California for the moneys proposed to be invested therein:

(a) Federal Securities;

(b) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations arc backed by the full faith and credit of the United States of America (stripped securities arc only permitted if they have been stripped by the agency itself): (i) certificates of beneficial ownership of the Farmers Home Administration; (ii) Federal Housing Administration debentures; (iii) participation certificates of the General Services Administration; (iv) guaranteed mortgage-backed bonds or guaranteed passthrough obligations of the Government National Mortgage Association; (v) guaranteed Title XI financings of the U.S. Maritime Administration; and ( vi) project notes, local authority bonds, new communities debentures and U.S. public housing notes and bonds of the U.S. Department of Housing and Urban Development.

(c) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non-full faith and credit U.S. government agencies (stripped securities only as stripped by the agency itself): (i) senior debt obligations of the Federal Home Loan Bank System; (ii) participation certificates and senior debt obligations of the Federal Home Loan Mortgage Corporation; (iii) mortgagedbackcd securities and senior debt obligations of Fannie Mac; (iv) senior debt obligations of the Student Loan Marketing Association; (v) obligations of the Resolution Funding Corporation; and (vi) consolidated system-wide bonds and notes of the Farm Credit System.

(d) Money market funds registered under the Federal Investment Company Act of 1940, whose shares arc registered under the Federal Securities Act of 1933, and

D-3

which arc rated in the highest short-term rating category by S&P (such funds may include funds for which the Trustee, its affiliates, parent or subsidiaries provide investment advisory or other management services).

(c) Certificates of deposit (including those of the Trustee, its parent and its affiliates) secured at all times by collateral described in (a) or (b) above, which have a maturity not greater than one year from the date of investment and which are issued by commercial banks, savings and loan associations or mutual savings banks whose short-term obligations arc rated A or better by S&P, which collateral must be held by a third party and provided that the Trustee must have a perfected first security interest in such collateral.

(I) Certificates of deposit, savings accounts, deposit accounts or money market deposits (including those of the Trustee and its affiliates) which are fully insured by the Federal Deposit Insurance Corporation.

(g) Investment agreements with a financial institution the long-term debt or claims paying ability of which, or in the case of a guaranteed corporation the long-term debt, or, in the case of a monoline financial guaranty insurance company, claims paying ability, of the guarantor or the institution is rated at least A or better from S&P, by the terms of which the Trustee is permitted to withdraw the invested funds if the rating from S&P falls below A.

(h) Commercial paper rated A or better by S&P.

(i) Bonds or notes issued by any state or municipality which arc rated A or better by S&P.

U) Federal funds, deposit accounts or bankers acceptances with a maximum term of one year of any bank which an unsecured, uninsured and unguarantecd obligation rating of A or better by S&P.

(k) The Local Agency Investment Fund which is administered by the California Treasurer for the investment of funds belonging to local agencies within the State of California, provided for investment of funds held by the Trustee, the Trustee is entitled to make investments and withdrawals in its own name as Trustee.

(I) Repurchase agreements with a financial institution the long-term debt or claims paying ability of which, or, in the case of a guaranteed corporation the long-term debt, or, in the case of a monolinc financial guaranty insurance company, claims paying ability, of the guarantor or the institution is rated at least A or better from S&P; provided that: (i) the over-collatcralization is at 102%, computed weekly, consisting of such securities as described in this paragraph, items (a), (b) and (c); (ii) a third party custodian, the Trustee or the Federal Reserve Bank shall have possession of such obligations; (iii) the Trustee shall have perfected a first priority security interest in such obligations; and (iv) failure to maintain the requisite collateral percentage will require the Trustee to liquidate the agreement.

(m) Forward delivery or forward purchase agreements with underlying securities of the types described in (a), (b), (c) and (h) above.

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"Plan Limitations" means the limitations contained or incorporated in the Redevelopment Plan on (a) the aggregate principal amount of indebtedness payable from Tax Revenues which may be outstanding at any time, (b) the aggregate amount of taxes which may be divided and allocated to the Agency under the Redevelopment Plan, and (c) the period of time for repaying indebtedness payable from Tax Revenues.

"Qualified Reserve Fund Credit Instrument" means an irrevocable standby or direct-pay letter of credit or surety bond issued by a commercial bank or insurance company and deposited with the Trustee, provided that all of the following requirements arc met:

(a) at the time of issuance the long-term credit rating of such bank or insurance company is in the highest rating category by S&P, or the claims paying ability of such insurance company is rated in the highest rating category by A.M. Best & Company;

(b) such letter of credit or surety bond has a term of at least 12 months;

( c) such letter of credit or surety bond has a stated amount at least equal to the portion of the Reserve Requirement with respect to which funds arc proposed to be released; and

(d) the Trustee is authorized under the terms of such letter of credit or surety bond to draw thereunder an amount equal to any deficiencies which may exist from time to time in the related Reserve Account.

"Redevelopment Caw" means the Community Redevelopment Law of the State of California, constituting Part I of Division 24 of the Health and Safety Code of the State of California and the acts amcndatory thereof and supplemental thereto.

"Reserve Requirement" means an amount equal to the lesser of (i) S 1,855,968. 78 with respect to the Series A Bonds, or $202,500.00 with respect to the Series B Bonds, as applicable, or (ii) the amount of Maximum Annual Debt Service on all Bonds which arc outstanding under the related Indenture.

"Revenues" means, with respect to any series of Bonds: (a) all amounts payable by the Agency under the related Loan Agreements; (b) any proceeds of such series of Bonds originally deposited with the Trustee and all moneys deposited and held from time to time by the Trustee in the funds and accounts established under the related Indenture; and (c) income and gains with respect to the investment of amounts on deposit in the funds and accounts established under the related Indenture.

"S&P" means Standard & Poor's Corporation, its successors and assigns.

"Subordinate Debt" means, with respect to any Loan, any loans, advances or indebtedness issued or incurred by the Agency in accordance with the requirements of the related Loan Agreement, which arc either (a) payable from, but not secured by a pledge of or lien upon, the Tax Revenues or the Housing Tax Revenues, or (b) secured by a pledge of or lien upon the Tax Revenues or the Housing Tax Revenues which is subordinate to the pledge of and lien upon the Tax Revenues or the Housing Tax Revenues for the security of such Loan.

"Tax Code" means the Internal Revenue Code of I 986, as amended. Any reference to a provision of the Tax Code includes the applicable temporary and permanent regulations promulgated under or with respect to Section 103 and Sections 141 through 150, inclusive, of such Code.

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"Tax Revenues" means all taxes annually allocated to the Agency with respect to the Project Arca following the Closing Date under Article 6 of Chapter 6 ( commencing with Section 33670) of the Redevelopment Law and Section 16 of Article XVI of the Constitution of the State of California and as provided in the Redevelopment Plan, including all payments, subventions and reimbursements (if any) to the Agency specifically attributable to ad valorcm taxes lost by reason of tax exemptions and tax rate limitations. With respect to the Non-Housing Loan, "Tax Revenues" do not include amounts of such taxes which arc required to be paid to other public agencies under the Tax Sharing Agreement or the Tax Sharing Statutes, unless subordinated to the payment of debt service on the Non-Housing Loan or any related issue of Parity Debt.

"Tax Sharing Agreements" means, collectively, (a) that certain agreement entitled "Owner Participation Agreement No. I - Project Arca C", among the Agency, the City and the Brea-Olinda Unified School District dated November 6, 1979, as amended; (b) that certain agreement entitled "First Amended and Restated Agreement to Apply Tax Increment for the Acquisition and Construction of the Brea High School", among the Agency, the City and the Brea-Olinda Unified School District dated as of August I, 1986, as amended; and ( c) any other agreements entered into in accordance with the Loan Agreement rch1ting to the Non-Housing Loan, under which the Agency is obligated to pay or cause to be paid to other taxing agencies an amount which would otherwise constitute Tax Revenues.

"Tax Sharing Statutes" means the provisions of the Redevelopment Law, including but not limited to Sections 33607.5 and 33607.7 thcrcol; under which a taxing entity is entitled to receive any portion of the Tax Revenues by operation of such statutory provision.

"Taxable Housing Loan" means the Loan made by the Authority to the Agency in the aggregate principal amount of $2,025,000 from a portion of the proceeds of the Series B Bonds, the proceeds of which arc required under the related Loan Agreement to be applied to finance qualifying low- and moderate-income housing projects which arc not required to meet the requirements of the Tax Code pertaining to tax-exempt obligations.

"Tax-Exempt Housing Loan" means the Loan made by the Authority to the Agency in the aggregate principal amount of $5, 132,000 from a portion of the proceeds of the Series A Bonds, the proceeds ·of which are required under the related Loan Agreement to be applied to finance qualifying lowand moderate-income housing projects which arc required to meet the requirements of the Tax Code pertaining to tax-exempt obligations.

INDENTURES OF TRUST

Establishment of Funds and Accounts; Flow of Funds

Costs of Issuance Funds. A portion of the proceeds of each series of Bonds will be deposited on the Closing Date in the Costs of Issuance Funds which arc established and held by the Trustee under the respective Indentures. Amounts in a Costs of Issuance Fund will be disbursed to pay Costs of Issuance for the related series of Bonds from time to time upon receipt of written requests of the Authority. On January I, 2009, the Trustee shall transfer any amounts remaining in the Costs of Issuance Funds to the Agency for deposit in accordance with the respective Loan Agreements.

Revenue Funds: Deposit and Transfer of Amounts Therein. All Revenues described in clause (a) of the definition thereof will be deposited by the Trustee promptly upon receipt in the Revenue Funds which arc established and held by the Trustee under the respective Indentures. The Trustee will transfer from each Revenue Fund and deposit into the following respective accounts ( each of which the Trustee will establish and maintain within the Revenue Fund), the following amounts at the following times in the

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following order of priority, the requirements of each such account (including the making up of any deficiencies in any such account resulting from lack of Revenues sufficient to make any earlier required deposit) at the time of deposit to be satisfied before any transfer is made to any account subsequent in priority:

(i) lntere.,t Account. On or before each date on which the interest on the related series of Bonds is payable, the Trustee shall deposit in the Interest Account an amount required to cause the aggregate amount on deposit in the Interest Account to equal the amount of interest coming due and payable on such date on such Bonds. The Trustee shall apply amounts in the Interest Account solely for the purpose of paying the interest on such Bonds when due, including accrued interest on any Bonds redeemed prior to maturity. Any amounts on deposit in the Interest Account on the first day of any Bond Y car, to the extent not required to pay any interest then having come due and payable on the Outstanding Bonds, shall be transferred to the Revenue Fund or, at the election of the Agency, transferred to the Agency to be used for any lawful purposes of the Agency.

(ii) Priflcipal Accouflt. On or before each date on which the principal of the related series of Bonds is payable, the Trustee shall deposit in the Principal Account an amount required to cause the aggregate amount on deposit in the Principal Account to equal the aggregate amount of principal coming due and payable on such date on such Bonds, or the redemption price of such Bonds ( consisting of the principal amount thereof and any applicable redemption premiums) required to be redeemed on such date. The Trustee shall apply amounts in the Principal Account for the purpose of (i) paying the principal of the Bonds at the maturity thereof, or (ii) paying the principal of the Bonds upon the redemption thereof. All amounts on deposit in the Principal Account on the first day of any Bond Y car, to the extent not required to pay the principal of any outstanding Bonds then having come due and payable, shall be transferred to the related Revenue Fund or, at the election of the Agency, transferred to the Agency to be used for any lawful purposes of the Agency.

(iii) Re.serve Account. lf the amount on deposit in the Reserve Account for any series of Bonds at any time becomes less than the related Reserve Requirement, the Trustee will promptly notify the Agency of that fact. As provided in the Loan Agreements, promptly upon receipt of any such notice the Agency will transfer to the Trustee an amount sufficient to maintain the Reserve Requirement on deposit in the Reserve Account. The Trustee will withdraw and apply amounts in a Reserve Account for the purpose of making transfers to the related Interest Account and Principal Account, in that order of priority, on any date which the interest on or principal of such Bonds is due and payable, in the event of any deficiency at any time in any of such accounts, or at any time for the retirement of all such Bonds then Outstanding. So long as no Event of Default has occurred and is continuing, the Trustee will withdraw any amount in a Reserve Account in excess of the Reserve Requirement on (A) the first Business Day of the month preceding each Interest Payment Date and deposit such amount in the Interest Account, or (B) if earlier, on the day that the Bonds arc partially dcfcascd or redeemed, so long as the balance in the Reserve Account following such release is at least equal to the Reserve Requirement computed following such dcfcasancc or redemption.

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Reserve Account Surety Bond

As provided in the Loan Agreements, the Agency is authorized to cause a Qualified Reserve Account Credit Instrument to be deposited with the Trustee for the credit of a Reserve Account. Upon the deposit of a Qualified Reserve Account Credit Instrument with the Trustee, the Trustee shall withdraw from such Reserve Account and transfer to the Agency an amount equal to the amount which the Trustee is authorized to draw under such Qualified Reserve Account Credit Instrument. The Trustee shall comply with all documentation relating to a Qualified Reserve Account Credit Instrument as required to maintain such Qualified Reserve Account Credit Instrument in full force and effect and as required to receive payments thereunder in the event and to the extent required to make any payment when and as required under the rcl.itcd Indenture.

Investment of Funds

All moneys in any of the funds or accounts held by the Trustee under the Indentures will be invested by the Trustee solely in Permitted Investments as directed by the Authority in advance of the making of such investments. In the absence of any such direction of the Authority, the Trustee will invest any such moneys in Permitted Investments consisting of money market funds. Obligations purchased as an investment of moneys in any fund will be deemed to be part of such fund or account. All interest or gain derived from the investment of amounts in any of the funds or accounts established under the Indentures will be deposited in the fund or account from which such investment was made, except in the case of the Reserve Accounts as described above.

Covenants of the Authority

Payment of Bonds. The Authority will punctually pay or cause to be paid the principal and interest to become due in respect of all the Bonds, in strict confonnity with the tcnns of the Bonds and of the Indenture, but only out of the related Revenues and other assets pledged for such payment as provided in the Indentures. The Authority will not create, or permit the creation of, any pledge, lien, charge or other encumbrance upon the Revenues and other assets pledged or assigned under the Indentures while any of the Bonds arc outstanding, except the pledge and assignment created by the Indentures.

No Additional Obligations. The Authority covenants that no additional bonds, notes or other indebtedness will be issued or incurred which arc payable out of the Revenues in whole or in part. This covenant docs not preclude the issuance of Parity Debt by the Agency in accordance with the Loan Agreements.

Tax Covenants. The Authority covenants in the Series A Indenture not to take, nor permit nor suffer to be taken by the Trustee or otherwise, any action with respect to the proceeds of any of the Series A Bonds which would cause any of the Series A Bonds to be "arbitrage bonds" or "private activity bonds" within the meaning of the Tax Code. The Authority will cause to be calculated annually all excess investment earnings which arc required to be rebated to the United States of America under the Tax Code, and will cause all required amounts to be rebated from payments made by the Agency under the Loan Agreements relating to the Series A Bonds. No such covenants are made under the Series B Indenture with respect to the Series B Bonds.

Loan Agreements: Amendments Thereof The Trustee will promptly collect all amounts due from the Agency under the Loan Agreements and diligently enforce the rights of the Authority thereunder and for the enforcement of all of the obligations of the Agency thereunder.

The Authority and the Agency may at any time amend or modify a Loan Agreement, but only: (a) if the Authority, the Agency or the Trustee first obtains the written consent of the Owners of a majority in

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aggregate principal amount of the Bonds then outstanding to such amendment or modification; or (b) without the consent of any of the Bond Owners, if such amendment or modification is for any one or more of the following purposes:

(i) to add to the covenants and agreements of the Agency contained in Loan Agreements other covenants and agreements thereafter to be observed, or to limit or surrender any rights or power therein reserved to or conferred upon the Agency so long as such limitation or surrender of such rights or powers do not materially adversely affect the Owners of the Bonds in the opinion of Bond Counsel filed with the Authority and the Trustee;

(ii) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained in the Loan Agreements, or in any other respect whatsoever as the Agency may deem necessary or desirable, provided under any circumstances that such modifications or amendments do not materially adversely affect the interests of the Owners of the Bonds in the opinion of Bond Counsel filed with the Authority and the Trustee;

(iii) to amend any provision thereof relating to the Tax Code, to any extent whatsoever but only if and to the extent such amendment will not adversely affect the exclusion from gross income for federal income tax purposes of interest on any of the Bonds under the Tax Code, in the opinion of Bond Counsel filed with the Authority and the Trustee;

(iv) to make provisions for the deposit and application of any a Qualified Reserve Account Credit Instrument in the related Reserve Account; or

(v) to provide for the issuance of Parity Debt under and in accordance with the provisions of such Loan Agreement.

Nothing in the Indentures prevents the Agency and the Authority from entering into any amendment or modification of a Loan Agreement which solely affects a particular Bond or Bonds all of the Owners of which have consented to such amendment or modification.

Amendment of Indentures

The Indentures may be modified or amended at any time by a supplemental indenture with' the written consents of the Owners of a majority in aggregate principal amount of the Bonds then outstanding. No such modification or amendment may (a) extend the maturity of or reduce the interest rate on any Bond or otherwise alter or impair the obligation of the Authority to pay the principal, interest or redemption premiums (if any) at the time and place and at the rate and in the currency provided therein of any Bond without the express written consent of the Owner of such Bond, (b) reduce the percentage of Bonds required for the written consent to any such amendment or modification, or (c) without its written consent thereto, modify any of the rights or obligations of the Trustee.

The Indentures may also be modified or amended at any time by a supplemental indenture, without the consent of any Bond Owners, to the extent permitted by law, but only for any one or more of the following purposes:

(a) to add to the covenants and agreements of the Authority contained in the Indentures, other covenants and agreements thereafter to be observed, to pledge or

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assign additional security for the Bonds ( or any portion thereof), or to surrender any right or power therein reserved to or conferred upon the Authority;

(b) to cure any ambiguity, inconsistency or omission, or correct any defective provision, contained in the Indentures, or in any other respect whatsoever, as the Authority may deem necessary or desirable, provided that such amendment docs not materially adversely affect the interests of the Bond Owners in the opinion of Bond Counsel filed with the Authority and the Trustee;

(c) to modify, amend or supplement the Indentures in such manner as to permit the qualification of the Indentures under the Trust Indenture Act of I 939, as amended, or any similar federal statute hereafter in effect, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute;

(d) in the case of the Series A Indenture, to amend any provision relating to the Tax Code, to any extent whatsoever but only if and to the extent such amendment does not adversely affect the exclusion from gross income of interest on any of the Series A Bonds under the Tax Code, in the opinion of Bond Counsel filed with the Authority and the Trustee;

(c) to make provisions for the deposit and application of any a Qualified Reserve Account Credit Instrument in the related Reserve Account; or

(f) to facilitate the issuance of Parity Debt by the Agency under the Loan Agreements.

Events of Default

Events of Default Defined. The following events constitute Events of Default under each Indenture:

(a) Default in the due and punctual payment of the principal of any related Bond when and as the same shall become due and payable, whether at maturity as therein expressed, by proceedings for redemption, by declaration or otherwise.

(b) Default in the due and punctual payment of any installment of interest on any related Bond when and as such interest installment comes due.

(c) Failure by the Authority to observe and perform any of the covenants, agreements or conditions on its part contained in the Indenture or in the related series of Bonds, other than as referred to in the preceding clauses (a) and (b ), for a period of 60 days after written notice, specifying such failure and requesting that it be remedied has been given to the Authority by the Trustee; provided. however, that if in the reasonable opinion of the Authority the failure stated in such notice can be corrected, but not within such 60-day period, such failure shall not constitute an Event of Default if corrective action is instituted by the Authority within such 60-day period and diligently pursued until such failure is corrected.

(d) Certain events relating to bankruptcy or insolvency of the Authority.

(e) The occurrence of a Loan Default Event under any of the related Loan Agreements.

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Remedies. Upon the occurrence and during the continuance of any Event of Default with respect to a series of Bonds, the Trustee may, and at the written direction of the Owners of a majority in aggregate principal amount of such Bonds at the time outstanding shall, (a) upon notice in writing to the Agency, declare the principal of all of the Bonds then outstanding, and the interest accrued thereon, to be due and payable immediately, of (b) enforce any rights of the Trustee under or with respect to the Indenture. The Trustee is irrevocably appointed as trustee and lawful attorney-in-fact of the Owners of the Bonds for the purpose of exercising and prosecuting on their behalf such rights and remedies as may be available to such Owners under the provisions of the Bonds, the Indenture and applicable provisions of any law.

Application of Revenues and Other Funds After Default. All amounts received by the Trustee under any right given or action taken by the Trustee under the Indentures and the Loan Agreements will be applied by the Trustee in the following order upon presentation of the Bonds:

First, to the payment of any fees, costs and expenses incurred by the Trustee to protect the interests of the Owners of the Bonds; payment of the fees, costs and expenses of the Trustee (including fees and expenses of its counsel, including any allocated costs of internal counsel) incurred in and about the performance of its powers and duties under the Indentures and the payment of all fees, costs and expenses owing to the Trustee, together with interest on all such amounts advanced by the Trustee at the maximum rate permitted by law; and

Second, to the payment of the whole amount then owing and unpaid upon the Bonds for interest and principal, with interest on such overdue amounts at the respective rates of interest borne by those Bonds, and in case such moneys shall be insufficient to pay in full the whole amount so owing and unpaid upon the Bonds, then to the payment of such interest, principal and interest on overdue amounts without preference or priority among such interest, principal and interest on overdue amounts ratably to the aggregate of such interest, principal and interest on overdue amounts.

Limitation on Bond Owners' Right to Sue. No Owner of any Bond has the right to institute any suit, action or proceeding at law or in equity, for any remedy under the related Indenture, unless (a) such Owner has previously given to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of a majority in aggregate principal amount of all the related series of Bonds then outstanding have made written request upon the Trustee to exercise the powers hereinbefore granted or to institute such action, suit or proceeding in its own name; (c) said Owners have tendered to the Trustee indemnity reasonably acceptable to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee has refused or omitted to comply with such .request for a period of60 days after such written request have been received by, and said tender of indemnity has been made to, the Trustee; and (c) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Owners of a majority in aggregate principal amount of the related series of Bonds then outstanding.

Non-Waiver. A waiver of any Event of Default by the Trustee or any Bond Owner will not affect any subsequent default or impair any rights or remedies on the subsequent default. No delay or omission of the Trustee or any Owner of any of the Bonds to exercise any right or power accruing upon any Event of Default will impair any such right or power or be construed to be a waiver of any such Event of Default.

Power of Trustee to Control Proceedings. If the Trustee, upon the happening of an Event of Default, has taken any action, by judicial proceedings or otherwise, under its duties under the Indenture,

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whether upon its own discretion or upon the request of the Owners of a majority in aggregate principal amount of the Bonds then outstanding, it will have full power, in the exercise of its discretion for the best interests of the Owners of the Bonds, with respect to the continuance, discontinuance, withdrawal, compromise, settlement or other disposal of such action; provided, however, that the Trustee will not, unless there no longer continues an Event of Default, discontinue, withdraw, compromise or settle, or otherwise dispose of any litigation pending at law or in equity, if at the time there has been filed with it a written request signed by the Owners of a majority in aggregate principal amount of the outstanding Bonds opposing such discontinuance, withdrawal, compromise, settlement or other disposal of such litigation.

Discharge of Indenture

The Authority may pay and discharge the indebtedness on any or all of the outstanding Bonds of any series in any one or more of the following ways:

(a) by paying or causing to be paid the principal of and interest and redemption premium (if any) on such Bonds, as and when the same become due and payable;

(b) by irrevocably depositing with the Trustee, in trust, at or before maturity, money which, together with the amounts then on deposit with the Trustee in the funds and accounts provided for in the Indenture and the Loan Agreements, is fully sutlicicnt to pay such Bonds, including all principal, interest and redemption premium; or

(c) by irrevocably depositing with the Trustee or any other fiduciary, in trust, noncallable Federal Securities or other specified Permitted Investments in such amount as an independent certified public accountant dctcnnincs will, together with the interest to accrue thereon and moneys then on deposit with the Trustee in the funds and accounts provided for in the related Indenture and Loan Agreements, be fully sufficient to pay and discharge the indebtedness on such Bonds (including all principal, interest and redemption premiums) at or before their respective maturity dates.

Upon such payment, and notwithstanding that any Bonds have not been surrendered for payment, the pledge of the Revenues and other funds provided for in the Indenture with respect to such Bonds, and all other obligations of the Authority under the Indenture with respect to such Bonds, will cease and terminate, except only the obligation of the Authority to pay or cause to be paid to the Owners of such Bonds not so surrendered and paid all sums due thereon from amounts set aside for such purpose. Any funds thercatier held by the Trustee, which are not required for said purposes, will be paid over to the Authority.

LOAN AGREEMENTS

Terms of Loans; Payment of Principal and Interest

The principal and interest on the Loans arc payable by the Agency to the Trustee, as assignee of the Authority under the Indentures, in immediately available funds on each Loan Repayment Date. The amount of principal and interest coming due on the Tax-Exempt Housing Loan and the Non-Housing Loan on each Loan Repayment Date is equal to the aggregate amount of principal of and interest on the Series A Bonds coming due on the related Interest Payment Date. The amount of principal and interest coming due on the Taxable Housing Loan on each Loan Repayment Date is equal to the aggregate

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amount of principal of and interest on the Series B Bonds coming. due on the related Interest Payment Date.

Prepayment of Loans

The Loans arc subject to optional prepayment in whole, or in part in any integral multiple of SS,000, on any date on which the related series of Bonds is subject to optional redemption, from any available source of funds of the Agency, at a prepayment price corresponding to the redemption price of the Bonds to be redeemed from such prepayments.

Issuance of Parity Debt

The Agency may issue or incur Parity Debt under each Loan Agreement. subject to the following specific conditions which arc hereby made conditions precedent to the issuance and delivery of such Parity Debt:

(a) No Loan Default Event has occurred and is then continuing, and the Agency is otherwise in compliance with all covenants set forth in the related Loan Agreement and any Parity Debt Documents.

(b) The Tax Revenues or Housing Tax Revenues for the then current Fiscal Year, based on assessed valuation of property in the Project Arca as evidenced in the written records of the County, plus, if the Prior Loan Obligations arc no longer outstanding, at the option of the Agency any or all of the Additional Revenues, arc at least equal to 125% of Maximum Annual Debt Service on all outstanding related Agency Debt; provided, however, that (i) the requirements of this subsection (b) will not apply to any issue of Parity Debt all of the available proceeds of which arc applied to refund the related Loan or Parity Debt in whole or in part, provided that debt service savings arc realized as a result of such refunding, and (ii) debt service on any Parity Debt the proceeds of which arc deposited into an escrow fund meeting the requirements of subsection (d) will be disregarded for purposes of computing Maximum Annual Debt Service.

(c) The related Parity Debt Document must provide that:

(i) interest on such Parity Debt is payable on March I and September I in each year of the term of such Parity Debt except ·the first twelve-month period, during which interest may be payable on any March I or September I; and

(ii) the principal of such Parity Debt is payable on September I in any year.

(d) The proceeds of such Parity Debt may be deposited into an escrow fund from which amounts may not be released to the Agency unless the Tax Revenues or Housing Tax Revenues, as the case may be, for the most recent Fiscal Year (as evidenced in the written records of the County), plus at the option of the Agency any or all of the Additional Revenues, at least equal 125% of the amount of Maximum Annual Debt Service on all outstanding agency Debt.

(c) The issuance of such Parity Debt docs not cause the Agency to exceed any applicable Plan Limitations.

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Issuance of Subordinate Debt

The Agency may issue or incur Subordinate Debt in such principal amount as may be determined by the Agency, provided that the issuance of such Subordinate Debt docs not cause the Agency to exceed any applicable Plan Limitations.

Pledge and Deposit of Ta:< Revenues for Non-Housing Loan

The Non-Housing Loan is secured by a first pledge of and lien on all of the Tax Revenues. The Agency has previously established the Special Fund and is required to deposit all of the Tax Revenues in the Special Fund until such time (if any) during any Bond Y car as the amounts on deposit in the Special Fund equal the aggregate amounts required to be transferred to the Trustee in such Bond Y car under the related Loan Agreement and under the Parity Debt Documents. Any Tax Revenues received during such Bond Y car in excess of such amounts are released from the pledge and lien and may be used for any lawful purposes of the Agency. The Agency is obligated to withdraw from the Special Fund the following amounts at the following times and in the following order of priority:

(a) Interest and Principal Deposits. On or before each Loan Repayment Date, the Agency shall withdraw from the Special Fund and transfer to the Trustee an amount which, together with an allocable portion of the amounts then held on deposit in the Interest Account, the Principal Account and the Revenue Fund established under the Indenture, is equal to the aggregate amount of the Loan Repayment then due on the Non-Housing Loan.

(b) Reserve Account Deposits. If the Trustee notifies the Agency under an Indenture that the amount on deposit in the related Reserve Account is less than the Reserve Requirement, the Agency shall promptly withdraw from the Special Fund and transfer to the Trustee for deposit in the Reserve Account an amount equal to an allocable portion of such deficiency in the Reserve Account. No such transfer and deposit need be made to a Reserve Account so long as there is on deposit therein a sum at least equal to the related Reserve Requirement.

(c) Sumlus. Except as may be otherwise provided in any Parity Debt Documents, all Tax Revenues which arc received by the Agency during any Bond Y car in excess of the amounts required to be transferred to the Trustee in such Bond Y car under the foregoing provisions arc released from the pledge thereof and lien thereon. If for any reason whatsoever any amounts remain on deposit in the Special Fund on any September 2 after making all of the transfers theretofore required to be made under the preceding clauses (a) and (b) and under any Parity Debt Documents, the Agency may withdraw such amounts from the Special Fund, to be used for any lawful purposes of the Agency.

Pledge and Deposit of Housing Tax Revenues for Housing Loans

The Tax-Exempt Housing Loan and the Taxable Housing Loan arc secured by a first pledge of and lien on all of the Housing Tax Revenues. The Agency has previously established the Housing Fund and is required to deposit all of the Housing Tax Revenues in the Housing Fund until such time (if any) during any Bond Y car as the amounts on deposit in the Housing Fund equal the aggregate amounts required to be transferred to the Trustee in such Bond Year under the related Loan Agreements and the related Parity Debt Documents. Any Housing Tax Revenues received during such Bond Y car in excess of such amounts arc released from the pledge and lien and may be used for any lawful purposes of the

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Agency. The Agency is obligated to withdraw from the Special Fund the following amounts at the following times and in the following order of priority:

(a) Interest and Principal Deposits. On or before each Loan Repayment Date, the Agency shall withdraw from the Housing Fund and transfer to the Trustee an amount which, together with an allocable portion of the amounts then held on deposit in the Interest Account, the Principal Account and the Revenue Fund established under the Indenture, is equal to the aggregate amount of the Loan Repayment then due on the Tax-Exempt Housing Loan and the Taxable Housing Loan.

(b) Reserve Account Deposits. If the Trustee notifies the Agency that the amount on deposit in a Reserve Account is less than the Reserve Requirement for such Reserve Account, the Agency shall promptly withdraw from the Housing Fund and transfer to the Trustee for deposit in such Reserve Account an amount equal to an allocable portion of such deficiency in such Reserve Account. No such transfer and deposit need be made to a Reserve Account so long as there is on deposit therein a sum at least equal to the related Reserve Requirement.

Deposit of Qualified Reserve Account Credit Instrument

The Agency may at any time tender to the Trustee a Qualified Reserve Account Credit Instrument for the Reserve Requirement or any portion thereof. Upon receipt of a Qualified Account Fund Credit Instrument, the Trustee will withdraw from the related Reserve Account and transfer to the Agency an amount equal to the amount of such Qualified Reserve Account Credit Instrument. The Agency will deposit the amount so transferred to it in a separate fund to be applied for purposes which arc authorized under the Redevelopment Law and the Tax Code. The Agency is solely responsible for repayment of amounts due under any such Qualified Reserve Account Credit Instrument. Upon the expiration of any Qualified Reserve Account Credit Instrument, the Agency shall either (i) replace such Qualified Reserve Account Credit Instrument with a new Qualified Reserve Account Credit Instrument, or (ii) deposit or cause to be deposited with the Trustee an amount of funds equal to the Reserve Requirement, to be derived from the first available Tax Revenues or Housing Tax Revenues, as the case may be.

Other Covenants of the Agency

Limitation on Superior Debt. So long as a Loan remains unpaid, the Agency may not issue any bonds, notes or other obligations, enter into any agreement or otherwise incur any loans, advances or indebtedness, which arc in any case secured by a lien on all or any part of the Tax Revenues or Housing Tax Revenues securing such Loan, which lien is superior to or on a parity with the lien established for the security of such Loan, excepting only Parity Debt, Subordinate Debt or other obligations which arc permitted under the related Loan Agreement.

Books and Accounts, Financial Statements and Additional Information. The Agency shall keep, or cause to be kept, proper books of record and accounts, separate from all other records and accounts of the Agency and the City, in which complete and correct entries are made of all transactions relating to the Redevelopment Project, the Tax Revenues and the Housing Fund. Such books of record and accounts shall at all times during business hours be subject, upon prior written request, to the reasonable inspection of the Authority and the Trustee or their representatives authorized in writing.

Protection of Security and Rights. The Agency will preserve and protect the security of the Loans and the rights of the Trustee and the Bond Owners with respect to the Loans. From and after the Closing Date, the Loans will be incontestable by the Agency.

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Taxation of Leased Property. All amounts derived by the Agency as payments in lieu of Tax Revenues with respect to the lease of property for redevelopment will be treated as Tax Revenues and Housing Tax Revenues, as the case may be, for all purposes of the Loan Agreements.

Disposition of Property. The Agency will not participate in the disposition of any land or real property in the Project Arca to anyone which will result in such property becoming exempt from taxation because of public ownership or use or otherwise (except property dedicated for public right-of-way and except property planned for public ownership or use by the Redevelopment Plan in effect on the date of the Loan Agreements) if such disposition would have the effect of reducing the amount of Tax Revenues or Housing Tax Revenues to be received in the current or any future fiscal Y car below 125% of Maximum Annual Debt Service on all related Agency Debt.

Maintenance of Tax Revenues. The Agency will comply with all requirements of the Redevelopment Law to insure the allocation and payment to it of the Tax Revenues and the Housing Tax Revenues, including without limitation the timely filing of any necessary statements of indebtedness with appropriate officials of the County and the State of California. The Agency shall not amend the Redevelopment Plan or the Tax Sharing Agreement, or enter into any agreement with the County or any other governmental unit, and will not amend the Redevelopment Plan in a manner which causes additional Tax Revenues or the Housing Tax Revenues to be paid to taxing agencies under the Tax Sharing Statutes, if such action would have the effect of reducing the amount of Tax Revenues or Housing Tax Revenues to be received in the current or any future Fiscal Year below 125% of Maximum Annual Debt Service on all related Agency Debt. These provisions do not apply to any agreement with the County or with any other governmental or private entity which by its terms is subordinate to the pledge oC security interest in and lien on the Tax Revenues or Housing Tax Revenues, or which docs not obligate the Agency to pay any Tax Revenues or Housing Tax Revenues except to the extent such Tax Revenues or Housing Tax Revenues arc released from the pledge thereof, security interest therein and lien thereon for the security of the related Loan.

Compliance With Plan Limitations. The Agency will not take any action, including but not limited to the issuance of its bonds, notes or other obligations, which causes or which, with the passage of time, would cause any of the Plan Limitations to be exceeded or violated.

Payment of Expenses: Lien of Trustee. The Agency agrees to pay to the Trustee from time to time all compensation for all services rendered under the Loan Agreements and the Indentures. Upon the occurrence of a Loan Default Event, the Trustee will have a first lien on the funds held by it under the Indentures to secure the payment to the Trustee of all fees, costs and expenses, including reasonable compensation to its experts, attorneys and counsel incurred in declaring such event default and in exercising the rights and remedies granted to the Trustee under the related Loan Agreements.

Amendment of Loan Agreement. The Loan Agreement may only be amended as provided in the Indentures. Sec "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - Indentures - Covenants of the Authority - Loan Agreements; Amendments Thereof' herein.

Loan Default Events and Remedies

The following events constitute Loan Default Events under each of the Loan Agreements:

(a) failure by the Agency to pay the principal of or interest or prepayment premium (if any) on the related Loan or Parity Debt when due and payable.

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(b) Failure by the Agency to observe and perform any of the covenants, agreements or conditions on its part contained in the Loan Agreement or in any Parity Debt Document, other than as referred to in the preceding clause (a), for a period of 60 days after written notice specifying such failure and requesting that it be remedied has been given to the Agency by the Trustee; provided. however, that if in the reasonable opinion of the Agency the failure stated in such notice can be corrected, but not within such 60-day period, such failure will not constitute a Loan Default Event if the Agency institutes corrective action within such 60-day period and thereafter diligently pursues such action until the failure is corrected.

(c) Certain events relating to bankruptcy or insolvency of the Agency.

(d) The occurrence of an event of default with respect to Parity Debt.

If a Loan Default Event has occurred and is continuing under a loan Agreement, the Trustee may, and at the written direction of the Owners of a majority in aggregate principal amount of the outstanding Bonds the Trustee shall, (a) declare the principal of the related Loan, together with the accrued interest on all unpaid installments thereof, to be due and payable immediately, and upon any such declaration the same will become immediately due and payable, and (b) exercise any other remedies available to the Trustee in law or at equity. This provision, however, is subject to the condition that if, at any time after the principal of the related Loan has been so declared due and payable, and before any judgment or decree for the payment of the moneys due has been obtained or entered, the Agency deposits with the Trustee a sum sufficient to pay all installments of principal of such Loan matured prior to such declaration and all accrued interest thereon, with interest on such overdue installments of principal and interest at the net effective ralc !hen borne by the outstanding Bonds, and the reasonable expenses of the Trustee, and any and all other defaults known to the Trustee (other than in the payment of principal of and interest on the Loan due and payable solely by reason of such declaration) has been made good or cured to the satisfaction of the Trustee or provision deemed by the Trustee to be adequate has been made therefor, then the Owners of the majority in aggregate principal amount of the outstanding Bonds may, by written notice to the Trustee and the Agency, rescind and annul such declaration and its consequences.

A waiver of any default by the Trustee docs not affect any subsequent default or impair any rights or remedies on the subsequent default. No delay or omission of the Trustee to exercise any right or power accruing upon any default will impair any such right or power or will be construed to be a waiver of any such default or an acquiescence therein, and every power and remedy conferred upon the Trustee by the Redevelopment Law or by the Loan Agreements may be enforced and exercised from time to time and as o!tcn as may be deemed expedient by the Trustee.

The rights of the Trustee and the Bond Owners will be exercised proportionately with the rights of the owners of outstanding Parity Debt.

Discharge of Loan Agreements

If the Agency pays and discharges the entire indebtedness on a Loan in any one or more of the following ways:

(a) by paying or causing to be paid the principal of and interest and prepayment premiums (if any) on such Loan, as and when the same become due and payable;

(b) by irrevocably depositing with the Trustee, in trust, at or before maturity, cash in an amount which, together with the available amounts then on deposit in any of the funds and accounts established under the related Indenture or the related Loan

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Agreement, is fully sufficient to pay all principal of and interest and prepayment premiums (if any) on such Loan; or

(c) by irrevocably depositing with the Trustee or any other fiduciary, in trust, noncallablc Federal Securities in such amount as an independent certified public accountant determines will, together with the interest to accrue thereon and available moneys then on deposit in the funds and accounts established under the related Indenture or Loan Agreement, be fully sufficient to pay and discharge the indebtedness on such Loan (including all principal, interest and prepayment premiums) at or before maturity;

then, at the election of the Agency but only if all other amounts then due and payable under the related Loan Agreement has been paid or provision for their payment has been made, the pledge of and lien upon the Tax Revenues or Housing Tax Revenues, as the case may be, and all other obligations of the Trustee, the Authority and the Agency under the related Loan Agreement with respect to such Loan, will cease and terminate, except only the oh ligation of the Agency to pay or cause to be paid to the Trustee, from the amounts so deposited with the Trustee or such other fiduciary, all sums due with respect to such Loan and all expenses and costs of the Trustee.

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APPENDIX E

FORM OF BOND COUNSEL OPINIONS

Upon issuance and delive,y o( the Series A Bond,·, Jones Hall, A Professional Law Cmporation, Bond Counsel, proposes to render its.final apJJroving opinion in suhstanlial(v the.fO!hJ'lving.fhrm:

Brea Public Financing Authority Number One Civic Center Circle Brea, California 92821

[Delivery Date]

OPINION: Sl8,900,000 Brea Public Financing Authority 2008 Tax Allocation Revenue Bonds, Series A

Members of the Authority:

We have acted as bond counsel in connection with the delivery by the Brea Public Financing Authority (the "Authority") of S 18,900,000 aggregate principal amount of the bonds of the Authority designated the "Brea Public Financing Authority 2008 Tax Allocation Revenue Bonds, Series A" (the "Bonds"), under the provisions of Article 4 (commencing with Section 6584) of Chapter 5 of Division 7 of Title I of the Government Code of the State of California (the "Bond Law"), and under an Indenture of Trust dated as of November I, 2008 (the "Indenture"), between the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee, and a resolution of the governing body of the Authority adopted on January l 5, 2008, as amended. The proceeds of the Bonds have been applied by the Authority to make loans to the Brea Redevelopment Agency (the "Agency") under Loan Agreements each dated as of November I, 2008 (the "Loan Agreements") between the Authority and the Agency. We have examined the law and such certified proceedings and other papers as we deem necessary to render this opinion.

As to questions of fact material to our opinion, we have relied upon representations of the Authority and the Agency contained in the Indenture, the Loan Agreements and the certified proceedings, and upon other certifications furnished to us, without undertaking to verify the same by independent investigation.

Based upon our examination we arc of the opinion, under existing law, that:

I. The Authority is a joint powers authority duly organized and existing under the laws of the State of California, with power to enter into the Indenture and the Loan Agreements, to perform the agreements on its part contained therein and to issue the Bonds. The Indenture and the Loan Agreements have been duly authorized, executed and delivered by the Authority and constitute the legal, valid and binding obligations of the Authority enforceable against the Authority in accordance with their respective terms.

2. The Bonds constitute legal, valid and binding special obligations of the Authority enforceable in accordance with their terms and payable solely from the sources provided therefor in the Indenture.

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3. The Indenture establishes a valid lien on, pledge of and security interest in the Revenues (as that tern, is defined in the Indenture) and other funds pledged thereby for the security of the Bonds, in accordance with the terms of the Indenture.

4. The Agency is a public body, corporate and politic, duly organized and existing under the laws of the State of California, with power to enter into the Loan Agreements and to perform the agreements on its part contained therein. The Loan Agreements have been duly approved by the Agency and constitutes the legal, valid and binding obligations of the Agency enforceable against the Agency in accordance with their respective terms.

5. Interest on the Bonds is exempt from California personal income taxation.

6. Interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; it should be noted, however, that for the purpose of computing the alternative minimum tax imposed on such corporations (as defined for federal income tax purposes), such interest is taken into account in determining certain income and earnings. The opinions set forth in the preceding sentence arc subject to the condition that the Authority and the Agency comply with all requirements of the Internal Revenue Code of 1986 which must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The Authority and the Agency have covenanted in the Indenture, the Loan Agreements and other instruments relating to the Bonds to comply with each of such requirements, and the Authority and the Agency have full legal authority to make and comply with such covenants. Failure lo comply with certain of such requirements may cause the inclusion of interest on the Bonds in gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds. We express no opinion regarding other federal tax consequences arising with respect to the Bonds.

The rights of the owners of the Bonds and the enforceability of the Bonds, the Indenture and the Loan Agreements may be subject to bankruptcy, insolvency, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and their enforcement may be subject to the exercise of judicial discretion in accordance with general principles of equity.

Respectfully submitted,

Jones Hall, A Professional Law Corporation

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Upon issuance and de!iverv uf !he Series B Bondi·, Junes Hall. A Professional law Corpora/ion, Bond Counsel, proposes lo render ils.final approving opinion in subs!anlially !he.following.form:

Brea Public Financing Authority Number One Civic Center Circle Brea, California 92821

[Delivery Date]

OPINION: S2,025,000 Brea Public Financing Authority 2008 Taxable Tax Allocation Revenue Bonds, Series B

Members of the Authority:

We have acted as bond counsel in connection with the delivery by the Brea Public Financing Authority (the "Authority") of S2,025,000 aggregate principal amount of the bonds of the Authority designated the "Brea Public Financing Authority 2008 Taxable Tax Allocation Revenue Bonds, Series B" (the "Bonds"), under the provisions of Article 4 (commencing with Section 6584) of Chapter 5 of Division 7 of Title I of the Government Code of the State of California (the "Bond Law"), and under an Indenture of Trust dated as of November I, 2008 (the "Indenture"), between the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee, and a resolution of the governing body of the Authority adopted on January 15, 2008, as amended. The proceeds of the Bonds have been applied by the Authority to make a loan to the Brea Redevelopment Agency (the "Agency") under a Loan Agreement dated as of November I, 2008 (the "Loan Agreement") between the Authority and the Agency. We have examined the law and such certified proceedings and other papers as we deem necessary to render this opm1on.

As to questions of fact material to our op,mon, we have relied upon representations of the Authority and the Agency contained in the Indenture, the Loan Agreement and the certified proceedings, and upon other certifications furnished to us, without undertaking to verify the same by independent investigation.

Based upon our examination we arc of the opinion, under existing law, that:

L The Authority is a joint powers authority duly organized and existing under the laws of the State of California, with power to enter into the Indenture and the Loan A1c,>rcemcnt, to perform the agreements on its part contained therein and to issue the Bonds. The Indenture and the Loan Agreement have been duly authorized, executed and delivered by the Authority and constitute the legal, valid and binding obligations of the Authority enforceable against the Authority in accordance with their respective terms.

2. The Bonds constitute legal, valid and binding special obligations of the Authority enforceable in accordance with their terms and payable solely from the sources provided therefor in the Indenture.

3. The Indenture establishes a valid lien on, pledge of and security interest in the Revenues (as that term is defined in the Indenture) and other funds pledged thereby for the security of the Bonds, in accordance with the terms of the Indenture.

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4. The Agency is a public body, corporate and politic, duly organized and existing under the laws of the State of California, with power to enter into the Loan Agreement and to perform the agreements on its part contained therein. The Loan Agreement has been duly approved by the Agency and constitutes the legal, valid and binding obligations of the Agency enforceable against the Agency in accordance with its terms.

5. Interest on the Bonds is exempt from California personal income taxation.

The rights of the owners of the Bonds and the enforceability of the Bonds, the Indenture and the Loan Agreement may be subject to bankruptcy, insolvency, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and their enforcement may be subject to the exercise of judicial discretion in accordance with general principles of equity.

Respectfully submitted,

Jones Hall, A Professional Law Corporation

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APPENDIX F

FORM OF CONTINUING DISCLOSURE AGREEMENT

This Continuing Disclosure Agreement (the "Disclosure Agreement"), dated as of November I, 2008, is executed and delivered by the Brea Redevelopment Agency (the "Agency") and The Bank of New York Mellon Trust Company, N.A., as Trustee (the "Trustee") and in its capacity as Dissemination Agent hereunder in connection with the issuance by the Brea Public Financing Authority (the "Authority") of its $18,900,000 2008 Tax Allocation Revenue Bonds. Series A and $2,025,000 2008 Taxable Tax Allocation Revenue Bonds, Series B (together, the "Bonds"). The Bonds arc being issued pursuant to two Indentures, each dated as of November I, 2008 (the "Indentures"), by and between the Authority and the Trustee.

Proceeds of the Bonds will be used to make three loans to the Agency to finance and refinance redevelopment projects and activities in furtherance of the Agency's low and moderate income housing program benefiting the Project Area. The Bonds arc limited obligations of the Authority payable from and secured by Revenues under the Indentures. Revenues, with respect to each series of Bonds, consist of primarily repayment by the Agency with respect to the related Loan(s) and certain funds held under the applicable Indenture. The Loans arc limited obligations of the Agency payable from and secured by Tax Revenues or Housing Tax Revenues as provided in three separate Loan Agreements, each dated as of November I, 2008 (the "Loan Agreements"), by and between the Agency and the Authority.

SECTION I. Pumosc of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the Agency, the Dissemination Agent and the Trustee for the benefit of the Owners and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with Ruic 15c2-12(b)(5) promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934.

SECTION 2. Definitions. Except as defined in this Disclosure Agreement, capitalized terms used in this Disclosure Agreement have the terms ascribed to them in the Indentures, and if not in the Indentures, the Loan Agreements. The following capitalized terms shall have the meanings set forth below:

"Annual Report" shall mean any Annual Report provided by the Agency pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement.

"Beneficial Owner" shall mean any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal income tax purposes.

"Central Post Office" means the Internet-based filing system currently located at www.DisclosurcUSA.org, or such other similar filing system approved by the SEC.

"Disclosure Representative" shall mean the Director of Finance/Treasurer of the Agency or his or her dcsignce, or such other officer or employee as the Agency shall designate in writing to the Dissemination Agent and ihc Trustee from time to time.

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http://www.DisclosurcUSA.org

"Dissemination Agent" shall mean The Bank of New York Mellon Trust Company, N.A., acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the Agency and which has filed with the Trustee a written acceptance of such designation.

"Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure Agreement.

"National Repository" shall mean any Nationally Recognized Municipal Securities lnfonnation Repository for purposes of the Ruic. The National Repositories currently approved by the SEC arc set forth in the SEC website located at-http://www.scc.gov/consumcr/nnnsir.htm.

"Official Statement" shall mean the final Official Statement, dated October 22, 2008, relating to the Bonds.

"Participating Underwriter" shall mean Stone & Youngberg, LLC, as the original underwriter of the Bonds required to comply with the Ruic in connection with offering of the Bonds.

"Repository" shall mean each National Repository and each State Repository.

"Rule" shall mean Ruic 15c2-12(b)(5) adopted by the SEC under the Securities Exchange Act of 1934, as the same may be amended from time to time.

"SEC" shall mean the United States Securities and Exchange Commission.

"State" shall mean the State of California.

"State Repository" shall mean any public or private repository or entity designated by the State as a state repository for the purpose of the Ruic and recognized as such by the SEC. As of the date of this Disclosure Agreement, there is no State Repository.

SECTION 3. Provision of Annual Reports.

(a) The Agency shall, or, upon written direction, shall cause the Dissemination Agent to, not later than eight months after the end of the Agency's fiscal year, commencing with the report for fiscal year 2007-08, provide to each Repository (or to the Central Post Office pursuant to subsection (c) and Section 11 below) an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other infonnation as provided in Section 4 of this Disclosure Agreement; provided that the audited financial statements of the Agency 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 ifthcy are not available by that date. If the Agency's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(1).

(b) Not later than fifteen (I 5) Business Days prior to the date specified in subsection (a) for providing the Annual Report to Repositories, the Agency shall provide the Annual Report to the Dissemination Agent and the Trustee (if the Trustee is not the Dissemination Agent). Ifby such date, the Trustee has not received a copy of the Annual Report, the Trustee shall contact the Agency and the Dissemination Agent to dctcnninc if the Agency is in compliance with the first sentence of this subsection (b ). The Agency shall provide a written certification with each Annual Report furnished to the Dissemination Agent and the Trustee to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. The Dissemination Agent and the Trustee may conclusively rely upon such certification of the Agency and shall have no duty or obligation to review such Annual Report.

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http://www.scc.gov/consumer/nrmsir.htm

(c) If the Dissemination Agent is unable to verify that an Annual Report has been provided to Repositories by the date required in subsection (a), the Dissemination Agent shall send a notice to each Repository or to the Municipal Securities Rulemaking Board and the State Repository, if any, in substantially the form attached as Exhibit A.

( d) The Dissemination Agent shall:

(i) determine each year prior to the date for providing the Annual Report the name and address of each National Repository and the State Repository, if any; and

(ii) upon providing the Annual Report to the Repositories, file a report with the Agency and (if the Dissemination Agent is not the Trustee) the Trustee certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided and listing all the Repositories to which it was provided.

(c) In lieu of filing the Annual Report with each Repository in accordance with the subsection (a) of this Section 3, the Agency or the Dissemination Agent may file such Annual Report solely with the Central Post Office pursuant to Section 11.

SECTION 4. Content of Annual Reports. The Agency's Annual Report shall contain or include by reference the following:

(a) The audited financial statements of the Agency for the most recently completed 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 Agency's audited financial statements arc 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 format customarily used by the Agency, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available.

(b ). To the extent not contained in the audited financial statements filed pursuant to the preceding paragraph (a), the Annual Report should contain information showing:

(i) the total assessed value of the Project Arca and the total Tax Revenues allocated to the Agency from the Project Arca for the most recently completed fiscal year, in the form of Table 4 and the bottom portion of Table 6 of the Official Statement (under the section entitled "TAX REVENUES AND DEBT SERVICE COVERAGE");

(ii) to the extent that the Agency has actual knowledge of any pending appeals of the assessed valuation of any property in the Project Arca, the total number of the such appeals and the aggregate amount by which such assessed value would be reduced if all of such appeals were granted in the amounts requested;

(iii) the top ten assessces of taxable property within the Project Area (by total assessed value) for the most recently completed fiscal year in the form of Table 2 and Table 3 of the Official Statement (under the section entitled "PROJECT AREA"); and

(iv) the percent by which Tax Revenues have provided coverage for debt service on the Series A Non-Housing Loan (as defined in the Official Statement) and any debt payable on a parity with the Series A Non-Housing Loan; and

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(v) the percent by which Housing Tax Revenues have provided coverage for debt service on the Series A Housing Loan and the Series B Housing Loan ( each as defined in the Official Statement) and any debt payable on a parity with the such loans; and

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 Agency or related public entities, which have been submitted to each of the Repositories or the SEC. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The Agency shall clearly identify each such other document so included by reference.

SECTIONS. Reporting of Significant Events.

(a) Pursuant to the provisions of this Section S, the Agency shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material:

I. principal and interest payment delinquencies;

2. non-payment related defaults;

3. modifications to rights ofBondowners;

4. optional, contingent or unscheduled Bond calls;

S. dcfcasanccs;

6. rating changes;

7. adverse tax opinions or events adversely affecting the tax-exempt status of the Bonds;

8. unscheduled draws on debt service reserves reflecting financial difficulties;

9. unscheduled draws on credit enhancements reflecting financial difficulties;

I 0. substitution of credit or liquidity providers, or their failure to perform;

11. release, substitution or sale of property securing repayment of the Bonds.

(b) The Trustee shall, as soon as reasonably practicable after obtaining actual knowledge of the occurrence of any of the Listed Events, contact the Disclosure Representative, inform such person of the event, and request that the Agency promptly notify the Dissemination Agent in writing whether or not to report the event pursuant to subsection (f). For purposes of this Disclosure Agreement, "actual knowledge" of the occurrence of such Listed Events shall mean actual knowledge by the officer at the Corporate Trust Office of the Trustee with regular responsibility for the administration of matters related to the Indenture. The Trustee shall have no responsibility to determine the materiality of any of the Listed Events.

(c) Whenever the Agency obtains knowledge of the occurrence of a Listed Event, whether because of a notice from the Trustee pursuant to subsection (b) or otherwise, the Agency shall as soon as possible determine if such event would be material under applicable federal securities laws.

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( d) If the Agency has determined that knowledge of the occurrence of a Listed Event would be material under applicable federal securities laws, the Agency shall promptly notify the Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to subsection (f).

(c) If in response to a request under subsection (b), the Agency determines that the Listed Event would not be material under applicable federal securities laws, the Agency shall so notify the Dissemination Agent in writing and instruct the Dissemination Agent not to report the occurrence pursuant to subsection ( f).

(f) If the Dissemination Agent has been instructed by the Agency to report the occurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence with the Municipal Securities Rulemaking Board and the State Repository or the Repositories. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(4) and (5) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to Owners of affected Bonds pursuant to the Indenture. In lieu of filing the notice of Listed Event in accordance with the first sentence of this subsection (f), the Agency or the Dissemination Agent may file such notice of a Listed Event solely with the Central Post Office pursuant to Section 11.

SECTION 6. Termination of Reporting Obligation. The Agency's obligations under this Disclosure Agreement shall terminate upon the legal dcfcasancc, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the Agency shall give notice of such termination in the same manner as for a Listed Event under Section 5(1).

SECTION 7. Dissemination Agent. The Agency may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent may resign by providing thirty days written notice to the Agency. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the Agency pursuant to this Disclosure Agreement. If at any time there is not any other designated Dissemination Agent, the Trustee shall be the Dissemination Agent. The initial Dissemination Agent shall be The Bank of New York Mellon Trust Company, N.A.

SECTION 8. Amendment· Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Agency and the Trustee may amend this Disclosure Agreement (and the Dissemination Agent and the Trustee shall agree to any amendment so requested by the Agency, provided that neither the Trustee nor the Dissemination Agent shall be obligated to enter into any such amendment that modifies or increases its duties or obligations hereunder), and any provision of this Disclosure Agreement may be waived, provided that the following conditions are satisfied:

(a) If the amendment or waiver relates to the provisions of Sections 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 the Agency, or the type of business conducted;

(b) The undertaking, as amended or taking into account such waiver, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Bonds, after taking into account any amendments or intcrpr~tations of the Rule, as well as any change in circumstances; and

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(c) The amendment or waiver either (i) is approved by the Owners of the Bonds in the same manner as provided in the Indenture for amendments to the Indenture with the consent of Owners, or (ii) docs not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Owners of the Bonds.

In the event of any amendment or waiver of a provision of this Disclosure Agreement, the Agency 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 Agency. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 5(!), and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative fonn) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the forrncr accounting principles.

SECTION 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Agency from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the Agency chooses to include any inforrnation in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the Agency shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

SECTION I 0. Default. In the event of a failure of the Agency or the Trustee to comply with any provision of this Disclosure Agreement, the Trustee, at the written request of any Participating Underwriter or the Owners of at least 25 percent aggregate principal amount of Outstanding Bonds, shall (but only to the extent funds in an amount satisfactory to the Trustee have been provided to it or it has been otherwise indemnified to its satisfaction from any cost, liability, expense or additional charges and fees of the Trustee whatsoever, including, without limitation, fees and expenses of its attorneys), or any Owners 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 Agency or Trustee, as the case may be, to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the Agency, the Trustee or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel perforrnance.

SECTION 11. Use of Central Post Office. The Agency and the Dissemination Agent may satisfy their respective obligations hereunder to file any notice, document or inforrnation with a National Repository or State Repository by filing the same with any agent which is responsible for accepting notice, documents or inforrnation for transmission to such National Repository or State Repository, to the extent permitted by the SEC or its staff, the Central Post Office. For this purpose, perrnission shall be deemed to have been granted by the staff of the SEC if and to the extent the Central Post Office has received an interpretive letter, which has not been revoked, from the SEC staff to the effect that using the Central Post Office to transmit inforrnation to the National Repositories and the State Repositories will be treated for purposes of the Rule as if such inforrnation were transmitted directly to the National Repositories and the State Repositories.

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SECTION 12. Duties. Immunities and Liabilities of Trustee and Dissemination Agent. Article VI of the Indenture is hereby made applicable to this Disclosure Agreement as if this Disclosure Agreement were (solely for this purpose) contained in the Indenture, and the Trustee and the Dissemination Agent shall be entitled to the protections, limitations from liability and the indemnities afforded the Trustee thereunder. The Dissemination Agent and the Trustee shall have only such duties as are specifically set forth in this Disclosure Agreement, and the Agency agrees to indemnify and save the Trustee and the Dissemination Agent, their officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's or the Trustee's respective negligence or willful misconduct. The Dissemination Agent shall be paid compensation by the Agency for its services provided hereunder in accordance with its schedule of fees as amended from time to time and all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent and the Trustee shall have no duty or obligation to review any information provided to them hereunder and shall not be deemed to be acting in any fiduciary capacity for the Agency, the Bond Owners, or any other party. Neither the Trustee or the Dissemination Agent shall have any liability to the Bond Owners or any other party for any monetary damages or financial liability of any kind whatsoever related to or arising from this Disclosure Agreement. The obligations of the Agency under this Section shall survive resignation or removal of the Dissemination Agent or the Trustee and payment of the Bonds. Any company succeeding to all or substantially all of the Dissemination Agent's corporate trust business shall be the successor to the Dissemination Agent hereunder without the execution or filing of any paper or any further act.

SECTION 13. Notices. Any notices or communications to or among any of the parties to this Disclosure Agreement may be given as follows:

To the Agency:

To the Trustee and Dissemination Agent:

Brea Redevelopment Agency l Civic Center Circle Brea, California 92821 Attention: Financial Services Manager Fax: (714) 630-4484

The Bank of New York Mellon Trust Company, N.A. 700 Flower Street, Suite 500 Los Angeles, California 900 l 7 Attention: Corporate Trust Fax: (213) 630-6215

Any person may, by written notice to the other persons listed above, designate a different address or facsimile transmission number to which subsequent notices or communications should be sent.

SECTION 14. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Agency, the Trustee, the Dissemination Agent, the Participating Underwriter and Owners and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity.

SECTION 15. Countcmarts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

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IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of the date first written above.


Executive Director

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Trustee and Dissemination Agent

Authorized Officer

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EXHIBIT A

NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT

Name of Obligated Party:

Name of Bond Issues:

Date of issuance:

Brea Redevelopment Agency (the "Agency")

$ l 8,900,000 Brea Public Financing Authority 2008 Tax Allocation Revenue Bonds, Series A, and

$2,025,000 Brea Public Financing Authority 2008 Taxable Tax Allocation Revenue Bonds, Series B

[November 6], 2008

NOTICE IS HEREBY G !VEN that the Agency has not provided an Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Agreement, dated as of November I, 2008 with respect to such Bonds. [The Agency anticipates that the Annual Report will be filed by _____ .] Dated: _____ _

cc: Brea Redevelopment Agency

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., on behalf of the Agency

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APPENDIXG

DTC'S BOOK-ENTRY ONLY SYSTEM

The infi,rmation in this Appendix concerning DTC and DTC 's book-entry system has been obtained.from sources that the Au!horily believes to he reliable, and the Authority does not take any responsibility for the accuracy thereof The Authority gives no assurances that (i) DTC. the Direct and Indirect Participants or others will distribute payments of'principal, premium (if' any) or interest with respect to the Bonds paid to DTC or its nominee as, the registered owner, to the Beneficial Owners. (ii) such entities will distribute redemplion notices or other notices. to the Beneficial Owners, or (iii) an error or delay relating.thereto will not occur.

The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered certificate will be issued for the Bonds of the same series, maturity and interest rate, each in the aggregate principal amount of the Bonds of the same series, maturity and interest rate, and will be deposited with OTC.

DTC, the world's largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17 A of the Securities Exchange Act of 1934. OTC holds and provides asset servicing for over 2.2 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC's participants ("Direct Participants") deposit with OTC. OTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC, in tum, 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"). OTC has Standard & Poor's highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.

Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond ("Beneficial Owner") is in turn to be recorded on the Direct and Jndircct Participants' records. Beneficial Owners will not receive written confirmation from OTC 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 arc to be accomplished by entries made on the books of Direct and Indirect Participants acting on

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http://www.dtcc.com

http://www.dtc.org

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 OTC 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 OTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other OTC nominee do not effect any change in beneficial ownership. OTC 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 OTC 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.

Redemption notices shall be sent to OTC. lfless than all of the Bonds within a maturity are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

Neither OTC nor Cede & Co. (nor any other OTC 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, OTC mails an Omnibus Proxy to the Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Bonds arc credited on the record date (identified in a listing attached to the Omnibus Proxy).

Principal, premium (if any) and interest payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of OTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the Authority or the Trustee, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of OTC, the Trustee or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Principal, premium (if any) and interest payments with respect to the Bonds to Cede & Co. (or such other nominee as may be requested by an authorized representative of OTC) is the responsibility of the Authority or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of OTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

OTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to-the Authority or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered.

The Authority may decide to discontinue use of the system of book-entry transfers through OTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered to OTC.

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