NEW ISSUE -BOOK-ENTRY-ONLY RATINGS S&P: AAA ...cdiacdocs.sto.ca.gov/2007-1026.pdf18, 2007 (see...

NEW ISSUE - BOOK-ENTRY-ONLY RATINGS

S&P: AAA (Insured)

Fitch: AAA (Insured)

S&P: A (Underlying)

Fitch: A (Underlying)

(See "CONCLUDING INFORMATION - Ratings on the Bonds" herein)

In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, interest on the Bonds is exempt from California personal income taxes and subject, however to certain qualifications described herein, 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, although for the purpose of computing the alternative minimum tax imposed on certain corporations, such interest is taken into accoW1t in determining certain income and earnings. See "LEGAL.MATTERS-Tax Matters" herein.

RNERSIDE COUNTY

$12,770,000 COMMUNITY REDEVELOPMENT AGENCY

OF THE CITY OF PALM SPRINGS MERGED PROJECT NO. 1

TAX ALLOCATION BONDS, 2007 SERIES A

Dated: Date of Delivery

STATE OF CALIFORNIA



TAXABLE TAX ALLOCATION BONDS, 2007 SERIES B

Due: September 1 as Shown on the Inside Front Cover

The cover page contains certain information for quick reference only. It is not a summary of the issue. Potential investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. See "BONDHOLDERS' RISKS" herein for a discussion of special risk factors that should be considered in evaluating the inveshnent quality of the Bonds.

Proceeds from the sale of the Community Redevelopment Agency of the City of Palm Springs (the "Agency") Merged Project No. 1 Tax Allocation Bonds, 2007 Series A (the "Series A Bonds") will be used to (i) finance redevelopment activities of the Agency within, or of benefit to, the Agency's Merged Project No. 1 (the "Project Area"), (ii) capitalize interest on the Series A Bonds, (iii) satisfy a portion of the reserve requirement for the Bonds, and (iv) provide for the costs of issuing the Series A Bonds. Proceeds from the sale of the Agency's Merged Project No. 1 Taxable Tax Allocation Bonds, 2007 Series B (the "Series B Bonds") will be used to (i) finance redevelopment activities of the Agency within or of benefit to the Project Area, (ii) capitalize interest on the Series B Bonds, (iii) satisfy the remaining portion of the reserve requirement for the Bonds and (iv) provide for the costs of issuing the Series B Bonds. The Series A Bonds and the Series B Bonds are collectively referred to herein as the "Bonds."

The Series A Bonds will be issued under an Indenture of Trust, dated as of May 1, 2004 (the "2004 Indenture") and a First Supplement to Indenture of Trust (the "First Supplement") dated as of August 1, 2007, each by and between the Agency and The Bank of New York Trust Company, N.A., as Trustee (the ''Trustee"). The Series B Bonds will be issued under the 2004 Indenture and a Second Supplement to Indenture of Trust (the "Second Supplement") dated as of August 1, 2007, by and between the Agency and the Trustee (the 2004 Indenture as amended and supplemented by the First Supplement and the Second Supplement is referred to herein as the "Indenture"). The Bonds are special obligations of the Agency and are payable solely from and secured by a pledge of certain tax increment revenues of the Agency's Merged Project No. 1 on a parity with certain other obligations of the Agency as described herein, and a pledge of amounts in certain fimds and accounts established under the Indenture, as further discussed herein.

Interest on the Bonds is payable semiannually on March 1 and September 1 of each year, commencing March 1, 2008, until maturity or optional redemption thereof (see "THE BONDS - General Provisions" and "THE BONDS - Redemption" herein).

Payment of the principal of and interest on the Bonds when due will be insured by a financial guaranty insurance policy to be issued by Ambac Assurance Corporation simultaneously with the delivery of the Bonds. See "SOURCES OF PAYMENT FOR THE BONDS -Financial Guaranty Insurance" herein.

Ambac The Bonds are being issued for sale to the City of Palm Springs Financing Authority which is concurrently selling the Bonds to the Underwriter. The Bonds are being offered when, as and if issued, subject to the approval as to their legality by Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel. Certain legal matters will be passed on for the Agency by Fulbright & Jaworski L.L.P., Los Angeles, California, as Disclosure Counsel and by Woodruff, Spradlin & Smart, as Agency Counsel. It is anticipated that the Bonds will be available for delivery through the facilities of The Depository Trust Company on or about September 18, 2007 (see "APPENDIXH -BOOK-ENTRY-ONLY SYSTEM" herein).

The date of the Official Statement is September 7, 2007.

STONE & YOUNGBERG

$12,770,000

COMMUNITY REDEVELOPMENT AGENCY

OF THE CITY OF PALM SPRINGS

MERGED PROJECT NO. 1

TAX ALLOCATION BONDS,

2007 SERIES A

MATURITY SCHEDULE

(Base CUSIP®t 696660)

$2,715,000 Serial Bonds

Maturity Date Principal Interest Reoffering

Se11tember 1 Amount Rate Yield CUSIP®!

2017 $350,000 400% 4.05%

2018 340,000 4.125 4.20

2019 345,000 4.125 4.32

2020 345,000 4.25 4.42

2021 215,000 4.375 4.50

2022 200,000 4.375 4.55

2023 155,000 4.50 4.60

2024 615,000 4.50 4.65

2025 150,000 4.50 4.70

$5,000,000 5.00% Term Bond due September 1, 2030 Yield 4.75% * CUSIP®t EPO

$5,055,000 5.00% Term Bond due September 1, 2034 Yield 4.80% * CUSIP®t ET2

* Priced to the September I, 2017 Optional Call Date.

$1,910,000

COMMUNITY REDEVELOPMENT AGENCY

OF THE CITY OF PALM SPRINGS

MERGED PROJECT NO. 1

TAXABLE TAX ALLOCATION BONDS,

2007 SERIES B

MATURITY SCHEDULE

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ENS

$1,910,000 6.141 % Term Bond due September 1, 2034 Yield 6.141 % CUSIP®t 696660 EU9

t CUSIP® A registered trademark of the American Bankers Association. Copyright © 1999-2007 Standard & Poor's, a Division of The McGraw-Hill Companies, Inc. CUSIP® data herein is provided by Standard & Poor's CUSIP® Service Bureau. This data in not intended to create a database and does not serve in any way as a substitute for the CUSIP® Service Bureau. CUSIP® numbers are provided for convenience of reference only. Neither the Agency, the Financial Advisor nor the Underwriter takes any responsibility for the accuracy of such munbers.

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 referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not to be construed as a contract with the purchasers of the Bonds.

Estimates and Forecasts. When used in this Official Statement and in any continuing disclosure by the Agency in any press release and in any oral statement made with the approval of an authorized officer of the Agency or any other entity described or referenced herein, the words or phrases "will likely result," ''are expected to," ''will continue," ''is anticipated," ''estimate," ''project," ''forecast," ''expect," ''intend" and similar expressions identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances may occur. Therefore, there are likely to be differences between forecasts and actual results, and those differences may be material.

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 herein and if given or made, such other information or representation must not be relied upon as having been authorized by the Agency, the Financial Advisor 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 sale.

Information Subject to Change. The information and expressions of opinions herein are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Agency or any other entity described or referenced herein since the date hereof. All summaries of the documents referred to in this Official Statement are made subject to the provisions of such documents, respectively, and do not purport to be complete statements of any or all of such provisions.

Stabilization 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 page hereof 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 EXEMPTION FROM THE REGISTRATION REQUIREMENTS CONTAINED IN SUCH ACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.

COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF PALM SPRINGS PALM SPRINGS, CALIFORNIA

CITY COUNCIL/AGENCY BOARD MEMBERS

Ronald Oden, Mayor and Chairman Stephen Pougnet, Mayor Pro-Tem and Vice Chairman

Ginny Foat, Council Member and Agency Member Michael McCulloch, Council Member and Agency Member

Christopher Mills, Council Member and Agency Member

CITY AND AGENCY STAFF

David H. Ready, Esq., Ph.D., City Manager and Agency Executive Director Troy L. Butzlaff, Assistant City Manager, Administrative Services Thomas Wilson, Assistant City Manager, Development Services

Craig A. Graves, Director of Finance and Treasurer and Agency Treasurer John S. Raymond, Director of Community & Economic Development

James Thompson, City Clerk and Agency Secretary

PROFESSIONAL SERVICES

Bond Counsel Jones Hall

A Professional Law Corporation San Francisco, California

Disclosure Counsel Fulbright & Jaworski L.L.P

Los Angeles, California

City Attorney and Agency Counsel Woodruff, Spradlin & Smart

Orange, California

Financial Advisor Harrell & Company Advisors, LLC

Orange, California

Trustee The Bank of New York Trust Company, N.A.

Los Angeles, California

Underwriter Stone & Youngberg LLC Los Angeles, California

TABLE OF CONTENTS

INTRODUCTION ...................................................... 1 The Agency ............................................................... 1 The City .................................................................... 1 Security and Sources of Repayment ......................... 1 Purpose ...................................................................... 2 Tax Matters ............................................................... 2 Other Professional Services ...................................... 3 Offering of the Bonds ................................................ 3 Information Concerning this Official Statement ....... 3

THEBONDS ............................................................... 4 General Provisions .................................................... 4 Series A Bonds Redemption ...................................... 4 Series B Bonds Redemption ..................................... 5 General Redemption Provisions ................................ 8 Scheduled Debt Service on the Bonds ...................... 9 Issuance of Additional Debt .................................... 11

THE TINANCING PLAN ........................................ 12

SOURCES OF PAYMENT FOR THE BONDS ..... 13 Tax Allocation Financing ........................................ 13 Tax Revenues .......................................................... 13 Pledge of Tax Revenues .......................................... 14 Reserve Account ..................................................... 14 Capitalized Interest ................................................. 15 Financial Guaranty Insurance .................................. 16

THEAGENCY .......................................................... 19 Agency Powers ....................................................... 19 Redevelopment Plans .............................................. 20 Plan Limitations ...................................................... 21 Low and Moderate Income Housing ....................... 22 Agency Budgetary Process and Administration ...... 23 Agency Accounting Records and Financial

Statements ............................................................ 23

THE PROJECT AREA ............................................ 25 Description of the Project Area ............................... 25 Major Taxpayers ...................................................... 28 AssessmentAppeals ................................................ 28 Assessed Valuations and Tax Increment Revenues . 29 Tax Collections ....................................................... 30 Outstanding Indebtedness of the Project Area ........ 30

Projected Tax Revenues and Debt Service Coverage .............................................................. 31

BONDHOLDERS' RISKS ....................................... 33 Factors Which May Affect Tax Revenues ............... 33 State of California Fiscal Issues .............................. 36 Secondary Market ................................................... 36 Loss of Tax Exemption on Series A Bonds ............. 36

LEGALMATTERS .................................................. 37 Enforceability of Remedies ..................................... 37 Approval of Legal Proceedings .............................. 37 Tax Matters ............................................................. 37 Absence of Litigation ............................................. 38

CONCLUDING INFORMATION .......................... 38 Ratings on the Bonds .............................................. 38 The Financial Advisor ............................................. 38 Continuing Disclosure ............................................ 38 Underwriting ........................................................... 39 Additional Information ........................................... 39 References ............................................................... 39 Execution ................................................................ 39

APPENDIX A- SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE

APPENDIX B - PROJECTED TAX REVENUES

APPENDIX C - CITY OF PALM SPRINGS INFORMATION STATEMENT

APPENDIX D -AGENCY AUDITED TINANCIAL STATEMENTS FOR THE TISCAL YEAR ENDING JUNE 30, 2006

APPENDIX E-FORM OF CONTINUING DISCLOSURE CERTITICATE

APPENDIX F - FORM OF BOND COUNSEL OPINION

APPENDIX G- SPECIMEN TINANCIAL GUARANTY INSURANCE POLICY

APPENDIX H- BOOK-ENTRY-ONLY SYSTEM

[THIS PAGE INTENTIONALLY LEFT BLANK]

OFFICIAL STATEMENT



TAX ALLOCATION BONDS, 2007 SERIES A



TAXABLE TAX ALLOCATION BONDS, 2007 SERIES B

This Official Statement which includes the cover page and appendices (the "Official Statement") is provided to furnish certain information concerning the sale of the Community Redevelopment Agency of the City of Palm Springs Merged Project No. 1 Tax Allocation Bonds, 2007 Series A (the "Series A Bonds"), in the aggregate principal amount of $12,770,000 and the Merged Project No. 1 Taxable Tax Allocation Bonds, 2007 Series B (the "Series B Bonds," and together with the Series A Bonds, the "Bonds") in the aggregate principal amount of$1,910,000.

INTRODUCTION This Introduction contains only a brief descrzption of this issue and does not purport to be complete. The Introduction is sub;ect in all respects to more complete information in the entire Official Statement and the offering of the Bonds to potential investors is made only by means of the entire Official Statement and the documents summarized herein. Potential investors must read the entire Official Statement to obtain information essential to the making of an informed investinent decision.

The Agency

The Community Redevelopment Agency of the City of Palm Springs (the "Agency") is a public body, corporate and politic, existing under and by virtue of the Community Redevelopment Law of the State, constituting Part 1 of Division 24 ( commencing with Section 33000) of the Health and Safety Code of the State (the "Redevelopment Law"). The Agency was activated by the City Council of the City of Palm Springs on June 26, 1973 by the adoption of Ordinance No. 200. The City Council, at the same time, declared itself to be the members of the Agency and appointed the City Manager to be the Agency's Executive Director (see "THE AGENCY" herein).

The City

The City of Pahn Springs (the "City") was incorporated as a general law city on April 20, 1938 and became a charter city on July 12, 1994. The City operates under the Council/1\1anager form of government. The City encompasses 96.2 square miles in central Riverside County. It is approximately 108 miles east of downtown Los Angeles and 120 miles west of the Arizona border. Neighboring communities include Palm Desert, Rancho Mirage, Desert Hot Springs and Cathedral City (see "APPENDIX C - CITY OF PALM SPRINGS INFORMATION STATEMENT" herein).

Security and Sources of Repayment

The Bonds. The Series A Bonds are issued and secured under an Indenture of Trust, dated as of May 1, 2004 (the "2004 Indenture") as amended and supplemented by a First Supplement to Indenture of Trust (the "First Supplement") dated as of August 1, 2007, by and between the Agency and The Bank of New York Trust Company, N.A., as trustee (the "Trustee"). The Series B Bonds are be issued under the 2004 Indenture and a Second Supplement to Indenture of Trust (the "Second Supplement") dated as of August 1, 2007, by and between the Agency and the Trustee (the 2004 Indenture as amended and supplemented

1

by the First Supplement and the Second Supplement is referred to herein as the "Indenture") (see "APPENDIX A- SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE" herein).

The Agency has pledged to the repayment of the Bonds, and has secured by a lien on, all of the Tax Revenues on a parity basis with the Agency's Merged Project No. I Tax Allocation Refunding Bonds, 2004 Series A issued pursuant to the 2004 Indenture (the "2004 Bonds"). Tax Revenues means all of the Tax Increment Revenues, defined below, allocated to the Agency's Merged Project No. I (the "Project Area") excluding (i) tax increment revenues otherwise required to be deposited in the Agency's Low and Moderate Income Housing Fund, and (ii) amounts required to be paid pursuant to the Tax Sharing Agreements and Tax Sharing Statutes to the extent not subordinated to the payment of debt service on the Bonds and the 2004 Bonds, all as defined herein. Tax Increment Revenues consist of tax increment revenues receivable by the Agency with respect to the Project Area pursuant to Article 6 of Chapter 6 of the Redevelopment Law and Section 16 of Article XVI of the Constitution of the State of California and as provided in the Redevelopment Plans, including all payments, subventions and reimbursements (if any) to the Agency specifically attributable to ad valorem taxes lost by reason of tax exemptions and tax rate limitations. See "THE AGENCY - Low and Moderate Income Housing," "THE PROJECT AREA -Outstanding Indebtedness of the Project Area," "APPENDIX B - PROJECTED TAX REVENUES" and "BONDHOLDERS' RISKS" herein.

The Project Area. Merged Project No. I was created on May 31, 2000 pursuant to an amendment to the redevelopment plans for the Agency's Central Business District Redevelopment Project, North Palm Canyon Redevelopment Project, South Pahn Canyon Redevelopment Project, Ramon-Bogie Redevelopment Project, Oasis Redevelopment Project, Highland-Gateway Redevelopment Project and Redevelopment Project No. 9. See "THE PROJECT AREA" herein.

The Bonds are special obligations of the Agency. The Bonds do not constitute a debt or liability of the City of Palm Springs, the County of Riverside, the State of California or of any political subdivision thereof, other than the Agency. The Agency shall only be obligated to pay the principal of the Bonds, or the interest thereon, from the funds described herein, and neither the faith and credit nor the taxing power of the City of Palm Springs, the County of Riverside, the State of California or any of its political subdivisions is pledged to the payment of the principal of or the interest on the Bonds. The Agency has no taxing power.

Purpose

Proceeds from the sale of the Series A Bonds will be used to (i) fmance redevelopment activities of the Agency within, or of benefit to, the Project Area, (ii) capitalize interest on the Series A Bonds, (iii) satisfy a portion of the reserve requirement for the Bonds, and (iv) provide for the costs of issuing the Series A Bonds. Proceeds from the sale of the Series B Bonds will be used to (i) finance redevelopment activities of the Agency within or of benefit to the Project Area, (ii) capitalize interest on the Series B Bonds, (iii) satisfy the remaining portion of the reserve requirement for the Bonds, and ( iii) provide for the costs of issuing the Series B Bonds.

Tax Matters

In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California ("Bond Counsel"), interest on the Bonds is exempt from State of California personal income tax and under existing statutes, regulations, rulings and judicial decisions, and assuming certain representations and compliance with certain covenants and requirements described herein, the interest on the Series A Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations, although for the purpose of computing the alternative minimum tax imposed on certain corporations, such interest is taken into account in determining certain income and earnings. See "LEGAL MATTERS - Tax Matters" herein.

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Other Professional Services

The Bank of New York Trust Company, N.A. serves as trustee (the "Trustee") under the Indenture. The Trustee will act on behalf of the Bondholders for the purpose of receiving all moneys required to be paid to the Trustee, to allocate, use and apply the same, to hold, receive and disburse the Tax Revenues and other funds held under the Indenture, and otherwise to hold all the offices and perform all the functions and duties provided in the Indenture to be held and performed by the Trustee.

Harrell & Company Advisors, LLC, Orange, California, (the "Financial Advisor"), advised the Agency as to the fmancial structure and certain other fmancial matters relating to the Bonds and assisted the Agency with the preparation of this Official Statement. Fees payable to Bond Counsel, Disclosure Counsel and the Financial Advisor are contingent upon the sale and delivery of the Bonds.

The Agency's financial statements for the fiscal year ended June 30, 2006, attached hereto as "APPENDIX D" have been audited by Mayer Hoffman McCann P.C., An Independent CPA Firm, Irvine, California. The Agency's audited financial statements are public documents and are included within this Official Statement without the prior approval of the auditor. The auditor has not performed any post-audit of the fmancial condition of the Agency.

Offering of the Bonds

Authority for Issuance. The Bonds are to be issued and secured pursuant to the Indenture, as authorized by Resolution No. 1331 of the Agency adopted on July 18, 2007 and the Redevelopment Law.

Offering and Delivery of the Bonds. The Bonds are offered, when, as and if issued, subject to the approval as to their legality by Jones Hall, A Professional Law Corporation, San Francisco, California, as Bond Counsel. The Bonds are being sold to the City of Palm Springs Financing Authority, which will concurrently sell the Bonds to the Underwriter. It is anticipated that the Bonds, in book-entry form, will be available for delivery through the facilities of The Depository Trust Company on or about September 18, 2007.

Information Concerning this Official Statement

This Official Statement speaks only as of its date. The information set forth herein has been obtained by the Agency with the assistance of the Financial Advisor from sources which are believed to be reliable and such information is believed to be accurate and complete, but such information is not guaranteed as to accuracy or completeness, nor has it been independently verified and is not to be construed as a representation by the Financial Advisor, Bond Counsel, Disclosure Counsel or the Underwriter. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended as such and are not to be construed as representations of fact. The information and expressions of opinion herein are subject to change without notice and the delivery of this Official Statement shall not, under any circumstances, create any implication that there has been no change in the information or opinions set forth herein or in the affairs of the Agency since the date hereof.

The summaries and references contained herein with respect to the Indenture, the Bonds and other statutes or documents do not purport to be comprehensive or definitive and are qualified by reference to each such document or statute, and references to the Bonds are qualified in their entirety by reference to the form thereof included in the Indenture. Copies of the documents described herein may be obtained after delivery of the Bonds from the Trustee at 700 S. Flower Street, Suite 500, Los Angeles, California 90017. The City may be contacted at 3 200 E. Tahquitz Canyon Way, Pahn Springs, California 92262, www.palmsprings-ca.gov.

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http://www.palmsprings-ca.gov

THE BONDS

General Provisions

Interest on each Series of the Bonds is payable at the rates per annum set forth on the inside front cover page hereof. Interest on the Bonds will be computed on the basis of a year consisting of 360 days and twelve 30-day months.

Interest on the Bonds will be payable semiannually on March I and September I of each year ( each an "Interest Payment Date"), commencing March I, 2008, and will be calculated on the basis of a 360-day year composed of twelve 30-day months. Interest on the Bonds shall be payable from the Interest Payment Date next preceding the date of authentication thereof unless (i) a 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 shall bear interest from such Interest Payment Date, (ii) a Bond is authenticated on or before the first Record Date, in which event interest thereon shall be payable from the Closing Date, or (iii) interest on any Bond is in default as of the date of authentication thereof, in which event interest thereon shall be payable from the date to which interest has been paid in full, payable on each Interest Payment Date. Interest shall be paid on each Interest Payment Date to the persons in whose names the ownership of the Bonds is registered on the Registration Books at the close of business on the immediately preceding Record Date. Interest on any Bond which is not punctually paid or duly provided for on any Interest Payment Date shall be 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 shall be given to such Owner not less than ten (10) days prior to such special record date.

Interest on the Bonds shall be paid by check of the Trustee mailed by first class mail, postage prepaid, on each Interest Payment Date to the Owners of the Bonds at their respective addresses shown on the Registration Books as of the close of business on the preceding Record Date; provided, however, that at the written request of the Owner of Bonds in an aggregate principal amount of at least $1,000,000, which written request is on file with the Trustee prior to any Record Date, interest on such Bonds shall be paid on each succeeding Interest Payment Date by wire transfer in immediately available funds to such account within the United States of America as shall be specified in such written request. While the Bonds are held in the book-entry-only system of DTC, all such payments will be made to Cede & Co., as the registered owner of the Bonds. See "APPENDIX H - BOOK-ENTRY-ONLY SYSTEM." Principal of and redemption premium (if any) on the Bonds are payable in lawful money of the United States of America upon presentation and surrender of the Bonds at maturity or earlier redemption at the corporate trust office of the Trustee indicated in the Indenture.

Series A Bonds Redemption

Series A Bonds Optional Redemption. The Series A Bonds maturing on or before September I, 2017 shall not be subject to redemption prior to the respective stated maturities. The Series A Bonds maturing on or after September I, 2018 shall be subject to redemption in whole, or in part among maturities on such basis as shall be designated in a Request of the Agency filed with the Trustee, and in any case by lot within a maturity, on any date on or after September I, 2017, at the option of the Agency from any available source of funds, at a redemption price equal to one hundred percent (100%) of the principal amount thereof to be redeemed together with accrued interest thereon to the redemption date, without premmm.

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Series A Bonds Mandatory Sinking Acconnt Redemption. The Series A Bonds maturing on September 1, 2030 and September 1, 2034 are Term Bonds and shall also be subject to redemption, in part by lot, on September 1 in each year as set forth in the following tables, from Sinking Account payments made by the Agency pursuant to the Indenture, at a redemption price equal to the principal amount thereof to be redeemed together with accrued interest thereon to the redemption date, without premium, or in lieu thereof shall be purchased pursuant to the Indenture, in the aggregate principal amounts and on the dates as set forth in the following tables; provided, however, that if some but not all of such Term Series A Bonds have been redeemed pursuant to the optional redemption provisions above, the total amount of all future Sinking Account payments shall be reduced by the aggregate principal amount of such Term Series A Bonds so redeemed, to be allocated among such Sinking Account payments in integral multiples of $5,000 as determined by the Agency (written notice of which determination shall be given by the Agency to the Trustee).

Term Series A Bonds Maturing Septem her 1, 2030

Sinking Account Redemption Date

(September 1)

2026 2027 2028 2029 2030 (maturity)

Principal Amount To Be Redeemed or

Purchased

$ 900,000 950,000

1,000,000 1,050,000 1,100,000

Term Series A Bonds Maturing Septem her 1, 2034

Sinking Account Redemption Date

(September 1)

2031 2032 2033 2034 (maturity)

Principal Amount To Be Redeemed or

Purchased

$1,170,000 1,235,000 1,295,000 1,355,000

In lieu of redemption of the Series A Term Bonds, amounts on deposit in the Special Fund may also be used and withdrawn by the Agency at any time for the purchase of such Series A Term Bonds at public or private sale as and when and at such prices (including brokerage and other charges and including accrued interest) as the Agency may in its discretion determine. The par amount of any of such Series A Term Bonds so purchased by the Agency in any twelve-month period ending on July 1 in any year shall be credited towards and shall reduce the par amount of such Series A Term Bonds' Sinking Account Redemption required to be redeemed on the next succeeding September 1.

Series B Bonds Redemption

Series B Bonds Optional Redemption. The Series B Bonds shall be subject to redemption in whole, or in part (and if in part, pro rata among Owners, as described below) on any date, at the option of the Agency from any available source of funds, at a redemption price equal to the greater of:

( i) 100% of the principal amount of the Series B Bond to be redeemed; or

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(ii) the sum of the present values of the remaining scheduled payments of principal and interest on the Series B Bonds to be redeemed ( exclusive of interest accrued to the date fixed for redemption) discounted to the date of redemption on a semiannual basis ( assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (defmed below) plus 12.5 basis points, as calculated by the Agency;

plus in each case, accrued and unpaid interest on the Series B Bonds being redeemed to the date fixed for redemption.

The following definitions will apply to this "Redemption" section only:

"Comparable Treasury Issue" means, with respect to any redemption date for a particular Series B Bond, the United States Treasury security or securities selected by the Designated Investment Banker which has an actual or interpolated maturity comparable to the remaining average life of the Series B Bonds to be redeemed, and that would be utilized in accordance with customary fmancial practice in pricing new issues of debt securities of comparable maturity to the remaining average life of such Series B Bonds.

"Comparable Treasury Price" means, with respect to any redemption date for a particular Series B Bond, (i) if the Designated Investment Banker receives at least four Reference Treasury Dealer Quotations, the average of such quotations for such redemption date, excluding the highest and lowest Reference Treasury Dealer Quotations, or (ii) if the Designated Investment Banker obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such quotations.

"Designated Investment Banker" means one of the Reference Treasury Dealers appointed by the Agency.

"Reference Treasury Dealer" means an investment banking institution of national standing, specified by the Agency from time to time, that is a primary U.S. Government securities dealer in the City of New York ( each a "Primary Treasury Dealer"); provided, however, that if any of them ceases to be a Primary Treasury Dealer, the Agency will substitute another Primary Treasury Dealer.

"Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date for a particular Series B Bond, the average, as determined by the Designated Investment Banker, of the bid and asked prices for the Comparable Treasury Issue ( expressed in each case as a percentage of its principal amount) quoted in writing to the Designated Investment Banker by such Reference Treasury Dealer at 3 :30 p.m., New York City time, on the third business day preceding such redemption date.

"Treasury Rate" means, with respect to any redemption date, the rate per annum equal to the semiannual equivalent yield to maturity or interpolated maturity of the Comparable Treasury Issue, assuming that the Comparable Treasury Issues is purchased on the redemption date for a price equal to the Comparable Treasury Price.

Series B Bonds Mandatory Sinking Account Redemption. The Series B Bonds shall also be subject to redemption, in part pro rata among Owners, on September I in each year as set forth in the following table, from Sinking Account payments made by the Agency pursuant to the Indenture, at a redemption price equal to the principal amount thereof to be redeemed together with accrued interest thereon to the redemption date, without premium, or in lieu thereof shall be purchased pursuant to the Indenture, in the aggregate principal amounts and on the dates as set forth in the following table; provided, however, that if some but not all of such Term Series B Bonds have been redeemed pursuant to the optional redemption provisions above, the total amount of all future Sinking Account payments shall be reduced by the aggregate principal amount of such Term Series B Bonds so redeemed, to be allocated among such Sinking Account payments in integral multiples of $5,000 as determined by the Agency (written notice of which determination shall be given by the Agency to the Trustee).

6

Term Series B Bonds Matnring September 1, 2034

Sinking Account Principal Amount Redemption Date To Be Redeemed or

(September 1) Purchased

2017 $ 60,000 2018 65,000 2019 70,000 2020 75,000 2021 80,000 2022 80,000 2023 85,000 2024 90,000 2025 100,000 2026 105,000 2027 110,000 2028 115,000 2029 125,000 2030 130,000 2031 140,000 2032 150,000 2033 160,000 2034 (maturity) 170 000

"Pro rata" among Owners as referred to above means, with respect to the allocation of amounts to be redeemed, the application to such amounts of a fraction, the numerator of which is equal to the amount of Series B Bonds held by an Owner, and the denominator of which is equal to the total amount of Series B Bonds then Outstanding.

In lieu of redemption of the Term Bonds, amounts on deposit in the Special Fund may also be used and withdrawn by the Agency at any time for the purchase of such Term Bonds at public or private sale as and when and at such prices (including brokerage and other charges and including accrued interest) as the Agency may in its discretion determine. The par amount of any of such Term Series A Bonds or Term Series B Bonds so purchased by the Agency in any twelve-month period ending on July 1 in any year shall be credited towards and shall reduce the par amount of such Term Series B Bonds required to be redeemed on the next succeeding September 1.

7

General Redemption Provisions

Notice of Redemption, Rescission. The Trustee will mail (by first class mail, postage prepaid) notice of any redemption at least 30 but not more than 60 days prior to the redemption date, to the owners of each such Bonds designated for redemption at their respective addresses appearing on the registration books of the Trustee. Neither the failure to receive any such notice nor any defect therein will affect the sufficiency of the proceedings for the redemption of such Bonds. The notice of redemption must state the date of the notice, the redemption date, the redemption place and the redemption price and must designate the CUSIP numbers, the Bond numbers (if less than all Bonds of a maturity are to be redeemed) and the maturity or maturities (in the event of redemption of all of the Bonds of such maturity or maturities in whole) of the Bonds to be redeemed, and must require that such Bonds be then surrendered at the office of the Trustee identified in such notice for redemption at the redemption price, giving notice also that further interest on such Bonds will not accrue from and after the redemption date.

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

The actual receipt by the Bond owner of the notice of redemption shall not be a condition precedent to the redemption of the applicable Bond, and failure to receive notice shall not affect the validity of the proceedings for redemption of such Bond or the cessation of interest with respect to such Bond on the redemption date.

Partial Redemption. In the event only a portion of any Bond is called for redemption, then upon surrender of such Bond the Agency will execute and the Trustee will authenticate and deliver to the Owner thereof, at the expense of the Agency, a new Bond or Bonds of the same interest rate and maturity, of authorized denominations in an aggregate principal amount equal to the unredeemed portion of the Bond to be redeemed.

Effect of Redemption. The rights of an Owner to receive interest will terminate on the date, if any, on which the Bond is to be redeemed pursuant to a call for redemption. The Indentures contain no provisions requiring any publication of notice of redemption, and Bondholders must maintain a current address on file with the Trustee to receive any notice of redemption.

8

Scheduled Debt Service on the Bonds

The following is the scheduled annual Debt Service on the Series A Bonds.

Bond Year Ending

September I, 2008 September I, 2009 September I, 2010 September I, 2011 September I, 2012 September I, 2013 September I, 2014 September I, 2015 September I, 2016 September I, 2017 September I, 2018 September I, 2019 September I, 2020 September I, 2021 September I, 2022 September I, 2023 September I, 2024 September I, 2025 September I, 2026 September I, 2027 September I, 2028 September I, 2029 September I, 2030 September I, 2031 September I, 2032 September I, 2033 September I, 2034

Total

$

Principal

350,000.00 340,000.00 345,000.00 345,000.00 215,000.00 200,000.00 155,000.00 615,000.00 150,000.00 900,000.00 950,000.00

1,000,000.00 1,050,000.00 I, 100,000.00 I, 170,000.00 1,235,000.00 1,295,000.00 I 355 000.00

$12,770,000.00

Interest

$ 589,983.82 619,225.00 619,225.00 619,225.00 619,225.00 619,225.00 619,225.00 619,225.00 619,225.00 619,225.00 605,225.00 591,200.00 576,968.76 562,306.26 552,900.00 544,150.00 537,175.00 509,500.00 502,750.00 457,750.00 410,250.00 360,250.00 307,750.00 252,750.00 194,250.00 132,500.00 67 750.00

$13,328,433.84

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Annual Debt Service

$ 589,983.82 619,225.00 619,225.00 619,225.00 619,225.00 619,225.00 619,225.00 619,225.00 619,225.00 969,225.00 945,225.00 936,200.00 921,968.76 777,306.26 752,900.00 699,150.00

1,152,175.00 659,500.00

1,402,750.00 1,407,750.00 1,410,250.00 1,410,250.00 1,407,750.00 1,422,750.00 1,429,250.00 1,427,500.00 I 422 750.00

$26,098,433.84

The following is the scheduled annual Debt Service on the Series B Bonds.

Bond Year Ending Principal Interest Annual Debt Service

September I, 2008 $ $ 111,754.26 $ 111,754.26 September I, 2009 117,293.10 117,293.10 September I, 2010 117,293.10 117,293.10 September I, 2011 117,293.10 117,293.10 September I, 2012 117,293.10 117,293.10 September I, 2013 117,293.10 117,293.10 September I, 2014 117,293.10 117,293.10 September I, 2015 117,293.10 117,293.10 September I, 2016 117,293.10 117,293.10 September I, 2017 60,000.00 117,293.10 177,293.10 September I, 2018 65,000.00 113,608.50 178,608.50 September I, 2019 70,000.00 109,616.86 179,616.86 September I, 2020 75,000.00 105,318.16 180,318.16 September I, 2021 80,000.00 100,712.40 180,712.40 September I, 2022 80,000.00 95,799.60 175,799.60 September I, 2023 85,000.00 90,886.80 175,886.80 September I, 2024 90,000.00 85,666.96 175,666.96 September I, 2025 100,000.00 80,140.06 180,140.06 September I, 2026 105,000.00 73,999.06 178,999.06 September I, 2027 110,000.00 67,551.00 177,551.00 September I, 2028 115,000.00 60,795.90 175,795.90 September I, 2029 125,000.00 53,733.76 178,733.76 September I, 2030 130,000.00 46,057.50 176,057.50 September I, 2031 140,000.00 38,074.20 178,074.20 September I, 2032 150,000.00 29,476.80 179,476.80 September I, 2033 160,000.00 20,265.30 180,265.30 September I, 2034 170 000.00 10 439.70 180 439.70

Total $1,910,000.00 $2,349,534.72 $4,259,534.72

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Issuance of Additional Debt

Parity Bonds. The Agency may issue or incur Parity Debt on a parity with the Bonds and the 2004 Bonds, subject to the requirement of the Indenture and to the following specific conditions.

(a) The Agency shall be in compliance with all covenants set forth in the Indenture and all Supplemental Indentures.

(b) The Tax Revenues estimated to be received for the then current Fiscal Year and all future Fiscal Years (using the then current Fiscal Years' assessed valuation and applying the maximum percentage of Tax Revenues potentially payable under any of the Tax Sharing Agreements for the purpose of this calculation) shall be at least equal to one hundred twenty-five percent (125%) of Maximum Annual Debt Service on all Bonds, 2004 Bonds and Parity Debt which will be Outstanding immediately following the issuance of such Parity Debt.

( c) The Supplemental Indenture providing for the issuance of such Parity Debt shall provide that interest thereon shall not be payable on any dates other than March 1 and September 1, and principal thereof shall be payable on September 1 in any year in which principal is payable.

( d) The Supplemental Indenture providing for the issuance of such Parity Debt shall provide for the deposit into the Reserve Account of an amount required to cause the balance therein to equal the full amount of the Reserve Requirement ( which may be maintained in whole or in part in the form of a Qualified Reserve Account Credit Instrument as provided herein).

(e) The issuance of such Parity Debt shall not cause the Agency to exceed the applicable Plan Limit.

(f) The Agency shall deliver to the Trustee a Certificate of the Agency certifying that the conditions precedent to the issuance of such Parity Debt set forth in the Indenture have been satisfied.

The Agency may not issue any Parity Debt bearing interest at a variable rate.

Subordinate Debt. If the Agency is in compliance with all covenants set forth in the Indenture, the Agency may within the Plan Limit for any purpose issue or incur obligations having a lien on the Tax Revenues which is subordinate to the pledge of the Tax Revenues to the Bonds.

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THE FINANCING PLAN Under the provisions of the Indenture, the Trustee will receive the proceeds from the sale of the Bonds, together with other available funds and will apply them as shown below.

Source of Funds

Par Amount of Bonds Net Original Issue Premium Total Net Sources of Funds

Uses of Funds

Redevelopment Fund Underwriter's Discount

Capitalized Interest Account Costs oflssuance Fund

SOURCES OF PAYMENT FOR THE BONDS

Tax Allocation Financing

The Redevelopment Law and the California Constitution provide a method for fmancing and refinancing redevelopment projects based upon an allocation of taxes collected within a redevelopment project area. First, the assessed valuation of the taxable property in a project area, as last equalized prior to adoption of the redevelopment plan, is established and becomes the base roll. Thereafter, except for any period during which the assessed valuation drops below the base year level, the taxing agencies, on behalf of which taxes are levied on property within the project area, will receive the taxes produced by the levy of the then current tax rate upon the base roll. Taxes collected upon any increase in the assessed valuation of the taxable property in a project area over the levy upon the base roll may be pledged by a redevelopment agency to the repayment of any indebtedness incurred in financing the redevelopment project. Redevelopment agencies themselves have no authority to levy taxes on property and must look specifically to the allocation of taxes as indicated above.

Tax Revenues

As provided in each of the Redevelopment Plans for the constituent project areas (the constituent project areas are individually referred to herein as "Redevelopment Projects" and the project area resulting from the merger of the Redevelopment Projects is referred to herein as the "Project Area"), and pursuant to Article 6 of Chapter 6 of the Redevelopment Law, and Section 16 of Article XVI of the Constitution of the State, taxes levied upon taxable property in the Redevelopment Projects each year by or for the benefit of the State, for cities, counties, districts or other public corporations (collectively, the "Taxing Agencies") for fiscal years beginning after the effective date of each constituent Redevelopment Plan, will be divided as follows:

I. To Taxing Agencies: The portion of the taxes which would be produced by the rate upon which the tax is levied each year by or for each of said Taxing Agencies, as defmed herein, upon the total sum of the assessed value of the taxable property in the project area as shown upon the assessment roll used in connection with the taxation of such property by such Taxing Agency last equalized prior to the establishment of the project area will be allocated to, and when collected will be paid into, the funds of the respective Taxing Agencies as taxes by or for said Taxing Agencies; and

2. To the Agency: The portion of such levied taxes each year in excess of such amount will be allocated to, and when collected, will be paid into a special fund of the Agency to the extent necessary to pay indebtedness of the Agency.

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 that would otherwise be available to pay the Agency's obligations under the Indenture and thus reduce the amount of Tax Revenues available to pay the principal of, premium (if any) and interest on the Bonds and the 2004 Bonds. Likewise, broadened property tax exemptions could have a similar effect. See "BONDHOLDERS' RISKS" and "APPENDIX B - PROJECTED TAX REVENUES" herein.

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Pledge of Tax Revenues

The Tax Revenues are pledged to the payment of principal of and interest on the Bonds pursuant to the Indenture until the Bonds have been paid, or until moneys have been set-aside irrevocably for that purpose. The Trustee will covenant to exercise such rights and remedies as may be necessary to enforce the payment of the Tax Revenues when due under the Indenture and otherwise to protect the interests of the Bondholders in the event of default by the Agency.

The Bonds are limited obligations of the Agency. The Bonds do not constitute a debt or liability of the City of Palm Springs, the State of California or of any political subdivision thereof, other than the Agency. The Agency shall only be obligated to pay the principal of the Bonds, or the interest thereon, from the funds described herein, and neither the faith and credit nor the taxing power of the City of Palm Springs, the State of California or any of its political subdivisions is pledged to the payment of the principal of or the interest on the Bonds. The Agency has no taxing power.

The Agency has irrevocably granted a pledge of, lien on, and security interest in the Tax Revenues for the repayment of the Bonds on a parity with the 2004 Bonds. Tax Revenues consist of all of the Tax Increment Revenues allocated to the Agency's Project Area excluding (i) tax increment revenues otherwise required to be deposited in the Agency's Low and Moderate Income Housing Fund and (ii) amounts required to be paid pursuant to the Tax Sharing Agreements and Tax Sharing Statutes to the extent not subordinated to the payment of debt service on the Bonds and the 2004 Bonds. See "THE PROJECT AREA - Outstanding Indebtedness of the Project Area," "THE AGENCY - Low and Moderate Income Housing," "APPENDIX B - PROJECTED TAX REVENUES," and "BONDHOLDERS' RISKS" herein.

Reserve Account

The Trustee, in its capacity as trustee for the 2004 Bonds, has previously established a reserve account (the "Reserve Account") which is held by the Trustee in trust for the mutual benefit of the owners of the 2004 Bonds and any Parity Debt. Under the Indenture, the Reserve Account will also secure the Bonds. The cumulative amount required to be maintained in the Reserve Account and all subaccounts within the Reserve Account established for the 2004 Bonds, the Bonds and any Parity Debt, as of any date of calculation, is an amount equal to the lesser of Maximum Annual Debt Service on all outstanding 2004 Bonds, Bonds and Parity Debt, or the amount permitted by the Code (the "Reserve Requirement"). Subject to certain rights of the Trustee, in the event that the amount on deposit with the Trustee to pay principal and interest due on the 2004 Bonds, Bonds and Parity Debt is less than the full amount required for such purpose on the date due, the Trustee will withdraw from the Reserve Account and all subaccounts within the Reserve Account on a proportionate basis, and transfer to the Interest Account and the Principal Account, as required, the difference between the amount required to be on deposit in any or all of those accounts and the amount available on such date.

Currently, $1,037,200 is held in the Reserve Account under the Indenture for the 2004 Bonds, being an amount equal to Maximum Annual Debt Service on the 2004 Bonds. The portion of the Reserve Requirement allocable to the Bonds will be funded by crediting to a subaccount of the Reserve Account a Qualified Reserve Account Credit instrument in the form of the Surety Bond described below. Maximum Annual Debt Service with respect to the Bonds and the 2004 Bonds is $2,183,446, and occurs in the bond year ending September I, 2017. However, since the Surety Bond may only be drawn upon to pay debt service on the Bonds, the Surety Bond will be in the initial face amount equal to Maximum Annual Debt Service on the Bonds ($1,608,726.80). Accordingly, in the event of any deficiencies in the Interest Account and the Principal Account, funds will be available from the Reserve Account in an amount equal to the aggregate of Maximum Annual Debt Service on the Bonds and Maximum Annual Debt Service on the 2004 Bonds.

14

2007 Bonds Snrety Bond. The Indenture requires the establishment of a subaccount within the Reserve Account in an amount equal to $1,608,726.80. The Indenture authorizes the Agency to obtain a Qualified Reserve Account Credit in place of fully funding such subaccount. Accordingly, application has been made to Ambac Assurance Corporation ("Ambac Assurance") for the issuance of a Surety Bond for the purpose of funding such subaccount. The Bonds will only be delivered upon the issuance of such Surety Bond. The premium on the Surety Bond is to be fully paid at or prior to the issuance and delivery of the Bonds. The Surety Bond provides that upon the later of (i) one (I) day after receipt by Ambac Assurance of a demand for payment executed by the Trustee certifying that provision for the payment of principal of or interest on the Bonds when due has not been made or (ii) the interest payment date specified in the Demand for Payment submitted to Ambac Assurance, Ambac Assurance will promptly deposit funds with the Paying Agent sufficient to enable the Paying Agent to make such payments due on the Bonds, but in no event exceeding the Surety Bond Coverage, as defined in the Surety Bond.

Pursuant to the terms of the Surety Bond, the Surety Bond Coverage is automatically reduced to the extent of each payment made by Ambac Assurance under the terms of the Surety Bond and the Agency is required to reimburse Ambac Assurance for any draws under the Surety Bond with interest at a market rate. Upon such reimbursement, the Surety Bond is reinstated to the extent of each principal reimbursement up to but not exceeding the Surety Bond Coverage. The reimbursement obligation of the Agency is subordinate to the Agency's obligations with respect to the Bonds.

In the event the amount on deposit, or credited to such subaccount, exceeds the amount of the Surety Bond, any draw on the Surety Bond shall be made only after all the funds in such subaccount have been expended. In the event that the amount on deposit in, or credited to, such subaccount, in addition to the amount available under the Surety Bond, includes amounts available under a letter of credit, insurance policy, Surety Bond or other such funding instrument (the "Additional Funding Instrument"), draws on the Surety Bond and the Additional Funding Instrument shall be made on a pro rata basis to fund the insufficiency. The Indenture provides that such subaccount shall be replenished in the following priority: (i) principal and interest on the Surety Bond and on the Additional Funding Instrument shall be paid from first available Tax Revenues on a pro rata basis; (ii) after all such amounts are paid in full, amounts necessary to fund such subaccount to the required level, after taking into account the amounts available under the Surety Bond shall be deposited from next available Tax Revenues.

The Surety Bond does not insure against nonpayment caused by the insolvency or negligence of the Trustee or the Paying Agent.

In the event that Ambac Assurance were to become insolvent, any claims arising under the Surety Bond would be excluded from coverage by the California Insurance Guaranty Association, established pursuant to the laws of the State of California.

Capitalized Interest

There will be an initial deposit by the Agency to the Capitalized Interest Account from proceeds of each series of the Bonds. The amount deposited, together with investment earnings thereon, will be applied to pay interest on the Series A Bonds through and including March I, 2008 and to pay interest on the Series B Bonds through and including September I, 2009.

15

Financial Guaranty Insurance

Payment Pnrsnant to Financial Gnaranty Insnrance Policy

Ambac Assurance Corporation ("Ambac Assurance") has made a commitment to issue a fmancial guaranty insurance policy (the "Financial Guaranty Insurance Policy") relating to the Bonds, effective as of the date of issuance of the Bonds. Under the terms of the Financial Guaranty Insurance Policy, Ambac Assurance will pay to The Bank of New York, in New York, New York, or any successor thereto (the "Insurance Trustee"), that portion of the principal of and interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Obligor (as such terms are defined in the Financial Guaranty Insurance Policy). Ambac Assurance will make such payments to the Insurance Trustee on the later of the date on which such principal and/or interest becomes Due for Payment or within one business day following the date on which Ambac Assurance shall have received notice of Nonpayment from the Trustee. The insurance will extend for the term of the Bonds and, once issued, cannot be canceled by Ambac Assurance.

The Financial Guaranty Insurance Policy will insure payment only on stated maturity dates and on mandatory sinking fund instalhnent dates, in the case of principal, and on stated dates for payment, in the case of interest. If the Bonds become subject to mandatory redemption and insufficient funds are available for redemption of all outstanding Bonds, Ambac Assurance will remain obligated to pay the principal of and interest on outstanding Bonds on the originally scheduled interest and principal payment dates, including mandatory sinking fund redemption dates. In the event of any acceleration of the principal of the Bonds, the insured payments will be made at such times and in such amounts as would have been made had there not been an acceleration, except to the extent that Ambac Assurance elects, in its sole discretion, to pay all or a portion of the accelerated principal and interest accrued thereon to the date of acceleration (to the extent unpaid by the Obligor). Upon payment of all such accelerated principal and interest accrued to the acceleration date, Ambac Assurance's obligations under the Financial Guaranty Insurance Policy shall be fully discharged.

In the event the Trustee has notice that any payment of principal of or interest on a Bond that has become Due for Payment and that is made to a holder by or on behalf of the Obligor has been deemed a preferential transfer and theretofore recovered from its registered owner pursuant to the United States Bankruptcy Code in accordance with a final, non-appealable order of a court of competent jurisdiction, such registered owner will be entitled to payment from Ambac Assurance to the extent of such recovery if sufficient funds are not otherwise available.

The Financial Guaranty Insurance Policy does not insure any risk other than Nonpayment (as set forth in the Financial Guaranty Insurance Policy). Specifically, the Financial Guaranty Insurance Policy does not cover:

1. payment on acceleration, as a result of a call for redemption ( other than mandatory sinking fund redemption) or as a result of any other advancement of maturity;

2. payment of any redemption, prepayment or acceleration premium; and

3. nonpayment of principal or interest caused by the insolvency or negligence of the Trustee, Paying Agent or Bond Registrar, if any.

If it becomes necessary to call upon the Financial Guaranty Insurance Policy, payment of principal requires surrender of the Bonds to the Insurance Trustee together with an appropriate instrument of assigmnent so as to permit ownership of such Bonds to be registered in the name of Ambac Assurance to the extent of the payment under the Financial Guaranty Insurance Policy. Payment of interest pursuant to the Financial Guaranty Insurance Policy requires proof of holder entitlement to interest payments and an appropriate assignment of the holder's right to payment to Ambac Assurance.

16

Upon payment of the insurance benefits, Ambac Assurance will become the owner of the Bond, appurtenant coupon, if any, or right to payment of the principal of or interest on such Bond and will be fully subrogated to the surrendering holder's rights to payment.

In the event that Ambac Assurance were to become insolvent, any claims arising under the Financial Guaranty Insurance Policy would be excluded from coverage by the California Insurance Guaranty Association, established pursuant to the laws of the State of California.

Ambac Assurance Corporation

Ambac Assurance is a Wisconsin-domiciled stock insurance corporation regulated by the Office of the Commissioner of Insurance of the State of Wisconsin, and is licensed to do business in 50 states, the District of Columbia, the Territory of Guam, the Commonwealth of Puerto Rico and the U.S. Virgin Islands, with admitted assets of approximately $10,391,000,000 (unaudited) and statutory capital of approximately $6,730,000,000 (unaudited) as of June 30, 2007. Statutory capital consists of Ambac Assurance's policyholders' surplus and statutory contingency reserve. Standard & Poor 's Ratings Services, a division of The McGraw-Hill Companies, Inc., Moody's Investors Service, Inc. and Fitch Ratings have each assigned a triple-A financial strength rating to Ambac Assurance.

Ambac Assurance has obtained a ruling from the Internal Revenue Service to the effect that the insuring of an obligation by Ambac Assurance will not affect the treatment for federal income tax purposes of interest on such obligation and that insurance proceeds representing maturing interest paid by Ambac Assurance under policy provisions substantially identical to those contained in the Financial Guaranty Insurance Policy shall be treated for federal income tax purposes in the same manner as if such payments were made by the Obligor.

Ambac Assurance makes no representation regarding the Bonds or the advisability of investing in the Bonds and makes no representation regarding, nor has it participated in the preparation of, this Official Statement other than the information supplied by Ambac Assurance and presented under the heading "SOURCES OF PAYMENT FOR THE BONDS -Financial Guaranty Insurance."

Available Information

The parent company of Ambac Assurance, Ambac Financial Group, Inc. (the "Company"), is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "SEC"). These reports, proxy statements and other information can be read and copied at the SEC's public reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. The SEC maintains an internet site at : vvww.s:cc .. _gov that contains reports, proxy and information statements and other information regarding companies that file electronically with the SEC, including the Company. These reports, proxy statements and other information can also be read at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.

Copies of Ambac Assurance's fmancial statements prepared in accordance with statutory accounting standards are available from Ambac Assurance. The address of Ambac Assurance's administrative offices is One State Street Plaza, 19th Floor, New York, New York 10004, and its telephone number is (212) 668-0340.

17

Incorporation of Certain Docnments by Reference

The following documents filed by the Company with the SEC (File No. 1-10777) are incorporated by reference in this Official Statement:

I. The Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2006 and filed on March I, 2007;

2. The Company's Current Report on Form 8-K dated and filed on April 25, 2007;

3. The Company's Quarterly Report on Form 10-0 for the fiscal quarterly period ended March 31, 2007 and filed on May 10, 2007;

4. The Company's Current Report on Form 8-K dated and filed on July 25, 2007;

5. The Company's Current Report on Form 8-K dated and filed on August 3, 2007; and

6. The Company's Quarterly Report on Form 10-0 for the fiscal quarterly period ended June 30, 2007 and filed on August 9, 2007.

All documents subsequently filed by the Company pursuant to the requirements of the Exchange Act after the date of this Official Statement will be available for inspection in the same manner as described above in "Available Information."

18

THE AGENCY The Agency is a public body, corporate and politic, existing under and by virtue of the California Community Redevelopment Law, being Part I of Division 24 ( commencing with Section 33000) of the Health and Safety Code of the State (the "Redevelopment Law"). The Agency was activated in 1980, and is governed by a five-member board which consists of all members of the City Council. The Mayor of the City is appointed as the Chairman of the Agency. The Agency's members and term expiration dates are as follows:

Board Member Ronald Oden, Mayor Stephen Pougnet, Mayor Pro Tern Ginny Foat Michael McCulloch Christopher Mills

Term Expires November 2007 November 2007 November 2009 November 2007 November 2009

The City performs certain general administrative functions for the Agency. The City Manager serves as the Agency's Executive Director and the City's Finance Director and Treasurer serves as Agency Treasurer. The costs of such functions, as well as additional services performed by City staff are allocated annually to the Agency. The Agency reimburses the City for such allocated costs out of available Tax Increment Revenues. Such reimbursement is subordinate to any outstanding bonds, loans and other indebtedness of the Agency. Current City Staff assigned to administer the Agency include:

David H. Ready, Esq., Ph.D., City Manager and Agency Executive Director Troy L. Butzlaff, Assistant City Manager, Administrative Services Thomas Wilson, Assistant City Manager, Development Services

Craig A. Graves, Director of Finance and Treasurer and Agency Treasurer John S. Raymond, Director of Community & Economic Development

James Thompson, City Clerk and Agency Secretary

Agency Powers

All powers of the Agency are vested in its members. Pursuant to the Redevelopment Law, the Agency is a separate public body and exercises governmental functions, including planning and implementing the Project Area.

The Agency may exercise the right to issue or incur loans, advances or other indebtedness for authorized purposes and to expend their proceeds, and the right to acquire, sell, rehabilitate, develop, administer or lease property. The Agency may demolish buildings, clear land and cause to be constructed certain improvements, including but not limited to streets, sidewalks, sanitary sewers, park and recreational facilities, airport improvements and utilities, and can further prepare for use as a building site any real property which it owns or administers. The Agency may, from any funds made available to it for such purposes, and subject to certain conditions, pay for all or part of the value of land and the cost of buildings, facilities or other improvements to be publicly owned and operated. The Agency may not construct or develop buildings, with the exception of public buildings and housing, and must sell or lease cleared property which it acquires within a redevelopment project for redevelopment in conformity with a particular redevelopment plan, and may further specify a period within which such redevelopment must begin and be completed. The Agency currently possesses power of eminent domain with respect to all non-residential property in all component redevelopment projects.

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Redevelopment Plans

Under the Redevelopment Law the governing board is required to adopt, by ordinance, a redevelopment plan for each redevelopment project. A redevelopment agency may only undertake those activities within a redevelopment project specifically authorized in the adopted redevelopment plan. A redevelopment plan is a legal document, the content of which is largely prescribed in the Redevelopment Law rather than a "plan" in the customary sense of the word. The general objectives of the Agency's Redevelopment Plans are to encourage investment in the project areas by the private sector. The Redevelopment Plans provide for the acquisition of property, the demolition of buildings and improvements, the relocation of any displaced occupants, and the construction of streets, sanitary sewers, park and recreational facilities, airport improvements, parking facilities, utilities and other public improvements. The Redevelopment Plans also allow the redevelopment of land by private enterprise, the rehabilitation of structures, the rehabilitation or construction of low and moderate income housing, and participation by owners and the tenants of properties in the project areas.

Constituent Project Areas Com prising Merged Project No. 1

The City Council approved and adopted the Redevelopment Plan for the Central Business District Redevelopment Project on July 11, 1973. It was subsequently amended on November 11, 1986 to add certain financial limitations, on December 21, 1994 and on December 15, 1999 to add limitations prescribed by AB 1290 and AB 1342 (see "Plan Limitations" below), on May 31, 2000 to merge the Redevelopment Project with six of the Agency's other redevelopment projects to form Merged Project No. I and on May 5, 2004 to eliminate the limitation on incurring debt pursuant to the provisions of SB 211 and to extend the Redevelopment Plan and the ability to collect tax increment revenue by one additional year pursuant to the provisions of SB 1045 (see "Plan Limitations" below).

The City Council approved and adopted the Redevelopment Plan for the South Palm Canyon Redevelopment Project on November 30, 1983. It was subsequently amended on December 21, 1994 and on December 15, 1999 to add limitations prescribed by AB 1290 and AB 1342, on May 31, 2000 to merge the Redevelopment Project with six of the Agency's other redevelopment projects to form Merged Project No. I and on May 5, 2004 to eliminate the limitation on incurring debt pursuant to the provisions of SB 211 and to extend the Redevelopment Plan and the ability to collect tax increment revenue by one additional year pursuant to the provisions of SB 1045.

The City Council approved and adopted the Redevelopment Plan for the Ramon-Bogie Redevelopment Project on November 30, 1983. It was subsequently amended on December 21, 1994 and on December 15, 1999 to add limitations prescribed by AB 1290 and AB 1342, on May 31, 2000 to merge the Redevelopment Project with six of the Agency's other redevelopment projects to form Merged Project No. I and on May 5, 2004 to eliminate the limitation on incurring debt pursuant to the provisions of SB 211 and to extend the Redevelopment Plan and the ability to collect tax increment revenue by one additional year pursuant to the provisions of SB 1045.

The City Council approved and adopted the Redevelopment Plan for the Oasis Redevelopment Project on July 10, 1984. It was subsequently amended on December 21, 1994 and on December 15, 1999 to add limitations prescribed by AB 1290 and AB 1342, on May 31, 2000 to merge the Redevelopment Project with six of the Agency's other redevelopment projects to form Merged Project No. I and on May 5, 2004 to eliminate the limitation on incurring debt pursuant to the provisions of SB 211 and to extend the Redevelopment Plan and the ability to collect tax increment revenue by one additional year pursuant to the provisions of SB 1045.

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The City Council approved and adopted the Redevelopment Plan for the North Palm Canyon Redevelopment Project on September 19, 1984. It was subsequently amended on December 21, 1994 and on December 15, 1999 to add limitations prescribed by AB 1290 and AB 1342, on May 31, 2000 to merge the Redevelopment Project with six of the Agency's other redevelopment projects to form Merged Project No. I and on May 5, 2004 to eliminate the limitation on incurring debt pursuant to the provisions of SB 211 and to extend the Redevelopment Plan and the ability to collect tax increment revenue by one additional year pursuant to the provisions of SB 1045.

The City Council approved and adopted the Redevelopment Plan for the Highland-Gateway Redevelopment Project on November 20, 1984. It was subsequently amended on December 21, 1994 and on December 15, 1999 to add limitations prescribed by AB 1290 and AB 1342, on May 31, 2000 to merge the Redevelopment Project with six of the Agency's other redevelopment projects to form Merged Project No. I and on May 5, 2004 to eliminate the limitation on incurring debt pursuant to the provisions of SB 211 and to extend the Redevelopment Plan and the ability to collect tax increment revenue by one additional year pursuant to the provisions of SB 1045.

The City Council approved and adopted the Redevelopment Plan for Redevelopment Project No. 9 on December 29, 1988. It was subsequently amended on December 21, 1994 to add limitations prescribed by AB 1290, on May 31, 2000 to merge the Redevelopment Project with six of the Agency's other redevelopment projects to form Merged Project No. I and on May 5, 2004 to eliminate the limitation on incurring debt pursuant to the provisions of SB 211 and to extend the Redevelopment Plan and the ability to collect tax increment revenue by one additional year pursuant to the provisions of SB 1045.

Plan Limitations

In 1993, the State Legislature adopted Assembly Bill 1290 (AB 1290), which imposed certain time limitations on (I) the allocation of Tax Increment Revenues to the constituent redevelopment projects, (2) the effectiveness of each Redevelopment Plan and (3) the incurrence of debt. Prior to subsequent changes, Section 33333.6 of the Redevelopment Law provided that a redevelopment agency may not pay indebtedness or receive property taxes pursuant to Section 33670 of the Redevelopment Law after ten years from the termination of the effectiveness of a Redevelopment Plan (which was limited to the later of January I, 2009 or 40 years after the adoption of such Redevelopment Plan). In 1998, the State Legislature adopted Assembly Bill 1342 (AB 1342), which allowed redevelopment agencies to extend plan limitations to such maximum terms if such agency's existing plan limits were shorter. In 2002, the State Legislature adopted Senate Bill 211 (SB 211), allowing the elimination of the Agency's limitation on incurring debt. More recently, Senate Bill 1045 (SB I 045) provided that the City Council could adopt an ordinance to extend the limits on the termination of a redevelopment plan and the authority to collect Tax Increment Revenues by one additional year if the Agency was required to make a payment to ERAF in 2003/04 (see "BONDHOLDERS' RISKS - State of California Fiscal Issues" herein) and Senate Bill 1096 (SB 1096) provided that the City Council could adopt an ordinance to extend the limits on the termination of a redevelopment plan and the authority to collect Tax Increment Revenues by one additional year if the Agency was required to make a payment to ERAF in each of 2004/05 and 2005/06. Even though the constituent Redevelopment Projects have been merged, the limitations established with respect to a constituent Redevelopment Project continue to apply to such constituent Redevelopment Project, except with respect to the limitation on the maximum cumulative Tax Increment Revenues and on maximum outstanding bonded indebtedness as described below, which was established through an amendment to each Redevelopment Plan.

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The current limitations imposed by the respective Redevelopment Plans are as follows:

Maximum Plan Last Date to Tax Increment Bonded Maximum Tax Expiration Collect Tax Received to

Redeveloi;:irnent Project Indebtedness Increment Date Increment C3) DateC2)

Central Business District NfACll $150,000,000 7/11/2014 7/11/2024 $31,155,000

North Palm Canyon $64,000,000 65,000,000 9/19/2025 9/19/2035 6,656,000

South Palm Canyon 80,000,000 80,000,000 11/30/2024 11/30/2034 5,707,000

Oasis 30,000,000 30,000,000 7/10/2025 7/10/2035 11,425,000

Highland-Gateway 50,000,000 50,000,000 11/20/2025 11/20/2035 2,466,000

Ramon-Bogie 100,000,000 100,000,000 11/30/2024 11/30/2034 5,000,000

Project No. 9 60,000,000 6,000,000 (4) 12/29/2029 12/29/2039

3,563,000 (4) (annual) (annual)

(1) Not required for plans adopted prior to 1976. (2) As of June 30, 2007. 0) Reflects the City Council adoption of SB 1045 Amendments.

(4

) Project No. 9 has an annual limitation rather than a cumulative limitation on the receipt of Tax Increment.

Source: Community Redevelopment Agency of the City of Palm Springs

Pursuant to SB 1096, the City Council may adopt an ordinance to extend the Agency's authorization to collect tax increment revenues as follows:

Central Business District 2 Year Extension (7/11/2026)

North Palm Canyon 1 Year Extension (9/19/2036)

South Palm Canyon 2 Year Extension (11/30/2036)

Oasis 1 Year Extension (7/10/2036)

Highland-Gateway 1 Year Extension (11/20/2036)

Ramon -Bogie 2 Year Extension (11/30/2036)

The City Council may take such action after the issuance of the Bonds.

Low and Moderate Income Housing

In 1976, the Redevelopment Law was amended to require that for every redevelopment plan adopted after January 1, 1977, or any area which is added to a redevelopment project by an amendment to a redevelopment plan after January 1, 1977, not less than 20% of Tax Increment Revenues must be set-aside annually for the purpose of increasing and improving the community's supply of low and moderate income housing available at affordable housing costs to persons and families of very low, low or moderate income households. In 1985, the Redevelopment Law was further amended to add substantially the same requirements with respect to plans adopted prior to January 1, 1977.

Amounts required to be deposited in the Agency's Low and Moderate Income Housing Fund are not pledged to repay the Bonds.

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Agency Budgetary Process and Administration

The Redevelopment Law requires redevelopment agencies to adopt an annual budget containing the following:

( 1) The proposed expenditures of the agency.

(2) The proposed indebtedness to be incurred by the agency.

(3) The anticipated revenues of the agency.

( 4) The work program for the coming year, including goals.

(5) An examination of the previous years' achievements and a comparison of the achievements with the goals of the previous years' work program.

All expenditures and indebtedness of the Agency are required to be in conformity with the adopted or amended budget.

The Executive Director of the Agency is responsible for preparing the proposed budget and submitting it to the Agency. After reviewing the proposed budget at a public meeting, the Agency adopts the budget prior to the start of each fiscal year. The Agency Treasurer is responsible for controlling expenditures within budgeted appropriations.

Agency Accounting Records and Financial Statements

Every redevelopment agency is required to present an annual report to its legislative body within six months of the end of each fiscal year. The annual report is required, among other things, to include an independent financial "audit report" and a fiscal statement for the previous fiscal year. The California Health and Safety Code defines "audit report" to mean an examination of and opinion on the financial statements of the agency which presents the results of the operations and financial position of the agency. The independent financial audit is required to be conducted in accordance with generally accepted auditing standards and the rules governing audit reports promulgated by the Governmental Accounting Standards Board. The independent financial audit report is also required to include an opinion of the agency's compliance with laws, regulations and administrative requirements governing activities of the agency. The Redevelopment Law requires the fiscal statement to contain the following information:

( 1) The amount of outstanding indebtedness of the agency and each project area.

(2) The amount of tax increment revenues generated in the agency and in each project area.

(3) The amount of tax increment revenues paid to a taxing agency pursuant to a tax sharing agreement, other than school or community college district.

( 4) The financial transactions report required to be submitted to the State Controller.

(5) The amount allotted to school or community college districts pursuant to the Redevelopment Law.

( 6) The amount of existing indebtedness and the total amount of payments required to be paid on existing indebtedness for that fiscal year.

(7) Any other fiscal information which the agency believes is useful to describe its programs.

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In addition, the annual report is required to include detailed information regarding the Agency's housing program to assist low and moderate income households and deposits and expenditures from the Low and Moderate Income Housing Fund required pursuant to the Redevelopment Law.

The Indenture requires the Agency to keep, or cause to be kept, proper books 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 Tax Revenues. The Indenture requires the Agency to file with the Trustee annually, within seven months after the close of each fiscal year, so long as any of the Bonds are Outstanding, its audited financial statements showing the Tax Revenues and all disbursements from the Special Fund as of the end of such fiscal year. The Agency covenants under the Indenture to furnish a copy of such statements upon reasonable request to any Bondholder.

Basis of Accounting and Financial Statement Presentation. The government-wide fmancial statements are reported using 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 fmancial statements are reported using 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. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures are recorded only when payment is due.

GASB No. 34. The Governmental Accounting Standards Board (GASB) published its Statement No. 34 "Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments" on June 30, 1999. Statement No. 34 provides guidelines to auditors, comptrollers, and financial officers on requirements for financial reporting for all governmental agencies in the United States. Retroactive reporting is required four years after the effective date on the basic provisions for all major general infrastructure assets that were acquired or significantly reconstructed, or that received significant improvements, in fiscal years ending after June 30, 1980.

The Agency implemented the provisions ofGASB 34 for the fiscal year ending June 30, 2003.

The Agency retained the firm of Mayer Hoffman McCann P.C., An Independent CPA Firm, Irvine, California, to examine the component unit fmancial statements of the Agency as of and for the fiscal year ended June 30, 2006, the most recent fiscal year for which audited fmancial statements have been prepared, which are included as "APPENDIX D" The fmn 's examination was made in accordance with auditing standards generally accepted in the United States of America, the standards applicable to fmancial audits contained in Governmental Auditing Standards issued by the Comptroller General of the United St

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