$16,085,000 Redevelopment Agency For the City of …cdiacdocs.sto.ca.gov/2011-0167.pdfThe Bonds are not a debt, liability or obligation of the City of Goleta, the County of Santa Barbara,

NEW ISSUE NO RATING Book-Entry Only

In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however

to certain qualifications described herein, under existing law, the interest on the Bonds is excluded from gross income for federal income tax purposes, 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 account in determining certain income and earnings. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. See “OTHER MATTERS - Tax Matters”.

$16,085,000 Redevelopment Agency For the City of Goleta

Goleta Old Town Redevelopment Project 2011 Tax Allocation Bonds

Dated: Date of Delivery Due: December 1 and June 1,, as shown on inside cover

The captioned 2011 Tax Allocation Bonds (the “Bonds”) are being issued by the Redevelopment Agency For the City of Goleta (the “Agency”) pursuant to the California Community Redevelopment Law, constituting Part 1, Division 24 (commencing with Section 33000) of the California Health and Safety Code (the “Redevelopment Law”) and an Indenture of Trust dated as of March 1, 2011 (the “Indenture”), by and between the Agency and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”). The Bonds are being issued to finance redevelopment activities with respect to the Agency’s Goleta Old Town Redevelopment Project (the ”Project Area”). The Bonds are special obligations of the Agency and are payable from Tax Revenues, consisting primarily of tax increment derived from property in the Project Area and allocated and paid to the Agency pursuant to the Redevelopment Law. No funds or properties of the Agency, other than the Tax Revenues, are pledged to secure the Bonds.

The Bonds are being issued in fully registered form, and when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”), New York, New York. DTC will act as securities depository for the Bonds. Individual purchases of the Bonds may be made in book-entry form only, in denominations 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 be payable semiannually on June 1 and December 1 of each year, commencing December 1, 2011. Payments of principal, and interest on the Bonds will be payable by the Trustee to DTC, which is obligated in turn to remit such principal, and interest to the DTC Participants for subsequent disbursement to the Beneficial Owners of the Bonds, as more fully described herein.

The Bonds are subject to optional and mandatory redemption prior to maturity. See “THE BONDS — Redemption of the Bonds”.

The Bonds are not a debt, liability or obligation of the City of Goleta, the County of Santa Barbara, the State of California, or any of its political subdivisions other than the Agency, and neither the City, the County, the State nor any of its political subdivisions, other than the Agency, is therefore liable to pay the principal of, and interest on the Bonds . The principal of, and interest on the Bonds are payable solely from Tax Revenues allocated and paid to the Agency from the Project Area and amounts in certain funds and accounts held under the Indenture. Neither the Agency, the City nor any persons executing the Bonds are liable personally on the Bonds by reason of their issuance.

This cover page contains certain information for general reference only. It is not intended to be a summary of the security or terms of this issue. Investors are advised to read the entire Official Statement to obtain information essential to the making of an informed investment decision. Capitalized terms used and not defined on this cover page shall have the meanings set forth in this Official Statement. For a discussion of some of the risks associated with a purchase of the Bonds, including certain State of California proposals regarding the elimination of redevelopment agencies, see “RISK FACTORS”.

MATURITY SCHEDULE (See inside cover)

The Bonds are offered, when, as and if issued by the Underwriter, subject to approval as to their legality by Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, and to certain other conditions. Jones Hall will also serve as Disclosure Counsel to the Agency. Certain matters will be passed on for the Agency by Tim W. Giles, City Attorney. It is anticipated that the Bonds in book-entry form will be available for delivery through the DTC book-entry system in New York, New York on or about March 8, 2011.

Dated: March 3, 2011

MATURITY SCHEDULE

BASE CUSIP : 381589

$2,155,000 Serial Bonds

Maturity Date (December 1)

Principal Amount

Interest Rate

Yield

Price

CUSIP†

2011 $ 420,000 2.500% 2.500% 100.000 AD2 2012 140,000 3.000 3.000 100.000 AE0 2013 145,000 4.000 4.000 100.000 AF7 2014 150,000 4.500 4.750 99.147 AG5 2015 155,000 5.250 5.500 98.962 AH3 2016 165,000 5.500 5.750 98.784 AJ9 2017 175,000 5.750 6.000 98.621 AK6 2018 185,000 6.000 6.250 98.474 AL4 2019 195,000 6.250 6.500 98.341 AM2 2020 205,000 6.500 6.750 98.224 AN0 2021 220,000 6.750 7.000 98.121 AP5

$1,365,000 7.500% Term Bonds due December 1, 2026; Yield: 7.650%; CUSIP†: AQ3

$1,970,000 7.750% Term Bonds due December 1, 2031; Yield: 7.900%; CUSIP†: AR1

$10,595,000 8.000% Term Bonds due June 1, 2044; Yield: 8.150%; CUSIP†: AT7

† Copyright 2011, American Bankers Association. CUSIP data are provided by Standard & Poor's CUSIP Service

Bureau, a division of The McGraw-Hill Companies, Inc., and are provided for convenience of reference only. Neither the Agency nor the Underwriter assumes any responsibility for the accuracy of these CUSIP data.

THE REDEVELOPMENT AGENCY FOR THE CITY OF GOLETA

AGENCY BOARD AND CITY COUNCIL

Margaret Connell, Agency Chair and Mayor Ed Easton, Agency Vice Chair and Mayor Pro Tem

Roger S. Aceves, Agency Member and Councilmember Michael T. Bennett, Agency Member and Councilmember

Paula Perotte, Agency Member and Councilmember

AGENCY AND/OR CITY STAFF

Daniel Singer, Agency Executive Director/City Manager Vyto Adomaitis, Director of Redevelopment and Neighborhood Services

Alvertina “Tina” Rivera, Agency Treasurer/City Director of Finance Steve Wagner, Community Services Director and City Engineer

SPECIAL SERVICES

Bond Counsel and Disclosure Counsel

Jones Hall, A Professional Law Corporation

San Francisco, California

Agency Counsel

Tim W. Giles, City Attorney/ Agency Counsel Goleta, California

Fiscal Consultant

Rosenow Spevacek Group, Inc. Santa Ana, California

Trustee

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

Los Angeles, California

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 in this Official Statement 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. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, give rise to 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.

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 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.

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

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

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TABLE OF CONTENTS

INTRODUCTION.......................................................1 PLAN OF FINANCE ..................................................3 Proposed Projects ...................................................3 Estimated Sources and Used of Funds ...................4 Annual Debt Service Requirements of the Bonds ...5

THE BONDS .............................................................6 General ....................................................................6 Redemption of the Bonds ........................................6

SECURITY FOR THE BONDS..................................9 Tax Allocation Financing..........................................9 Allocation of Taxes ..................................................9 Pledge Under the Indenture...................................10 Funds Under the Indenture....................................11 Issuance of Additional Parity Debt.........................13 Issuance of Subordinate Debt ...............................14 Certain Limitations in the Redevelopment Plan.....14

Tax Sharing Statutes...............................................14 THE REDEVELOPMENT AGENCY .................................................................15 General ..................................................................15 Management of the Agency...................................16

THE PROJECT AREA.............................................18 Land Use ...............................................................18 Assessed Value Information ..................................20 New Development .................................................23 Property Transfers .................................................23 Appeals to Assessed Value...................................23 Outstanding Indebtedness of the Agency..............24 Projected Tax Revenues .......................................24 Projected Debt Service Coverage .........................26

RISK FACTORS......................................................28 Reduction in Taxable Value - Economic Factors and Property Damage............................................28 Recent Downturn in Residential and Other Values28

Reduction in Inflation Rate .................................... 28 Concentration of Ownership.................................. 29 Real Estate and Development Risks..................... 29 Levy and Collection of Taxes ................................ 30 State Budget Deficit; ERAF; SERAF..................... 30 Investment Risk..................................................... 37 Bankruptcy ............................................................ 37 Change in Law ...................................................... 38 Assumptions and Projections................................ 38 Risk of Earthquake and other Hazards ................. 38

STATUTORY LIMITATIONS ON TAX REVENUES ............................................................ 39 Property Tax Limitations: Article XIII A of the California Constitution ........................................... 39 Implementing Legislation ...................................... 39 Challenges to Article XIII ....................................... 40 Property Tax Collection Procedures ..................... 40 Teeter Plan............................................................ 41 Unitary Property .................................................... 42 Exclusion of Tax Revenues for General Obligation Bonds Debt Service .............................................. 42 Certification of Agency Indebtedness.................... 42 Appropriations Limitations: Article XIII B of the California Constitution ........................................... 43

OTHER MATTERS ................................................. 44 Litigation................................................................ 44 Rating.................................................................... 44 Tax Matters ........................................................... 44 Certain Legal Matters ............................................ 45 Underwriting .......................................................... 45 The Goleta Financing Authority............................. 45 Professionals Involved in the Offering................... 45 Miscellaneous ....................................................... 46

APPENDIX A Fiscal Consultant’s Report APPENDIX B Audited Financial Statements of the Agency For Fiscal Year Ended June 30, 2010 APPENDIX C General Information About the City of Goleta and Santa Barbara County APPENDIX D Summary of Certain Provisions of the Indenture APPENDIX E The Book-Entry System APPENDIX F Form of Opinion of Bond Counsel APPENDIX G Form of Continuing Disclosure Certificate

[THIS PAGE INTENTIONALLY LEFT BLANK]

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$16,085,000 Redevelopment Agency For the City of Goleta

Goleta Old Town Redevelopment Project 2011 Tax Allocation Bonds

INTRODUCTION

This Introduction contains a brief summary of information contained in this Official Statement. It is not intended to be complete and is qualified by the more detailed information contained elsewhere in this Official Statement. Definitions of certain terms used in this Official Statement are set forth in “APPENDIX D SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE”.

Authority for Issuance. The Agency is a redevelopment agency existing under the

Community Redevelopment Law of the State of California (the “State”), constituting Part 1 of Division 24 (commencing with Section 33000) of the California Health and Safety Code, as amended (the “Redevelopment Law”). The Bonds are being issued under the Redevelopment Law and pursuant to an Indenture of Trust (the “Indenture”), dated as of March 1, 2011, by and between the Agency and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”). The Bonds are being issued for sale to the Goleta Financing Authority (the “Authority”) pursuant to the Marks-Roos Local Bond Pooling Act of 1985, constituting Article 4 of Chapter 5 of Division 7 of Title 1 (commencing with Section 6584) of the California Government Code (the “JPA Law”). The Bonds purchased by the Authority will be resold concurrently to Stone & Youngberg LLC, the Underwriter.

Use of Proceeds. The proceeds of the Bonds will be applied by the Agency to (i)

construct and acquire certain capital improvements of benefit to the Agency’s Project Area, (ii) fund a reserve fund for the Bonds and (iii) pay costs of issuance. See “PLAN OF FINANCE.”

Security for the Bonds. The Bonds will be payable from and secured by Tax Revenues

allocated and paid to the Agency from the Project Area, as described below. In California, the financing and refinancing of redevelopment projects may be provided

by the issuance of tax allocation bonds. Such bonds are payable from property taxes collected within a redevelopment project area attributable to the increase in assessed valuation of property therein, as explained in greater detail below. The Bonds are payable from and secured by tax increment revenues of the Agency constituting Tax Revenues generated from property in the Project Area. The term Tax Revenues is defined in the Indenture and generally includes a portion of ad valorem property taxes attributable to increases in the assessed valuation of property (except public property and property exempt from taxation) in the Project Area over that shown on the assessment rolls for the adjusted base year assessment roll. Such taxes are eligible for allocation to the Agency pursuant to the Redevelopment Law to repay loans, advances and indebtedness incurred in connection with the Project Area. Tax Revenues are more fully described under the caption “SECURITY FOR THE BONDS – Allocation of Taxes”.

Pursuant to the Redevelopment Law, other taxing agencies receive statutory tax sharing

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payments aggregating approximately 20% of the tax increment revenues from the Project Area. Such amounts are paid to the taxing agencies on a basis senior to the payment of debt service on the Bonds. See “ SECURITY FOR THE BONDS - Tax Sharing Statutes.”

On the date of issuance of the Bonds, the Agency is required under the Indenture to

deposit the amount of $1,340,400.00 (the “Reserve Requirement”) into the Reserve Account held under the Indenture. See “SECURITY FOR THE BONDS – Funds Held Under the Indenture - Reserve Account”.

Risk Factors. Any future decrease in the taxable valuation in the Project Area or in the

applicable tax rates could reduce the Tax Revenues allocated to the Agency and correspondingly could have an adverse impact on the ability of the Agency to pay debt service on the Bonds. See “RISK FACTORS”. In addition, certain State of California budget proposals regarding the elimination of redevelopment agencies could adversely impact the Agency and its projects, See “RISK FACTORS - State Budget Deficit; ERAF; SERAF”.

The Agency and the Project Area. The Agency was activated on February 1, 2002, by

the City Council of the City of Goleta (the “City”) pursuant to the Redevelopment Law. For further information with respect to the Agency, see “THE REDEVELOPMENT AGENCY”.

The Redevelopment Plan for the Goleta Old Town Redevelopment Project (the “Project

Area”) was originally adopted by the County of Santa Barbara (the “County”) on June 16, 1998. The City assumed control of the Redevelopment Plan of the Project Area after the City incorporated in 2002. The Project Area encompasses approximately 595 acres and consists of industrial, residential, commercial, and agricultural lands. For information concerning the Agency’s Project Area, see “THE PROJECT AREA”.

In connection with the issuance of the Bonds, the Agency has engaged Rosenow

Spevacek Group, Inc., Santa Ana, California (the “Fiscal Consultant”) to prepare a Fiscal Consultant Report dated February 22, 2011. See “APPENDIX A – Fiscal Consultant’s Report”.

Continuing Disclosure. The Agency will undertake all responsibilities for continuing

disclosure to Owners of the Bonds as described below. The Agency has covenanted in the Indenture and in a Continuing Disclosure Certificate to prepare and deliver an annual report to the Municipal Securities Rule-making Board, and to provide certain other information. The specific nature of the information to be contained in the Annual Report or the notices of listed events is described in “APPENDIX G – Form of Continuing Disclosure Certificate.” These covenants have been made in order to assist the Underwriter in complying with S.E.C. Rule 15c2-12(b)(5). The Bonds are the first obligations of the Agency subject to such Rule.

Miscellaneous. There follows in this Official Statement, which includes the cover page

and Appendices hereto, a brief description of the Bonds, the Agency, Tax Revenues, the Project Area, security for the Bonds, risk factors and limitations on Tax Revenues and certain other information relevant to the issuance of the Bonds. All references to the Indenture are qualified n their entirety by reference to the definitive form thereof, all references to the Bonds are further qualified by references to the information with respect thereto contained in the Indenture. A summary of certain provisions of the Indenture is included in APPENDIX D. The audited financial statements of the Agency for fiscal year 2009-10 are included in APPENDIX B. The information set forth in this Official Statement and in the Appendices has been furnished by the Agency and includes information which has been obtained from other sources which are believed to be reliable but is not guaranteed as to accuracy or completeness and is not to be

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construed as a representation by the Underwriter. All capitalized terms used and not normally capitalized have the meanings assigned in the Indenture, unless otherwise stated in this Official Statement.

The information and expressions of opinion in this Official Statement speak only as of

the date of this Official Statement and are subject to change without notice. Neither delivery of this Official Statement nor any sale made hereunder nor any future use of this Official Statement shall, under any circumstances, create any implication that there has been no change in the affairs of the Agency since the date of this Official Statement.

PLAN OF FINANCE

The Bonds are being issued to provide a portion of the funds needed to (i) provide

moneys to finance redevelopment activities of the Agency relating to the Project Area, (ii) fund a reserve fund for the Bonds, and (iii) pay costs of issuance of the Bonds.

Proposed Projects

The net proceeds of the Bonds will be used for some or all of the following projects. The actual timing and scope of the projects are in the planning stages and cannot be guaranteed. It is possible that one or more of the projects described below may not occur. The Agency, consistent with the Redevelopment Law, may substitute other projects for the projects described below.

San Jose Creek Channel Improvement. The San Jose Creek Capacity Improvement

Project will increase the capacity of the channel and decrease the likelihood of flooding in the downtown Goleta area along Hollister Avenue. The current capacity of San Jose Creek Channel is insufficient to accommodate a 100 year flood storm event. As a result, during lesser events, flood waters have traditionally broken out at Hollister Bridge and caused significant flooding damage in Goleta Old Town. The project includes replacing the existing Hollister Avenue Bridge over San Jose Creek, and replacing the existing 4,250 foot long channel with a wider channel with an articulated concrete revetment bottom with an internal fish passage channel.

Ekwill/Fowler Road Extension. The Ekwill/Fowler Road Extension Project is designed

to decrease traffic in downtown Goleta by creating alternative routes to the South of Hollister Avenue. The new streets will span from Kellogg Avenue to Fairview Avenue, contain two lanes with left turn pockets, Class II bikeways, and sidewalks. The project will also install two roundabouts on Hollister Avenue east and west of SR 217. This project will relieve regional congestion, improve traffic circulation in Goleta Old Town, and improve access within Goleta Old Town and to the airport.

Hollister Avenue Reconstruction. The purpose of the Hollister Avenue Reconstruction

Project is to create a more efficient flow of traffic, improve drainage, make sidewalk and parking improvements, accommodation of alternative transportation, enhance safety lighting and add visual appeal to the area with the addition of landscaped medians, sidewalk amenities and other landscaping which will increase the overall appeal of the area and draw new customers to local businesses. The Hollister Corridor experiences major traffic congestion due to a number of factors: local and regional through traffic, driveways along Hollister Avenue that have poor visibility, and on-street parking that slows drivers in the right lane due to safety concerns for

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persons exiting parking vehicles.

Estimated Sources and Used of Funds

Set forth below are the estimated sources and uses of proceeds of the Bonds.

Sources: Par Amount of Bonds $16,085,000.00 Original Issue Discount (253,615.20) TOTAL SOURCES: $15,831,384.80 Uses: Deposit to Redevelopment Fund $14,082,472.30 Deposit to Reserve Account 1,340,400.00 Underwriter’s Discount 262,512.50 Costs of Issuance (1) 146,000.00 TOTAL USES: $15,831,384.80

_____________________

(1) Includes legal fees, fiscal consultant fees, printing, expenses, and other issuance costs.

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Annual Debt Service Requirements of the Bonds

The following table provides the annual debt service requirements of the Bonds.

Year (Ending December 1)

Principal

Interest

Total

2011 $ 420,000 $ 882,976.84 $ 1,302,976.84 2012 140,000 1,198,137.50 1,338,137.50 2013 145,000 1,193,937.50 1,338,937.50 2014 150,000 1,188,137.50 1,338,137.50 2015 155,000 1,181,387.50 1,336,387.50 2016 165,000 1,173,250.00 1,338,250.00 2017 175,000 1,164,175.00 1,339,175.00 2018 185,000 1,154,112.50 1,339,112.50 2019 195,000 1,143,012.50 1,338,012.50 2020 205,000 1,130,825.00 1,335,825.00 2021 220,000 1,117,500.00 1,337,500.00 2022 235,000 1,102,650.00 1,337,650.00 2023 255,000 1,085,025.00 1,340,025.00 2024 270,000 1,065,900.00 1,335,900.00 2025 290,000 1,045,650.00 1,335,650.00 2026 315,000 1,023,900.00 1,338,900.00 2027 340,000 1,000,275.00 1,340,275.00 2028 365,000 973,925.00 1,338,925.00 2029 390,000 945,637.50 1,335,637.50 2030 420,000 915,412.50 1,335,412.50 2031 455,000 882,862.50 1,337,862.50 2032 490,000 847,600.00 1,337,600.00 2033 530,000 808,400.00 1,338,400.00 2034 570,000 766,000.00 1,336,000.00 2035 620,000 720,400.00 1,340,400.00 2036 665,000 670,800.00 1,335,800.00 2037 720,000 617,600.00 1,337,600.00 2038 780,000 560,000.00 1,340,000.00 2039 840,000 497,600.00 1,337,600.00 2040 910,000 430,400.00 1,340,400.00 2041 980,000 357,600.00 1,337,600.00 2042 1,060,000 279,200.00 1,339,200.00 2043 1,145,000 194,400.00 1,339,400.00 2044* 1,285,000 51,400.00 1,336,400.00 Total $16,085,000 $29,370,089.34 $45,455,089.34

* Final Sinking Fund Payment / Maturity will be on June 1, 2044

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THE BONDS General

The Bonds will be issued as fully registered bonds, and when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”), as securities depository for the Bonds. Individual purchases of the Bonds will be made in book-entry form only. The Bonds will be issued in denominations of $5,000. The Bonds will be issued in the principal amounts, will be dated and will bear interest at the rates and mature on the dates and in the amounts set forth on the inside cover page of this Official Statement.

Interest on the Bonds is payable commencing December 1, 2011, and semiannually

thereafter on each June 1 and December 1 (each an “Interest Payment Date”). Interest will be calculated on the basis of a 360-day year composed of twelve 30-day months. Principal, and interest on the Bonds are payable by the Trustee to DTC, which is obligated in turn to remit such amounts to DTC Participants for subsequent disbursement to Beneficial Owners of the Bonds. See APPENDIX E - “The Book-Entry System”.

Redemption of the Bonds*

Optional Redemption. The Bonds maturing on or before December 1, 2016 are not subject to optional redemption. The Bonds maturing on and after December 1, 2017, are subject to redemption, at the option of the Agency on any date on or after December 1, 2016, as a whole or in part, by such maturities as shall be determined by the Agency, and by lot within a maturity, from any available source of funds, at a redemption price equal to the par amount of the Bonds being so redeemed, without premium, together with accrued interest to the date fixed for redemption.

Mandatory Sinking Account Redemption. The Bonds maturing on December 1,

2026, December 1, 2031 and on June 1, 2044 are also subject to mandatory redemption in part by lot on December 1 (or June 1, if applicable) in each year, as shown below from Sinking Account payments made by the Agency 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 in whole or in part as described below, in the aggregate respective principal amounts and on the respective dates as set forth in the following table; provided, however, that if some but not all of the Bonds have been redeemed pursuant to optional redemption as described above, the total amount of all future Sinking Account payments shall be reduced by the aggregate principal amount of Bonds so redeemed, to be allocated among the applicable Sinking Account payments as are thereafter payable on a pro rata basis in integral multiples of $5,000 as determined by the Agency (notice of which determination shall be given by the Agency to the Trustee).

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$1,365,000 Bonds Maturing December 1, 2026

Sinking Account Redemption Date

Principal Amount To Be Redeemed or Purchased

12/01/2022 $235,000 12/01/2023 255,000 12/01/2024 270,000 12/01/2025 290,000 12/01/2026 (Maturity) 315,000

$1,970,000 Bonds Maturing December 1, 2031

Sinking Account

Redemption Date Principal Amount To Be

Redeemed or Purchased

12/01/2027 $340,000 12/01/2028 365,000 12/01/2029 390,000 12/01/2030 420,000 12/01/2031 (Maturity) 455,000

$10,595,000 Bonds Maturing June 1, 2044

Sinking Account

Redemption Date Principal Amount To Be

Redeemed or Purchased

12/01/2032 $ 490,000 12/01/2033 530,000 12/01/2034 570,000 12/01/2035 620,000 12/01/2036 665,000 12/01/2037 720,000 12/01/2038 780,000 12/01/2039 840,000 12/01/2040 910,000 12/01/2041 980,000 12/01/2042 1,060,000 12/01/2043 1,145,000 6/01/2044 (Maturity) 1,285,000

In lieu of mandatory Sinking Account redemption of Bonds as described above, amounts

on deposit as Sinking Account payments may also be used and withdrawn by the Trustee, at the written direction of the Agency, at any time for the purchase of Bonds otherwise required to be redeemed on the following December 1 (or June 1, if applicable) 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 the Bonds so purchased by the Agency and surrendered to the Trustee for cancellation in any twelve-month period ending on July 1 in any year shall be credited towards and shall reduce the par amount of the Bonds otherwise required to be redeemed on the following December 1 (or June 1, if applicable) pursuant to mandatory Sinking Account redemption.

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Notice of Redemption; Rescission. The Trustee on behalf and at the expense of the Agency 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 (i) to the Owners of any Bonds designated for redemption at their respective addresses appearing on the Registration Books, and (ii) the Securities Depositories and to one or more Information Services designated in a Written Request of the Agency filed with the Trustee; but such mailing is a condition precedent to such redemption and neither failure to receive any such notice nor any defect therein will affect the validity of the proceedings for the redemption of such Bonds or the cessation of the accrual of interest thereon. Such notice will state the redemption date and the redemption price, will state that such redemption is conditioned upon the timely delivery of the redemption price by the Agency to the Trustee for deposit in the Redemption Account, will designate the CUSIP number of the Bonds to be redeemed, shall state the individual number of each Bond to be redeemed or will state that all Bonds between two stated numbers (both inclusive) or all of the Bonds Outstanding are to be redeemed, and shall require that such Bonds be then surrendered at the Principal Corporate Trust Office of the Trustee 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 has 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 will 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 will not constitute an Event of Default under the Indenture. The Agency and the Trustee will 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 in the same manner as the original notice of redemption was sent.

From and after the date fixed for redemption, if funds available for the payment of the

redemption price of and interest on the Bonds so called for redemption have been duly deposited with the Trustee, such Bonds so called will cease to be entitled to any benefit under the Indenture other than the right to receive payment of the redemption price and accrued interest to the redemption date, and no interest will accrue on the Bonds from and after the redemption date specified in such notice.

Manner of Redemption. Whenever all or any portion of the Bonds are to be selected

for redemption by lot, the Trustee will make such selection, in such manner as the Trustee deems appropriate, and shall notify the Agency thereof to the extent Bonds are no longer held in book-entry form. In the event of redemption by lot of Bonds, the Trustee will assign to each Bond then Outstanding a distinctive number for each $5,000 of the principal amount of each such Bond. The Bonds to be redeemed will be the Bonds to which were assigned numbers so selected, but only so much of the principal amount of each such Bond of a denomination of more than $5,000 will be redeemed as equals $5,000 for each number assigned to it and so selected.

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SECURITY FOR THE BONDS

Tax Allocation Financing

The Redevelopment Law generally provides a means for financing redevelopment projects based upon an allocation of taxes collected within a redevelopment 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 within a project area, which generally includes any city, county, district or other public corporation for whose benefit taxes are levied (the “Taxing Agencies”), thereafter receive only 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 (the “Tax Increment”) are 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. The Tax Increment, however, is subject to a number of claims and reductions which are prior to the pledge of the repayment of redevelopment agency indebtedness, including among others, statutory pass-through agreements to Taxing Agencies and administrative charges by the County, as further described herein. Redevelopment agencies themselves have no authority to levy property taxes and must look specifically to the allocation of taxes produced as above described.

Since the Agency has no power to levy and collect property taxes, any property tax

limitation, legislative measure, voter initiative or diversion of Tax Increment to Taxing Agencies may have the effect of reducing the amount of Tax Revenues that would otherwise be available to pay the Bonds and any Parity Debt (as hereinafter defined). Likewise, the reduction of assessed valuations of taxable property in the Project Area, any reduction in tax rates or tax collection rates and broadened property tax exemptions would have a similar effect. See “RISK FACTORS” and “STATUTORY LIMITATIONS ON TAX REVENUES”.

The Bonds are not a debt of the City of Goleta, the County of Santa Barbara, the

State of California, or any of its political subdivisions, and neither the City, the County, the State, nor any of its political subdivisions is therefore liable to pay the Bonds, nor in any event shall the Bonds be payable out of any funds or properties other than those of the Agency. The Bonds do not constitute an indebtedness in contravention of any constitutional or statutory debt limitation or restriction.

Allocation of Taxes

As provided in the Redevelopment Plan for the Project Area originally approved by the County on June 16, 1998, pursuant to Ordinance No. 4326 (the “Redevelopment Plan”), and pursuant to 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, taxes levied upon taxable property in the Project Area each year by or for the benefit of the Taxing Agencies, for fiscal years beginning after July 1 subsequent to the effective date of the ordinance adopting the Redevelopment Plan for the Project Area, or any amendment thereof, are divided as follows:

1. To the Taxing Agencies: 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 said Taxing Agencies 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

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taxation of such property by such Taxing Agency last equalized prior to the ordinance approving the Redevelopment Plan, shall be allocated to, and when collected shall be paid into the funds of the respective Taxing Agencies as taxes by or for said Taxing Agencies on all other property are paid;

2. To the Agency: Except for taxes which are attributable to a tax rate levied 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 1, 1989, which shall be allocated to and when collected shall be paid to the respective Taxing Agency, that portion of said levied taxes each year in excess of such amount (the Tax Increment) shall be allocated to, and when collected, shall be paid to the Agency to pay principal of and interest on 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, the redevelopment project.

Housing Set-Aside Amounts. The Redevelopment Law requires that, except under

certain circumstances, redevelopment agencies set-aside 20% of all gross Tax Increment (as described above) derived from redevelopment project areas into a low and moderate income housing fund, to be used for the purpose of increasing, improving and/or preserving the community’s supply of low and moderate income housing. This 20% set-aside requirement is referred to as the “Housing Set-Aside Amounts.” The Housing Set-Aside Amounts are not pledged to any portion of the debt service on the Bonds.

Pledge Under the Indenture

Pursuant to the Indenture, the Tax Revenues are pledged to the payment of the debt service on the Bonds and Parity Debt. See “Issuance of Additional Parity Debt” below.

The Indenture defines “Tax Revenues” to mean (a) moneys allocated within the Plan Limit and paid to the Agency derived from that

portion of taxes levied upon assessable property within the Project Area allocated to the Agency pursuant to Article 6 of Chapter 6 of the Law and Section 16 of Article XVI of the Constitution of the State of California, or pursuant to other applicable State laws, and

(b) reimbursements, subventions, or other payments made by the State with respect to

any property taxes that would otherwise be due on real or personal property but for an exemption of such property from such taxes.

“Tax Revenues” shall not include: (a) payments made to the Agency with respect to personal property within the Project

Area pursuant to Section 16110, et seq., of the Government Code of the State; (b) that portion of taxes paid to the Agency which are required by Section 33334.3 of the

Law to be deposited in the Low and Moderate Income Housing Fund to increase, improve or preserve the supply of low and moderate income housing within or of benefit to the Project Area; and

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(c) all amounts payable by the Agency pursuant to Section 33607.5 or Section 33607.7 of the Law, unless the payment of such amounts has been subordinated to the payment of Debt Service on the Bonds or on any Parity Debt, as applicable.

The Indenture establishes a special fund known as the “Special Fund”, which is held by

the Agency. The Agency is required to deposit all of the Tax Revenues received in any Bond Year promptly upon receipt by the Agency, until such time during such Bond Year as the amounts on deposit in the Special Fund equal the aggregate amounts required to be transferred by the Trustee for deposit in such Bond Year with respect to any additional Parity Debt pursuant to the applicable Parity Debt Instrument and for deposit into the Debt Service Fund for transfer to the Interest Account, the Principal Account, the Sinking Account, the Reserve Account and the Redemption Account in such Bond Year to pay debt service on the Bonds.

All Tax Revenues received by the Agency during any Bond Year in excess of the

amount required to be deposited in the Special Fund for transfer to the Trustee during such Bond Year are released from the pledge under the Indenture for the security of the Bonds and any additional Parity Debt and may be applied by the Agency for any lawful purpose of the Agency.

Funds Under the Indenture

Moneys in the Debt Service Fund are transferred by the Trustee in the following

amounts, at the following times, and deposited by the Trustee in the following respective special accounts, which are established in the Debt Service Fund, and in the following order of priority:

Interest Account. On or before the Business Day preceding each Interest Payment

Date, the Trustee will withdraw from the Debt Service Fund and deposit in the Interest Account an amount which when added to the amount contained in the Interest Account on that date, will be equal to the aggregate amount of the interest becoming due and payable on the Outstanding Bonds on such Interest Payment Date. All moneys in the Interest Account will be used and withdrawn by the Trustee solely for the purpose of paying the interest on the Bonds as it shall become due and payable (including accrued interest on any Bonds redeemed prior to maturity pursuant to the Indenture).

Principal Account. On or before the Business Day preceding December 1 in each year

in which principal amounts of the Bonds is due, the Trustee will withdraw from the Special Fund and deposit in the Principal Account an amount which, when added to the amount then contained in the Principal Account, will be equal to the principal becoming due and payable on the Outstanding Serial Bonds on the next December 1. All moneys in the Principal Account shall be used and withdrawn by the Trustee solely for the purpose of paying the principal of the Serial Bonds and maturing Term Bonds as it will become due and payable.

Sinking Account. No later than the Business Day preceding each December 1 or June

1, as applicable, on which any Outstanding Term Bonds, issued as Parity Debt pursuant to a Parity Debt Instrument, are subject to mandatory Sinking Account redemption, or otherwise for purchases of Term Bonds, the Trustee will withdraw from the Special Fund and deposit in the Sinking Account an amount which, when added to the amount then contained in the Sinking Account, will be equal to the aggregate principal amount of the Term Bonds required to be redeemed on such December 1 (or June 1, if applicable). All moneys on deposit in the Sinking Account will be used and withdrawn by the Trustee for the sole purpose of paying the principal of the Term Bonds as it shall become due and payable upon redemption or purchase.

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Reserve Account. The Indenture requires the establishment of a Reserve Account in an

amount equal to the Reserve Requirement. The Indenture defines the term “Reserve Requirement” to mean, as of the date of calculation, lesser of: (i) Maximum Annual Debt Service on the Bonds; (ii) ten percent (10%) of the original principal amount of the Bonds; or (iii) 125% of Average Annual Debt Service on the Bonds. The term “Reserve Requirement”, for Parity Debt, means as of the date of calculation, an amount equal to the lesser of: (i) Maximum Annual Debt Service on the Parity Debt; (ii) ten percent (10%) of the original principal amount of the Parity Debt; or (iii) 125% of Average Annual Debt Service on the Parity Debt. The Indenture defines the term “Maximum Annual Debt Service” to mean, as of the date of calculation, the largest Annual Debt Service for the current or any future Bond Year, including payments on any additional Parity Debt, as certified in writing by the Agency to the Trustee. For purposes of such calculation, there shall be excluded the principal of any Parity Debt, together with the interest to accrue thereon, in the event and to the extent that the proceeds of such Parity Debt are deposited in an escrow fund are then held in cash or are invested solely in Permitted Investments and from which amounts may not be released to the Agency unless the amount of Tax Revenues for the current Fiscal Year (as evidenced in the written records of the County), at least equal the requirements for issuance of Parity Debt under the Indenture. Initially, the Reserve Account will be funded in the amount of $1,340,400.

In the event that on the Business Day preceding an Interest Payment Date the amount

on deposit in the Reserve Account at any time becomes less than the Reserve Requirement, the Trustee shall promptly notify the Agency of such fact. 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. If there shall then not be sufficient Tax Revenues to transfer an amount sufficient to maintain the Reserve Requirement on deposit in the Reserve Account, the Agency is obligated to continue making transfers as Tax Revenues become available until there is an amount sufficient to maintain the Reserve Requirement on deposit in the Reserve Account. All money in the Reserve Account will be used and withdrawn by the Trustee solely for the purpose of making transfers to the Interest Account, the Principal Account and the Sinking Account in such order of priority, in the event of any deficiency at any time in any of such accounts or for the retirement of all the Bonds then Outstanding, except that so long as the Agency is not in default under the Indenture, any amount in the Reserve Account in excess of the Reserve Requirement shall be withdrawn from the Reserve Account semiannually on or before four Business Days preceding each June 1 and December 1 by the Trustee and deposited in the Interest Account.

The Reserve Account may be maintained in the form of one or more separate sub-

accounts which are established for the purpose of holding the proceeds of separate issues of the Bonds and any Parity Debt in conformity with applicable provisions of the Code to the extent directed by the Agency in writing to the Trustee.

Redemption Account. On or before the Business Day preceding any date on which

Bonds are to be optionally redeemed, the Trustee will withdraw from the Debt Service Fund any amount transferred by the Agency for optional redemption of Bonds, for deposit in the Redemption Account, such amount being the amount required to pay the principal of and premium, if any, on the Bonds to be redeemed on such date. All moneys in the Redemption Account will be used and withdrawn by the Trustee solely for the purpose of paying the principal of and premium, if any, on the Bonds to be redeemed on the date set for such redemption. Interest due on Bonds to be redeemed on the date set for redemption will, if applicable, be paid from funds available therefor in the Interest Account.

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Issuance of Additional Parity Debt

In addition to the Bonds, the Indenture permits the Agency to issue or incur other loans, advances or indebtedness payable from Tax Revenues on a parity with the Bonds (“Parity Debt”), to finance or refinance the Redevelopment Project in such principal amount as shall be determined by the Agency. The Agency may issue and deliver any such Parity Debt subject to the following specific conditions:

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

(b) The Tax Revenues for the then current Fiscal Year based on assessed valuation of property in the Project Area as evidenced in a written document from an appropriate official of the County, plus, at the option of the Agency, the Additional Allowance (as defined below) shall be at least equal to the Parity Debt Test Percentage of Maximum Annual Debt Service on all Bonds and Parity Debt which will be Outstanding following the issuance of such Parity Debt; provided, however:

(i) for purposes of calculating Tax Revenues, an assumed tax rate of $1.00 per

$100 assessed value shall be used; and (ii) the amount of Tax Revenues used in calculating the foregoing coverage test

will be the amount received or to be received in the most recent Fiscal Year (which may be the current Fiscal Year) for which records are available from the County of Santa Barbara establishing the assessed valuations of property in the Project Area.

(c) The Parity Debt Instrument or other document providing for the issuance of such

Parity Debt shall provide that:

(i) Interest on said Parity Debt shall be payable on June 1 and December 1 in each year of the term of such Parity Debt except the first twelve month period, during which interest may be payable on any June 1 or December 1;

(ii) The principal of such Parity Debt shall be payable on December 1 in any year

in which principal is payable; and (iii) Money shall be deposited in a reserve account in an amount equal to the

Reserve Requirement following the issuance of incurrence of such Parity Debt.

(d) The Parity Debt Instrument or other document providing for the issuance of such Parity Debt may provide for the establishment of separate funds, accounts or subaccounts.

(e) The proceeds of such Parity Debt may be deposited into an escrow fund from which

amounts may not be released to the Agency unless and until the Tax Revenues (as evidenced in the written records of the County) at least equal the Parity Debt Test Percentage of the amount of Maximum Annual Debt Service.

The Indenture defines the term “Additional Allowance” to mean, as of the date of

calculation, the amount of Tax Revenues which, as shown in the report of an Independent Redevelopment Consultant, are estimated to be receivable by the Agency in the next Fiscal Year as a result of increases in the assessed valuation of taxable property in the Project Area

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due to either (i) construction which has been completed but has not yet been reflected on the tax roll, or (ii) transfer of ownership or any other interest in real property, which is not then reflected on the tax rolls.

The Indenture defines “Parity Debt Test Percentage” to mean initially, 150%, unless and

until the total value of taxable property in the Project Area, as set forth in a Tax Revenues Certificate, is at least equal to 200% of the value of the taxable property in the Project Area as of the Base Year for the Project Area established in the Redevelopment Plan; and thereafter, the Parity Debt Test Percentage shall be equal to 135%.

Issuance of Subordinate Debt

In addition to the Bonds, the Agency may issue or incur debt subordinate to the payment

of debt service on the Bonds.

Certain Limitations in the Redevelopment Plan

The Redevelopment Law requires that the Redevelopment Plan contain certain limitations on the redevelopment activities of the Agency and related matters. In compliance with AB 1290 adopted by the California Legislature as Chapter 942, Statutes 1993 (“AB 1290”), the Redevelopment Plan established a time limit on the establishing of loans, advances, and indebtedness as June 16, 2018, and the date after which the Agency may not pay indebtedness or receive property taxes as June 16, 2044.

The California Legislature enacted Senate Bill 1045, Chapter 260, Statutes 2003,

effective September 1, 2003 (“SB 1045”). SB 1045 provides, among other things, that the Redevelopment Plan for the Project Area may be amended to add one year to the effectiveness of the Redevelopment Plan and on to the period for collection of tax increment revenues and the repayment of indebtedness. As permitted by SB 1045, the City Council on May 21, 2007, adopted Ordinance No. 07-05, adding one year on to the effectiveness of the Redevelopment Plan and on to the period for collection of tax increment revenues and the repayment of indebtedness. The Redevelopment Plan establishes June 16, 2029, as the termination date for the effectiveness of the Redevelopment Plan, as a result of Ordinance No. 07-05.

The Redevelopment Plan also contains a limitation on bonded indebtedness of the

Agency which can be outstanding at any one time of not exceed $45,956,884, as required by the Redevelopment Law. Although the Redevelopment Law does not require that there be a limit on the aggregate amount of tax increment revenues, with respect to project areas formed after the adoption of AB 1290, the Redevelopment Plan does contain a limit of $363,339,006 on the amount of tax increment the Agency may receive. Through fiscal year 2009-10, the Agency has reported total receipts of $19,421,236, leaving almost $344 million of gross tax increment revenue remaining to be collected under the current limitation. The Agency does not foresee that the Agency will reach its tax increment collection limit throughout the duration of the Redevelopment Plan and the period thereafter for repayment of indebtedness. The Fiscal Consultant has reviewed these limitations and has determined that the Bonds would not be negatively impacted by these limitations. See “APPENDIX A - Fiscal Consultant’s Report – Time Limitations.”

Tax Sharing Statutes

AB 1290 eliminated the statutory authority to negotiate tax sharing agreements with

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Taxing Agencies and provided a formula for mandatory tax sharing, applicable to projects adopted after January 1, 1994 or amended after that date to add territory. The formula thus applies to the Project Area.

The AB 1290 formula is set forth in Section 33607.5 of the Redevelopment Law. Generally speaking, under the Tax Sharing Statutes, the Agency is to pay to the affected

taxing entities percentages of tax increment generated in the Project Area as follows: 1. Throughout the term of the Project Area’s eligibility to receive tax increment

commencing with a base year determined as of the year the formula first becomes effective (Fiscal Year 1997-98), 25% of post Housing Set-Aside Amounts; plus,

2. For the eleventh year of the receipt of tax increment and thereafter, 21% of

revenues in excess of tenth year revenue; plus, 3. For the thirty-first year of receipt of tax increment and thereafter, 14% of revenues

in excess of thirtieth year revenues. As indicated, amounts specified as payable to taxing agencies under the AB 1290

formula contained in the Tax Sharing Statutes are to be computed after deducting the Housing Set-Aside amounts.

The Agency is treating all payments to taxing entities under the Tax Sharing Statutes to

be superior to the payment of debt service on the Bonds. See Table 6 “Redevelopment Agency For the City of Goleta – Goleta Old Town Redevelopment Project – Projected Tax Revenues”.

THE REDEVELOPMENT AGENCY

General

The County originally adopted the Redevelopment Plan on June 16, 1998 by County Ordinance No. 4326. The Redevelopment Plan was administered as part of the County’s unincorporated territory until the City Council assumed control of redevelopment activities for the Project Area under the Redevelopment Plan after the City incorporated in 2002. The City of Goleta activated the Redevelopment Agency on February 1, 2002 by Ordinance No. 02-08 and assumed control of the Redevelopment Plan for the Project Area on April 15, 2002 by Ordinance No. 02-19. The Redevelopment Plan enables the Agency to collect tax increment to implement and finance revitalization projects in the 595-acre Project Area, which is approximately 12% of the total area of the City.

All powers of the Agency are vested in its governing body. Pursuant to the

Redevelopment Law, the Agency may exercise broad governmental functions and authority to accomplish its purposes, including, but not limited to, the right to issue bonds, notes and other obligations and expend their proceeds and the right to acquire, sell, develop, administer or lease property (the Agency is not authorized to exercise eminent domain under its Redevelopment Plan). The Agency may clear or move buildings, structures, or other improvements form real property as necessary to carry out the purposes of the Redevelopment Plan. .

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To the extent permitted and in the manner required by law, the Agency is authorized to install and construct or cause to be installed and constructed the public improvements and public utilities (within or outside the Project Area) necessary to carry out the Redevelopment Plan. Such public improvements include, but are not limited to, parking lots or structures, over or underpasses, bridges, streets, curbs, gutters, sidewalks, streetlights, sewers, storm drains, traffic signals, electrical distribution systems, flood control facilities, natural gas distribution systems, water distribution systems, landscaping, parks, playgrounds, and any buildings, structures or improvements necessary and convenient to the full development of any of the above.

With certain exceptions, the Agency may not construct or develop buildings, with the

exception of public facilities, but must sell or lease cleared property to redevelopers for construction and development in accordance with the Redevelopment Plan. The Agency may, out of any funds available to it for such purposes, pay for all or part of the value of the land and the cost of buildings, facilities, structures or other improvements to be publicly owned and operated, to the extent that such improvements are of benefit to a project area and no other reasonable means of financing is available.

Certain State of California budget proposals regarding the elimination of redevelopment

agencies could adversely impact the Agency and its projects. See “RISK FACTORS - State Budget Deficit; ERAF; SERAF” herein for a description of recent State proposals to eliminate redevelopment agencies.

Management of the Agency

Margaret Connell currently serves as Chair of the Agency. The current members of the Council and term expiration are as follows:

Name City and Agency Title Term Expires

Margaret Connell Agency Chair/Mayor November 2012 Ed Easton Agency Vice Chair/Mayor Pro Tem November 2012 Roger S. Aceves Agency Member/Councilmember November 2014 Michael T. Bennett Agency Member/Councilmember November 2014 Paula Perotte Agency Member/Councilmember November 2014

Agency staff services are provided by City staff. Such support includes project

management, real estate acquisition and disposition, relocation, engineering and planning, legal, financing and fiscal services. See “THE PROJECT AREA - Outstanding Indebtedness of the Agency - Arrangement with City for Administrative Services”.

The City Manager also serves as the Executive Director of the Agency. Daniel Singer is currently the City Manager of the City, and has served in that capacity

since September 2005. He came to the City of Goleta with 14 years of local government experience including service as City Manager for the City of Ojai in Ventura County. Mr. Singer’s municipal background includes extensive experience in redevelopment, grant management, finance, risk management, transportation, and community relations and he has also served on numerous non-profit and civic organization boards. Mr. Singer received a master’s degree in Political Science and a master’s degree in Public Administration from the

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Maxwell School of Citizenship at Syracuse University. He also holds a certificate in Conflict Resolution and was a former mediator in both California and New York.

Vytautas "Vyto" Adomaitis has served the City of Goleta since July, 2002. He is

currently the Director of the Redevelopment & Neighborhood Services Department. Mr. Adomaitis has 20 years of broad local government and private sector experience including economic development, redevelopment, planning, city administration, grant administration, public safety and inspection services. Mr. Adomaitis has also served as an advisory board member for Habitat for Humanity and other non-profit organizations. He received a Master's Degree in Public Administration and a Bachelor's Degree in Political Science from California State University, Northridge.

Alvertina Rivera, the City Finance Director, joined the City of Goleta’s management

team in November 2006. Prior to her work with the City she served for 7 1/2 years as Finance Director for the cities of Santa Paula and Orange Cove. Ms. Rivera received a Bachelor of Science degree in Business Administration with an emphasis in Accounting from California State University Fresno. She has experience in finance, risk management, financial reporting, investments, labor negotiations, grant management, redevelopment, and bond issuances.

Steve Wagner has served as the City’s Community Services Director and City Engineer

since February 2003. He has over 20 years of local government experience in public works capital project management. Prior to coming to the City Mr. Wagner served as Public Works Director/City Engineer for the City of Carpinteria and Deputy Director of Public Works for the County of Santa Barbara. He obtained his Bachelor of Science degree in Civil Engineering from Cal Poly San Luis Obispo. He is a registered Civil Engineer and Certified Flood Plain Manager in the State of California.

See APPENDIX B for the Agency’s audited financial statement for the Fiscal Year ended

June 30, 2010. The auditor has not reviewed such statements in connection with their inclusion in this Official Statement, nor has the Agency requested such a review. See also “RISK FACTORS – State Budget Deficit; ERAF; SERAF” herein for a discussion of recent proposals to eliminate redevelopment agencies.

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THE PROJECT AREA The Project Area is located within the City of Goleta, and includes approximately 12% of

the City area. For general information concerning the City of Goleta, see APPENDIX C - “General Information About the City of Goleta and Santa Barbara County”.

Land Use

Of the various land uses in the Project Area, industrially zoned land represents the most prevalent land use, and accounts for approximately 29.1% of the Project Area’s secured assessed value. Other major land use categories include residential, commercial, and government/social/institutional.

The table below illustrates land uses in the Project Area, according to fiscal year 2010-

11 secured assessed value. For a break-out of “Other Land Use” categories, see “APPENDIX A - Fiscal Consultant’s Report - Redevelopment Agency and Project Area”.

TABLE 1

THE REDEVELOPMENT AGENCY FOR THE CITY OF GOLETA Land Use by Secured Assessed Value

Fiscal Year 2010-11

Land Use Category

Acres

A.V. Real

Property

A.V. Personal Property

A.V. Total

Change from Prior Year

Percent of

Project Area

Industrial, Light 140.55 $ 204,663,409 $ 97,334,499 $ 301,997,908 -1.5% 29.1% Commercial, Office 83.14 156,828,578 36,814,469 193,643,047 13.3 18.6 Residential, MultiFamily 51.97 121,622,716 5,524,831 127,147,547 78.9 12.2 Other Land Uses 319.80 378,092,706 38,523,271 416,615,977 -12.3 40.1 Total 595.46 $861,207,409 $178,197,070 $1,039,404,479 1.6 100.0%

Source: Rosenow Spevacek Group, Inc.; Santa Barbara County Assessor & Auditor-Controller

A map of the Project Area appears on the following page.

Goleta Old Town . Redevelopment :Project Area .Boundary

{

1_: .. OCH2 ..

'-~

City of Santa·. Borbara

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Assessed Value Information

Assessed Valuations. Taxable values are prepared and reported by the County Auditor-Controller each fiscal year and represent the aggregation of all locally assessed properties, which are part of the Project Area. The assessments are assigned to Tax Rate Areas (TRA) that are coterminous to the boundaries of the Project Area.

The current (fiscal year 2010-11) total assessed value of the Project Area is

$1,039,603,877, of which tax increment revenue is generated from the incremental assessed value in excess of the Project Area’s 1997-98 base year value of $665,653,295. The 2010-11 incremental assessed value for the Project Area, equal to the difference between the current assessed value and base year value, is $373,751,184.

The following table presents the assessed values, base year values, and incremental

assessed values for the past five years. For a ten-year history of assessed value in the Project Area, see “APPENDIX A – Fiscal Consultant’s Report – Assessed Valuation”. See also “Appeals to Assessed Valuation” below.

TABLE 2

THE REDEVELOPMENT AGENCY FOR THE CITY OF GOLETA Historical Assessed Valuation Growth

Year Real Property Personal Property Total AV % Change Incremental AV

2010-11 $853,936,906 $185,467,573 $1,039,404,479 1.6% $373,751,184

2009-10 833,984,780 189,426,507 1,023,411,287 6.3 357,757,992

2008-09 759,059,796 204,149,879 963,209,675 5.1 297,556,380

2007-08 713,908,786 202,613,471 916,522,257 5.3 250,868,962

2006-07 674,111,291 196,046,092 870,157,383 7.4 204,504,088

1997-98 (Base Year)

476,922,697 188,730,598 665,653,295

Source: Rosenow Spevacek Group, Inc.; Santa Barbara County Auditor Controller Reports.

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Largest Taxpayers. The following table lists the ten largest payers of property taxes in the Project Area for fiscal year 2010-11. The top ten taxpayers account for $259,507,562 account for 25.0% of the Project Area’s 2010-11 total assessed value and 69.4% of its total incremental value. See “RISK FACTORS – Concentration of Ownership”.

TABLE 3

THE REDEVELOPMENT AGENCY FOR THE CITY OF GOLETA Total Project Area

Largest Fiscal Year 2010-11 Taxpayers

Property Owner

Bills (1) Assessed Value Real Property

Assessed Value Personal Prop.

Assessed Value Total

% Change

from Prior Year (5)

% of Project Area

% of

Increment Value

Sumida Gardens LP (2) 1 $ 55,342,473 $ 648,080 $55,990,553 143.7% 5.4% 15.0% Raytheon Company (3) 2 22,853,007 20,083,460 42,936,467 (7.9) 4.1 11.5 Torridon LLC 2 28,524,666 -- 28,524,666 (0.2) 2.7 7.6 SB Corporate Center 2 24,056,853 -- 24,056,853 (0.2) 2.3 6.4 Fairview Business Center(4) 1 20,691,442 -- 20,691,442 5.9 2.0 5.5 Cox Enterprises, Inc. 5 6,063,517 13,358,200 19,421,717 (1.1) 1.9 5.2 Ocean Park Hotels, LLC 1 16,259,253 1,421,000 17,680,253 (0.2) 1.7 4.7 Ampersand Publishing LLC 2 9,922,533 7,248,310 17,170,843 (2.1) 1.7 4.6 Dupont Displays Inc. 1 3,882,570 12,789,040 16,671,610 0.0 1.6 4.5 Ekwill Partners LTD 1 16,363,158 -- 16,363,158 (0.2) 1.6 4.4 Total Top Ten 18 $203,959,472 $55,548,090 259,507,562 12.9% Total Project Area 1,039,404,469 25.0%

Total Project Area Incremental $373,751,184 69.4%

(1) Bills consist of the number of secured parcels and unsecured bill records. (2) Sumida Gardens LP filed a base year appeal with the County in 2010 to reduce assessed value to $36

million. Potential reduction could decrease 2011-12 personal property value by approximately $20 million. (3) Raytheon Co. filed an appeal in 2009 to reduce personal property value from $13.2 million to $1.3 million.

The appeal was withdrawn. Raytheon Co. has no appeals in 2010. (4) Fairview Business Center filed a base year appeal in 2009 to reduce assessed value to $15.3 million; the

appeal is still open. Potential reduction could reduce the 2011-12 assessed value by approximately $4 million.

(5) Represents the change in assessed value from fiscal year 2009-10 Source: Rosenow Spevacek Group, Inc.; Santa Barbara County Assessor and City of Goleta

The following provides brief descriptions of the ten largest taxpayers in the Project Area: Sumida Gardens LP owns one parcel which is located at 100 Sumida Gardens Lane

occupied by a multifamily residential development constructed in 2007. Sumida Gardens is a 200-unit apartment complex, which includes 34 apartments for low- and very low-income households. The parcel was purchased from the Sumida Limited Partnership in 2002. Sumida Gardens filed an appeal in 2010 to reduce the base year value (reassessed due to construction) to $36 million.

Raytheon Company, a defense and aerosystems supplier has two industrial owner-

occupied research parks located at 6380 Hollister Avenue and 115 Robin Hill Road. The Raytheon Company appealed its personal property assessed values in 2009, but the appeal was withdrawn. There have been no other appeals within the last five years. The parcels were last transferred on December 5, 1980 (APN 073050027) and March 14, 1979 (APN 073050044).

Torridon LLC owns two commercial parcels located at 430 S. Fairview Avenue and 490

S. Fairview Avenue #100. There have been no assessment appeals filed by this property owner

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within the last five years. The parcels were last transferred on April 22, 2004 (APN 071130057) and August 10, 2007 (APN 07113062).

Santa Barbara Corporate Center LLC has two multi-story offices located at 5383

Hollister Avenue #150, and 201 Mentor Drive. There have been no assessment appeals filed by this property owner within the last five years. The 5383 Hollister Avenue (APN 071140074) property, or the GRCI Founders Building, is a two-story, steel frame, stucco-faced commercial Class A office building built in 1995. Major tenants include GRC International, Time-Warner Telecom, Somera Communications, and Bermant Development Co. The property(APN 071140074) was last transferred on February 16, 1996. The 201 Mentor Drive property (APN 071140078), or Mentor Corporation Building One, is a two-story office building built in 1991. It is designed for technology and office uses. The property was last transferred on February 13, 2006.

Fairview Business Center owns one parcel which is located at 420 Fairview Avenue.

Fairview Business Center has filed two appeals within the past five years. In 2009, a base year appeal was filed to reduce its assessed value to $15.3 million, and this appeal is still open. They appealed their 2008 personal property value assessed value and the case was stipulated in August 2003 to reduce the unsecured value from $5.9 million to $5.7 million.

Cox Enterprises, a cable service provider, owns two commercial parcels in the project

area and has additional unsecured value reported worth $13,565,150. The parcels are located at 22 S. Fairview Avenue. There have been no assessment appeals filed by this property owner within the last five years. Both parcels (APN 07102101 and APN 071021044) were last transferred on November 30, 1993.

Ocean Park Hotels has one motel located at 5665 Hollister Avenue. There have been

no assessment appeals filed by this property owner within the last five years. The property was last transferred on December 29, 2005(071130060).

Ampersand Publishing LLC, a publisher of electronic newspapers, has two light

industrial properties located at 725 S. Kellogg Avenue. There have been no assessment appeals filed by this property owner within the last five years. The parcels were last transferred on October 19, 2000 (APN 071170005 and APN 07117011).

Dupont Displays, a manufacturer of electronic displays, has one unsecured value

reported worth $16,671,610. The site address is 600 Ward Drive (APN 071140015), which is an industrial research park. There have been no assessment appeals filed by this property owner within the last five years.

Ekwill Partners Ltd has one light manufacturing property at 5540 Ekwill Street (APN

071230009). There have been no assessment appeals filed by this property owner within the last five years. The property was last transferred on December 29, 1988.

Tax Rates. The Agency collects tax increment revenues generated by the general

(1.00%) tax levy in the Project Area. There is no levy in excess of the 1.00% rate, otherwise known as override or debt service, in the Project Area from which the Agency receives revenue.

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New Development

The Revenue and Taxation Code provides for reassessment of properties upon the completion of new construction. The County Assessor determines the construction value in place as of January 1 each year and that amount is reflected on the next equalized assessment roll. Construction in process or completed as of January 1, 2011 is assessed on the 2011-12 roll; construction in place after this date will be reflected on future tax rolls.

Based on a review of building permit records provided by the City’s Building and Safety

Department, it is unlikely that any material changes in assessed values will occur on the 2011-12 assessment roll due to the low level of construction activity in the past year. While owners are investing in their properties, most of this reinvestment appears to be repairs and replacement in nature, and therefore less likely to result in a reassessment.

The Fiscal Consultant has made no attempt to estimate the level of new construction in

the Project Area in future years, although there is ample land available in the Project Area to do so. The Fiscal Consultant believes this assumption is reasonable given the current local, regional and national real estate climate, even though it may result in some understating in potential future tax increment revenues for the Agency.

Property Transfers

The Fiscal Consultant compiled statistics of sales transactions based on data from the County Recorder, via a private property vendor. Sales closed and recorded between January 1, 2010 and January 1, 2011 would be reassessed on the 2011-12 assessment roll, while sales after this date would be reflected on subsequent assessment rolls. During 2009, a total of 39 transactions occurred in the Project Area, dropping to 24 sales for the same 12-month period in 2010. In 2009, sales prices were somewhat lower than assessed values, resulting in an aggregate decrease in Project Area real property values of $866,227, or 0.104 percent of the 2009-10 assessment roll. Condominium residential property sales were the dominant cause of this decrease in the Project Area.

The Fiscal Consultant’s projections shown on Table 5 incorporate a 0.039% decrease in

2011-12 assessed value due to resales. The projections do not include supplemental roll revenues that may be generated from resale activity. See “THE PROJECT AREA - Projected Debt Service Coverage”. See also “APPENDIX A – Fiscal Consultant’s Report – General Assumptions in the Revenue Projections - Resales.”

Appeals to Assessed Value

Proposition 8 Appeals. Most of the appeals that might be filed in the Project Area would be based on Section 51 of the Revenue and Taxation Code, which requires that for each lien date the value of real property shall be the lesser of its base year value annually adjusted by the inflation factor under Article XIIIA of the State Constitution or its full cash value, taking into account reductions in value due to damage, destruction, depreciation, obsolescence, removal of property or other factors causing a decline in value. Under California law, property owners may apply for a reduction of their property tax assessment by filing a written application, in form prescribed by the State Board of Equalization, with the appropriate county board of equalization or assessment appeals board. In most cases, the appeal is filed because the applicant believes that present market conditions (such as residential home prices) cause the property to be worth less than its current assessed value. These market-driven appeals are known as Proposition

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8 appeals. Any reduction in the assessment ultimately granted as a Proposition 8 appeal applies to

the year for which application is made and during which the written application was filed. These reductions are often temporary and are adjusted back to their original values when market conditions improve. 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 State Board of Equalization has approved this reassessment formula and such formula has been used by county assessors statewide. The reassessment formula was approved by the California of Appeal, Fourth District, in the recent case of County of Orange et al. v Bezaire, petition for review to the California Supreme Court denied.

Base Year Appeals. A second type of assessment appeal is called a Base Year appeal,

where the property owners challenge the original (basis) value of their property. 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.

Appeals Summary. The Fiscal Consultant collected assessment appeal data for the

past five assessment years for the Project Area from the County Clerk of the Board. Between 2006 and 2010, a total of 16 appeals were filed on Project Area property, consisting of twelve Proposition 8 appeals and four Base Year appeals. To date, five of the Proposition 8 appeals have been closed, resulting in either denials or reductions totaling $17,062. The remaining seven Proposition 8 appeals are expected to be considered by the Appeals Board within the next twelve months. Given past patterns of denials and the relatively more stable real estate market, the Fiscal Consultant does not anticipate a sustained impact of any Proposition 8 appeals should any of these seven appeals be granted.

However, Base Year appeals may have an effect on future Project Area real property

values. Of the four filed within the past five years, two have been denied and two are pending. The two pending appeals involve the Sumida Gardens LP property (the largest taxpayer in the Project Area), and Fairview Business Center (the fifth ranking taxpayer in the Project Area). Together, the respective owners are seeking a reduction in value of more than $18.7 million in 2010-11 assessed values, equal to 2.249% of the total Project Area real property value. Based on this information, the Fiscal Consultant has assumed decreased due to Base Year appeals to cause a 2.249%decrease in assessed value in fiscal year 2011-12. See “APPENDIX A – Fiscal Consultant’s Report – General Assumptions in the Revenue Projections – Assessment Appeals.”

Outstanding Indebtedness of the Agency

The Agency currently has no outstanding bonded indebtedness payable from Tax Revenues.

Projected Tax Revenues

The Agency has retained the Fiscal Consultant to provide projections of taxable

valuation and projected Tax Revenues expected to be generated within the Project Area. The Agency believe the assumptions upon which the projections are based are reasonable; however, some assumptions may not materialize and unanticipated events and circumstances

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may occur (see “RISK FACTORS”). Therefore, the actual Tax Revenues received during the forecast period may vary from the projections and the variations may be material. The tax increment revenue projections for the Project Area, as prepared by the Fiscal Consultant, are summarized below. All of the projections commence with the reported values for Fiscal Year 2010-11.

Due to two outstanding appeals that have been assumed to be implemented by

Rosenow Spevacek Group, Inc. (the “Fiscal Consultant”), the Project Area may experience a modest drop in real property values of approximately 1.535% in 2011-12. In light of this decrease in valuation, the Fiscal Consultant has further estimated no growth in real property values in 2012-13 and a one percent growth rate in 2013-14. Thereafter, the Fiscal Consultant is estimating a two percent growth rate in real property values.

In projecting Tax Revenues and debt service coverage, the Fiscal Consultant assumed

the following:

TABLE 4 THE REDEVELOPMENT AGENCY FOR THE CITY OF GOLETA

Growth Assumptions

Component 2010-11 2011-12 2012-13 2013-14 Thereafter Inflationary 0.753% 0.000% 1.000% 2.000% Changes due to resales -0.039 0.000 0.000 0.000 Increases from Construction 0.000 0.000 0.000 0.000 Decreases due to Base Year Appeals -2.249 0.000 0.000 0.000 Decreases due to Prop 8 Appeals 0.000 0.000 0.000 0.000

Actual Growth Rates

Source: Rosenow Spevacek Group, Inc.

For a more detailed presentation of the projected tax Increment revenues, see

“APPENDIX A – Fiscal Consultant’s Report – Tax Increment Revenue Projections”. There can be no assurance that actual tax increment receipts will not significantly differ from the projections in the table below.

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Projected Tax Revenues

Total

Taxable Value

Taxable Value

over Base (1)

Gross Tax Revenue

Statutory Payments(2)

County

Administration Fee

Housing Set-Aside (3)

Projected Net Tax

Revenues

2010-11 $1,039,404,479 $373,751,184 $3,737,512 $879,636 $44,850 $738,532 $2,074,494

2011-12 1,026,296,547 360,643,252 3,606,433 831,254 43,277 712,631 2,019,270

2012-13 1,026,296,547 360,643,252 3,606,433 831,254 43,277 712,631 2,019,270

2013-14 1,034,704,837 369,051,542 3,690,515 862,289 44,286 729,246 2,054,694

2014-15 1,051,689,583 386,036,288 3,860,363 924,981 46,324 762,808 2,126,250

2015-16 1,069,014,023 403,360,728 4,033,607 988,926 48,403 797,041 2,199,237

2016-17 1,086,684,952 421,031,657 4,210,317 1,054,150 50,524 831,959 2,273,684

2017-18 1,104,709,299 439,056,004 4,390,560 1,120,679 52,687 867,575 2,349,620

2018-19 1,123,094,134 457,440,839 4,574,408 1,188,538 54,893 903,903 2,427,075

2019-20 1,141,846,665 476,193,370 4,761,934 1,257,754 57,143 940,958 2,506,078 (1) Base year value is $665,653,295. (2) Senior to debt service on the Bonds. (3) Equal to 20% of Gross Tax Increment. Source: Rosenow Spevacek Group, Inc; the Redevelopment Agency For the City of Goleta.

Projected Debt Service Coverage

The following table shows the debt service coverage on the Bonds, based on estimated

Tax Revenues from the Project Area. Projected Tax Revenues for fiscal year 2011-12 are approximately $2,019,000, which is approximately 150% of maximum annual debt service which is approximately $1,340,000 payable in fiscal year 2023-24.

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Projected Debt Service Coverage

Fiscal Year (June 30) / Bond Year

(December 1) Total Taxable Value (000s)

Incremental Value

(000s)(1) Gross Tax Revenues

Housing Set-Aside

Revenues(2) County Admin

Fees Statutory

Payments(3)

Non-Housing Tax Increment

Revenues

2011 Total Debt

Service

Debt Service

Coverage 2011 $1,039,404 $373,751 $3,737,512 $ (738,532) $ (44,850) $ (879,636) $2,074,494 $1,302,977 1.59 2012 1,026,297 360,643 3,606,433 (712,631) (43,277) (831,254) 2,019,270 1,338,138 1.51 2013 1,026,297 360,643 3,606,433 (712,631) (43,277) (831,254) 2,019,270 1,338,938 1.51 2014 1,034,705 369,052 3,690,515 (729,246) (44,286) (862,289) 2,054,694 1,338,138 1.54 2015 1,051,690 386,036 3,860,363 (762,808) (46,324) (924,981) 2,126,250 1,336,388 1.59 2016 1,069,014 403,361 4,033,607 (797,041) (48,403) (988,926) 2,199,237 1,338,250 1.64 2017 1,086,685 421,032 4,210,317 (831,959) (50,524) (1,054,150) 2,273,684 1,339,175 1.70 2018 1,104,709 439,056 4,390,560 (867,575) (52,687) (1,120,679) 2,349,620 1,339,113 1.75 2019 1,123,094 457,441 4,574,408 (903,903) (54,893) (1,188,538) 2,427,075 1,338,013 1.81 2020 1,141,847 476,193 4,761,934 (940,958) (57,143) (1,257,754) 2,506,078 1,335,825 1.88 2021 1,160,974 495,321 4,953,210 (978,754) (59,439) (1,328,355) 2,586,662 1,337,500 1.93 2022 1,180,484 514,831 5,148,311 (1,017,306) (61,780) (1,400,367) 2,668,857 1,337,650 2.00 2023 1,200,385 534,731 5,347,314 (1,056,629) (64,168) (1,473,820) 2,752,697 1,340,025 2.05 2024 1,220,683 555,030 5,550,298 (1,096,739) (66,604) (1,548,742) 2,838,213 1,335,900 2.12 2025 1,241,387 575,734 5,757,341 (1,137,651) (69,088) (1,625,163) 2,925,439 1,335,650 2.19 2026 1,262,506 596,852 5,968,525 (1,179,380) (71,622) (1,703,112) 3,014,410 1,338,900 2.25 2027 1,284,047 618,393 6,183,932 (1,221,945) (74,207) (1,782,619) 3,105,161 1,340,275 2.32 2028 1,306,018 640,365 6,403,648 (1,265,361) (76,844) (1,863,717) 3,197,726 1,338,925 2.39 2029 1,328,429 662,776 6,627,758 (1,309,645) (79,533) (1,946,437) 3,292,143 1,335,638 2.46 2030 1,351,288 685,635 6,856,351 (1,354,815) (82,276) (2,056,491) 3,362,769 1,335,413 2.52 2031 1,374,605 708,951 7,089,515 (1,400,888) (85,074) (2,168,745) 3,434,807 1,337,863 2.57 2032 1,398,388 732,734 7,327,342 (1,447,883) (87,928) (2,283,245) 3,508,286 1,337,600 2.62 2033 1,422,646 756,993 7,569,926 (1,495,817) (90,839) (2,400,035) 3,583,235 1,338,400 2.68 2034 1,447,389 781,736 7,817,362 (1,544,711) (93,808) (2,519,160) 3,659,683 1,336,000 2.74 2035 1,472,628 806,975 8,069,746 (1,594,582) (96,837) (2,640,668) 3,737,659 1,340,400 2.79 2036 1,498,371 832,718 8,327,178 (1,645,450) (99,926) (2,764,606) 3,817,196 1,335,800 2.86 2037 1,524,629 858,976 8,589,759 (1,697,336) (103,077) (2,891,023) 3,898,322 1,337,600 2.91 2038 1,551,412 885,759 8,857,591 (1,750,260) (106,291) (3,019,968) 3,981,072 1,340,000 2.97 2039 1,578,731 913,078 9,130,780 (1,804,242) (109,569) (3,151,492) 4,065,476 1,337,600 3.04 2040 1,606,597 940,943 9,409,433 (1,859,304) (112,913) (3,285,647) 4,151,569 1,340,400 3.10 2041 1,635,019 969,366 9,693,659 (1,915,467) (116,324) (3,422,485) 4,239,383 1,337,600 3.17 2042 1,664,010 998,357 9,983,569 (1,972,753) (119,803) (3,562,059) 4,328,954 1,339,200 3.23 2043 1,693,581 1,027,928 10,279,278 (2,031,185) (123,351) (3,704,425) 4,420,316 1,339,400 3.30 2044 1,723,743 1,058,090 10,580,900 (2,090,786) (126,971) (3,849,638) 4,513,506 1,336,400 3.38

(1) Base year value is $665,653,295. (2) Equal to 20% of Gross Tax Increment. (3) Senior to debt service on the Bonds. Source: Rosenow Spevacek Group, Inc; the Redevelopment Agency For the City of Goleta.

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RISK FACTORS

The following section describes certain risk factors affecting the payment and security of

the Bonds. The following discussion of risks is not meant to be an exhaustive list of the risks associated with the purchase of the Bonds and does not necessarily reflect the relative importance of the various risks. Potential investors are advised to consider the following factors along with all other information in this Official Statement in evaluating the Bonds. There can be no assurance that other risk factors will not become material in the future.

Reduction in Taxable Value - Economic Factors and Property Damage

Tax Increment revenues allocated to the Agency are determined by the amount of incremental taxable value in the Project Area and the current rate or rates at which property in the Project Area is taxed. Article XIII A of the State Constitution provides that the full cash value base of real property used in determining taxable value may be adjusted from year to year to reflect the inflation rate, not to exceed a 2% increase for any given year, or may be reduced to reflect a reduction in the consumer price index, comparable local data or any reduction in the event of declining property value caused by damage, destruction or other factors. See “STATUTORY LIMITATIONS ON TAX REVENUES– Property Tax Limitations: Article XIII A of the California Constitution”.

The reduction of taxable values of property in the Project Area due to economic or other

factors beyond the Agency’s control, such as a relocation out of the Project Area by one or more major property owners, or the complete or partial destruction of such property caused by, among other events, an earthquake or other natural disaster, could cause a reduction in the Tax Revenues. In addition, sale of property to a nonprofit corporation or purchase or condemnation of property by a governmental agency would remove such property from the tax rolls. See “THE PROJECT AREA” for a description of the largest assessed properties within the Project Area. The County has also in the past made some County-wide reductions in assessed values for single family homes based on reductions in market value. See “Appeals to Assessed Values and Blanket Reductions to Assessed Values” below. Recent Downturn in Residential and Other Values

According to the Fiscal Consultant, residential properties make-up approximately 12.2%

of the value of properties in the Project Area. The Fiscal Consultant notes that a review of residential property values over the past five years shows that in the Project Area the values of residential properties increased in each Fiscal Year until Fiscal Year 2009-10 and that for Fiscal Year 2009-10 residential values declined only by $3.9 million (-0.66%) relative to Fiscal Year 2008-09. The Fiscal Consultant concludes that the recent residential market downturn has not created any significant residential value losses in the Project Area. See “APPENDIX A – FISCAL CONSULTANT’S REPORT – II. Redevelopment Project Assessed Values – Residential Real Estate Values.” Reduction in Inflation Rate

As described in greater detail below, Article XIIIA of the California Constitution provides that the full cash value base of real property used in determining taxable value may be adjusted from year to year to reflect the inflationary rate, not to exceed a 2% increase for any given year,

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or may be reduced to reflect a reduction in the consumer price index or comparable local data. Such measure is computed on a calendar year basis. Because Article XIIIA limits inflationary assessed value adjustments to the lesser of the actual inflationary rate or 2%, there have been years in which the assessed values were adjusted by actual inflationary rates, which were less than 2%.

Until 2009-10, since Article XIIIA was approved, the annual adjustment for inflation had

fallen below the 2% limitation five times: in fiscal year 1983-84, 1%; in fiscal year 1995-96, 1.19%; in fiscal year 1996-97, 1.11%; in fiscal year 1999-00, 1.85%; and in fiscal year 2004-05, 1.867%. However, the inflationary growth rate will be a negative -0.237% for 2010-11. For purposes of the projections shown on Table 6 herein, the Fiscal Consultant has used this negative growth rate for 2010-11. The State Board of equalization has stated that the inflationary growth rate for fiscal year 2011-12 is 0.753%. See “APPENDIX A – Fiscal Consultant’s Report – General Assumptions in the Revenue Projects” for a discussion of the inflation rate set by the State Board of Equalization. The Agency is unable to predict if any adjustments to the full cash value base of real property within the Project Area, whether an increase or a reduction, will be realized in the future. See “THE PROJECT AREA – Projected Tax Revenues” above.

Concentration of Ownership

The top ten property taxpayers (See Table 3) are, in the aggregate, responsible for the payment of property taxes allocable to approximately 69% of the increase in the assessed values of the property in the Project Area over the base year assessed values. This means, for example, that a loss of substantially all of the assessed value assigned to the property taxpayer responsible for the most property taxes, that is: Sumida Gardens LP (representing 5.4% of total assessed value), could result in a reduction of approximately 15% of the property taxes allocable to the Project Area and in a like reduction in the amount of Tax Revenues available to pay debt service on the Bonds. Such a reduction could impact the Agency’s ability to pay debt service on the Bonds. Furthermore, as described above, there are substantial risks to the taxable values in the Project Area from economic and other factors outside the control of the Agency. These risks are magnified significantly to the extent they adversely impact those taxpayers responsible for the payment of greater amounts of property taxes in the Project Area.

Real Estate and Development Risks

The Agency’s ability to make payments on the Bonds will in large measure depend on the continued economic strength of the Project Area. The market for real estate in the Project Area will be subject to all the risks generally associated with the local and regional economy. Projected development within the Project Area may be subject to unexpected delays, disruptions and changes. Real estate development may be adversely affected by changes in general economic conditions, fluctuations in the real estate market and interest rates, unexpected increases in development costs and by other similar factors. Further, real estate development within the Project Area could be adversely affected by future governmental policies, including governmental policies to restrict or control development. If projected development in the Project Area is delayed or halted, the economy of the Project Area could be affected causing a reduction of the Tax Revenues. In addition, if there is a decline in the general economy of the Project Area, the owners of property within the Project Area may be less able or less willing to make timely payments of property taxes causing a delay or stoppage of the Tax Revenues received by the Agency from the Project Area. In addition, the insolvency

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or bankruptcy of one or more large owners of property within the Project Area could delay or impair the receipt of Tax Increment by the Agency.

Levy and Collection of Taxes

The Agency has no 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. See “STATUTORY LIMITATIONS ON TAX REVENUES - Property Tax Collection Procedures”.

State Budget Deficit; ERAF; SERAF

State Budgets. Information about the State budget and State spending is regularly

available from various State offices or on the applicable websites, including the Department of Finance, the Office of the Legislative Analyst and the State Treasurer. However, none of such information is incorporated by such reference.

Historical ERAFs. In connection with its approval of the State budget for fiscal years

1992-93, 1993-94, 1994-95, 2002-03, 2003-04, 2004-05, 2005-06 and 2008-09, the State Legislature enacted legislation which, 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 redevelopment project areas on a collective basis, and was not allocated separately to individual project areas.

Fiscal Year 2008-09. In 2008, the State Legislature adopted, and the Governor of the

State signed, legislation, Chapter 751, Statutes 2008 (AB 1389) (“AB 1389”), that among other things required redevelopment agencies to pay into ERAF in fiscal year 2008-09, prior to May 10, 2009, an aggregate amount of $350 million. On April 30, 2009, a California superior court in California Redevelopment Association v. Genest (County of Sacramento) (Case No. 34-2008-00028334) held that the required payment by redevelopment agencies into ERAF in fiscal year 2008-09 pursuant to AB 1389 violated the California Constitution and invalidated and enjoined the operation of the California Health and Safety Code section requiring such payment. On May 26, 2009, the State filed a notice that it would appeal the decision of the superior court. On September 28, 2009, the State noticed its withdrawal of its appeal of California Redevelopment Association v. Genest.

Fiscal Year 2009-10 and Fiscal Year 2010-11. In connection with various legislation

related to the budget for the State for its fiscal year 2009-10, in late July 2009, the State legislature adopted, and the Governor of the State signed, Assembly Bill No. 26x4 (the “2009 SERAF Legislation”).

The 2009 SERAF Legislation mandates that redevelopment agencies in the State make

deposits to the Supplemental Educational Revenue Augmentation Fund (“SERAF”) that is established in each county treasury throughout the State the aggregate amounts of $1.7 billion for fiscal year 2009-10, which were due prior to May 10, 2010, and $350 million for fiscal year 2010-11, which are due prior to May 10, 2011.

As noted below, the Agency timely paid the SERAF payment for fiscal year 2009-10 in

the amount of $811,609 and the Agency has funds available to pay the SERAF Payment in the

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amount of $167,096 for fiscal year 2010-11. Pursuant to the 2009 SERAF Legislation, redevelopment agencies may use any funds that are legally available and not legally obligated for other uses, including reserve funds, proceeds of land sales, proceeds of bonds or other indebtedness, lease revenues, interest and other earned income.

The 2009 SERAF Legislation contains provisions that subordinate the obligation of

redevelopment agencies to make the SERAF payments specified therein to certain indebtedness. Health and Safety Code, § 33690 (a) (3) states: “The obligation of any agency to make the payments required pursuant to this subdivision shall be subordinate to the lien of any pledge of collateral securing, directly or indirectly, the payment of the principal, or interest on any bonds of the agency including, without limitation, bonds secured by a pledge of taxes allocated to the agency pursuant to Section 33670 of the California Health and Safety Code.”

The 2009 SERAF Legislation imposes various restrictions on redevelopment agencies

that fail to timely make the required SERAF payments, including (i) a prohibition on adding or expanding project areas, (ii) a prohibition on the incurrence of additional debt, (iii) limitations on the encumbrance and expenditure of funds, including funds for operation and administration expenses, and (iv) commencing with the July 1 following the due date of a SERAF annual payment that is not timely made, a requirement that the applicable redevelopment agency allocate an additional five percent of all taxes that are allocated to the redevelopment agency under the Redevelopment Law for low and moderate income housing for the remainder of the time that the applicable redevelopment agency receives allocations of tax revenues under the Redevelopment Law.

The five percent additional housing set-aside penalty provision referred to in the 2009

SERAF Legislation (the “Penalty Set-Aside Requirement”) would be in addition to the percentage of such tax revenues already required to be used for low and moderate income housing purposes. A redevelopment agency that borrows from amounts required to be allocated to its housing set-aside funds to make required SERAF payments but does not timely repay the funds, will also be subject to the Penalty Set-Aside Requirement. If a redevelopment agency borrows funds from its low and moderate income housing fund to make the SERAF payment in either year, and does not repay the funds within the specified time frame, it would be subject to the Penalty Set-Aside Requirement. Note that, if a redevelopment agency fails to comply with the foregoing described requirements in both fiscal year 2009-10 and 2010-11, the redevelopment agency will be subject to the Penalty Set-aside Requirement in both such Fiscal Years for a total of 10% additional housing set-aside penalty. The Agency’s SERAF payment for fiscal year 2009-10 was not made from the Housing Set-Aside Fund and the Agency has no plans to borrow housing set-aside funds for the fiscal year 2010-11 SERAF.

The California Redevelopment Association, the Union City Redevelopment Agency and

the Fountain Valley Redevelopment Agency filed a lawsuit in Sacramento Superior Court on October 20, 2009 challenging the constitutionality of the 2009 SERAF Legislation and seeking to prevent the State from taking redevelopment funds for non-redevelopment purposes. On May 4, 2010, the Superior Court ruled that the 2009 SERAF Legislation is constitutional. The Agency timely paid its SERAF payment by May 10, 2010. The California Redevelopment Association has appealed the judgment of the Superior Court. The appeal seeks repayment of the fiscal year 2009-10 payment and a prohibition of the second payment. The Agency cannot predict whether or not the Court of Appeal will approve or overturn the judgment of the Superior Court or whether or not the Agency will be able to recover the amount of the SERAF payment for fiscal year 2009-10 in the event the judgment of the Superior Court is overturned. Further, the Agency cannot predict whether or not such judgment will be overturned regarding the SERAF

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payment for fiscal year 2010-11. The State’s ability to impose future ERAF and SERAF payments on redevelopment

agencies may be affected by Proposition 22, which was approved by the California electorate on November 2, 2010. Proposition 22, among other things, amends Sections 24 and 25.5 of Article XIII of the California Constitution to prohibit the State from reallocating, transferring, borrowing, appropriating or restricting the use of taxes imposed or levied by a local government solely for the local government’s purposes. As applied to redevelopment agencies, Proposition 22 adds Section 25.5(A)(7) to Article XIII of the State Constitution to prohibit the State from requiring a redevelopment agency (A) to pay, remit, loan, or otherwise transfer, directly or indirectly, taxes on ad valorem real property and tangible personal property allocated to the agency pursuant to Section 16 of Article XVI of the State Constitution to or for the benefit of the State, any agency of the State, or any other jurisdiction; or (B) to use, restrict, or assign a particular purpose for such taxes for the benefit of the State, any agency of the State, or any other jurisdiction, other than (i) statutory pass through payments required by Health and Safety Code Sections 33607.5 and 33607.7 and (ii) payments for the purpose of increasing, improving, and preserving the supply of low and moderate income housing available at affordable housing cost. Although the passage of Proposition 22 will have no impact upon the Agency’s obligation to pay the 2010 SERAF Amount, the State Legislative Analyst’s Office (“LAO”) has stated that the measure prohibits the State from enacting new laws that require redevelopment agencies to shift funds to schools or other agencies. No assurance can be provided that Proposition 22 will be implemented as contemplated by the LAO. In addition, Proposition 22 is subject to interpretation by the courts and there can be no assurance that the measure will not be challenged by the State or other parties or repealed by the voters of the State in the future.

Proposed 2011-12 Budget and Redevelopment Agencies. On January 10, 2011

Governor Jerry Brown released his proposed budget for fiscal year 2011-12 ("Proposed Budget"). The Proposed Budget is designed to address an estimated budget shortfall of $25.4 billion in the fiscal year 2011-12 California State Budget. The budget shortfall consists of an $8.2 billion projected deficit for 2010-11 and a $17.2 billion gap between projected revenues and spending in 2011-12. The Governor's proposal includes approximately $12.5 billion in budget cuts, $12 billion in tax extensions and changes, and $1.9 billion in other solutions. The Governor is calling for a statewide special election in June to extend for five more years tax measures currently set to expire.

The Proposed Budget makes the following redevelopment-related proposals (the "RDA

Provisions"), among others: (i) The RDA Provisions, if adopted, would eliminate the current funding mechanism

for redevelopment agencies, although only limited details are provided for such a far-reaching proposal.

(ii) The RDA Provisions, if adopted, would prohibit existing agencies from creating

new contracts or obligations effective upon enactment of urgency legislation. (iii) By July 1, the RDA Provisions, if adopted, would disestablish existing

redevelopment agencies and successor local agencies would be required to use the property tax revenues that redevelopment agencies would otherwise have received to retire redevelopment agency debts and contractual obligations "in accordance with existing payment schedules” (emphasis added).

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(iv) For fiscal year 2011-12, the RDA Provisions, if adopted, would divert an estimated $1.7 billion remaining after payment of the redevelopment agency debts and contractual obligations described in the preceding paragraph (iii) to offset State General Fund costs for Medi-Cal and trial courts. An additional estimated $210 million would be distributed on a one-time basis to cities, counties, and special districts proportionate to their current share of the countywide property tax.

(v) For fiscal years after fiscal year 2011-12, the RDA Provisions, if adopted, would

distribute the money available after payment of the redevelopment agency debt and contractual obligations described in the preceding paragraph (iii) to schools, counties, cities, and non-enterprise special districts for general uses.

(vi) The RDA Provisions, if adopted, would shift amounts in the redevelopment

agency's balances reserved for low-moderate income housing to local housing authorities for low and moderate income housing.

(vii) If adopted, the RDA Provisions would introduce a new financing mechanism for

economic development. Specifically, the Proposed Budget proposes that the Constitution be amended to provide for 55% voter approval for limited tax increases and bonding against local revenues for development projects such as are currently done by redevelopment agencies. Voters in each affected jurisdiction would be required to approve use of their tax revenues for these purposes.

Implementation of the Proposed Budget, including the RDA Provisions, would require

implementing legislation by the Legislature and perhaps voter approval as to certain material elements and would probably include terms which are not yet proposed but that would be material to the Agency and the Bonds. The Agency cannot predict the ultimate form of any implementing legislation, if any is adopted.

Elements of the RDA Provisions, including the economic development program

authorization, contemplate voter approval through the initiative process. It is possible that Proposition 22, which amended the State Constitution to prohibit state diversion of redevelopment agency revenues generally, will affect the State's ability to implement some of the RDA Provisions. It is possible that the Governor and the Legislature may seek voter approval of changes to the terms of Proposition 22 that are in conflict with the Proposed Budget, including the RDA Provisions.

The Agency cannot predict the timing, terms or ultimate implementation of any such final

legislation or voter initiative measures, or the impact on the Agency or the Bonds of any proposed, interim or final legislative and constitutional changes which may be adopted arising out of the Proposed Budget.

Legislative Analyst Report. The LAO released its Overview of the Governor's Budget

("LAO Overview") on January 12, 2011. As it relates to the RDA Provisions the LAO Overview suggests the proposal has merit "but faces considerable implementation issues." The LAO Overview notes:

the administration's plan will require considerable work by the Legislature to sort through many legal, financial and policy issues. Several voter-approved constitutional measures, for example, constrain the State's authority to redirect redevelopment funds, use property tax revenues to pay for state programs, or impose increased costs on local

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agencies. In addition, the administration’s plan does not address many related issues, such as clarifying the future financial responsibility for low- and moderate- income housing (currently, a redevelopment program). Finally, the LAO Overview recommends that the Legislature pass urgency legislation as

soon as possible prohibiting redevelopment agencies, during the period of legislative review of the Proposed Budget, from taking actions that increase their debt.

Potential Impact on the Agency and the Bonds. There are a variety of ways in which the

Proposed Budget and the RDA Provisions, if adopted, could impact the Agency and the Bonds, although the Agency is not able to predict the full variety or extent of these impacts, and the impacts will vary greatly depending on the final terms of laws adopted to implement the Proposed Budget and the RDA Provisions:

(i) The RDA Provisions, if adopted, could impact the Agency's activities and

programs generally and could reduce or eliminate its fund balances and staffing. (ii) The RDA Provisions, if adopted, could affect the Agency's compliance with and

performance under existing contracts and obligations, including senior Pass-Through Agreements and Housing Set-Aside obligations.

(iii) Subject to certain constitutional protections described below, the RDA

Provisions, if adopted, could affect the Agency's compliance with and performance under the terms of the Indenture and the Bonds. These impacts could relate to the amount or availability of property tax revenue, Tax Increment revenues or Tax Revenues for the Bonds and other uses, the manner of application of Tax Revenues to debt service, flow of funds, use of Bond proceeds to fund new projects, compliance with Indenture covenants, continuing disclosure and other matters.

(iv) Pending final adoption of laws to implement the RDA Provisions, interim

proposals could affect the activities of the Agency and the value of the Bonds. (v) Most significantly, the RDA Provisions -- if adopted and implemented in their

proposed form – would eliminate redevelopment agencies and redeploy tax increment revenues currently available to redevelopment agencies. These actions would almost certainly raise legal and practical issues, some of which may be subject to litigation and ultimate resolution in the courts, or subsequent legislative action. These issues could affect the Agency and its compliance with the terms of the Indenture and the Bonds, and resolution of these issues could involve expense and delay or modification of certain of the rights of the bondholders in ways the Agency cannot predict.

Constitutional Protections. The Agency believes that constitutional protections against

the impairment of contracts may prevent the proposed actions in the RDA Provisions from adversely affecting the validity of the Bonds or the Agency's pledge of Tax Revenues to secure the payment of the Bonds. Indeed, the RDA Provisions purport to provide for the payments by successor entities of existing redevelopment agencies' "debts and contractual obligations."

Article I, section 10 of the United States Constitution provides that “No state shall...pass

any...law impairing the obligation of contracts.” Article I, section 9 of the California Constitution provides that a “law impairing the obligation of contracts may not be passed.” Each of these provisions is generally referred to as a “contracts clause”. Federal courts have applied a fact-

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based three-part test to determine whether a state law violates the federal contracts clause. In general, the test compares any impairment against the significant and legitimate public purpose behind the state law; there is no absolute prohibition against impairment.

The United States Supreme Court has declared in the context of a New Jersey law that

would have retroactively repealed a 1962 statutory (but contractual) covenant that would have adversely impacted bondowners: “A governmental entity can always find a use for extra money, especially when taxes do not have to be raised. If a State could reduce its financial obligations whenever it wanted to spend the money for what it regarded as an important public purpose, the Contract Clause would provide no protection at all.” (See United States Trust Co. of New York v. New Jersey (1977) 431 U.S. 1, 25-26.)

The Agency cannot predict the applicable scope of "contract clause" protections to the

Bonds and the RDA Provisions as they may ultimately be implemented. Efforts to protect the rights of Bondholders and to enforce the terms of the Indenture, if necessary, could involve expense and delay including with respect to the determination of the applicable scope of the "contract clause" provisions.

Future State Action. The Agency cannot predict what actions will be taken in the future

by the voters of the State, the State Legislature and the Governor to deal with changing State revenues and expenditures and the repercussions they may have on the current fiscal year State Budget, the Proposed Budget and future State budgets, or their impact on the Agency. These developments at the State level, whether related to the Proposed Budget or not, may, in turn, affect local governments and agencies, including the Agency. Even if the proposals affecting the Agency in the Proposed Budget are not adopted, the State Legislature may adopt other legislation from time to time requiring redevelopment agencies to make other payments to ERAF or SERAF or to make other payments. The impact that current and future State fiscal shortfalls will have on the Agency is unknown at this time. In prior years, the State has experienced budgetary difficulties and as in the Proposed Budget, balanced its budget by requiring local political subdivisions, such as the County, the City and the Agency, to fund certain costs previously borne by the State.

Draft Legislation to Eliminate Redevelopment Agencies and Restrict Activities. In

his proposed budget, Governor Brown included a provision that would eliminate all redevelopment agencies in California starting on July 1, 2011. Draft legislation implementing this proposal was released by the Department of Finance of the State on February 23, 2011 (the "draft legislation"). The draft legislation has not been submitted to the Legislature, but appears likely to be taken up by the budget conference committee within the next week. The budget conference committee has latitude to amend the draft legislation. Accordingly, no assurance can be given whether or not the draft legislation will be enacted in its present form, a different form, or at all.

The draft legislation is styled as an urgency measure, which requires a two-thirds vote of

each house of the Legislature for passage, and which would become effective immediately upon passage and upon the signature of the Governor. It is possible that, if the draft legislation is included as a part of a complete budget package passed by the Legislature, it could be passed with only majority vote approval and still become effective immediately. The draft legislation makes it clear that its provisions would not be retroactive, but would rather become effective as of the date of enactment.

The draft legislation declares that it is the intent of the Legislature to do the following:

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"(1) Bar existing redevelopment agencies from incurring new obligations that would

divert any more money from core functions and dissolve all existing redevelopment. It is the intent of the Legislature that the greatest amount of funding be realized from these actions to fund core governmental services.

(2) Beginning with 2012-13 fiscal year, allocate these funds according to the existing

property tax allocation, except for enterprise special districts, to make the funds available for cities, counties, special districts, school and community college districts to provide core governmental services. As a result of these actions, it is estimated that, by fiscal year 2012-13, these local entities will receive $1.9 billion per year in new resources to use for their core priorities.

(3) Require a successor entity to settle the affairs of the redevelopment agencies. (4) Require the protection of contractual rights by successor agencies, which will be

required to retire redevelopment agency debts in accord with existing payment schedules. No existing contractual obligations will be impaired."

Among the changes in the draft legislation is a lengthening of the statute of limitations to

challenge various actions by the Agency taken after January 1, 2011, including the issuance of the Bonds, from 60 days to three years. While the Agency does not believe there is any defect in the proceedings for the issuance of the Bonds that could give rise to a successful challenge and Bond Counsel is providing its opinion with respect to the Bonds as set forth in Appendix F, due to the heightened scrutiny that may occur with respect to redevelopment agency activities that occur after January 1, 2011, there could be an increased risk of a challenge and any such challenge could affect the market price of the Bonds.

The proposed legislation would establish successor agencies to administer each

agency’s existing “enforceable obligations” and would establish a series of special funds to effectuate the payments of such obligations and administer the transfer of property taxes to other local entities and the disposition of an agency’s other assets such as real property and cash. As defined in the proposed legislation, “enforceable obligations” include bonds, debt service on bonds, reserve set-asides and other payments required under the indenture governing the issuance of the bonds.

The proposed legislation also establishes a seven member oversight committee to

monitor and approve the activities of each successor agency. Only one member of the oversight committee may be selected by the city that formed the redevelopment agency. The remaining members are to be selected by the applicable county, county superintendent of education and largest non-enterprise special district in the territory of the former redevelopment agency (or by the Governor if positions are not otherwise filled). The result of this make up of the oversight committee is that its actions may not be in the best interest of the former redevelopment agency or the city that formed the redevelopment agency. As a result, if enacted as drafted, the proposed legislation may severely limit the Agency’s future ability to spend the proceeds of the Bonds.

Interpretation of the wording and effect of the draft legislation is subject to varying

opinions. It appears that if enacted as drafted in its present form and if found to be legal and enforceable by the courts in the event of a court challenge, the legislation will include provisions having the effect of barring redevelopment agencies from entering into certain

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contracts and, in some circumstances, expending funds after the effective date of the legislation. These provisions, as well as possibly other provisions, may limit the Agency’s future ability to spend the proceeds of the Bonds. The existence and/or extent of such limitations cannot be determined at this time.

The draft legislation implements the intended purposes through a complex series of

provisions, and appears to contain several inconsistencies and drafting problems which will likely require revision. The Agency cannot predict what changes may be made to the draft legislation or whether the draft legislation in any form will be adopted.

Finally, investors should be aware that the draft legislation, if adopted, would extend the

statute of limitations to 3 years for challenges to various actions by the Agency taken after January 1, 2011, including the issuance of the Bonds. Although the Agency does not believe there is any defect in the proceedings for the issuance of the Bonds that could give rise to a successful challenge and Bond Counsel is providing its opinion with respect to the Bonds as set forth in an Appendix to this Official Statement, there could be an increased risk of a legal challenge because the Agency is issuing the Bonds after January 1, 2011, and any such challenge could affect the market price of the Bonds.

The full text of the draft legislation may be obtained from the State of California

Department of Finance at the following web link: http://www.dof.ca.gov/budgeting/trailer_bill_language/financial_research_and_local_gov

ernment/documents/502%20RDA%20Legislation%202-23p.docx. The link to the draft legislation is provided for convenience and is not a part of nor

incorporated into this Official Statement, and the Agency undertakes no responsibility to update or comment on any changes to the material included in such link.

Investment Risk

The Reserve Account and all funds held under the Indenture are required to be invested in Permitted Investments as provided under the Indenture. See Appendix D for a summary of the definition of Permitted Investments. The Redevelopment Fund, into which a portion of the proceeds of the Bonds will be deposited, may be invested by the Agency in any investment authorized by law. All investments, including the Permitted Investments and those authorized by law from time to time for investments by public agencies, contain a certain degree of risk. Such risks include, but are not limited to, a lower rate of return than expected and loss or delayed receipt of principal. The occurrence of these events with respect to amounts held by the Agency or under the Indenture could have a material adverse affect on the security for the Bonds.

Further, the Agency cannot predict the effects on the receipt of Tax Increment if the

County or the City were to suffer significant losses in their portfolio of investments or if the County or the City were to become insolvent or declare bankruptcy. See “Bankruptcy” below.

Bankruptcy

The rights of the Owners of the Bonds may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights under currently existing law or laws enacted in the future and may also be subject to the exercise of judicial

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discretion under certain circumstances. The opinions of Bond Counsel as to the enforceability of the obligation to make payments on the Bonds will be qualified as to bankruptcy and such other legal events. See APPENDIX F - “Form of Opinion of Bond Counsel”.

Change in Law

In general, there can be no assurance that the California electorate will not at some future time adopt initiatives or that the Legislature will not enact legislation that will amend the Redevelopment Law or other laws or the Constitution of the State of California resulting in a reduction of Tax Increment. If any such subsequent initiative or legislation would impair the Agency’s ability to make payments on the Bonds, such initiative or legislation may be subject to legal challenge. See “STATUTORY LIMITATIONS ON TAX REVENUES”.

Assumptions and Projections

To estimate the total Tax Revenues available to pay debt service on the Bonds, the Agency has made certain assumptions with regard to the assessed valuation in the Project Area, future tax rates, the percentage of taxes collected and the likelihood of appeals. The Agency believes these assumptions to be reasonable, but to the extent that the payment of any revenues that constitute Tax Increment is less than such assumptions, the total Tax Increment available will, in all likelihood, be less than those projected.

Risk of Earthquake and other Hazards

Seismic Risks. The Goleta area is subject to seismic hazard potential due to its location in relationship to known faults in the general vicinity. Santa Barbara County, in general, is recognized as a seismically active region with several major unstable fault lines identified in the county's geologic composition. Faults near or within the City include the More Ranch Fault, the Glen Annie Fault, and the Carneros Fault. None of these faults are classified as active by the State Division of Mines and Geology or are subject to an Alquist-Priolo Special Studies Zone. However, according to the Santa Barbara County Seismic Safety and Safety Element, the More Ranch Fault is considered active based on the existence of geologically recent fault scarp. If an earthquake or other hazard were to substantially damage or destroy taxable property within the Project Area, the assessed valuation of such property would be reduced. Such a reduction of assessed valuations could result in a reduction of the Tax Revenues that secure the Bonds.

Flood Hazards. According to the City’s Safety Element of the General Plan, 640 acres

(about one square mile) are located within Federal Emergency Management Agency (“FEMA”) designated 100-year floodplains. This comprises about 12% of the area of the City. About 168 of these acres, or one quarter of total, are in the Old Town area east of Fairview Avenue, which lies within the Project Area. Flooding is generally confined to the winter months of December to March and correspond to overflow from creeks onto City streets during prolonged winter storms. The overflow is generally one to two feet of water in a given flood event.. Stream flooding is exacerbated by inadequately sized culverts under U.S. Highway 101, Hollister Avenue, and the Union pacific Railroad. A notable area subject to flooding is the floodplain associated with San Jose Creek and San Pedro/Las Vegas Creeks. This is notable in that it includes two of the City’s three major commercial areas: the Calle Real Center and the Goleta Old town area. The San Jose Creek Channel Improvement Project being financed with a portion of the proceed of the Bonds is expected to alleviate much of this flooding. See “PLAN OF FINANCE – Proposed Projects – San Jose Creek Channel Improvement”

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STATUTORY LIMITATIONS ON TAX REVENUES

Property Tax Limitations: Article XIII A 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 XIIIA 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 2% 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 1% 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 1, 1978. In addition, an amendment to Article XIII was adopted in June 1986 by initiative which exempts any bonded indebtedness approved by two-thirds of the votes cast by voters for the acquisition or improvement of real property from the 1% limitation.

In the general election held November 4, 1986, voters of the State of California approved

two measures, Propositions 58 and 60, which further amend Article XIIIA. Proposition 58 amends Article XIIIA to provide that the terms “purchased” and “change of ownership,” for purposes of determining full cash value of property under Article XIIIA, do not include the purchase or transfer of (1) real property between spouses and (2) the principal residence and the first $1,000,000 of other property between parents and children.

Proposition 60 amends Article XIIIA to permit the Legislature to allow persons over age

55 who sell their residence 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. Pursuant to Proposition 60, the Legislature has enacted legislation permitting counties to implement the provisions of Proposition 60.

Implementing Legislation

Legislation enacted by the California Legislature to implement Article XIII A (Statutes of 1978, Chapter 292, as amended) provides that, notwithstanding any other law, local agencies may not levy any property tax, except to pay debt service on indebtedness approved by the voters prior to July 1, 1978, and that each county will levy the maximum tax permitted by Article XIII A of $4.00 per $100 assessed valuation (based on the traditional practice in California of using 25% of full cash value as the assessed value for tax purposes). The legislation further provided that, for fiscal year 1978-79, the tax levied by each county was to be appropriated among all taxing agencies within the county in proportion to their average share of taxes levied in certain previous years.

The apportionment of property taxes in fiscal years after fiscal year 1978-79 has been

revised pursuant to Statutes of 1979, Chapter 282 which provides relief funds from State moneys beginning in fiscal year 1978-79 and is designed to provide a permanent system for sharing State taxes and budget surplus funds with local agencies. Under Chapter 282, cities and counties receive about one-third more of the remaining property tax revenues collected

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under Proposition 13 instead of direct State aid. School districts receive a correspondingly reduced amount of property taxes, but receive compensation directly from the State and are given additional relief. Chapter 282 does not affect the derivation of the base levy ($4.00 per $100 assessed valuation) and the bonded debt tax rate.

Effective as of fiscal year 1981-82, assessors in California no longer record property

values in the tax rolls at the assessed value of 25% of market values. All taxable property is shown at full market value (subject to a 2% annual limit in growth so long as property is not sold). In conformity with this change in procedure, all taxable property value included in this Official Statement is shown at 100% of market value and all general tax rates reflect the $1 per $100 of taxable value. Tax rates for bond service and pension liability are also applied to 100% of market value.

Future assessed valuation growth allowed under Article XIII A (new construction, change

of ownership, 2% annual value growth) will be 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 (“Unitary Property”) which is allocated by a different method as described under “--Unitary Property” below.

Challenges to Article XIIIA

There have been many challenges to Article XIIIA of the California Constitution. In

Nordlinger v. Hahn, the United States Supreme Court heard an appeal relating to residential property. Based upon the facts presented in Nordlinger, the United States Supreme Court held that the method of property tax assessment under Article XIIIA did not violate the federal Constitution. 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 increment revenues should a future decision hold unconstitutional the method of assessing property.

Property Tax Collection Procedures

Classifications. In California, property which is subject to ad valorem taxes is classified as “secured” or “unsecured.” Secured and unsecured property are entered on separate parts of the assessment roll maintained by the county assessor.

The secured classification includes property on which any property tax levied by the

County becomes a lien on that property sufficient, in the opinion of the county assessor, to secure payment of the taxes. Every tax which becomes a lien on secured property has priority aver all other liens on the secured property, regardless of the time of the creation of other liens. A tax levied on unsecured property does not become a lien against the taxes on unsecured property, but may become a lien on certain other property owned by the taxpayer.

Collections. The method of collecting delinquent taxes is substantially different for the

two classifications of property. The taxing authority has four ways of collecting unsecured property taxes in the absence of timely payment by the taxpayer: (1) a civil action against the taxpayer; (2) filing a certificate in the office of the county clerk specifying certain facts an order to obtain a judgment lien on certain property of the taxpayer; (3) filing a certificate of delinquency for record in the county recorder’s office, in order to obtain a lien on certain property of the taxpayer; and (4) seizure and sale of the personal property, improvements or possessory interests belonging or assessed to the assessee. The exclusive means of enforcing

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the payment of delinquent taxes with respect to property on the secured roll is the sale of property securing the taxes to the State for the amount of taxes which are delinquent. A 10% penalty also applies to delinquent taxes on property on the unsecured roll, and further, an additional penalty of 1 ½% per month accrues with respect to such taxes beginning the first day of the third month following the delinquency date.

The valuation of property is determined as of January 1 each year and equal

installments of taxes levied upon secured property become delinquent on the following September 10 and April 10. Taxes on unsecured property are due August 1 and become delinquent August 31.

Supplemental Assessments. A bill enacted in 1983, SB 813 (Statutes of 1983,

Chapter 498) provides for the supplemental assessment and taxation of property as of 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 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 provided increased revenue to redevelopment agencies to the extent that supplemental assessments as a result of new construction or changes of ownership occur within the boundaries of redevelopment projects subsequent to the tax lien date. To the extent such supplemental assessments occur within the Project Area, Tax Revenue may increase.

Property Tax Administration Costs. In 1990, the Legislature enacted SB 2557

(Chapter 466, Statutes of 1990) which allows counties to charge for the cost of assessing, collecting and allocating property tax revenues to local government jurisdictions on a prorated basis. It has been the practice of most California counties, including Santa Barbara County, to reduce an agency’s tax increment or bill an agency for their pro rata share of property tax administration costs. The amount deducted by the County from fiscal year 2009-10 tax increment revenues allocable to the Project Area was $46,896, or approximately 1.2% of tax increment revenue paid to the Agency.

Teeter Plan

The Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the "Teeter Plan") has been adopted by 53 of the 58 counties, including Santa Barbara County, as provided for in section 4701 et seq. of the California Revenue and Taxation Code. Under the Teeter Plan, each participating local agency, including cities, Ievying property taxes in a county receives the amount of uncollected taxes credited to its fund, in the same manner as if the amount credited had been collected. In return, the county receives and retains delinquent payments, penalties and interest as collected, that would have been due the local agency. However, although a local agency receives the total levy for its property taxes without regard to actual collections, to the extent of a reserve established and held by its county for this purpose, the basic legal liability for property tax deficiencies at all times remains with the local agency.

The Teeter Plan is to remain in effect unless the county board of supervisors orders its

discontinuance or unless, prior to the commencement of any fiscal year of the county, the board of supervisors receives a petition for its discontinuance from two-thirds of the participating revenue districts in the county. The board of supervisors may, after holding a public hearing on the matter, discontinue the procedures under the Teeter Plan with respect to any tax levying agency in its county. As a result of its participation in the Teeter Plan, delinquent property taxes

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do not impact the Agency's tax increment revenues. To the extent the Teeter Plan continues in existence and is carried out as adopted, the Teeter Plan may help protect the Owners from the risk of delinquencies in ad valorem taxes.

Unitary Property

Commencing in the 1988/89 fiscal year, the Revenue and Taxation Code of the State of California changed the method of allocating property tax revenues derived from state assessed utility properties. It provides for the distribution of state assessed values to tax rate areas by a county-wide mathematical formula rather than assignment of state assessed value according to the location of those values in individual tax rate areas.

Commencing with the 1988/89 fiscal year, each county has established one county-wide tax rate area. The assessed value of all unitary property in the county has been assigned to this tax rate area and one tax rate is levied against all such property (“Unitary Revenues”).

The property tax revenue derived from the assessed value assigned to the county-wide tax rate area shall be allocated as follows: (1) each jurisdiction will be allocated up to two percent of the increase in Unitary Revenues on a pro rata basis county-wide; and (2) any decrease in Unitary Revenues or increases less than two percent, or any increase in Unitary Revenues above two percent will be allocated among jurisdictions in the same proportion of each jurisdiction’s Unitary Revenues received in the prior year to the total Unitary Revenues county-wide.

However, legislation adopted in 2006 (SB 1317, Chapter 872) provides that,

commencing with Fiscal Year 2007-08, certain property related to new electrical facilities shall be allocated entirely to the county in which such property is located and property tax revenues derived from such property shall be allocated to such county and certain taxing entities with such county.

Exclusion of Tax Revenues for General Obligation Bonds Debt Service

An initiative to amend the California Constitution entitled “Property Tax Revenues of Redevelopment Agencies” was approved by California voters at the November 8, 1988 general election. Under prior law, a redevelopment agency using tax increment revenue received additional property tax revenue whenever a local government increases its property tax rate to pay off its general obligation bonds. This initiative amended the California Constitution to allow the California Legislature to prohibit redevelopment agencies from receiving any of the property tax revenue raised by increased property tax rates imposed by local governments to make payments on their bonded indebtedness. The initiative only applies to tax rates levied to finance bonds approved by the voters on or after January 1, 1989. The Agency receives no general obligation tax overrides.

Certification of Agency Indebtedness

Section 33675 was added to the Redevelopment Law in 1976, providing for the filing not later than the first day of October of each year with the county auditor of a statement of indebtedness certified by the chief fiscal officer of the agency for each redevelopment project that receives tax increment. The statement of indebtedness is required to contain the date on which any bonds were delivered, the principal amount, term, purpose and interest rate of bonds and the outstanding balance on bonds. Similar information must be given for each loan,

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advance or indebtedness that the agency has incurred or entered into to be payable from tax increment. The Agency has complied with the requirements of Section 33675.

Section 33675 also provides that the county auditor is limited in payment of tax

increment the agency to the amounts shown on the agency’s statement of indebtedness. The section further provides that the statement of indebtedness is prima facie evidence of the indebtedness of the agency, but that the county auditor may dispute the amount of indebtedness shown on the statement in certain cases. Provision is made for time limits under which the dispute can be made by the county auditor as well as provisions for determination by the Superior Court in a declaratory relief action of the property disposition of the matter. The issue in any such action must involve only the amount of the indebtedness and not time validity of any contract or debt instrument, or any expenditures pursuant thereto. An exception is made for payments to a public agency in connection with payments by such public agency pursuant to a bond issue which shall not be disputed in any action under Section 33675.

Appropriations Limitations: Article XIII B of the California Constitution

On November 6, 1979, California voters approved Proposition 4, the so-called Gann Initiative, which added Article XIII B to the California Constitution. The principal effect of Article XIII B 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.

Effective September 30, 1980, the California Legislature added Section 33678 to the

Redevelopment Law which provided that the allocation of taxes to a redevelopment agency for the purpose of paying principal of, or interest on, loans, advances, or indebtedness shall not be deemed the receipt by such agency of proceeds of taxes levied by or on behalf of the agency within the meaning of Article XIII B, nor shall such portion of taxes be deemed receipt of proceeds of taxes by, or an appropriation subject to the limitation of, any other public body within the meaning or for the purpose of the Constitution and laws of the State of California, including Section 33678 of the Redevelopment Law. The constitutionality of Section 33678 has been upheld in two California appellate court decisions, Brown v. Community Redevelopment Agency of the City of Santa Ana and Bell Community Redevelopment Agency v. Woosley. The plaintiff in Brown v. Community Redevelopment Agency of the City of Santa Ana petitioned the California Supreme Court for a hearing of this case. The California Supreme Court formally denied the petition and therefore the earlier court decisions are now final and binding. On the basis of these court decisions, the Agency has not adopted an appropriations limit.

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OTHER MATTERS

Litigation

There is no litigation pending and served or, to 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 or the Indenture or any proceedings of the Agency with respect thereto. In the opinion of the Agency and its counsel, there are no lawsuits or claims pending or threatened against the Agency which will materially affect the Agency’s finances or operations so as to impair its ability to pay the Bonds.

Rating

The Agency has not applied for a rating on the Bonds.

Tax Matters

In the opinion 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 Bonds is excluded from gross income for federal income tax purposes, such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporation, 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, and the Bonds are “qualified tax-exempt obligations” within the meaning of section 265(b)(3) of the Internal Revenue Code of 1986 (the “Code”) such that, in the case of certain financial institutions (within the meaning of section 265(b)(5) of the Code), a deduction for federal income tax purposes is allowed for 80% of that portion of such financial institution’s interest expense allocable to interest payable on the Bonds.

In the further opinion of Bond Counsel, interest on the Bonds is exempt from California personal income taxes.

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 and original issue premium is disregarded. Owners of Bonds with original issue discount or original issue premium, including purchasers who do not purchase in the original offering, should consult their own tax advisors with respect to federal income tax and State of California personal income tax consequences of owning such Bonds.

The opinions set forth in the preceding paragraphs are subject to the condition that the City comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds in order that such interest be, or continue to be, excluded from gross income for federal income tax purposes. The City has covenanted to comply with each requirement. Failure to comply with certain of such requirements may cause the inclusion of such interest in

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gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds.

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.

Certain Legal Matters

The legal opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, approving the validity of the Bonds and regarding certain tax matters with respect to the Bonds, will be made available to purchasers at the time of original delivery of the Bonds. The proposed form of the legal opinion of Bond Counsel is attached hereto as Appendix F. Jones Hall is also acting as Disclosure Counsel to the Agency. Certain legal matters will be passed upon for the Agency by Tim W. Giles, City Attorney. Payment of the fees of Bond Counsel and Disclosure Counsel is contingent upon sale and delivery of the Bonds.

Underwriting

The Bonds will be sold to the Goleta Financing Authority for concurrent resale to Stone & Youngberg LLC, as Underwriter (the “Underwriter”) under a bond purchase agreement among the Authority, the Agency and the Underwriter (the “Purchase Contract”), pursuant to which the Underwriter will agree to purchase all of the Bonds for an aggregate purchase price of $15,568,872.30 (being an amount equal to the principal amount of the Bonds ($16,085,000) and less an underwriter’s discount of $262,512.50) and an original issue discount of $253,615.20. The Underwriter is committed to purchase all of the Bonds if any are purchased.

The Bonds are offered for sale at the initial prices stated on the cover page of this

Official Statement, which may be changed from time to time by the Underwriter. The Bonds may be offered and sold to certain dealers at prices lower than the public offering prices.

The Goleta Financing Authority

The Goleta Financing Authority (the “Authority”) was created by a Joint Exercise of Powers Agreement, dated as of May 1, 2007, between the City and the Agency (the “Agreement”). The Agreement was entered into pursuant to the provisions of Articles 1, 2 and 4, Chapter 5, Division 7, Title 1 of the California Government Code (the “JPA Law”). The Authority was created for the primary purpose of assisting the financing or refinancing of public capital improvements of benefit to the City or the Agency. Under the JPA Law, the Authority has the power to purchase the Bonds from the Agency and to sell the Bonds to the Underwriter.

Professionals Involved in the Offering

The following professionals are participating in this financing: Jones Hall, A Professional Law Corporation, as Bond Counsel and Disclosure Counsel; Rosenow Spevacek Group, Inc., as Fiscal Consultant; The Bank of New York Mellon Trust Company, N.A., as Trustee; and Stone & Youngberg LLC, as Underwriter.

The fees of Bond Counsel and Disclosure Counsel and the Underwriter are contingent

on the issuance of the Bonds.

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Miscellaneous

All references to the Bonds and the Indenture, are brief outlines of certain provisions thereof. Such outlines do not purport to be complete statements of any or all of such provisions and reference is hereby made to such documents on file with the Agency for further information in connection therewith.

This Official Statement is not to be construed as a contract with the purchasers of the Bonds. Any statements made in this Official Statement involving matters of opinion or of estimates, whether or not expressly so stated, are 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 Agency.

THE REDEVELOPMENT AGENCY FOR THE CITY OF GOLETA By: /s/ Daniel Singer Executive Director

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APPENDIX A

FISCAL CONSULTANT’S REPORT


REDEVELOPMENT AGENCY FOR THE CITY OF GOLETA

ROSENOW SPEVACEK GROUP INC.

FISCAL CONSULTANT’S REPORT Tax Allocation Bonds Series 2011 February 22, 2011

FISCAL CONSULTANT REPORT

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TABLE OF CONTENTS INTRODUCTION ............................................................................................................... 1

BACKGROUND INFORMATION ....................................................................................... 1

Redevelopment Agency and Project Area .................................................................. 1

Time and Financial Limitations ..................................................................................... 2

Time Limitations ............................................................................................................................... 3

Financial Limitations ....................................................................................................................... 3

Ownership of Project Area Properties ........................................................................ 4

Top Ten Taxpayers .......................................................................................................................... 4

Agency-Owned Properties in Project Area .......................................................................... 7

GENERAL ASSUMPTIONS IN THE REVENUE PROJECTIONS ........................................ 7

Assessed Valuation ......................................................................................................... 7

Growth Assumptions ....................................................................................................... 9

Revenue & Taxation Code Inflationary Adjustments ...................................................... 10

Resales ................................................................................................................................................ 10

Construction .......................................................................................................................................11

Assessment Appeals ......................................................................................................................12

Tax Rates .......................................................................................................................... 13

Unitary Utility Revenue ................................................................................................. 13

County AdminIstrative Fees ......................................................................................... 14

Delinquency Rates .......................................................................................................... 14

Low and Moderate Income Housing Fund Deposits ................................................ 15

Payments to affected taxing agencies ....................................................................... 15

Owner Participation & Developer Agreement Payments ....................................... 16

Supplemental Educational Revenue Augmentation Fund Shift ............................ 16

California State Budget Proposal to Eliminate Redevelopment ........................... 16

TAX INCREMENT REVENUE PROJECTIONS ................................................................. 17


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INTRODUCTION

This Fiscal Consultant Report (“Report”) has been prepared at the request of the Redevelopment Agency of the City for Goleta (“Agency”) to present the projected tax increment revenues from the Goleta Old Town Redevelopment Project Area (“Project Area”). It is our understanding that the Agency will employ this Report to substantiate available tax increment revenue generated within the Project Area that will support debt service for the Agency’s proposed 2011 Tax Allocation Bonds (“Bonds”), which would be used to finance redevelopment projects.

This Report presents historical assessment information and future revenue projections for the Project Area. The projected assessed values and tax revenues presented in this Report are based upon the following assumptions:

§ Assessment and apportionment procedures of the County of Santa Barbara (“County”);

§ Historical growth trends within the Project Area;

§ Trended growth in valuation as permitted by Article XIIIA of the California Constitution (“Proposition 13”); and

§ Assessed values and tax rates as reported by the County Auditor-Controller and Assessor.

Revenue projections have been conservatively estimated in order to reduce the possibility of overstating future tax increment revenue.

BACKGROUND INFORMATION

The City of Goleta (“City”) is one of 11 incorporated cites located in Santa Barbara County (“County”), California. Incorporated on February 1, 2002, the City has a population of 31,099, according to January 1, 2010 estimates from the State of California Department of Finance, making it the seventh largest city in the County.

REDEVELOPMENT AGENCY AND PROJECT AREA

Prior to incorporation of the City, the County Board of Supervisors adopted the Goleta Old Town Redevelopment Plan (“Redevelopment Plan”) on June 16, 1998 by Ordinance No. 4326. The Plan was administered by the County until the City incorporated in 2002. The City formed its Redevelopment Agency on February 1, 2002 by Ordinance No. 02-08 and assumed control of the Redevelopment Plan for the Project Area on April 15, 2002 by Ordinance No. 02-19. The Plan has been amended only once since adoption; on May 21, 2007, the City Council adopted Ordinance No. 07-05 to extend by one year the duration of the effectiveness of the Redevelopment Plan and time limit to collect tax increment revenue. Tax increment revenue is generated from increases the Project Area’s total assessed value above the 1997-98 base year value.

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The Redevelopment Plan enables the Agency to collect tax increment to implement and finance revitalization projects in the 596-acre1 Project Area, which is approximately 12 percent of the total area of the City. The Project Area contains a wide variety of land uses along the Hollister Avenue corridor, a major commercial district in the City. Breaking down the Project Area’s 2010-11 net assessed value2 of $1,039,603,877, the top three land use categories in the Project Area include light industrial (29.1percent), commercial office (18.6 percent) and multifamily residential (12.2 percent). Together, these three categories account for nearly 60 percent of the total assessed value of the Project Area.

Figure 1 below details land use data for the Project Area, including the number of acres, parcels and assessed values.

FIGURE 1: 2010-11 ASSESSED VALUES BY LAND USE CATEGORY

Land Use Category Acres Bills/1 % of Real Property Personal Prop. Total Prior Yr Δ Project Area

Industrial, Light 140.55 206 204,663,409$ 97,334,499$ 301,997,908$ -1.5% 29.1%Commercial, Office 83.14 167 156,828,578 36,814,469 193,643,047 13.3% 18.6%Residential, Multifamily 51.97 117 121,622,716 5,524,831 127,147,547 78.9% 12.2%Other Land Uses 319.80 1,351 378,092,706 38,523,271 416,615,977 -12.3% 40.1%

Residential, Condominiums - 333 84,060,406 91,679 84,152,085 -2.7% 8.1% Residential, SFR 34.72 216 52,526,527 199,758 52,726,285 -0.8% 5.1% Commercial, Other 71.24 285 84,154,001 9,267,724 93,421,725 -11.5% 9.0% Industrial, Warehouse 35.13 78 37,796,311 17,436,109 55,232,420 -0.9% 5.3% Residential, Mobile Home - 281 33,417,094 6,030,667 39,447,761 0.0% 3.8% Motel/ Hotel 8.42 6 34,433,416 2,410,100 36,843,516 -0.2% 3.5% Industrial, Other 23.82 66 31,742,226 2,690,816 34,433,042 -1.6% 3.3% Undeveloped Land 37.80 37 14,041,493 144,210 14,185,703 -74.8% 1.4% Institutional 30.18 19 2,313,393 75,750 2,389,143 -0.2% 0.2% Recreation 14.65 13 1,461,781 106,898 1,568,679 -0.2% 0.2% Mobile Home Park 32.53 5 1,432,574 69,560 1,502,134 2.5% 0.1% Other 15.17 3 588,400 - 588,400 -6.6% 0.1% Miscellaneous 16.14 9 125,084 - 125,084 -0.2% 0.0%

Public Right-of-Way n/a

Total Project Area 595.46 1,841 861,207,409$ 178,197,070$ 1,039,404,479$ 1.6% 100.0%

Source: Santa Barbara County Assessor's Secured and Unsecured Roll

Notes:1/ Bills consist of the number of secured and unsecured roll records for each land use type

2010-11 Assessed Values (Net of Exemptions)

T IME AND FINANCIAL LIMITATIONS

The Redevelopment Plan contains various time and financial limitations that affect the ability to collect and utilize tax increment revenue. As a result of the 2007 amendment to the Plan, the current limitations differ from those at the time of adoption and are summarized below:

1 The Redevelopment Plan contains a legal description which indicates Project Area acreage is 595.28 - slightly different than the figures presented in this report which were derived from the City’s geographic information system data because it contains more precise parcel-level data. Because the difference is less than 0.18 acres, RSG considered this discrepancy immaterial. 2 Assessed values referenced in this report refer to net assessed values, plus homeowners exemptions. State law provides local agencies property tax relief for the homeowners’ exemptions.

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Time Limitations

Incur Indebtedness: Section 602 of the Plan establishes a time limit on incurring indebtedness for the Project Area. This time limit is 20 years from the effective date of the ordinance adopting the Redevelopment Plan by the County. The adopting ordinance became effective on July 16, 1998. Consequently, indebtedness may be incurred anytime prior to July 16, 2018.

Effectiveness of the Redevelopment Plan: Currently, the Plan has a 31-year duration, expiring on June 16, 2029 as a result of Ordinance No. 07-05 adopted by the City Council on May 21, 2007.

Final Date to Collect Tax Increment Revenue: Pursuant to Ordinance No. 07-05, the Plan permits the Agency to collect tax increment for a 46-year period, ending on June 16, 2044.

RSG has reviewed these limitations and has determined that proposed Bonds would not be negatively impacted by these limitations.

Financial Limitations

Cumulative Tax Increment Revenue Limit: Although not required by statute, the Redevelopment Plan contains a cumulative tax increment revenue limit on the gross tax increment revenue that may be apportioned to the Agency. Section 602 of the Plan establishes a $363,339,006 cumulative limit on the amount of tax increment revenue that may be collected by the Agency.

As shown in Figure 2 below, through fiscal year 2009-10, the Agency has reported total receipts of $19,421,236, leaving $343,917,770 of gross tax increment revenue remaining to be collected under the current limit to repay existing and future indebtedness of the Agency. Based on the projections contained in this report, RSG anticipates that the remaining tax increment revenue allowable under the Plan provides sufficient capacity to repay existing indebtedness and the indebtedness on the proposed Bonds. RSG estimates that the Project Area’s 2010-11 assessed values will be required at a minimum annual growth rate of 3.034 percent in order for the Agency to reach its current cumulative limit on tax increment revenue by the expiration of the Agency’s time limit to collect taxc increment..

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FIGURE 2: HISTORIC TAX INCREMENT REVENUE APPORTIONMENTS

Gross NetTax Increment 1% of Favorable / Apportionments Agency ApportionmentApportioned Incremental AV (Unfavorable) to Billing Ratio Payments to Agency

2009-10 3,903,872$ 3,577,580$ 326,292$ 1.091 881,917$ 3,021,955$ 2008-09 3,234,533 2,975,564 258,969 1.087 656,077 2,578,456 2007-08 2,754,708 2,508,690 246,018 1.098 550,944 2,203,764 2006-07 2,252,723 2,045,041 207,682 1.102 450,545 1,802,178 2005-06 1,707,005 1,448,129 258,876 1.179 336,961 1,370,044

2004-05 1,562,448 1,204,291 358,157 1.297 331,416 1,231,032 2003-04 1,314,998 1,164,185 150,813 1.130 324,407 990,591 2002-03 1,056,875 938,653 118,222 1.126 218,538 838,337 2001-02 728,173 546,914 181,259 1.331 145,186 582,987 2000-01 607,169 not available not available not available 121,434 485,735

1999-00 298,732 not available not available not available 59,454 239,278

Total 19,421,236$

Source: Table 7, Annual Report to State Controller by Agency through 2008-09; Goleta Redevelopment AgencyAudit for 2009-10.

1/ Reflects comparison of 1% of incremental assessed values as reported by Santa Barbara County AuditorController to actual apportionments as reported by Redevelopment Agency.

TaxingApportionments to Est. Billing /1

Amount of Bonds Outstanding At One Time: Section 602 of the Plan also establishes a $45,956,884 limit on the amount of bond principal that may be outstanding at any one time. The Agency has not issued any bonds as of the date of this report, and ample capacity to issue the proposed Bonds under this limit.

OW NERSHIP OF PROJECT AREA PROPERTIES

This section describes the top taxpayers and other key components of the ownership of Project Area property on the 2010-11 assessment roll.

Top Ten Taxpayers

Using the County’s 2010-11 Secured and Unsecured Assessment Rolls, the ten largest taxpayers within the Project Area own $23,556,499 (approximately 5.4 percent) of the total Project Area net assessed value and enumerated in Figure 3 below.

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FIGURE 3: TOP TEN 2010-11 TAXPAYERS - SHARES OF INCREMENTAL ASSESSED VALUE

Taxpayer Name Bills /1 % of Total % ofReal Property Personal Prop. Total Prior Yr Δ Project Area Incremental

1 Sumida Gardens LP /2 1 55,342,473$ 648,080$ 55,990,553$ 143.7% 5.4% 15.0%2 Raytheon Company /3 2 22,853,007 20,083,460 42,936,467 -7.9% 4.1% 11.5%3 Torriddon LLC 2 28,524,666 - 28,524,666 -0.2% 2.7% 7.6%4 SB Corporate Center 2 24,056,853 - 24,056,853 -0.2% 2.3% 6.4%5 Fairview Business Center /4 1 20,691,442 - 20,691,442 5.9% 2.0% 5.5%

6 Cox Enterprises, Inc. 5 6,063,517 13,358,200 19,421,717 -1.1% 1.9% 5.2%7 Ocean Park Hotels, LLC 1 16,259,253 1,421,000 17,680,253 -0.2% 1.7% 4.7%8 Ampersand Publishing, LLC 2 9,922,533 7,248,310 17,170,843 -2.1% 1.7% 4.6%9 Dupont Displays Inc 1 3,882,570 12,789,040 16,671,610 0.0% 1.6% 4.5%

10 Ekwill Partners Ltd. 1 16,363,158 - 16,363,158 -0.2% 1.6% 4.4%

Total Top Ten Taxpayers 18 203,959,472$ 55,548,090$ 259,507,562$ 12.9%Total Project Area Value 1,039,404,469 25.0%Total Project Area Incremental 373,751,184 69.4%

Source: Santa Barbara County Assessor's 2010-11 Secured and Unsecured Roll

Notes1/ Bills consist of the number of secured parcels and unsecured bill records.2/ Sumida Gardens LP filed a base year appeal with the County in 2010 to reduce assessed value to $36 million. Potential

reduction could decrease 2011-12 assessed values by approximately $20 million3/ Raytheon Co. filed an appeal in 2009 to reduce personal property value from $13.2 million to $1.3 million. The appeal

was withdrawn. There are no appeals in 2010.4/ Fairview Business Center filed a base year appeal in 2009 to reduce assessed values to $15.3 million, appeal is still open.

Potential reduction could reduce 2011-12 assessed values by approximately $4 million

2010-11 Assessed Value (Net of Exemptions)

Descriptions of these taxpayers, including any recent appeals or changes in their assessed values as compared to the prior 2009-10 assessment roll are detailed below:

1. Sumida Gardens LP owns one parcel which is located at 100 Sumida Gardens Lane occupied by a multifamily residential development constructed in 2007. Sumida Gardens is a 200-unit apartment complex, which includes 34 apartments for low- and very low-income households. The parcel was purchased from the Sumida Limited Partnership in 2002. Sumida Gardens filed an appeal in 2010 to reduce the base year value (reassessed due to construction) to $36 million.

2. Raytheon Company, a defense and aero systems supplier has two industrial owner-occupied research parks located at 6380 Hollister Avenue and 115 Robin Hill Road. The Raytheon Company appealed its personal property assessed values in 2009, but the appeal was withdrawn. There have been no other appeals within the last five years. The parcels were last transferred on December 5, 1980 (APN 073050027) and March 14, 1979 (APN 073050044).

3. Torridon LLC owns two commercial parcels located at 430 S. Fairview Avenue and 490 S. Fairview Avenue #100. There have been no assessment appeals filed by this property owner within the last five years. The parcels were last transferred on April 22, 2004 (APN 071130057) and August 10, 2007 (APN 07113062).

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4. Santa Barbara Corporate Center LLC has two multi-story offices located at 5383 Hollister Avenue #150, and 201 Mentor Drive. There have been no assessment appeals filed by this property owner within the last five years. The 5383 Hollister Avenue (APN 071140074) property, or the GRCI Founders Building, is a two-story, steel frame, stucco-faced commercial Class A office building built in 1995. Major tenants include GRC International, Time-Warner Telecom, Somera Communications, and Bermant Development Co. The property(APN 071140074) was last transferred on February 16, 1996. The 201 Mentor Drive property (APN 071140078), or Mentor Corporation Building One, is a two-story office building built in 1991. It is designed for technology and office uses. The property was last transferred on February 13, 2006.

5. Fairview Business Center owns one parcel which is located at 420 Fairview Avenue. Fairview Business Center has filed two appeals within the past five years. In 2009, a base year appeal was filed to reduce its assessed value to $15.3 million, the appeal is still open. They appealed their 2008 personal property value assessed value and the case was stipulated in August 2003 to reduce the unsecured value from $5.9 million to $5.7 million.

6. Cox Enterprises, a cable service provider, owns two commercial parcels in the project area and has additional unsecured value reported worth $13,565,150. The parcels are located at 22 S. Fairview Avenue. There have been no assessment appeals filed by this property owner within the last five years. Both parcels (APN 07102101 and APN 071021044) were last transferred on November 30, 1993.

7. Ocean Park Hotels has one motel located at 5665 Hollister Avenue. There have been no assessment appeals filed by this property owner within the last five years. The property was last transferred on December 29, 2005(071130060).

8. Ampersand Publishing LLC, a publisher of electronic newspapers, has two light industrial properties located at 725 S. Kellogg Avenue. There have been no assessment appeals filed by this property owner within the last five years. The parcels were last transferred on October 19, 2000 (APN 071170005 and APN 07117011).

9. Dupont Displays, a manufacturer of electronic displays, has one unsecured value reported worth $16,671,610. The site address is 600 Ward Drive (APN 071140015), which is an industrial research park. There have been no assessment appeals filed by this property owner within the last five years.

10. Ekwill Partners Ltd has one light manufacturing property at 5540 Ekwill Street (APN 071230009). There have been no assessment appeals filed by this property owner within the last five years. The property was last transferred on December 29, 1988.

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Agency-Owned Properties in Project Area

The Redevelopment Agency of the City of Goleta does not own any taxable properties in the Project Area according to the data in the 2010-11 assessment roll.

GENERAL ASSUMPTIONS IN THE REVENUE PROJECTIONS

ASSESSED VALUATION

According to data from the County Assessor’s office, the Project Area’s 2010-11 total assessed value is $1,039,404,479, of which the base year value is $665,653,295 leaving an incremental value of $373,751,184.

Figure 4 below presents the assessed values, base year values, and incremental assessed values since the Project Area was established in 1998.

FIGURE 4: PROJECT AREA ASSESSED VALUE HISTORY

Year Real Property Personal Prop. Total Prior Yr Δ Incremental

2010-11 853,936,906$ 185,467,573$ 1,039,404,479$ 1.6% 373,751,184$ 2009-10 833,984,780 189,426,507 1,023,411,287 6.3% 357,757,992 2008-09 759,059,796 204,149,879 963,209,675 5.1% 297,556,380 2007-08 713,908,786 202,613,471 916,522,257 5.3% 250,868,962 2006-07 674,111,291 196,046,092 870,157,383 7.4% 204,504,088

2005-06 628,556,685 181,909,495 810,466,180 3.1% 144,812,885 2004-05 591,641,766 194,440,587 786,082,353 0.5% 120,429,058 2003-04 570,775,804 211,296,032 782,071,836 3.0% 116,418,541 2002-03 568,248,139 191,270,460 759,518,599 5.4% 93,865,304 2001-02 548,849,557 171,495,170 720,344,727 54,691,432

1997-98 (Base) 476,922,697 188,730,598 665,653,295

Source: Santa Barbara Auditor Controller Reports

Relative to other California communities, the Project Area has not experienced the kind of drop in real estate values and assessed values that have occurred over the past three years. This is largely due to the fact that Goleta lies in the historically strong real estate market in southern portion of the County, and the fact that the Project Area has recently experienced the development of a 200-unit apartment project (Sumida Gardens, the largest taxpayer in the Project Area). A portion of the Sumida Gardens assessed value may be at risk to being removed from the assessment roll due to an application by the owner for an assessment appeal as discussed later in this report.

Historically, assessed values in the Project Area have trended similarly to the Countywide statistics, increasing annually. Figure 5 below, shows a comparative graph of the Project Area assessed value in comparison to the City and County.

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FIGURE 5: ANNUAL GROWTH IN ASSESSED VALUES

1/ Assessed value information for the City unavailable prior to 2004-05.

Source: Santa Barbara County Auditor Controller Reports and Property Tax Highlights

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%A

sses

sed

Val

ue G

row

th

Fiscal Year

County of Santa Barbara Project Area City of Goleta/1

Thus far, the County Assessor has not announced any plans for blanket reductions in assessed values in 2011-12, although resales and market activity appear to be trending below assessed values somewhat in the past year. For this reason, RSG has limited assessed value growth in our projections as described in the next section.

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GROW TH ASSUMPTIONS

Project Area assessed values are conservatively projected based on several factors as summarized in Figure 6 below, which have been refined by RSG to reflect a conservative forecast based on available data known to RSG.

Historically, assessed values in the Project Area have grown from year to year. For the purposes of this forecast, RSG forecast specific changes in real property values as noted below, but held personal property values constant (due to the nature of the reassessment process for such property, personal property values tend to remain constant and less predictable).

As shown in Figure 4 earlier, real property values in the Project Area increased from $833,984,780 in 2009-10 to $853,936,906 (or by 2.392 percent) in 2010-11. However, largely due to two pending assessment appeals, RSG anticipates that the Project Area may experience a modest drop in real property values of approximately 1.535 percent in 2011-12. In light of this drop, we have estimated no growth in real property values in 2012-13 and a one percent growth rate in 2013-14. Thereafter, RSG is estimating a two percent growth rate in real property values.

FIGURE 6: REAL PROPERTY ASSESSED VALUE GROWTH ASSUMPTIONS

Component 2010-11 2011-12 2012-13 2013-14 Thereafter

Revenue & Taxation Code- Inflationary 0.753% 0.000% 1.000% 2.000%Changes due to Resales Actual -0.039% 0.000% 0.000% 0.000%Increases from Construction Growth 0.000% 0.000% 0.000% 0.000%Decreases due to Base Year Appeals Rate -2.249% 0.000% 0.000% 0.000%Decreases due to Prop 8 Appeals 0.000% 0.000% 0.000% 0.000%

Total Assumed Growth Rate 2.392% -1.535% 0.000% 1.000% 2.000%

2.392%

-1.535%

0.000%

1.000%

2.000%

-2.000%

-1.500%

-1.000%

-0.500%

0.000%

0.500%

1.000%

1.500%

2.000%

2.500%

3.000%

2010-11 2011-12 2012-13 2013-14 Thereafter

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The growth assumptions were established by RSG to account for the following factors that affect future tax increment collections in the Project Area.

Revenue & Taxation Code Inflationary Adjustments

As enacted by Proposition 13 in 1978, Article XIIIA of the State Constitution limits annual inflationary adjustments to secured assessed values to a maximum of two percent. Each year, the State Board of Equalization (SBE) establishes this annual increase based on the statewide consumer price index for the previous year. Between 1978 and 2010-11, the Proposition 13 inflationary factor has been less than the 2 percent maximum six times, most recently in fiscal year 2010-11 reported by the SBE of -0.237 percent (negative inflation factors are referred to as a deflation factor). This was the first time since 1978 that the rate was negative. On December 16, 2010, the SBE released a report indicating that the 2011-12 inflationary factor would be +0.753 percent.

In order to present a conservative forecast in projected tax increment revenues, RSG is projecting no change in the inflationary factor in 2012-13, a one percent increase in 2013-14, and the maximum two percent change thereafter.

Resales

Under Section 110.1 of the Revenue and Taxation Code, a change of ownership establishes a reassessment of taxable property based on the property’s purchase price and fair market value. Sales that occur prior to January 1 are reflected on the next equalized assessment roll. Sales occurring after January 1 are subject to a supplemental tax bill for the prorated amount of increase in taxes during the fiscal year.

RSG compiled statistics of sales transactions based on data from the County Recorder, via a private property vendor. Sales closed and recorded between January 1, 2010 and January 1, 2011 would be reassessed on the 2011-12 assessment roll, while sales after this date would be reflected on subsequent rolls.

Figure 7 summarizes sales transactions in the Project Area between January 1, 2009 and December 31, 2010. During 2009, a total of 39 transactions occurred in the Project Area, dropping to 24 sales for the same 12-month period in 2010. In 2009, sales prices were somewhat lower than assessed values, resulting in an aggregate decrease in Project Area real property values of $866,227, or 0.104 percent of the 2009-10 assessment roll. Condominium residential property sales were the dominant cause of this decrease in the Project Area. These activities are reflected on the 2010-11 assessed value roll.

Due to lower levels of transactions and a smaller variance in sales prices to assessed values, reassessments occurring from 2010 sales appear to be less severe as in the prior year. Although the 2010 condominium sales volume was roughly half of the level of 2009, these transactions generally resulted in higher sales prices as compared to their existing assessed values and will add value to the roll in 2011-12. A few industrial transfers were the primary cause of the aggregate drop in real property

11

values in the Project Area during 2010, and will result in a modest decrease of $330,133, or 0.039 percent, from the 2010-11 assessed values.

Data for 2011 is not yet available to RSG, but given the modest level of transfers and variance between assessed values and sales prices, RSG does not anticipate this factor to be a significant source of changes in real property values in the near future.

FIGURE 7: CHANGE IN REAL PROPERTY ASSESSED VALUE DUE TO RESALES

Land Use CategoryParcels 2009-10 Sales Δ from AV Parcels 2010-11 Sales Δ from AV

Sold Value Price Sold Value Price

Residential, Condominiums 30 12,033,000$ 12,629,232$ 596,232$ 14 3,827,000$ 4,222,379$ 395,379$ Commercial 3 3,822,500 2,535,546 (1,286,954) - - - Residential, SFR 4 1,466,000 1,684,112 218,112 5 1,792,000 1,755,507 (36,493) Industrial 1 660,000 267,383 (392,617) 3 2,355,500 1,675,583 (679,917) Residential, Multifamily 1 290,000 290,000 - 2 1,125,000 1,115,898 (9,102)

Total Sales 39 18,271,500$ 17,406,273$ (865,227) 24 9,099,500$ 8,769,367$ (330,133)

% of Project Area 833,984,780$ -0.104% 853,936,906$ -0.039%

Source: Santa Barbara County Assessment Rolls for 2009-10 and 2010-11; Metroscan

Aggregate Values of 2010 SalesAggregate Values of 2009 Sales

It should be noted that this report does not include supplemental roll revenues that may be generated from resale activity.

Construction

The Revenue and Taxation Code provides for reassessment of properties upon the completion of new construction. The County Assessor determines the construction value in place as of January 1 each year and that amount is reflected on the next equalized assessment roll. Construction in process or completed as of January 1, 2011 is assessed on the 2011-12 roll; construction in place after this date will be reflected on future tax rolls.

Based on a review of building permit records provided by the City’s Building and Safety Department, it is unlikely that any material changes in assessed values will occur on the 2011-12 assessment roll due to the low level of construction activity in the past year. While owners are investing in their properties, most of this reinvestment appears to be repairs and replacement in nature, and therefore less likely to result in a reassessment.

RSG has made no attempt to speculate on the level of new construction in the Project Area in future years, although there is ample land available in the Project Area to do so. We believe this assumption is reasonable given the current local, regional and national real estate climate, even though it may result in some understating in potential future tax increment revenues for the Agency.

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Assessment Appeals

Property owners that dispute the value of their property may file an assessment appeal with the County Assessor. There are two types of appeals on real property assessed values under the California Revenue and Taxation Code: Proposition 8 appeals and Base Year appeals. In most cases, an applicant files an assessment appeal because present market conditions, such as residential home prices or decreased lease rates, cause the property to be worth less than its assessed value. These market-driven appeals are referred to as Proposition 8 appeals. Although these reductions are temporary, the assessed values reduced pursuant to Proposition 8 are frequently reduced from their original value for multiple years until market conditions improve. Base Year appeals are when a property owners challenge the original (basis) value of their property. Because a successful Base Year appeal could reduce the basis value used to compute future reassessments pursuant to Proposition 13, Base Year appeals may have a more long-term effect on Project Area tax increment revenues as compared to Proposition 8 appeals.

RSG collected assessment appeal data for the past five assessment years for the Project Area from the County Clerk of the Board. Between 2006 and 2010, a total of 16 appeals were filed on Project Area property, consisting of twelve Proposition 8 appeals and four Base Year appeals. In the past five years, five of the Proposition 8 appeals have been closed, resulting in three denials of the appeal and two reductions totaling $17,062 in total assessed value losses. The remaining seven Proposition 8 appeals are expected to be considered by the Appeals Board within the next twelve months. Given past patterns of denials and the relatively more stable real estate market, RSG does not anticipate a sustained impact of any Proposition 8 appeals should any of these seven appeals be granted.

On the other hand, Base Year appeals may have an effect on future Project Area real property values. Of the four filed within the past five years, two have been denied and two are pending. The two pending appeals involve the Sumida Gardens LP property (the largest taxpayer in the Project Area), and Fairview Business Center (the fifth ranking taxpayer in the Project Area). Together, the respective owners are seeking a reduction in value of more than $18.7 million in 2010-11 assessed values, equal to 2.249 percent of the total Project Area real property value. While RSG cannot predict how the Appeals Board may rule on these appeals, the fact that the nature of these particular appeals can be sustained as long as the property remains in the same ownership must be considered when projecting tax increment revenues for the Project Area at this time. Consequently, RSG has assumed both appeals would be granted at the applicants’ opinion of value, as shown in Figure 8 below.

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FIGURE 8: CHANGES IN REAL PROPERTY VALUES DUE TO BASE YEAR APPEALS

Appeals by Status2009-10 2010-11 Combined

Total Appeals Filed 3 1

Reduced - - Denied or Withdrawn 2 - Pending 1 1

Pending Appeals Roll Value 20,245,500$ 50,473,947$ Applicant's Value Opinion 15,962,996 36,000,000

Potential Reduction in Value 4,282,504 14,473,947 18,756,451$

Total Project Area Real Property Value 833,984,780 Potential Reduction as % of Project Area -2.249%

Source: Santa Barbara County Clerk of the Board- Assessor

Base Year Appeals by Year

It should be noted that the Appeals Board has the discretion to deny these Base Year appeals or reduce the by a lesser amount than what the applicants have requested. Therefore, the actual impact of these appeals may be less than what RSG is projecting for the purposes of this Bond financing.

TAX RATES

The Agency currently receives incremental revenue based on the 1.0% general ad valorem property tax levy. By law, any taxes in excess of the general levy, approved by the voters on of after January 1, 1989, imposed after the Plan was adopted must be paid to the respective taxing entities. There are no tax levies in excess of the 1 percent and the tax increment projections employ a 1.0% general ad valorem property tax levy.

UNITARY UTILITY REVENUE

As provided by Assembly Bill 454, tax revenue from unitary utility property is disbursed in a different manner than revenue from non-unitary property. Unitary utility taxes are apportioned by the County Auditor-Controller based on a regional distribution methodology, regardless as to where the unitary utility property is located. Typically, unitary utility taxes are relatively small and see limited growth due to this methodology.

According to the County Auditor-Controller, the Agency has not received any unitary utility taxes during the past ten years. For the purposes of the tax increment revenue projections in this report, RSG does not anticipate the Agency would begin collecting such revenue in the future.

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COUNTY ADMINISTRATIVE FEES

Actual tax increment disbursements are reduced to reflect the tax collection fee charged by the County Auditor-Controller pursuant to Senate Bill 2577. The tax collection fee varies slightly from year to year, based on actual costs incurred by the County for administration of property taxes to the Agency. In 2009-10, the County charged the Agency a total of $46,896 for the fiscal year, equal to approximately 1.20 percent of the gross tax increment revenue received that year. RSG has accounted for a similar rate of County administrative fees going forward in our projections, and has reduced both housing and non-housing funds by their pro rata share of this fee.

DELINQUENCY RATES

According to the County Tax Collector, property taxes are reported as delinquent in their reports when such taxes remain unpaid at the end of the fiscal year, after June 30. Taxes are generally paid twice a year, on November 1 and February 1; so taxpayers that are late making these installments but current by June 30 are not reported as delinquent.

The Agency is currently part of the County’s Teeter Plan, which stabilizes property tax payments at 100 percent of anticipated receipts, ensuring that the Agency receives the amount of property tax increment revenues based on the amount of property taxes billed regardless of the amount and timing of collections. Consequently, delinquent property taxes do not impact Agency property tax increment revenues. As shown earlier on Figure 2, the Project Area has historically collected more revenues than billings each year, largely due to supplemental taxes charged after the assessment roll is equalized. In instances where an taxing entity is not on the Teeter Plan and receipts are not offset by supplemental roll activity, delinquencies can result in tax apportionments being lower than annual billings, at least until such delinquent taxes (and any related penalties and interest) are collected. As an taxing agency not on the Teeter Plan, the Agency does not experience such losses, nor does it receive its share of penalties and interest from delinquent collections.

Under Section 4702.7 of the California Revenue and Taxation Code, the County Auditor Controller may remove a taxing agency from the Teeter Plan if the County’s secured property tax delinquency rate exceeds three percent for a tax year. Such actions are at the discretion of each auditor-controller and not necessarily automatic in all instances in California. Regardless, the County as a whole has been experiencing relatively low delinquency rates for the past ten assessment years. In 2009-10, County-wide delinquencies totaled $14.8 million, or approximately 2.45 percent of the total billings for the year. Over the past ten years, the Countywide delinquency rate has not exceeded the three percent threshold triggering possible action to remove taxing agencies from the Teeter Plan.

Figure 9 below shows the Countywide delinquent tax payment history.

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FIGURE 9: HISTORIC COUNTY DELINQUECY RATES

Fiscal Year Delinquency Rates

2009-10 2.45%2008-09 2.83%2007-08 2.42%2006-07 2.10%2005-06 1.43%2004-05 1.19%2003-04 1.16%2002-03 1.50%2001-02 1.45%2000-01 1.80%1999-00 1.87%

Source: County of Santa Barbara; 2010-11 Property Tax Highlights

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

County-wide Delinquency Rates

LOW AND MODERATE INCOME HOUSING FUND DEPOSITS

The CRL requires the Agency to deposit 20 percent of the tax increment received by the Agency into a Low and Moderate Income Housing Fund for the purposes of maintaining and expanding the supply of housing affordable to very low, low, and moderate income households.

The proposed Bonds are planned to be used exclusively for the purposes of nonhousing projects; therefore, the annual Housing Fund deposit should be excluded from the calculation of available revenues for Bond debt service.

PAYMENTS TO AFFECTED TAXING AGENCIES

Under the Community Redevelopment Law (“CRL”) and pursuant to Section 33607.5 of the Health and Safety Code, the Agency is required to begin to remit annual payments to taxing agencies that levy taxes in the Project Area (“Statutory Payments”). Statutory Payments are calculated annually using the Project Area assessed value and each taxing entities share of the tax levy. For the first 10 years the Agency collects tax increment revenue, the Statutory Payments are equal to 25 percent of the Project Area’s annual non-housing tax increment revenue. Subsequently, these Statutory Payments are subject to two increases. Beginning in the eleventh year, in addition to the first 25 percent share, the Agency would be required to pay an additional 21 percent of the incremental increase in nonhousing tax increment revenues exceeding amounts in the tenth payment year. Then, beginning in the thirty-first year, The CRL further provides for a second increase in the Statutory Payments of 14 percent of the incremental increase in non-housing tax increment revenues in excess of the thirtieth year.

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In total, these three tiers of Statutory Payments amount to approximately 32 percent of projected Project Area nonhousing revenues over the 46 year duration the Agency may collect revenue under the Redevelopment Plan. The actual amount of the Statutory Payments will vary based on the amount of tax increment revenues collected each year. A forecast of Statutory Payments has been included in the projections contained in this report. Should actual tax increment revenues exceed or fall below these projections, actual Statutory Payments would be higher or lower.

OW NER PARTICIPATION & DEVELOPER AGREEMENT PAYMENTS

The Agency does not have any agreements with respect to the nonhousing funds proposed to be used to pay debt service on the Bonds.

SUPPLEMENTAL EDUCATIONAL REVENUE AUGMENTATION FUND SHIFT

The State of California approved the fiscal year 2009-10 budget relying on a $2.05 billion shift from redevelopment agencies over two years. In fiscal years 2009-10 and 2010-11, all redevelopment agencies were required to make Supplemental Educational Revenue Augmentation Fund (“SERAF”) payments to their local County Auditor-Controller from available funds, or employ other legal means to shift the funds to the County for distribution to local school districts.

The Agency’s share of these SERAF payments were $811,609 due in May 2010 and $167,096 due in May 2011. The Agency has paid the May 2010 SERAF installment from its cash reserves and has adequate cash balances to meet both payments without affecting its cash flow. The California Redevelopment Association (“CRA”) has lost a court challenge on the legality of these SERAF payments; while it pursues an appeal, CRA has advised redevelopment agencies to remit these payments. Future shifts are less likely, as the voters approved Proposition 22 in November 2010 to constitutionally protect redevelopment agency tax increment funds from similar state shifts. As mentioned earlier, the 2011-12 state budget proposed by Governor Brown has proposed to abolish redevelopment agencies as a means to circumvent the constitutional protections for redevelopment funds; it remains to be seen whether such a course is legal or politically viable.

CALIFORNIA STATE BUDGET PROPOSAL TO ELIMINATE REDEVELOPMENT

On January 10, 2011, Governor Brown released his proposed 2011-12 State budget which in part proposes the statewide abolishment of redevelopment agencies as a means to end the flow of tax increment revenue to redevelopment agencies and reallocate such funds at the discretion of the State. As of the date of this report, the full Legislature has yet to consider the merits of this proposal, and most details as to how the elimination of redevelopment may be implemented have not yet been made available to the public, such as how existing debts may be treated. Thus far, preliminary indications from the Governor’s office are that existing indebtedness would not be affected, although it remains unclear how such indebtedness is defined. Based on statements made before the State Senate Budget and Fiscal Subcommittee on February 18, 2011, contractual indebtedness is not subject to be impaired by the

17

Governor’s proposal and successor agencies would receive tax increment revenue to pay such obligations in the absence of a redevelopment agency. Depending on the timing of the Bond issue and the final details of the resolution of the State budget, the Bonds may not necessarily be impaired by this proposal. (For additional information, please refer to the analysis by Bond Counsel contained in the Official Statement for the Bonds.) Details and modifications are anticipated to come forward over the next several weeks, as the State hopes to adopt a new budget on or before April 1, 2011.

TAX INCREMENT REVENUE PROJECTIONS

Figure 9 presents the tax increment revenue projections for the Project Area, based upon the assumptions described in this Report.

A second scenario has been prepared for the purposes of review by the underwriters assuming zero growth in assessed values. This second scenario, presented in Figure 9a, does not necessarily reflect the opinion of future assessed values or tax increment revenue of RSG, but is provided for informational purposes.


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FIGURE 9: PROJECTED TAX INCREMENT REVENUES

Fiscal Year Gross Cummulative CountyPers. Prop Total Incremental Revenue @ Tax Increment Payments Admin Housing Nonhousing Total

Collected Fee0% 1% 1.20% 20% (Net)

BY 1997-98 476,922,697$ 188,730,598$ 665,653,295$ To Date: 19,421,236$

13 2010-11 853,936,906 185,467,573 1,039,404,479 373,751,184$ 3,737,512$ 34,195,992 879,636$ 44,850$ 738,532$ 2,074,494$ 2,813,026$ 14 2011-12 -1.535% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 37,802,424 831,254 43,277 712,631 2,019,270 2,731,901 15 2012-13 0.000% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 41,408,857 831,254 43,277 712,631 2,019,270 2,731,901 16 2013-14 1.000% 849,237,264 185,467,573 1,034,704,837 369,051,542 3,690,515 45,099,372 862,289 44,286 729,246 2,054,694 2,783,940 17 2014-15 2.000% 866,222,010 185,467,573 1,051,689,583 386,036,288 3,860,363 48,959,735 924,981 46,324 762,808 2,126,250 2,889,058

18 2015-16 2.000% 883,546,450 185,467,573 1,069,014,023 403,360,728 4,033,607 52,993,343 988,926 48,403 797,041 2,199,237 2,996,278 19 2016-17 2.000% 901,217,379 185,467,573 1,086,684,952 421,031,657 4,210,317 57,203,659 1,054,150 50,524 831,959 2,273,684 3,105,643 20 2017-18 2.000% 919,241,726 185,467,573 1,104,709,299 439,056,004 4,390,560 61,594,219 1,120,679 52,687 867,575 2,349,620 3,217,195 21 2018-19 2.000% 937,626,561 185,467,573 1,123,094,134 457,440,839 4,574,408 66,168,628 1,188,538 54,893 903,903 2,427,075 3,330,978 22 2019-20 2.000% 956,379,092 185,467,573 1,141,846,665 476,193,370 4,761,934 70,930,561 1,257,754 57,143 940,958 2,506,078 3,447,036

23 2020-21 2.000% 975,506,674 185,467,573 1,160,974,247 495,320,952 4,953,210 75,883,771 1,328,355 59,439 978,754 2,586,662 3,565,416 24 2021-22 2.000% 995,016,807 185,467,573 1,180,484,380 514,831,085 5,148,311 81,032,082 1,400,367 61,780 1,017,306 2,668,857 3,686,164 25 2022-23 2.000% 1,014,917,143 185,467,573 1,200,384,716 534,731,421 5,347,314 86,379,396 1,473,820 64,168 1,056,629 2,752,697 3,809,326 26 2023-24 2.000% 1,035,215,486 185,467,573 1,220,683,059 555,029,764 5,550,298 91,929,693 1,548,742 66,604 1,096,739 2,838,213 3,934,952 27 2024-25 2.000% 1,055,919,796 185,467,573 1,241,387,369 575,734,074 5,757,341 97,687,034 1,625,163 69,088 1,137,651 2,925,439 4,063,090

28 2025-26 2.000% 1,077,038,192 185,467,573 1,262,505,765 596,852,470 5,968,525 103,655,559 1,703,112 71,622 1,179,380 3,014,410 4,193,791 29 2026-27 2.000% 1,098,578,956 185,467,573 1,284,046,529 618,393,234 6,183,932 109,839,491 1,782,619 74,207 1,221,945 3,105,161 4,327,106 30 2027-28 2.000% 1,120,550,535 185,467,573 1,306,018,108 640,364,813 6,403,648 116,243,139 1,863,717 76,844 1,265,361 3,197,726 4,463,087 31 2028-29 2.000% 1,142,961,546 185,467,573 1,328,429,119 662,775,824 6,627,758 122,870,898 1,946,437 79,533 1,309,645 3,292,143 4,601,788 32 2029-30 2.000% 1,165,820,777 185,467,573 1,351,288,350 685,635,055 6,856,351 129,727,248 2,056,491 82,276 1,354,815 3,362,769 4,717,584

33 2030-31 2.000% 1,189,137,192 185,467,573 1,374,604,765 708,951,470 7,089,515 136,816,763 2,168,745 85,074 1,400,888 3,434,807 4,835,695 34 2031-32 2.000% 1,212,919,936 185,467,573 1,398,387,509 732,734,214 7,327,342 144,144,105 2,283,245 87,928 1,447,883 3,508,286 4,956,169 35 2032-33 2.000% 1,237,178,335 185,467,573 1,422,645,908 756,992,613 7,569,926 151,714,031 2,400,035 90,839 1,495,817 3,583,235 5,079,052 36 2033-34 2.000% 1,261,921,901 185,467,573 1,447,389,474 781,736,179 7,817,362 159,531,393 2,519,160 93,808 1,544,711 3,659,683 5,204,393 37 2034-35 2.000% 1,287,160,339 185,467,573 1,472,627,912 806,974,617 8,069,746 167,601,139 2,640,668 96,837 1,594,582 3,737,659 5,332,241

38 2035-36 2.000% 1,312,903,546 185,467,573 1,498,371,119 832,717,824 8,327,178 175,928,317 2,764,606 99,926 1,645,450 3,817,196 5,462,646 39 2036-37 2.000% 1,339,161,617 185,467,573 1,524,629,190 858,975,895 8,589,759 184,518,076 2,891,023 103,077 1,697,336 3,898,322 5,595,659 40 2037-38 2.000% 1,365,944,849 185,467,573 1,551,412,422 885,759,127 8,857,591 193,375,668 3,019,968 106,291 1,750,260 3,981,072 5,731,332 41 2038-39 2.000% 1,393,263,746 185,467,573 1,578,731,319 913,078,024 9,130,780 202,506,448 3,151,492 109,569 1,804,242 4,065,476 5,869,719 42 2039-40 2.000% 1,421,129,021 185,467,573 1,606,596,594 940,943,299 9,409,433 211,915,881 3,285,647 112,913 1,859,304 4,151,569 6,010,873

43 2040-41 2.000% 1,449,551,602 185,467,573 1,635,019,175 969,365,880 9,693,659 221,609,540 3,422,485 116,324 1,915,467 4,239,383 6,154,850 44 2041-42 2.000% 1,478,542,634 185,467,573 1,664,010,207 998,356,912 9,983,569 231,593,109 3,562,059 119,803 1,972,753 4,328,954 6,301,707 45 2042-43 2.000% 1,508,113,486 185,467,573 1,693,581,059 1,027,927,764 10,279,278 241,872,386 3,704,425 123,351 2,031,185 4,420,316 6,451,501 46 2043-44 2.000% 1,538,275,756 185,467,573 1,723,743,329 1,058,090,034 10,580,900 252,453,287 3,849,638 126,971 2,090,786 4,513,506 6,604,291

252,453,287$ 68,331,480$ 2,663,938$ 43,866,174$ 107,133,215$ 150,999,389$

Statutory Revenue to AgencyReal Property

TOTALS

Projected Assessed Values


19

FIGURE 9a: PROJECTED TAX INCREMENT REVENUES - WITH ZERO GROWTH

Fiscal Year Gross Cummulative CountyPers. Prop Total Incremental Revenue @ Tax Increment Payments Admin Housing Nonhousing Total

Collected Fee0% 1% 1.20% 20% (Net)

BY 1997-98 476,922,697$ 188,730,598$ 665,653,295$ To Date: 19,421,236$

13 2010-11 853,936,906 185,467,573 1,039,404,479 373,751,184$ 3,737,512$ 34,195,992 879,636$ 44,850$ 738,532$ 2,074,494$ 2,813,026$ 14 2011-12 -1.535% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 37,802,424 831,254 43,277 712,631 2,019,270 2,731,901 15 2012-13 0.000% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 41,408,857 831,254 43,277 712,631 2,019,270 2,731,901 16 2013-14 0.000% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 45,015,290 831,254 43,277 712,631 2,019,270 2,731,901 17 2014-15 0.000% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 48,621,722 831,254 43,277 712,631 2,019,270 2,731,901

18 2015-16 0.000% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 52,228,155 831,254 43,277 712,631 2,019,270 2,731,901 19 2016-17 0.000% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 55,834,587 831,254 43,277 712,631 2,019,270 2,731,901 20 2017-18 0.000% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 59,441,020 831,254 43,277 712,631 2,019,270 2,731,901 21 2018-19 0.000% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 63,047,452 831,254 43,277 712,631 2,019,270 2,731,901 22 2019-20 0.000% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 66,653,885 831,254 43,277 712,631 2,019,270 2,731,901

23 2020-21 0.000% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 70,260,317 831,254 43,277 712,631 2,019,270 2,731,901 24 2021-22 0.000% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 73,866,750 831,254 43,277 712,631 2,019,270 2,731,901 25 2022-23 0.000% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 77,473,182 831,254 43,277 712,631 2,019,270 2,731,901 26 2023-24 0.000% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 81,079,615 831,254 43,277 712,631 2,019,270 2,731,901 27 2024-25 0.000% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 84,686,047 831,254 43,277 712,631 2,019,270 2,731,901

28 2025-26 0.000% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 88,292,480 831,254 43,277 712,631 2,019,270 2,731,901 29 2026-27 0.000% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 91,898,912 831,254 43,277 712,631 2,019,270 2,731,901 30 2027-28 0.000% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 95,505,345 831,254 43,277 712,631 2,019,270 2,731,901 31 2028-29 0.000% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 99,111,777 831,254 43,277 712,631 2,019,270 2,731,901 32 2029-30 0.000% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 102,718,210 831,254 43,277 712,631 2,019,270 2,731,901

33 2030-31 0.000% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 106,324,642 831,254 43,277 712,631 2,019,270 2,731,901 34 2031-32 0.000% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 109,931,075 831,254 43,277 712,631 2,019,270 2,731,901 35 2032-33 0.000% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 113,537,507 831,254 43,277 712,631 2,019,270 2,731,901 36 2033-34 0.000% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 117,143,940 831,254 43,277 712,631 2,019,270 2,731,901 37 2034-35 0.000% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 120,750,373 831,254 43,277 712,631 2,019,270 2,731,901

38 2035-36 0.000% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 124,356,805 831,254 43,277 712,631 2,019,270 2,731,901 39 2036-37 0.000% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 127,963,238 831,254 43,277 712,631 2,019,270 2,731,901 40 2037-38 0.000% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 131,569,670 831,254 43,277 712,631 2,019,270 2,731,901 41 2038-39 0.000% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 135,176,103 831,254 43,277 712,631 2,019,270 2,731,901 42 2039-40 0.000% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 138,782,535 831,254 43,277 712,631 2,019,270 2,731,901

43 2040-41 0.000% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 142,388,968 831,254 43,277 712,631 2,019,270 2,731,901 44 2041-42 0.000% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 145,995,400 831,254 43,277 712,631 2,019,270 2,731,901 45 2042-43 0.000% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 149,601,833 831,254 43,277 712,631 2,019,270 2,731,901 46 2043-44 0.000% 840,828,974 185,467,573 1,026,296,547 360,643,252 3,606,433 153,208,265 831,254 43,277 712,631 2,019,270 2,731,901

153,208,265$ 28,311,016$ 1,472,997$ 24,255,358$ 68,710,414$ 92,965,771$

Projected Assessed Values Statutory Revenue to AgencyReal Property

TOTALS


20

We trust this information provides the bond financing team with an adequate basis for determining the Agency’s ability to meet debt service requirements for the Bonds. While RSG has taken precautions to assure the accuracy of the data used in the formulation of these tax increment revenue projections, we cannot ensure that projected valuations will be realized. Future events and conditions that cannot be controlled or predicted with certainty may affect actual values presented in this report.

ROSENOW SPEVACEK GROUP INC.

Jim Simon Principal

B-1

APPENDIX B

AGENCY AUDITED FINANCIAL STATEMENTS FOR FISCAL YEAR ENDED JUNE 30, 2010


GOLETA REDEVELOPMENT AGENCY

REPORT ON AUDIT AND COMPLIANCE

FOR THE YEAR ENDED JUNE 30, 2010

Prepared By

FINANCE DEPARTMENT

Alvertina Rivera

Finance Director

Goleta Redevelopment Agency Basic Financial Statements

Table of Contents

Independent Auditors' Report

Management's Discussion and Analysis (Required Supplementary Information)

Basic Financial Statements

Government-wide Financial Statements Statement of Net Assets Statement of Activities

Fund Financial Statements

Governmental Funds:

Balance Sheet Reconciliation of the Balance Sheet of Governmental Funds to the

Statement of Net Assets Statement of Revenues, Expenditures, and Changes in Fund

Balances Reconciliation of the Statement of Revenues, Expenditures, and

Changes in Fund Balances of Governmental Funds to the Statement of Activities

Notes to the Basic Financial Statements

Supplementary Information

Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual:

Page

1

3

7 8

10

11

12

13

14

Debt Service Fund 28 Capital Projects Fund 29 Low and Moderate Housing Capital Projects Fund 30

Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 31

FINANCIAL SECTION

I dill.-R oGERS, ANDERSON, M ALODY & S c orr, LLP CEfl TIFfED PUBLIC ACCOUNTANTS

ROBE RT ll MEMORY, CPA (194:, .2009)

O F COUNS!:l .lAY I~ ZERCHER, CP A

Board of Directors Goleta Redevelopment Agency Goleta, California

PHILLIP H WALLER, CPA BRENDA L ODLE, CPA

TERRY P SHEA C P A KIRK A FRANKS, C F A

~lATTHEW B WI~SON, C pA SCOn W MANNO, C P A LEENA SHANBHAG, C P A

NANCY O'RAFFERTY, CPA BRADFERD A . WELEBIR, CPA

JENNY LIU, CPA KATIE l , MILLSOM, C P .A

JONATHAN R KUHN, CPA PAPA MATAR THIAW. CPA KATHERINE J MUIR, CPA

MAYAS IVANOV A. C PA CHRISTOPHER MONTOYA, C I> A

DANIELLE E ODGERS, CPA

INDEPENDENT AUDITORS' REPORT

We have audited the accompanying financial statements of the governmental activities and each major fund of the Goleta Redevelopment Agency (the Agency), a component unit of the City of Goleta, California, as of and for the year ended June 30, 2010, which collectively comprise the Agency's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the management of the Goleta Redevelopment Agency. 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 the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. 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 the 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.

In our opinion,. the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the Goleta Redevelopment Agency as of June 30, 2010, and the respective changes in financial position of the Goleta Redevelopment Agency for the year then ended in conformity with accounting principles generally accepted in the United States of America.

In accordance with Government Auditing Standards, we have also issued our report dated November 8, 2010 on our consideration of the Agency's internal control over financial reporting and on our tests of its compliance with certain provisions of 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.

MEMBERS

AMERICAN INSTITUTE OF CEnTIFIED PUBLIC ACCOUNTANTS

PCPS TH[ AICPA ALLIANCE fOR CPA FIRMS

CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS -1-

VANIA TOWER • 290 NORTH "0 '' STREET • SUITE 300 SAN BERNARDINO, CA 92401

(909) 889-0877 • (909) 824-6736 • FAX (909) 889-5367 Website: www.ramscpa.net

---- ----~-

Board of Directors Goleta Redevelopment Agency

The information identified in the accompanying table of contents as management's discussion and analysis is not a required part of the basic financial statements, but is supplementary information required by the accounting standards generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it.

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Agency's basic financial statements. The accompanying budgetary comparison schedules listed as supplementary information in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. The budgetary comparison schedules have 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.

November 8, 2010

-2-

MANAGEMENT'S DISCUSSION AND ANALYSIS

MANAGEMENT'S DISCUSSION AND ANALYSIS

This discussion and analysis of the Goleta Redevelopment Agency's financial performance provides an overview of the Agency's financial activities for the fiscal year ended June 30, 2010. Please read it in conjunction with the accompanying basic financial statements.

USING THIS ANNUAL REPORT

This annual report consists of a series of financial statements. The Statement of Net Assets and the Statement of Activities provide information about the activities of the Agency as a whole and present a longer-term view of the Agency's finances. Fund financial statements tell how these services were financed in the short term as well as what remains for future spending. Fund financial statements also report the Agency's operations in more detail than the government-wide statements by providing information about the Agency's most significant funds.

Reporting the Agency as a Whole

The Statement of Net Assets and the Statement of Activities

One of the most important questions asked about the Agency's finances is, "Is the Agency as a whole better or worse off as a result of this year's activities?" The Statement of Net Assets and the Statement of Activities report information about the Agency as a whole and about its activities in a way that helps to answer this question. These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting used by most private sector companies. All of the current year's revenues and expenses are taken into account regardless of when cash is received or paid.

These two statements report the Agency's net assets and changes in them. The Agency's net assets, the difference between assets and liabilities, are one way to measure the Agency's financial health or financial position. Over time, increases or decreases in the Agency's net assets are one indicator of whether its financial health is improving or deteriorating. Consideration should also be given to other non-financial factors, such as changes in the Agency's tax increment, grants, and bonding capacity, to assess the overall health of the Agency.

The Statement of Net Assets and the Statement of Activities present information about the following:

• Governmental activities - All of the Agency's basic services are considered to be governmental activities, including salaries and wages, community development, and public works. Tax increment and investment income finance all of these activities.

Reporting the Agency's Most Significant Funds

Fund Financial Statements

The fund financial statements provide detailed information about the most significant funds. Some funds are required to be established by State law and by bond covenants. However, the Agency's Board establishes many other funds to help it control and manage money for particular purposes or to show that it is meeting legal responsibilities for using certain taxes, grants, and other money. The Agency only has governmental fund types.

-3-

• Governmental funds - All of the Agency's basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the Agency's general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the Agency's programs. We describe the relationship (or differences) between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds in the reconciliations following both of the fund financial statements.

THE AGENCY AS A WHOLE

This analysis focuses on the Agency's governmental net assets (Table 1) and changes in net assets (Table 2) of the Agency's governmental activities.

Table 1 Net Assets

June 30, 2010

Governmental Activities 2010 2009

Current and Other Assets $ 8,800,813 $ 7,475,680 Capital Assets 2,747 3,663

Total Assets $ 8,803,560 $ 7,479,343

Current Liabilities 3,579,967 75,788 Noncurrent Liabilities 23,952 2,525,338

Total Liabilities $ 3,603,919 $ 2,601,126

Net Assets: Invested in Capital Assets 2,747 3,663 Restricted for:

Low and Moderate Housing 1,375,504 1,300,645 Community Development 3,821,390 3,573,909

Total Net Assets $ 5,199,641 $ 4,878,217

-4-

Table 2 Changes in Net Assets

For the Year Ended June 30, 2010

Governmental Activities 2010 2009

General Revenues Tax Increment $ 3,903,872 $ 3,234,533 Investment Income 80,804 178,698 Other Income 153 4,800

Total revenues $ 3,984,829 $ 3,418,031

Expenses Community Development $ 2,817,434 $ 5,482,187 Payment for SERAF to State 811,609 Interest and Other Charges 34,362 55,087

Total Expenses $ 3,663,405 $ 5,537,274

Increase (Decrease) in Net Assets $ 321,424 $ (2, 119,243)

The increase in Net Assets for the Governmental type funds can be attributed to the positive variance between tax increment received and total expenses.

Governmental Type Activities

Table 3 presents the cost of the Agency's program, community development and debt service. The net cost is the total program expenses less the associated program revenues earned.

Table 3 Governmental Type Activities

Governmental: Community Development SERAF Payment Interest and Other Charges

Net Cost of Services

Total Cost of Service

$ 2,817,434 811,609

34,362

$ 3,663,405

Net Cost of Service

$ (2,817,434) (811 ,609)

(34,362)

$ {3,663,405}

• The net cost of services indicates that the overall cost of government is more than the revenues generated to support it. However, general revenues, such as tax increment and investment income, not associated with a particular program, are not off-set against the cost of services. See the Statement of Activities for further detail on program revenues and general revenues.

-5-

CAPITAL ASSET AND DEBT ADMINISTRATION

Capital Assets

At June 30, 2010, the Agency capital assets, net of depreciation, were $2,747. See the Notes to the Basic Financial Statements for more detailed information on the Agency's capital assets.

Debt

At June 30, 2010, the Agency's long-term liabilities consisted of a loan payable for $3,500,000 from the City of Goleta and compensated absences of $29,940. See the Notes to the Basic Financial Statements for more detailed information on the Agency's long-term debt.

CONTACTING THE AGENCY'S FINANCIAL MANAGEMENT

This financial report is designed to provide Goleta citizens, taxpayers, customers, investors, and creditors with a general overview of the City's finances and to demonstrate the City's accountability for the money it receives. If you have any questions about this report or need additional financial information, contact the City of Goleta Finance Department, 130 Cremona Drive, Suite B, Goleta, California 93117 or by calling (805) 961-7500.

-6-

GOVERNMENT -WIDE FINANCIAL STATEMENTS

ASSETS

Goleta Redevelopment Agency Statement of Net Assets

June 30, 2010

Cash and investments (note 2) Interest receivable Due from other governments Prepaid expenses Capital assets, depreciated, net (note 4)

Total assets

LIABILITIES Accounts payable Accrued salaries and benefits

Noncurrent liabilities: Due within one year Due in more than one year

Total liabilities

NET ASSETS Invested in capital assets Restricted for:

Low and moderate housing Community development

Total net assets

Governmental

Activities

$ 8,777,076 1,317

50 22,370

2,747

8,803,560

62,936 11,043

3,505,988 23,952

3,603,919

2,747

1,375,504 3,821,390

$ 5,199,641

The accompanying notes are an integral part of these financial statements. -7-

Governmental activities: Community development Payment for SERAF to

State Interest and other

charges

Total governmental activities

Goleta Redevelopment Agency Statement of Activities


Program Revenues Operating

Charges for Contributions Expenses Services and Grants

$ 2,817,434 $ $

811,609

34,362

$ 3,663,405 $ $

General revenues: Tax increment Investment income Other income

Total general revenues

Change in net assets

Net assets, beginning of year

Net assets, end of year

Net (Expenses) Revenues and

Changes in Net Assets

Governmental Activities

$ (2,817,434)

(811 ,609)

(34,362)

$ (3,663,405)

3,903,872 80,804

153

3,984,829

321,424

4,878,217

$ 5,199,641


FUND FINANCIAL STATEMENTS

GOVERNMENTAL FUNDS

DEBT SERVICE FUND

Debt service funds are used to account for the payment of principal and interest of long-term obligations. The following fund has been classified as a major governmental fund:

Debt Service Fund

This fund is used to account for the collection of tax increment which is used to pay for principal and interest on long-term obligations issued by the redevelopment agency.

CAPITAL PROJECTS FUNDS

Capital projects funds are used to account for the financial resources to be used for the acquisition and construction of major capital facilities within the Project Area. The following funds have been classified as major governmental funds:

Capital Projects Fund

This fund is used to account for redevelopment project area administration and capital projects.

Low and Moderate Housing Capital Projects Fund

This fund is used to account for low and moderate housing set-aside funds and projects.

-9-

ASSETS Cash and investments Interest receivable Due from other governments Prepaid expenditures

Total assets

LIABILITIES AND FUND BALANCES

Liabilities: Accounts payable Accrued salaries and benefits Loan payable

Total liabilities

Fund balances: Reserved for:

Encumbrances Low and moderate housing

Unreserved: Designated for continuing

appropriations

Total fund balances

Total liabilities and fund balances

Goleta Redevelopment Agency Balance Sheet

Governmental Funds June 30, 2010

Debt Service Fund Ca~ital Projects Funds

Low and Debt Capital Moderate

Service Projects Housing

$ 3,514,093 $ 3,885,637 $ 1,377,346 701 396 220

50 22,370

$ 3,514,794 $ 3,908,453 $ 1,377,566

$ 14,794 $ 48,142 $ 8,981 2,062

3,500,000

3,514,794 57,123 2,062

371,236 1,375,504

3,480,094

3,851,330 1,375,504

$ 3,514,794 $ 3,908,453 $ 1,377,566


Total Governmental

Funds

$ 8,777,076 1,317

50 22,370

$ 8,800,813

$ 62,936 11,043

3,500,000

3,573,979

371,236 1,375,504

3,480,094

5,226,834

$ 8,800,813

Goleta Redevelopment Agency Reconciliation of the Balance Sheet of Governmental

Funds to the Statement of Net Assets June 30, 2010

Fund balances of governmental funds

Amounts reported for governmental activities in the statement of net assets are different because:

Capital assets used in governmental activities are not current financial resources and, therefore, are not reported in the governmental funds.

Capital assets Accumulated depreciation

Long-term liabilities are not due and payable in the current period and, therefore, are not reported in funds.

Compensated absences

Net assets of governmental activities


$ 5,226,834

17,815 (15,068)

(29,940)

$ 5,199,641

Goleta Redevelopment Agency Statement of Revenues, Expenditures, and Changes in Fund Balances

Governmental Funds For the Year Ended June 30,2010

Debt Service Fund Ca~ital Projects Funds

Low and Total Debt Capital Moderate Governmental

Service REVENUES

Projects Housing

Taxes $ 3,903,872 $ $ Investment income 36,595 31,815 12,394 Other 153

Total revenues 3,940,467 31,968 12,394

EXPENDITURES Current:

Community development 46,896 420,926 718,309 Pass-through to other agencies 881,917

Payment for SERAF to State 811,609 Capital outlay 743,868 Debt service:

Interest 34,362

Total expenditures 1,774,784 1 '164,794 718,309

Excess (deficiency) of revenues over (under) expenditures 2,165,683 {1 '132,826} {705,915}

OTHER FINANCING SOURCES (USES)

Transfers in (note 6) 1,384,909 780,774 Transfers out (note 6) {2, 165,683}

Total other financing sources (uses) {2, 165,683} 1,384,909 780,774

Net change in fund balances 252,083 74,859

Fund balances, beginning of year 3,599,247 1,300,645

Fund balances, end of year ~ ~ 3,851,330 ~ 1,375,504


Funds

$ 3,903,872 80,804

153

3,984,829

1 '186, 131 881,917 811,609 743,868

34,362

3,657,887

326,942

2,165,683 {2, 165,683}

326,942

4,899,892

~ 5,226,834

Goleta Redevelopment Agency Reconciliation of the Statement of Revenues, Expenditures, and

Changes in Fund Balances of Governmental Funds to the Statement of Activities


Net change in fund balances - total governmental funds

Amounts reported for governmental activities in the statement of activities differ from the amounts reported in the statement of activities because:

Govermental funds report capital outlays as expenditures. However, in the statement of activities, the costs of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which capital outlay ($-0-) was exceeded by depreciation expense ($916) in the current period.

Some 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.

Increase in compensated absences payable

Change in net assets of governmental activities

$

$


326,942

(916)

(4,602)

321,424

Goleta Redevelopment Agency Notes to the Basic Financial Statements


Note 1: Summary of Significant Accounting Policies

The accounting policies of the Goleta Redevelopment Agency conform to generally accepted accounting principles as applicable to governments. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles.

Reporting entity

The Goleta Redevelopment Agency (the Agency) was originally adopted under the Santa Barbara County's Redevelopment Agency (the County RDA) Ordinance No. 4326 on July 7, 1998 pursuant to the State of California Health and Safety Code Section 33200. The Agency's purpose is to prepare and carry out plans for improvement, rehabilitation and redevelopment of blighted areas within the territorial limits of the Old-Town Project Area. Even though it is a legally separate entity, the activity of the Agency is included in the basic financial statements of the City of Goleta because the Board of Directors of the Agency is also the City of Goleta's City Council. Only the governmental funds of the Agency are included herein and these financial statements, therefore, do not purport to represent the financial position or the results of operations of the City of Goleta, California.

Basis of accounting, measurement focus and financial statement presentation

The basic financial statements of the Agency are composed of the following:

• Government-wide financial statements

• Fund financial statements

• Notes to the basic financial statements

Financial reporting is based upon all GASB pronouncements, as well as the FASB Statements and Interpretations, APB Opinions, and Accounting Research Bulletins that were issued on or before November 30, 1989 that do not conflict with or contradict GASB pronouncements.

Government-wide financial statements

Government-wide financial statements display information about the reporting government as a whole. These statements include a single column for the governmental activities of the Agency. Eliminations have been made in the statement of activities so that certain allocated expenses are recorded only once (by the function to which they were allocated). However, general government expenses have not been allocated as indirect expenses to the various functions of the Agency.

-14-


For the Year Ended June 30,2010

Note 1: Summary of Significant Accounting Policies (continued)

Government-wide financial statements are presented using the economic resources measurement focus and the accrual basis of accounting. Under the economic resources measurement focus, all (both current and long-term) economic resources and obligations of the reporting government are reported in the government-wide financial statements. Basis of accounting refers to when revenues and expenses are recognized in the accounts and reported in the financial statements. Under the accrual basis of accounting, revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place.

Program revenues include charges for services, special assessments, and payments made by parties outside of the reporting government's citizenry if that money is restricted to a particular program. Program revenues are netted with program expenses in the statement of activities, to present the net cost of each program.

Amounts paid to acquire capital assets are capitalized as assets in the government-wide financial statements, rather than reported as an expenditure. Proceeds of long-term debt are recorded as a liability in the government-wide financial statements, rather than as an other financing source. Amounts paid to reduce long-term indebtedness of the reporting government are reported as a reduction of the related liability, rather than as an expenditure.

Fund financial statements

The underlying accounting system of the Agency is organized and operated on the basis of separate funds, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures or expenses, as appropriate. Governmental resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled.

Fund financial statements for the Agency are presented after the government-wide financial statements. These statements display information about major governmental funds individually. The Agency has no non-major funds.

Governmental funds

In the fund financial statements, governmental funds are presented using the modified accrual basis of accounting. Their revenues are recognized when they become measurable and available as net current assets. Measurable means that the amounts can be estimated, or otherwise determined. Available means that the amounts were collected during the reporting period or soon enough thereafter to be available to finance the expenditures accrued for the reporting period. The Agency uses an availability period of 60 days.

-15-

Note 1:



Summary of Significant Accounting Policies {continued)

Revenue recognition is subject to the measurable and availability criteria for the governmental funds in the fund financial statements. Exchange transactions are recognized as revenues in the period in which they are earned (i.e., the related goods or services are provided). Locally imposed derived tax revenues are recognized as revenues in the period in which the underlying exchange transaction upon which they are based takes place. Imposed non-exchange transactions are recognized as revenues in the period for which they were imposed. If the period of use is not specified, they are recognized as revenues when an enforceable legal claim to the revenues arises or when they are received, whichever occurs first. Government-mandated and voluntary non-exchange transactions are recognized as revenues when all applicable eligibility requirements have been met. Revenues, expenditures, assets, and liabilities resulting from non-exchange transactions are recognized in accordance with the requirements of GASB Statement No. 33 which requires that local governments defer grant revenue that is not received within their availability period of 60 days after the fiscal year ends to meet the "available" criteria of revenue recognition.

In the fund financial statements, governmental funds are presented using the current financial resources measurement focus. This means that only current assets and current liabilities are generally included on their balance sheets. The reported fund balance (net current assets) is considered to be a measure of "available spendable resources." Governmental fund operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Accordingly, they are said to present a summary of sources and uses of "available spendable resources" during a period.

Non-current portions of long-term receivables due to governmental funds are reported on their balance sheets in spite of their spending measurement focus. However, special reporting treatments are used to indicate that they should not be considered "available spendable resources," since they do not represent net current assets.

Recognition of governmental fund type revenue represented by noncurrent receivables are deferred until they become current receivables. Non-current portions of other long-term receivables are offset by fund balance reserve accounts.

Because of their spending measurement focus, expenditure recognition for governmental fund types excludes amounts represented by noncurrent liabilities. Since they do not affect net current assets, such long-term amounts are not recognized as governmental fund type expenditures or fund liabilities.

Amounts expended to acquire capital assets are recorded as expenditures in the year that resources were expended, rather than as fund assets. The proceeds of long-term debt are recorded as an other financing source rather than as a fund liability. Amounts paid to reduce long-term indebtedness are reported as fund expenditures.

When both restricted and unrestricted resources are combined in a fund, expenses are considered to be paid first from restricted resources, and then from unrestricted resources.

-16-




Fund classifications

The Agency reports the following major governmental funds:

Debt Service Fund

This fund is used to account for the collection of tax increment which is used to pay for principal and interest on long-term obligations issued by the redevelopment agency.

Capital Projects Fund

This fund is used to account for redevelopment project area administration and capital projects.

Low and Moderate Housing Capital Projects Fund

This fund is used to account for low and moderate housing set-aside funds and projects.

Cash and investments

Investments are reported in the accompanying statement of net assets at fair value. Changes in fair value that occur during a fiscal year are recognized as investment income reported for that fiscal year. Investment income includes interest earnings and changes in fair value. The Agency pools cash and investments with all of the funds of the City of Goleta. Each fund's share in this pool is displayed in the accompanying financial statements as cash and investments. Investment income earned by the pooled investments is allocated to the various funds based on each fund's average cash and investment balance, except for investment income associated with funds not legally required to receive pooled investment income which has been assigned to and recorded as revenue of the general fund, as provided by California Government Code Section 53647.

Capital assets

Capital assets are recorded at cost where historical records are available and at an estimated original cost where no historical records exist. Contributed fixed assets are valued at their estimated fair market value at the date of the contribution. Generally, capital asset purchases in excess of $5,000 are capitalized if they have an expected useful life of three years or more.

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Capital assets (continued)

The Agency uses the straight-line method in the government-wide financial statements for depreciating its capital assets. Depreciation is charged as an expense against operations and accumulated depreciation is reported on the respective statement of net assets. The range of lives used for depreciation purposes for each capital asset class is as follows:

Property taxes

Item

Building and improvements Vehicles Equipment and furniture

Useful Life

30- 50 years 5 years

5-15 years

Under California law, property taxes are assessed and collected by the counties up to 1% of assessed value, plus other increases approved by the voters. The property taxes go into a pool, and are then allocated to the cities based on complex formulas. Accordingly, the Agency recognizes as revenue only those taxes which are received within 60 days after year end.

The property tax calendar is as follows:

Lien Date: Levy Date: Due Date:

Delinquent Date:

Obligations under pass-through agreements

January 1 July 1 First Installment- November 1 Second Installment - February 1 First Installment- December 10 Second Installment -April 10

Pass-through expense includes amounts paid to Goleta Union School District, County General Fund, Santa Barbara High School, ERAF, Santa Barbara County Fire District and other smaller agencies. These amounts, payable pursuant to Redevelopment Law, represent a portion of tax increment funds received by the Agency attributable to property within the territorial limits of the districts.

Prepaid items

Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. The Agency accounts for such items using the consumption method.

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Use of estimates

The preparation of financial statements requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Budgetary accounting

The Executive Director prepares and submits the proposed annual budget to the Board of Directors for its approval for all governmental funds. After reviewing the proposed budget and making revisions as it may deem advisable, the Board of Directors conducts a public meeting on the budget. After conclusion of the public meeting, the Board of Directors shall further consider the proposed budget and make any revisions thereof it may deem necessary. The budget is then legally enacted by means of a budget resolution passed by the Board of Directors. Upon final adoption, the budget shall be in effect for the ensuing fiscal year.

The level of budgetary control (that is, the level at which expenditures cannot legally exceed the appropriated amount) is established at the fund level. Board of Director's approval is required for any budget revisions that affect total appropriations within each fund.

Budgets are prepared in accordance with generally accepted accounting principles using the modified accrual basis of accounting.

Appropriations lapse at the end of the fiscal year unless they are re-appropriated through the formal budget process. Open encumbrances are recorded as reservations of fund balance since the commitments will be paid by subsequent year's budget appropriations. Encumbrances do not constitute expenditures or liabilities of the Agency.

Budgeted amounts are as originally adopted, or as amended in accordance with prescribed procedures throughout the fiscal year.

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Note 2:



Cash and Investments

Cash and investments as of June 30, 2010 are classified in the accompanying financial statements as follows:

Statement of net assets: Cash and investments $ 8,777,076

Cash and investments held by the Agency at June 30, 2010 consisted of the following:

Cash pooled with the City Local Agency Investment Fund (LAIF)

Total cash and investments

$

$

6,382,616 2,394,460

8,777,076

Investments authorized by the California Government Code and the Agency's investment policy

Allowable investment instruments are defined in the California Government Code Section 53600, et. seq., as amended. If the Code is further revised to allow additional investments or is changed regarding the limits on certain categories of investments, the Agency is authorized to conform to these changes, excluding those changes that may be prohibited by this policy. Where the Government Code specifies a percentage limitation for a particular category of investments, that percentage is applicable only at the date of purchase.

The table below identifies the investment types that are authorized for the Agency by the California Government Code and the Agency's investment policy. The table also identifies certain provisions of the California Government Code (or the Agency's investment policy, if more restrictive) that address interest rate risk, credit risk, and concentration of credit risk.

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Note 2: Cash and Investments (continued)

Authorized By Investment Types Investment *Maximum

Authorized by State Law Policy Maturity

Local Agency Bonds No 5 years U.S. Treasury Obligations Yes 5 years U.S. Agency Securities Yes 5 years Banker's Acceptances No 180 days Commercial Paper Yes 180 days Negotiable Certificates of Deposit Yes 5 years Repurchase Agreements No 1 year

Reverse Repurchase Agreements No 92 days Medium-Term Notes No 5 years Mutual Funds No N/A Money Market Mutual Funds Yes N/A Mortgage Pass-Through Securities No 5 years County Pooled Investment Funds No N/A Local Agency Investment Fund (LAIF) Yes N/A JPA Pools (other investment pools) No N/A

*Maximum *Maximum Percentage Investment

Allowed in One Issuer

None 5% None None None None 40% 5% 15% 5% 30% 5% None 5%

20% of base value 5%

30% 5% 20% 5% 20% 5% 20% 5% None None None None None None

* Based on state law requirements or investment policy requirements, whichever is more restrictive.

Investments of bond funds will be made in conformance with the trust indenture for each issue. Such investments shall be held separately when required.

It is the Agency's intent, at the time of purchase, to hold all investments until maturity to ensure the return of all invested principal dollars; however, sales prior to maturity are permitted.

Investment maturities shall be based on a review of cash flow forecasts. Maturities will be scheduled so as to permit the Agency to meet all projected cash obligations.

A policy of laddered maturities will be followed for pooled investments. At least fifty percent (50%) of the portfolio will be invested in instruments maturing within one year from the investment date. No more than twenty-five percent (25%) of the entire portfolio may have a maturity date between three (3) and five (5) years from the investment date. Investments having a maturity greater than five (5) years will not be made. The average portfolio investment maturity shall be three (3) years or less. The dollarweighted average will be used in computing the average maturity of the portfolio.

Maturities for investments of bond funds held separately will conform to the trust indenture for each issue.

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Note 2:



Cash and Investments (continued)

The portfolio will be diversified to the extent feasible to avoid incurring unreasonable and avoidable risks regarding specific security types indicated in the City's investment policy, and with the exception of the U.S. Treasury/Federal Agency securities and authorized pools, no more than 5% of the City's portfolio will be placed with any single issuer.

Certain investments are prohibited under Government Code Sections 53601.6 and 53631.5. Security types which are prohibited include, but are not limited to:

• "Complex" derivative structures such as range notes, dual index notes, inverse floaters, leveraged or de-leveraged floating rate notes, or any other complex variable rate or structured note.

• Interest only strips that are derived from a pool of mortgages or any security that could result in zero interest accrual if held to maturity.

• Futures, options, or any leveraged purchases, reverse repurchase agreements and speculations on interest rates.

Purchasing these types of instruments does not coincide with the Investment Policy's objectives and would require a thorough review and monitoring of the underlying security. Although some of these transactions are legal under Government Code, they do not meet the objectives contained herein.

The investment policy shall allow for investment in the prohibitions noted above, to the extent that such investments are made by the State LAIF pool, which is subject to policies adopted by the Local Agency Investment Fund.

Investments authorized by debt agreements

As of June 30, 2010, the Agency had no investments from debt proceeds held by bond trustees.

Disclosures relating to interest rate risk

Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the Agency manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations.

-22-

Note 2:

------~ ~----------------------



Cash and Investments (continued)

Information about the sensitivity of the fair values of the Agency's investments (including investments held by bond trustee) to market interest rate fluctuations is provided by the following table that shows the distribution of the Agency's investments by maturity:

Investment Type

Local Agency Investment Fund

Total

12 Months Or Less

Remaining Maturity 13-24 25-60 More Than

Months Months 60 Months

$ 2,394,460 $ ......;_ ___ _ $ $

$ 2,394,460 =$==== $ $

Investments with fair values highly sensitive to interest rate fluctuations

Total

$ 2,394,460

$ 2,394,460

During the fiscal year ended June 30, 2010, the Agency did not hold any investments that were highly sensitive to interest rate fluctuations (to a greater degree than already indicated in the information provided above).

Disclosures relating to credit risk

Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligations to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the California Government Code, the Agency's investment policy or debt agreements, and the actual rating as of year end for each investment type.

Investment Type

Local Agency Investment Fund

Total

Amount

$ 2,394,460

$ 2,394,460

Minimum Legal Rating

N/A

-23-

AAA

$

$

Rating as of Year End

A a

$

$

Not Rated

$ 2,394,460

$ 2,394,460



Note 2: Cash and Investments (continued)

Concentration of credit risk

The investment policy of the Agency contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. During the fiscal year ended June 30, 2010, the Agency did not hold any investments in any one issuer (other than U.S. Treasury securities, mutual funds, and external investment pools) that represented 5% or more of total Agency investments.

Custodial credit risk

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 its 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 (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the Agency's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits. The California Government Code requires that a financial institution secure deposits made by governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least 11 0% of the total amount deposited by the public agencies. California law also allows financial institutions to secure the Agency's deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits. As of June 30, 2010, the Agency did not have any deposits with financial institutions in excess of federal depository insurance limits that were held in uncollateralized accounts.

Investment in State Investment Pool

The City and Agency are a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by the California Government Code under the oversight of the Treasurer of the State of California. The fair value of the City of Goleta's investment in this pool is reported in the accompanying financial statements at amounts based upon the City of Goleta's pro-rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis.

-24-

Note 3:



Tax Increment Financing

California state law authorizes the financing of redevelopment projects through the use of tax increment revenues. This method provides that the taxable valuation of the property within a project area on the property tax roll last equalized prior to the effective date of the ordinance which adopts the redevelopment plan becomes the base year valuation. The increase in taxable valuation in subsequent years over the base year valuation becomes the increment upon which taxes are levied and allocated to the Agency. Tax increment revenue (based on increases in taxable valuation over the base year valuation property tax roll) subject to limitations contained in the Redevelopment Plan and in agreements with various taxing entities, is allocated to the Agency and recorded in the Debt Service Fund because such monies are restricted for the payment of principal and interest on Agency debt. Redevelopment agencies have no authority to levy taxes but must look to the allocation of tax increment revenue described above. As of July 1, 2009, the Agency had no excess surplus (unspent tax increment).

Note 4: Capital Assets

A summary of changes in the Agency's capital assets for the fiscal year ended June 30, 2010 was as follows:

Governmental Activities: Capital assets, being depreciated:

Vehicles

Total capital assets, being depreciated

Less accumulated depreciation for: Vehicles

Capital assets, net of accumulated depreciation

Balance at June 30,

2009

$ 17,815

17,815

(14, 152)

$

Additions Reductions

$ $

(916)

$ (916) =$======

Balance at June 30,

2010

$ 17,815

17,815

(15,068)

$ 2 747

Depreciation expense for the fiscal year ended June 30, 2010 was classified in the Statement of Activities as follows:

Community development $ 916

-25-

Note 5:



Long-term Debt

The following is a schedule of changes in long-term debt of the Agency for the fiscal year ended June 30, 2010:

Governmental Activities:

Loan payable:

Balance at June 30,

2009 Additions Reductions

Balance at June 30,

2010 Due Within One Year

City of Goleta Loan $ 2,500,000 $ 3,500,000 $ 2,500,000 $ 3,500,000 $ 3,500,000

Compensated absences 25,338 13,912 9,310 29,940 5,988

$ 2.525.338 $ 3.513.912 $ 2.509.310 $ 3.529,940 $ 3.505.988

City of Goleta Loan Payable

On June 1, 2010, the City of Goleta loaned $3,500,000 to the Goleta Redevelopment Agency. The loan bears simple interest at a fixed rate equal to three and a half percent paid monthly. The entire outstanding principal balance plus all interest accrued thereon is due on June 1, 2011.

Note 6: lnterfund Transfers

lnterfund transfers at June 30, 2010 consisted of the following:

Transfers to: Low and

Capital Moderate Projects Housing Totals

Transfers from: Debt Service $1,384,909 $ 780,774 $2,165,683

Totals $1.384.909 ~ 780.774 ~ 2.165.683

lnterfund transfers were principally used to provide available funds from the Debt Service Fund to the Capital Projects Fund in the amount of $1,384,909 for allowable capital projects and to the Low and Moderate Housing Fund in the amount of $780,774 for the 20% set-aside. During the fiscal year ended June 30, 2010, there were no significant interfund transfers that were not expected, budgeted for, unusual nor of a non-routine nature.

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Note 7:



Supplemental Education Revenue Augmentation Fund

On July 24, 2009, the State Legislature passed Assembly Bill (AB) x4-26, which requires redevelopment agencies statewide to deposit a total of $2.05 billion of property tax increment in county "Supplemental" Educational Revenue Augmentation Funds (SERAF) to be distributed to meet the State's Proposition 98 obligations to schools. The SERAF revenue shift of $2.05 billion will be made over two years, $1.7 billion in fiscal year 2009-2010 and $350 million in fiscal year 2010-2011. The SERAF would then be paid to school districts and the county offices of education which have students residing in redevelopment project areas, or residing in affordable housing projects financially assisted by a redevelopment agency, thereby relieving the State of payments to those schools. The Agency's share of this revenue shift was $811,609 for fiscal year 2009-2010 and $166,936 for fiscal year 2010-2011. Payments are to be made by May 10 of each respective fiscal year. In response to AB x4-26, the Agency funded the SERAF payment due in May 2010 with the Low/Mod Housing Fund.

The California Redevelopment Association (CRA) is the lead petitioner on a lawsuit to invalidate AB x4-26 4x, similar to last year's successful lawsuit challenging the constitutionality of AB 1389. CRA filed the lawsuit on October 20, 2009. The lawsuit asserted that the transfer of property tax increment to the SERAF is not permitted under Article XVI, Section 16 of the California Constitution. The complaint also asserted impairment of contract and gift of public funds arguments. While the State made adjustments in AB x4-26 to address the constitutional issues raised by the Superior Court over last year's lawsuit challenging AB 1389, the Agency, along with the CRA and other California redevelopment agencies, believe that the SERAF remains unconstitutional.

Note 8: Other Required Disclosures

Expenditures in excess of appropriations

The following funds reported expenditures in excess of appropriations:

(Unfavorable) Appropriations Expenditures Variance

Debt Service - Debt Service Fund $ 1,705,960 $ 1,774,784 $ (68,824) Low and Moderate Housing - Capital Projects

Fund $ 708,436 $ 718,309 $ (9,873)

-27-

SUPPLEMENTARY INFORMATION

Goleta Redevelopment Agency Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - Debt Service Fund


Bud9eted Amounts Actual Ori9inal Final Amounts

REVENUES Taxes $ 3,428,605 $ 3,577,579 $ 3,903,872 Investment income 37,500 37,500 36,595

Total revenues 3,466,105 3,615,079 3,940,467


Community development 36,800 51,896 46,896 Pass-through to other

agencies 771,436 804,955 881,917 Payment for SERAF to State 811,609 811,609 Debt service:

Interest 37,500 37,500 34,362

Total expenditures 845,736 1,705,960 1,774,784

Excess of revenues over expenditures 2,620,369 1,909,119 2,165,683


Transfers out (2,618,221) (1 ,904,343) (2, 165,683)

Total other financing sources (uses) (2,618,221) (1 ,904,343) (2, 165,683)

Net change in fund balance 2,148 4,776

Fund balance, beginning of year

Fund balance, end of year $ 2,148 $ 4,776 $

-28-

Variance with Final Bud9et

$ 326,293 (905)

325,388

5,000

(76,962)

3,138

(68,824)

256,564

(261 ,340)

(261 ,340)

(4,776)

$ (4, 776)

---------- --------------------------------

Goleta Redevelopment Agency Schedule of Revenues, Expenditures, and Changes in

Fund Balance - Budget and Actual - Capital Projects Fund For the Year Ended June 30, 2010

Budaeted Amounts Actual Ori£!inal Final Amounts

REVENUES Investment income $ 60,000 $ 60,000 $ 31,815 Other 4,000,000 4,000,000 153

Total revenues 4,060,000 4,060,000 31,968


Community development 537,126 540,518 420,926 Capital outlay 9,478,000 9,923,912 743,868

Total expenditures 10,015,126 10,464,430 1 '164,794

Excess (deficiency) of revenues over (under) expenditures (5,955, 126) (6,404,430) (1' 132,826)


Transfers in 1,932,500 1,188,827 1,384,909

Total other financing sources (uses) 1,932,500 1,188,827 1,384,909

Net change in fund balance (4,022,626) (5,215,603) 252,083

Fund balance, beginning of year 3,599,247 3,599,247 3,599,247

Fund balance, end of year $ {423,379} $ (1 ,616,356} $ 3,851,330

-29-

Variance with Final Bud9et

$ (28, 185) (3,999,847)

(4,028,032)

119,592 9,180,044

9,299,636

5,271,604

196,082

196,082

5,467,686

$ 5,467,686

Goleta Redevelopment Agency Schedule of Revenues, Expenditures, and Changes in

Fund Balance - Budget and Actual - Low and Moderate Housing Capital Projects Fund For the Year Ended June 30, 2010

Bud9eted Amounts Actual Variance with Ori9inal Final Amounts Final Bud9et

REVENUES Investment income $ 14,982 $ 14,982 $ 12,394 $ (2,588)

Total revenues 14,982 14,982 12,394 (2,588)


Community development 468,280 708,436 718,309 (9,873)

Total expenditures 468,280 708,436 718,309 (9,873)

Excess (deficiency) of revenues over (under) expenditures (453,298) (693,454) (705,915) (12,461)


Transfers in 685,721 715,516 780,774 65,258

Total other financing sources (uses) 685,721 715,516 780,774 65,258

Net change in fund balance 232,423 22,062 74,859 52,797

Fund balance, beginning of year 1,300,645 1,300,645 1,300,645

Fund balance, end of year $ 1,533,068 $ 1,322,707 $ 1,375,504 $ 52,797

-30-

I dill.-RoGERS, A ND ERSON, MALODY & ScoTT, LLP C/iRI!F/ED PUBt!C ACCOUNTANTS

ROBERT B MEMORY. CPA (1945 ·2009)

U F COlJNSH JAY H ZERCHER C P II

Board of Directors Goleta Redevelopment Agency Goleta, California

PHILLIP H WALLER. C P II BRENDA L ODLE. C P II

TERRY P SHEA. C P A KIRK A FRANKS. C P II

MATTHEW B. WILSON. CPA SCOTT W MANNO, C P A LEENA SHANBHAG. CPA

NANCY O'RAFFERTY, C I> A BRADFERD A WELEBIR, C P. A

JENNY LIU, C P.A KATIE l MlllSOM, CPA

JONATHAN R KUHN. CPA PAPA MATAR THIAW. CPA KATHERINE J MUIR, CpA

MAYAS IVANOV A. CPA CHRISTOPHER MONTOYA, C P A

DANIELLE E ODGERS. C P A

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF

FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

We have audited the financial statements of the governmental activities and each major fund of the Goleta Redevelopment Agency (the Agency), a component unit of the City of Goleta, California, as of and for the year ended June 30, 2010, which collectively comprise the Agency's basic financial statements and have issued our report thereon dated November 8, 2010. 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 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 Agency's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Agency's internal control over financial reporting.

A deficiency in internal control 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 and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis.

Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, 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.

MEMBERS

AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS

PCPS HI( AICPA ALLIANCE FOR CPA FIRMS

CAL IFORNIA SOCIETY OF CERTIFIEU PUBLIC ACCOUNTANTS -31-

VANIA TOWER • 290 NORTH "0 " STREET • SUITE 300 SAN BERNARDINO, CA 92401

(909) 889-0871 • (909) 824-6736 • FAX (909) 889·5361 Webs•te: www.ramscpa.ne/

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the 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 with which could have a direct and material effect on the determination of financial statement amounts. Such provisions included those provisions of laws and regulations identified in the Guidelines for Compliance Audits of California Redevelopment Agencies, issued by the State Controller and as interpreted in the Suggested Auditing Procedures for Accomplishing Compliance Audits of California Redevelopment Agencies, issued by the Governmental Accounting and Auditing Committee of the California Society of Certified Public Accountants. 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 noncompliance 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, Agency Board, others within the entity, and 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.

November 8, 2010

-32-


C-1

APPENDIX C

GENERAL INFORMATION ABOUT THE CITY OF GOLETA AND SANTA BARBARA COUNTY

The following information concerning the City and the Santa Barbara County is included

only for the purpose of supplying general information regarding the area of the Project Area. The Bonds are not a debt of the City, the County, the State or any of its political subdivisions, and neither the City, the County, the State nor any of its political subdivisions is liable therefor.

The County. Santa Barbara County was established by an act of the State Legislature

on February 18, 1850. It occupies an area of 2,774 square miles, of which one-third is located in the Los Padres National Forest. There are eight incorporated cities located wholly or partially within Santa Barbara County: Santa Barbara, Santa Maria, Lompoc, Carpinteria, Guadalupe, Solvang, Goleta and Buellton. The City of Goleta is the second smallest city in the County, in terms of population.

The City. The City is located in the area known as the Goleta Valley, which includes the

City of Goleta and surrounding urban areas, eight miles north of Santa Barbara, California. The Goleta Valley encompasses 40,000 acres of land between Los Padres National Forest's Santa Ynez Mountains and the Pacific Ocean. The population of the Goleta Valley west of San Marcos Pass to Winchester Canyon is estimated at 80,000. Goleta has approximately 30,290 residents.

The Goleta Valley is the location of the principal industrial sector of Santa Barbara

County and the University of California, Santa Barbara campus, and is often referred to as “Silicon Beach.” High technology, including diversified electronics, telecommunications, medical device and remote sensing manufacturing industries are the primary wealth producing sectors of the local economy. The largest industrial firms in the County are located in the City. Other prominent economic sectors include tourism and retail.

City Investment Policy The Agency's funds are invested by the City in accordance with the City's Investment

Policy. Responsibility for the Investment Policy has been delegated by the City Council to the City Treasurer. Each calendar year the City Treasurer prepares the Investment Policy that sets the framework for the investment practices relating to the City treasury.

Authorized investments under the Investment Policy include:

• Local Agency Investment Fund (LAIF) of the State of California.

• Obligations of the U.S. Government, its agencies and instrumentalities, including mortgage-

backed securities with a fixed coupon issued by an agency of the U.S. Government.

• Certificates of Deposit. Deposits should not exceed one-year maturity.

• Prime Commercial Paper of the highest numerical rating of Moody's Investment Service, Inc. or Standard & Poor Corporation. Further, eligible paper is limited to issuing corporations that are organized and operating within the United States and having total assets in excess of $500 million and having an “AA” or higher rating for other debt of the issuer. Purchases may not exceed 180 days maturity or 15% of the portfolio.

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• Money market funds whose portfolio consists of one or more of the indicated legal

investments and none of the prohibited investments.

• Sweep account for the investment of overnight funds when the funds are swept into investments allowed by this policy.

• Passbook accounts maintained solely provide for ongoing operational needs shall subject to

the requirements of this policy. Currently, the Agency’s funds are invested solely in the Local Agency Investment Fund

(LAIF) of the State.

Agency Pension Obligation The Agency pays a portion of the City’s personnel and pension costs based upon the

time spent on Agency business by specific employees. The City contributes to the California Public Employees’ Retirement System (“PERS”), a cost-sharing multiple-employer public employee retirement system defined benefit pension plan administered by PERS. Active plan members are required to contribute 7% of their salary. The City has no safety personnel. The City is required to contribute an actuarially determined rate. The City’s contribution rate for fiscal year ended June 30, 2010 was 9.452% for miscellaneous plan members. The City contributed $381,777 (100% of the City’s required contribution) for the fiscal year ended June 30, 2010.

Agency Post-Retirement Medical Benefits

In addition to the pension benefits described above, the City offers certain post-

employment health care benefits to its retirees. These benefits include payment of supplemental Medicare insurance premiums on behalf of retirees until the age of 65. The City pays for these benefits on a pay-as-you-go basis. During fiscal year ending June 30, 2010, the City did not expend and amount for such post-employment benefits.

The City participates in the PERS Health Benefit Program which requires the City to

offer all eligible retirees health insurance at the same cost paid by active employees. All retirees eligible for the supplemental Medicare insurance described above were given the option to convert to the PERS Health Benefit Program. The City contributed $4,522 to PERS Health Benefit Program in Fiscal Year 2009-10.

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Population

The City was incorporated on February 1, 2002. The table below shows population

estimates for the City, Santa Barbara County and the State of California for the last five full years since the City’s incorporation.

CITY OF GOLETA, SANTA BARBARA COUNTY

AND STATE OF CALIFORNIA Population Estimates

Calendar City of County of State of

Year Goleta Santa Barbara California 2006 30,163 419,883 37,087,005 2007 30,082 422,731 37,463,609 2008 30,307 426,757 37,871,509 2009 30,404 430,333 38,255,508 2010 31,099 434,481 38,648,090

Source: State Department of Finance estimates.

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Employment and Industry

The following table shows civilian labor force and wage and salary employment data for the Santa Barbara Metropolitan Statistical Area, which is coterminous with Santa Barbara County and, therefore, includes the City of Goleta, for the past five calendar years. These figures are area-wide statistics and may not necessarily accurately reflect employment trends in the City.

SANTA BARBARA METROPOLITAN STATISTICAL AREA Civilian Labor Force, Employment and Unemployment and Employment by Industry

(Annual Averages; not seasonally adjusted)

2005 2006 2007 2008 2009 Civilian Labor Force (1) 213,600 212,100 214,800 219,400 221,200 Employment 204,300 203,500 205,400 207,500 202,700 Unemployment 9,300 8,600 9,300 11,900 18,600 Unemployment Rate 4.4% 4.0% 4.3% 5.4% 8.4% Wage and Salary Employment: (2) Agriculture 16,300 15,400 16,100 17,100 18,300 Mining and Logging 900 1,100 1,200 1,100 900 Construction 10,100 10,500 10,500 9,700 7,700 Manufacturing 13,600 13,600 13,300 13,000 11,900 Wholesale Trade 4,700 4,900 4,800 4,600 4,200 Retail Trade 20,300 20,300 20,300 20,000 18,700 Trans., Warehousing and Utilities 3,000 3,100 3,000 3,100 3,100 Information 4,100 4,000 3,900 3,700 3,500 Finance and Insurance 5,500 5,600 5,300 4,900 4,300 Real Estate and Rental and Leasing 3,100 3,100 3,000 2,900 2,600 Professional and Business Services 22,800 22,300 22,200 22,400 21,400 Educational and Health Services 19,400 19,500 20,300 20,600 20,600 Leisure and Hospitality 22,400 22,700 22,900 23,100 22,100 Other Services 5,700 5,800 6,000 6,000 5,500 Federal Government 3,800 3,800 3,700 3,700 3,700 State Government 10,400 10,300 10,600 10,800 10,900 Local Government 22,200 22,000 22,700 22,800 23,000 Total, All Industries (3)

188,200 187,900 189,600 189,400 182,300 (1) Labor force data is by place of residence; includes self-employed individuals, unpaid family workers, household

domestic workers, and workers on strike. March 1, 2003 benchmark. (2) Industry employment is by place of work; excludes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike. (3) Totals may not add due to rounding. Source: State of California Employment Development Department.

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Largest Employers The following table lists the largest employers within the County as of January 2011.

MAJOR EMPLOYERS SANTA BARBARA COUNTY

Employer Name

Location Industry

Adam Brothers Farming Inc. Santa Maria Farming Service Bacara Resort & Spa Goleta Resorts Bargain Network Inc. Goleta Membership Organizations Nec C & D Zodiac Inc Santa Maria Aircraft-Manufacturers Chumash Hotel Santa Ynez Casinos Citrix Online LLC Goleta Marketing Programs & Services Cottage Health System Santa Barbara Non-Profit Organizations D B Specialty Farms Santa Maria General Farms-Primarily Crop Den-Mat Holdings LLC Santa Maria Exporters (Whls) Devereux Foundation Goleta Schools Doubletree-Fess Parker's Resort Santa Barbara Hotels & Motels Four Seasons-Santa Barbara Santa Barbara Hotels & Motels Goleta Police Departtment Santa Barbara Police Departments Jordano's Foodservice Santa Barbara Grocers-Wholesale Lompoc Hospital Lompoc Hospitals Marian Medical Ctr Santa Maria Hospitals Mission Linen Supply Inc Santa Barbara Linen Supply Service Montecito Fm Inc Santa Barbara Radio Stations & Broadcasting Companies Santa Barbara City College Santa Barbara Schools-Universities & Colleges Academic Santa Barbara Cottage Hospital Santa Barbara Health Services Santa Barbara County Coroner Santa Barbara Government Offices-County Santa Ynez Tribal Gaming Cmmtt Santa Ynez Government Ofcs-Authorities/Commissions Teixeira Farms Inc Santa Maria Farms University Ca Santa Barbara Santa Barbara Schools-Universities & Colleges Academic

Source: California Employment Development Dept., America's Labor Market Information System (ALMIS) Employer Database, 2011 1st Edition.

Effective Buying Income

"Effective Buying Income" is defined as personal income less personal tax and nontax payments, a number often referred to as "disposable" or "after-tax" income. Personal income is the aggregate of wages and salaries, other labor-related income (such as employer contributions to private pension funds), proprietor's income, rental income (which includes imputed rental income of owner-occupants of non-farm dwellings), dividends paid by corporations, interest income from all sources, and transfer payments (such as pensions and welfare assistance). Deducted from this total are personal taxes (federal, state and local), nontax payments (fines, fees, penalties, etc.) and personal contributions to social insurance. According to U.S. government definitions, the resultant figure is commonly known as "disposable personal income." The following table summarizes the total effective buying income for the Santa Barbara County, the State of California and the United States for the years 2005 through 2009.

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SANTA BARBARA COUNTY Effective Buying Income

2005 through 2009

Total Effective Median Household Buying Income Effective Buying

Year Area (000's Omitted) Income

2005 Goleta Valley Area $ 1,407,810 $54,499 Santa Barbara County 8,202,243 44,316 California 720,798,106 44,681 United States 5,894,663,364 40,529





Source: Sales & Marketing Management Survey of Buying Power.

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Commerce

In 2009, the State Board of Equalization converted the business codes of sales and use tax permit holders to North American Industry Classification System codes. As a result of the coding change, data for 2009 is not comparable to that of prior years. A summary of historic taxable sales within the City during the past five years in which data is available is shown in the following table. Total taxable sales during calendar year 2009 in the City were reported to be $638,123,000, an 8.4% decrease over the total taxable sales of $696,450,000 reported during calendar year 2008. Figures are not yet available for 2010.

CITY OF GOLETA

Taxable Transactions (Dollars in thousands)

Retail Stores Total All Outlets

Number

of Permits

Taxable

Transactions

Number

of Permits

Taxable

Transactions 2005 429 $547,815 1,338 $727,437 2006 444 567,153 1,351 740,855 2007 428 572,539 1,328 738,849 2008 443 528,609 1,307 696,450 2009 733 491,982 1,237 638,123

(1) Not comparable to prior years. “Retail” category now includes “Food Services”. Source: State Board of Equalization.

Total taxable sales during calendar year 2009 in the County were reported to be $5,104,186,000, a 13.3% decrease over the total taxable sales of $5,883,938,000 reported during calendar year 2008. Figures are not yet available for 2010.

SANTA BARBARA COUNTY

Taxable Transactions (Figures in Thousands)

Retail Stores Total All Outlets

Number

of Permits

Taxable

Transactions

Number

of Permits

Taxable

Transactions 2005 4,886 $4,343,183 13,212 $5,806,935 2006 5,027 4,435,128 13,170 6,133,270 2007 5,069 4,428,913 13,177 6,067,223 2008 5,176 4,097,313 13,114 5,883,938 2009 7,815 3,634,081 12,303 5,104,186

(1) Not comparable to prior years. “Retail” category now includes “Food Services”. Source: State Board of Equalization.

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Construction Activity

The following tables show a five-year summary of the valuation of building permits issued in the City and the County.

CITY OF GOLETA

Building Permit Valuation (Valuation in Thousands of Dollars)

2005 2006 2007 2008 2009 Permit Valuation New Single-family $ 189.4 $13,4886.5 $4,590.8 $ 0.0 $ 140.0 New Multi-family 1,520.0 0.0 0.0 14,066.4 0.0 Res. Alterations/Additions 4,599.6 3,865.3 2,785.5 3,154.6 1,419.1

Total Residential 6,309.0 17,351.8 7,376.3 17,221.0 1,559.1

New Commercial 1,705.0 4,602.8 6,900.0 0.0 3,000.0 New Industrial 0.0 0.0 0.0 0.0 0.0 New Other 415.0 3,083.8 2,082.4 1,136.7 721.0 Com. Alterations/Additions 8,477.5 9,021.4 14,115.2 24,546.5 6,673.3

Total Nonresidential $10,597.5 16,708.0 23,097.6 25,683.2 10,394.3 New Dwelling Units

Single Family 1 56 13 0 1 Multiple Family 8 0 0 202 0 TOTAL 9 56 13 202 1

Source: Construction Industry Research Board, Building Permit Summary.

SANTA BARBARA COUNTY Building Permit Valuation

(Valuation in Thousands of Dollars)

2005 2006 2007 2008 2009 Permit Valuation New Single-family $192,866.8 $193,121.6 $159,140.0 $82,245.3 $98,827.0 New Multi-family 47,599.6 45,204.9 38,865.0 39,163.5 7,230.8 Res. Alterations/Additions 99,840.9 82,829.4 75,645.4 76,075.9 54,059.9

Total Residential 340,307.3 321,155.9 273,650.4 197,484.7 160,117.8

New Commercial 56,488.1 29,591.4 59,201.8 52,417.1 21,062.2 New Industrial 10,243.4 14,743.4 10,912.1 10,785.7 8,901.3 New Other 25,365.4 39,375.3 35,844.3 23,099.4 33,708.1 Com. Alterations/Additions 74,005.3 98,268.1 108,301.9 105,903.7 66,546.1

Total Nonresidential $166,102.2 181,978.1 214,260.1 130,217.8 New Dwelling Units

Single Family 688 642 478 189 182 Multiple Family 272 255 245 354 31 TOTAL 960 897 723 543 213

Source: Construction Industry Research Board, Building Permit Summary.

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APPENDIX D

SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE The following is a brief summary of certain provisions of the Indenture of Trust (the

“Indenture”) authorizing the Bonds that are not otherwise described in the text of this Official Statement. Such summary is not intended to be definitive, and reference is made to the actual Indenture (copies of which may be obtained from the Agency) 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 Allowance” means, as of the date of calculation, the amount of Tax

Revenues which, as shown in the report of an Independent Redevelopment Consultant, are estimated to be receivable by the Agency in the next Fiscal Year as a result of increases in the assessed valuation of taxable property in the Project Area due to either (i) construction which has been completed but has not yet been reflected on the tax roll, or (ii) transfer of ownership or any other interest in real property, 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 Area in the next Fiscal Year is estimated to exceed the assessed valuation of taxable property in the Project Area in the then current Fiscal Year (as evidenced in a written document from an appropriate official of the County) as of the date on which such calculation is made.

"Annual Debt Service" means, for each Bond Year, the sum of (a) the interest payable

on the Outstanding Bonds in such Bond Year, assuming that the Outstanding Serial Bonds are retired as scheduled and that the Outstanding Term Bonds are redeemed from mandatory Sinking Account payments as scheduled, (b) the principal amount of the Outstanding Serial Bonds payable by their terms in such Bond Year, and (c) the principal amount of the Outstanding Term Bonds scheduled to be paid or redeemed from mandatory Sinking Account payments in such Bond Year. Annual Debt Service includes payments, for each Bond Year, on any Parity Debt.

“Bond” or “Bonds” means, the Redevelopment Agency For the City of Goleta, Goleta Old

Town Redevelopment Project, 2011 Tax Allocation Bonds, and, when the context requires, includes any additional Parity Debt.

"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 excludable from gross income for federal income tax purposes under the Code.

"Bond Year" means, any twelve-month period beginning on December 2 in any year and

ending on the next succeeding December 1, both dates inclusive, except that the first Bond Year shall begin on the Closing Date, and end on December 1, 2011, and the last Bond Year shall end on June 1, 2044.

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"Business Day" means a day of the year, other than a Saturday or Sunday, on which banks in Los Angeles, California, are not required or permitted to be closed, and on which the New York Stock Exchange is open.

"Closing Date" means the date on which the Bonds are delivered by the Agency to the

Original Purchaser. "Code" means the Internal Revenue Code of 1986 as in effect on the date of issuance of

the Bonds or (except as otherwise referenced herein) as it may be amended to apply to obligations issued on the date of issuance of the Bonds, together with applicable proposed, temporary and final regulations promulgated, and applicable official public guidance published, under the Code.

“Continuing Disclosure Certificate” means that certain Continuing Disclosure Certificate

executed and delivered by the Agency and accepted by the Trustee, as dissemination agent thereunder, dated as of the Closing Date, as originally executed and as it may be amended from time to time in accordance with the terms thereof.

“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, bond insurance premiums, rating agency fees, filing and recording fees, initial fees and charges and first annual administrative fee of the Trustee and fees and expenses of its counsel, fees, charges and disbursements of attorneys, financial advisors, accounting firms, consultants and other 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 Santa Barbara, a county duly organized and existing

under the laws of the State. “Defeasance Obligations” means:

(a) cash; (b) U.S. Treasury Certificates, Notes and Bonds (including State and Local

Government Series); (c) Direct obligations of the Treasury which have been stripped by the Treasury

itself, CATS, TIGRS and similar securities; (d) The interest component of Resolution Funding Corporation strips which have

been stripped by request to the Federal Reserve Bank of New York in book entry form; (e) Pre-refunded municipal bonds rated “Aaa” by Moody’s and “AAA” by S&P,

provided that, if the issue is rated only by S&P (i.e., there is no Moody’s rating), then the pre-refunded municipal bonds must have been pre-refunded with cash, direct U.S.. or U.S. guaranteed obligations, or AAA rated pre-refunded municipals; and

(f) bonds, debentures, notes or other evidence of indebtedness issued or

guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself): (i) direct obligations or

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fully guaranteed certificates of beneficial ownership of the U.S. Export-Import Bank; (ii) certificates of beneficial ownership of the Farmers Home Administration; (iii) obligations of the Federal Financing Bank; (iv) debentures of the Federal Housing Administration; (v) participation certificates of the General Services Administration; (vi) guaranteed Title XI financings of the U.S. Maritime Administration; (vii) 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. “Fair Market Value” means the price at which a willing buyer would purchase the

investment from a willing seller in a bona fide, arm's length transaction (determined as of the date the contract to purchase or sell the investment becomes binding) if the investment is traded on an established securities market (within the meaning of section 1273 of the Tax Code) and, otherwise, the term “Fair Market Value” means the acquisition price in a bona fide arm's length transaction (as referenced above) if (i) the investment is a certificate of deposit that is acquired in accordance with applicable regulations under the Tax Code, (ii) the investment is an agreement with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate (for example, a guaranteed investment contract, a forward supply contract or other investment agreement) that is acquired in accordance with applicable regulations under the Tax Code, (iii) the investment is a United States Treasury Security--State and Local Government Series that is acquired in accordance with applicable regulations of the United States Bureau of Public Debt, or (iv) any commingled investment fund in which the Agency and related parties do not own more than a ten percent (10%) beneficial interest therein if the return paid by the fund is without regard to the source of the investment.

"Federal Securities" means any direct, noncallable 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 and CATS and TGRS), or obligations the payment of principal of and interest on which are unconditionally guaranteed by the United States of America.

"Fiscal Year" means any twelve-month period beginning on July 1 in any year and

extending to the next succeeding June 30, both dates inclusive, or any other twelve-month period selected and designated by the Agency as its official fiscal year period in writing to the Trustee.

"Independent Accountant" means any accountant or firm of such accountants duly

licensed or registered or entitled to practice as such under the laws of the State, appointed by the Agency, and who, or each of whom: (a) is in fact independent and not under domination of the Agency; (b) does not have any substantial interest, direct or indirect, with the Agency; and (c) 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.

"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 otherwise with respect to the financing of Redevelopment Projects; (b) is in fact independent and not under domination of the Agency; (c) does not have any substantial interest, direct or indirect, with the Agency; 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.

“Low and Moderate Income Housing Fund” means the fund of the Agency by that name

established pursuant to Section 33334.3 of the Redevelopment Law.

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“Maximum Annual Debt Service” means, as of the date of calculation, the largest

Annual Debt Service for the current or any future Bond Year, including payments on any additional Parity Debt, as certified in writing by the Agency to the Trustee. For purposes of such calculation, there shall be excluded the principal of any Parity Debt, together with the interest to accrue thereon, in the event and to the extent that the proceeds of such Parity Debt are deposited in an escrow fund are then held in cash or are invested solely in Permitted Investments and from which amounts may not be released to the Agency unless the amount of Tax Revenues for the current Fiscal Year (as evidenced in the written records of the County), at least equal the requirements for issuance of Parity Debt under the Indenture.

"Moody's" means Moody's Investors Service Inc., of New York, New York, and its

successors. "Outstanding", when used as of any particular time with reference to Bonds, means

(subject to the provisions of the Indenture) all Bonds except: (a) Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation; (b) Bonds paid or deemed to have been paid within the meaning of the Indenture; and (c) Bonds in lieu of or in substitution for which other Bonds shall have been authorized, executed, issued and delivered by the Agency pursuant to the Indenture.

"Owner" or “Bondowner” means, with respect to any Bond, the person in whose name

the ownership of such Bond shall be registered on the Registration Books. “Parity Debt Test Percentage” means initially, one hundred fifty percent (150%), unless

and until the total value of taxable property in the Project Area, as set forth in a Tax Revenues Certificate, is at least equal to 200% of the value of the taxable property in the Project Area as of the Base Year for the Project Area established in the Redevelopment Plan; and thereafter, the Parity Debt Test Percentage shall be equal to one hundred thirty-five percent (135%).

"Parity Debt" means any additional loans, advances or other indebtedness issued or

incurred by the Agency on a parity with the Bonds pursuant to the Indenture. “Parity Debt Instrument” means the indenture, loan agreement, resolution or other

document under which Parity Debt is issued. "Participating Underwriter" has the meaning ascribed thereto in the Continuing

Disclosure Certificate. “Permitted Investments” means any of the following which at the time of investment are

legal investments under the laws of the State for the moneys proposed to be invested therein, but only to the extent that the same are acquired at Fair Market Value (provided the Trustee may rely upon any investment direction from the Agency as a certification to it that such investment constitutes a Permitted Investment and the Trustee shall not be responsible to determine Fair Market Value):

(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 are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself): (i) direct obligations or

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fully guaranteed certificates of beneficial ownership of the U.S. Export-Import Bank; (ii) certificates of beneficial ownership of the Farmers Home Administration; (iii) obligations of the Federal Financing Bank; (iv) debentures of the Federal Housing Administration; (v) participation certificates of the General Services Administration; (vi) guaranteed mortgage-backed bonds or guaranteed pass-through obligations of the Government National Mortgage Association; (vii) guaranteed Title XI financings of the U.S. Maritime Administration; (viii) 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 are only permitted if they have been 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) mortgaged-backed securities and senior debt obligations of the Federal National Mortgage Association (excluding stripped mortgage securities which are valued greater than par on the portion of unpaid principal); (iv) senior debt obligations of the Student Loan Marketing Association; (v) obligations (but only the interest component of stripped obligations) of the Resolution Funding Corporation; and (vi) consolidated system wide bonds and notes of the Farm Credit System;

(d) money market funds (including funds of the Trustee or its affiliates) registered

under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a rating by S&P of “AAAm-G”, “AAAm”, or “AAm”, or, if rated by Moody’s, rated Aaa, Aa1 or Aa2, including funds for which the Trustee, its affiliates or subsidiaries provide investment advisory or other management services;

(e) certificates of deposit secured at all times by collateral described in (a) or (b)

above, which have a maturity of one year or less, which are issued by commercial banks, including affiliates of the Trustee, savings and loan associations or mutual savings banks, and such collateral must be held by a third party, and the Trustee on behalf of the Bond Owners must have a perfected first security interest in such collateral;

(f) 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, including guaranteed investment contracts, which,

are general obligations of an entity whose long term debt obligations, or claims paying ability, respectively, is rated in one of the two highest rating categories by Moody's or S&P;

(h) commercial paper rated, at the time of purchase, “Prime-1” by Moody's and

“A-1” or better by S&P; (i) bonds or notes issued by any state or municipality which are rated not lower

than “A” or “A2” by Moody's or S&P;

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(j) federal funds or bankers acceptances with a maximum term of one year of any bank which has an unsecured, uninsured and unguaranteed obligation rating of “Prime-1” or “A3” or better by Moody's and “A-1” or “A” or better by S&P;

(k) repurchase agreements which are 30 days or less and which provide for the

transfer of securities from a dealer bank or securities firm (seller/borrower) to the Trustee and the transfer of cash from the Trustee to the dealer bank or securities firm with an agreement that the dealer bank or securities firm will repay the cash plus a yield to the Trustee in exchange for the securities at a specified date, which satisfy the following criteria:

(i) repurchase agreements must be between the Trustee and (A) a primary dealer on the Federal Reserve reporting dealer list which falls under the jurisdiction of the Securities Investors Protection Corporation and which are rated “A” or better by Moody's and S&P, or (B) a bank rated “A” or better by Moody's and S&P;

(ii) the written repurchase agreement contract must include the following:

(A) securities acceptable for transfer, which may be direct U.S. government obligations, or federal agency obligations backed by the full faith and credit of the U.S. government; (B) the term of the repurchase agreement may be up to 30 days; (C) the collateral must be delivered to the Trustee or a third party acting as agent for the Trustee simultaneous with payment (perfection by possession of certificated securities); (D) the Trustee must have a perfected first priority security interest in the collateral; (E) the collateral must be free and clear of third-party liens and, in the case of a broker which falls under the jurisdiction of the Securities Investors Protection Corporation, are not subject to a repurchase agreement or a reverse repurchase agreement; (F) failure to maintain the requisite collateral percentage, after a two day restoration period, will require the Trustee to liquidate the collateral; (G) the securities must be valued weekly, marked-to-market at current market price plus accrued interest and the value of collateral must be equal to 104% of the amount of cash transferred by the Trustee to the dealer bank or securities firm under the repurchase agreement plus accrued interest (unless the securities used as collateral are obligations of the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, in which case the collateral must be equal to 105% of the amount of cash transferred by the Trustee to the dealer bank or securities firm under the repurchase agreement plus accrued interest). If the value of securities held as collateral falls below 104% of the value of the cash transferred by the Trustee, then additional cash and/or acceptable securities must be transferred; and

(iii) a legal opinion must be delivered to the Trustee to the effect that the

repurchase agreement meets guidelines under state law for legal investment of public funds;

(l) pre-refunded municipal bonds rated “Aaa” by Moody's and “AAA” by S&P;

provided, however, pre-refunded municipal bonds rated by S&P only (i.e., no Moody's rating) are acceptable if such pre-refunded municipal bonds were pre-refunded with cash, direct U.S. or U.S. guaranteed obligations or AAA rated pre-refunded municipal bonds; and

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(m) the Local Agency Investment Fund of the State of California, created pursuant to Section 16429.1 of the California Government Code, to the extent the Trustee is authorized to deposit and withdraw from such investment directly in its own name.

“Plan Limitations” means the limitations contained or incorporated in the Redevelopment

Plan on (a) the aggregate principal amount of indebtedness payable from Tax Revenues derived under the Redevelopment Plan which may be outstanding at any time, (b) the aggregate amount of taxes which may be divided and allocated to the Agency pursuant to the Redevelopment Plan, and (c) the period of time for establishing, incurring or repaying indebtedness payable from Tax Revenues derived under the Redevelopment Plan.

“Project Area” means the territory within the Redevelopment Project, as described in the

Redevelopment Plan. “Redevelopment Fund” means the fund by that name established and held by the

Agency pursuant to the Indenture. “Redevelopment Plan” means the Redevelopment Plan for the Goleta Old Town

Redevelopment Project, originally approved by Ordinance No. 4326, by the County of Santa Barbara on June 16, 1998, which was prior to the City’s incorporation in 2002. Subsequently, the City assumed control of the Redevelopment Agency on February 1, 2002 by Ordinance No. 02-08 and assumed control of the Redevelopment Plan for the Goleta Old Town Redevelopment Project on April 15, 2002 by Ordinance No. 02-19, as amended by Ordinance No. 07-05, adopted May 21, 2007, together with any further amendments thereof, heretofore or hereafter duly authorized pursuant to the Law.

"Redevelopment Project" means the Goleta Old Town Redevelopment Project, as

described in the Redevelopment Plan. "Reserve Account" means the account by that name established and held by the Trustee

pursuant to the Indenture. “Reserve Requirement” means, for the Bonds, as of the date of calculation, an amount

equal to the lesser of: (i) Maximum Annual Debt Service on the Bonds; (ii) ten percent (10%) of the original principal amount of the Bonds; or (iii) 125% of Average Annual Debt Service on the Bonds. The term “Reserve Requirement”, for Parity Debt, means as of the date of calculation, an amount equal to the lesser of: (i) Maximum Annual Debt Service on the Parity Debt; (ii) ten percent (10%) of the original principal amount of the Parity Debt; or (iii) 125% of Average Annual Debt Service on the Parity Debt.

"S&P" means Standard & Poor's Ratings Services and its successors. "Sinking Account" means the account by that name established with respect to any

applicable Parity Debt and held by the Trustee pursuant to the Indenture. “Special Fund” means the fund by that name established and held by the Trustee

pursuant to the Indenture. "Subordinate Debt" means any loans, advances or indebtedness issued or incurred by

the Agency in accordance with the requirements of the Indenture, which are either: (a) payable from, but not secured by a pledge of or lien upon, the Tax Revenues; or (b) secured by a pledge

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of or lien upon the Tax Revenues which is subordinate to the pledge of and lien upon the Tax Revenues under the Indenture for the security of the Bonds.

“Tax Revenues” means: (a) moneys allocated within the Plan Limit and paid to the

Agency derived from that portion of taxes levied upon assessable property within the Project Area allocated to the Agency pursuant to Article 6 of Chapter 6 of the Law and Section 16 of Article XVI of the Constitution of the State of California, or pursuant to other applicable State laws, and (b) reimbursements, subventions, or other payments made by the State with respect to any property taxes that would otherwise be due on real or personal property but for an exemption of such property from such taxes.

“Tax Revenues” shall not include: (a) payments made to the Agency with respect to

personal property within the Project Area pursuant to Section 16110, et seq., of the Government Code of the State; (b) that portion of taxes paid to the Agency which are required by Section 33334.3 of the Law to be deposited in the Low and Moderate Income Housing Fund to increase, improve or preserve the supply of low and moderate income housing within or of benefit to the Project Area; and (c) all amounts payable by the Agency pursuant to Section 33607.5 or Section 33607.7 of the Law, unless the payment of such amounts has been subordinated to the payment of Debt Service on the Bonds or on any Parity Debt, as applicable.

“Tax Revenues Certificate” means a certificate of the Executive Director of the Agency

(or his written designee) identifying, among other things, the amount of Tax Revenues received or estimated to be received by the Agency in the then current Bond Year.

Establishment of Funds and Accounts; Flow of Funds

Costs of Issuance Account. The Indenture establishes a separate Costs of Issuance

Account. The moneys in the Costs of Issuance Account will be used and withdrawn by the Trustee from time to time to pay the Costs of Issuance upon submission of a Request of the Agency stating the person to whom payment is to be made, the amount to be paid, the purpose for which the obligation was incurred and that such payment is a proper charge against the Costs of Issuance Account. On the date which is six (6) months following the Closing Date, or upon earlier Written Request of the Agency, all amounts (if any) remaining in the Costs of Issuance Account will be withdrawn by the Trustee and transferred to the Agency for deposit in the Redevelopment Fund.

Redevelopment Fund. Any moneys in the Redevelopment Fund will be used and

withdrawn by the Agency solely in accordance with the Law and the Redevelopment Plan. Any amounts in the Redevelopment Fund are not pledged as security for the Bonds.

Special Fund; Deposit of Tax Revenues. The Agency will hold the Special Fund, and

the Agency will transfer all of the Tax Revenues received in any Bond Year from the Special Fund to the Trustee for deposit in the Debt Service Fund promptly upon receipt thereof by the Agency until such time during such Bond Year as the amounts on deposit in the Debt Service Fund (taking into account amounts, if any, transferred from the Redevelopment Fund upon the Written Request of the Agency to pay interest on the Bonds during such Bond Year), equal the aggregate amounts required to be transferred by the Trustee for deposit in such Bond Year with respect to any additional Parity Debt pursuant to the applicable Parity Debt Instrument and for deposit into the Interest Account, the Principal Account, the Sinking Account, the Reserve Account and the Redemption Account in such Bond Year pursuant to the Indenture.

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Deposit of Amounts by the Trustee. The Trustee will transfer moneys in the Deb Service Fund in the following amounts at the following times, in the following respective special accounts established within the Special Fund, in the following order of priority:

(a) Interest Account. On or before the Business Day preceding each Interest

Payment Date, the Trustee will withdraw from the Debt Service Fund and deposit in the Interest Account an amount which, when added to the amount contained in the Interest Account on that date, will be equal to the aggregate amount of the interest becoming due and payable on the Outstanding Bonds on such Interest Payment Date. All moneys in the Interest Account will be used and withdrawn by the Trustee solely for the purpose of paying the interest on the Bonds as it comes due and payable (including accrued interest on any Bonds purchased or redeemed prior to maturity pursuant to the Indenture).

(b) Principal Account. On or before the Business Day preceding each date on

which principal of the Bonds is due and payable at maturity, the Trustee will withdraw from the Special Fund for deposit in the Principal Account an amount which, when added to the amount then on deposit in the Principal Account, will be equal to the amount of principal coming due and payable on such date on the Outstanding Bonds. All moneys in the Principal Account will be used and withdrawn by the Trustee solely for the purpose of paying the principal of the Bonds upon the maturity thereof.

(c) Sinking Account. On or before the Business Day preceding each date on

which any Outstanding Term Bonds, issued as Parity Debt pursuant to a Parity Debt Instrument, are subject to mandatory Sinking Account redemption, the Trustee will withdraw from the Special Fund for deposit in the Sinking Account an amount which, when added to the amount then contained in the Sinking Account, will be equal to the aggregate principal amount of the Term Bonds required subject to mandatory Sinking Account redemption on such date. All moneys on deposit in the Sinking Account will be used and withdrawn by the Trustee for the sole purpose of paying the principal of the Term Bonds as it comes due and payable upon the mandatory Sinking Account redemption thereof.

(d) Reserve Account. In the event that, on the Business Day preceding an

Interest Payment Date, the amount on deposit in the Reserve Account is less than the Reserve Requirement, the Trustee will promptly notify the Agency of such fact. Promptly upon receipt of any such notice, the Agency will transfer to the Trustee an amount of available Tax Revenues sufficient to maintain the Reserve Requirement on deposit in the Reserve Account. Amounts in the Reserve Account will be used and withdrawn by the Trustee solely for the purpose of making transfers to the Interest Account, the Principal Account and the Sinking Account, in such order of priority, on any date which the principal of or interest on the Bonds comes 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 the Bonds then outstanding. So long as no Event of Default has occurred and is continuing, any amount in the Reserve Account in excess of the Reserve Requirement on or before the Business Day preceding each Interest Payment Date will be withdrawn from the Reserve Account by the Trustee and deposited in the Interest Account.

The Reserve Account may be maintained in the form of one or more separate

sub-accounts which are established for the purpose of holding the proceeds of separate issues of the Bonds in conformity with applicable provisions of the Code.

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(e) Redemption Account. On or before the Business Day preceding any date on which Bonds are subject to redemption (other than mandatory Sinking Account redemption of Term Bonds), the Trustee will withdraw from the Debt Service Fund any amount transferred by the Agency, such amount on deposit in the Redemption Account the amount provided by the Agency to pay the principal of and premium, if any, on the Bonds to be so redeemed on such date. All moneys in the Redemption Account will be used and withdrawn by the Trustee solely for the purpose of paying the principal of and premium, if any, on the Bonds upon the redemption thereof, on the date set for such redemption other than mandatory Sinking Account redemption of Term Bonds.

Investment of Funds Moneys in the Debt Service Fund, the Interest Account, the Principal Account, the

Sinking Account, the Redemption Account and the Costs of Issuance Account will be invested by the Trustee in Permitted Investments specified in the Request of the Agency delivered to the Trustee at least two (2) Business Days in advance of the making of such investments; except that moneys in the Reserve Account shall not be invested in Permitted Investments having a maturity of more than five (5) years, unless any such Permitted Investment is described in clause (g) of the definition thereof. In the absence of any such direction from the Agency, the Trustee will invest any such moneys solely in Permitted Investments described in clause (d) of the definition thereof. Moneys in the Special Fund will be invested by the Agency in any obligations in which the Agency is legally authorized to invest funds within its control. Obligations purchased as an investment of moneys in any fund shall be deemed to be part of such fund or account. Whenever in the Indenture any moneys are required to be transferred by the Agency to the Trustee, such transfer may be accomplished by transferring a like amount of Permitted Investments. All interest or gain derived from the investment of amounts in any funds or accounts will be retained in the respective fund or account from which such Investment was made; provided, however, that all interest or gain from the investment of amounts in the Reserve Account will be deposited by the Trustee in the Interest Account to the extent not required to cause the balance in the Reserve Account to equal the Reserve Requirement. The Trustee may act as principal or agent in the acquisition or disposition of any investment and may impose its customary charges therefor. The Trustee will incur no liability for losses arising from any investments made pursuant to the Indenture.

Issuance of Parity Debt

In addition to the Bonds, the Agency may, by Parity Debt Instrument or otherwise, issue

or incur other loans, advances or indebtedness payable from Tax Revenues on a parity with the Bonds to finance or refinance the Redevelopment Project in such principal amount as shall be determined by the Agency. The Agency may issue and deliver any such Parity Debt subject to the following specific conditions all of which are made conditions precedent to the issuance and delivery of such Parity Debt:

(a) The Agency shall be in compliance with all covenants set forth in the

Indenture.

(b) The Tax Revenues for the then current Fiscal Year based on assessed valuation of property in the Project Area as evidenced in a written document from an appropriate official of the County shall be at least equal to the applicable Parity Debt Test Percentage of Maximum Annual Debt Service on all Bonds and Parity Debt which will be Outstanding following the issuance of such Parity Debt; provided, however:

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(i) for purposes of calculating Tax Revenues, an assumed tax rate of $1.00 per $100 assessed value shall be used; and

(ii) the amount of Tax Revenues used in calculating the foregoing

coverage test will be the amount received or to be received in the most recent Fiscal Year (which may be the current Fiscal Year) for which records are available from the County establishing the assessed valuations of property in the Project Area.

(c) The Parity Debt Instrument or other document providing for the issuance of

such Parity Debt shall provide that:

(i) Interest on said Parity Debt shall be payable on June 1 and December 1 in each year of the term of such Parity Debt;

(ii) The principal of such Parity Debt shall be payable on December 1 or

June 1 in any year in which principal is payable; and (iii) Money shall be deposited in a reserve account for such Parity Debt

equal to the Reserve Requirement following the issuance or incurrence of such Parity Debt.

(d) The Parity Debt Instrument or other document providing for the issuance of

such Parity Debt may provide for the establishment of separate funds, accounts or sub-accounts.

(e) The proceeds of such Parity Debt may be deposited into an escrow fund

from which amounts may not be released to the Agency unless and until the Tax Revenues (as evidenced in the written records of the County) at least equal the Parity Debt Test Percentage of the amount of Maximum Annual Debt Service.

(f) The Agency shall deliver to the Trustee a Written Certificate of the Agency

certifying that the conditions precedent to the issuance of such Parity Debt set forth in subsections (a), (b), and (c) above have been satisfied.

Issuance of Subordinate Debt

The Agency may, from time to time, issue or incur Subordinate Debt in such principal

amount as may be determined by the Agency.

Certain Other Covenants of the Agency Limitation on Additional Indebtedness. The Agency agrees in the Indenture that it will

not issue any bonds, notes or other obligations, enter into any agreement or otherwise incur any indebtedness, which is in any case payable from all or any part of the Tax Revenues, excepting only the Bonds, Parity Debt and Subordinate Debt.

Extension of Payment of Bonds. The Agency will not directly or indirectly extend or

assent to the extension of the maturity of any of the Bonds or the time of payment of any claims for interest by the purchase of such Bonds or by any other arrangement, and in case the maturity of any of the Bonds or the time of payment of any such claims for interest is extended, such Bonds or claims for interest will not be entitled, in case of any default under the Indenture,

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to the benefits of the Indenture, except subject to the prior payment in full of the principal of all of the Outstanding Bonds and of all claims for interest thereon which shall not have been so extended. Nothing in the Indenture will limit the right of the Agency to issue bonds for the purpose of refunding any Outstanding Bonds, and such issuance will not constitute an extension of maturity of the Bonds.

Payment of Claims. The Agency will pay and discharge, or cause to be paid and

discharged, any and all lawful claims for labor, materials or supplies which, if unpaid, might become a lien or charge upon the Tax Revenues or any part thereof, or upon any funds held by the Trustee pursuant to the Indenture, or which might impair the security of the Bonds. Nothing in the Indenture will require the Agency to make any such payment so long as the Agency in good faith contests the validity of said claims.

Books and Accounts; Financial Statements. The Agency will 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 Tax Revenues and the Special Fund. Such books of record and accounts will at all times during business hours be subject to the inspection of the Owners of not less than ten percent 10% in aggregate principal amount of the Bonds then outstanding, or their representatives authorized in writing.

Payments of Taxes and Other Charges. The Agency will pay and discharge, or cause to

be paid and discharged, all taxes, service charges, assessments and other governmental charges which may be lawfully imposed upon the Agency or the properties then owned by the Agency in the Redevelopment Project, when the same become due. Nothing contained in the Indenture requires the Agency to make any such payment so long as the Agency in good faith shall contest the validity of said taxes, assessments or charges. The Agency will duly observe and conform with all valid requirements of any governmental authority relative to the Redevelopment Project or any part thereof.

Disposition of Property. The Agency will not participate in the disposition of any land or

real property in the Redevelopment Project 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 in implementation of the Redevelopment Plan in effect on the date of the Indenture) so that such disposition, when taken together with other such dispositions, aggregates more than ten percent (10%) of the land area in the Redevelopment Project unless such disposition is permitted as hereinafter described. If the Agency proposes to participate in such a disposition, it will appoint an Independent Redevelopment Consultant to report on the effect of said proposed disposition. If the Report of the Independent Redevelopment Consultant concludes that the security of the Bonds or the rights of the Owners will not be materially adversely impaired by said proposed disposition, the Agency may thereafter make such disposition. If said Report concludes that such security will be materially adversely impaired by said proposed disposition, the Agency shall disapprove such proposed disposition.

Maintenance of Tax Revenues; Plan Limitations.

(i) The Agency will comply with all requirements of the Redevelopment Law to insure the allocation and payment to it of the Tax Revenues, including without limitation the timely filing of any necessary statements of indebtedness with appropriate officials of the County and the State.

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(ii) Plan Limitations. The Agency agrees that the then remaining amount of annual debt service remaining to be paid on all outstanding Bonds, Parity Debt and Subordinate Debt shall at no time exceed ninety-five percent (95%) of the aggregate amount of the Tax Revenues which the Agency is permitted to receive under the Plan Limitations. In the event that the aggregate amount of annual debt service remaining to be paid on all outstanding Bonds, Parity Debt and Subordinate Debt at any time equals or exceeds ninety-five percent (95%) of the then remaining amount of the Tax Revenues which the Agency is permitted to receive under its Plan Limitations, (a) all Tax Revenues thereafter received by the Agency shall immediately be deposited with the Trustee and applied by the Trustee for the sole purpose of paying the principal of and interest on the Bonds, Parity Debt and Subordinate Debt as it comes due and payable, and (b) not later than July 1 of each succeeding Fiscal Year, the Agency shall cause to be prepared and included in the annual report required by the Continuing Disclosure Certificate a calculation which shows the aggregate amount of annual debt service remaining to be paid on all outstanding Bonds, Parity Debt and Subordinate Debt, and the amount of Tax Revenues which the Agency is permitted to receive under the Plan Limitations. In addition, the Agency shall prepare annually, commencing January 1, 2012, and include in the annual report required by the Continuing Disclosure Certificate, a calculation of remaining amount of Tax Revenues which the Agency is permitted to receive under the Plan Limitations and the total remaining debt service on the Bonds, Parity Debt and Subordinate Debt. Compliance With Law; Low and Moderate Income Housing Fund. The Agency shall

ensure that all activities undertaken by the Agency with respect to the redevelopment of the Project Area are undertaken and accomplished in conformity with all applicable requirements of the Redevelopment Plan and the Law, including, without limitation, duly noticing and holding any public hearing required by either Section 33445 or Section 33679 of the Law prior to application of proceeds of the Bonds to any portion of the Redevelopment Project. Without limiting the generality of the foregoing, the Agency covenants that it shall deposit or cause to be deposited in the Low and Moderate Income Housing Fund established pursuant to Section 33334.3 of the Law, all amounts when, as and if required to be deposited therein pursuant to the Law, that is: deposit of not less than twenty percent (20%) of the taxes allocated to the Agency pursuant to Section 33670 of the Redevelopment Law.

Tax Covenants Relating to the Bonds. The Agency will assure that the proceeds of the

Bonds are so used as to cause the Bonds to satisfy the private business tests of section 141(b) of the Code or the private loan financing test of Section 141(c) of the Code. The Agency will not take any action or permit or suffer any action to be taken if the result of the same would be to cause the Bonds to be "federally guaranteed" within the meaning of section 149(b) of the Code. The Agency will not take, or permit or suffer to be taken by the Trustee or otherwise, any action with respect to the Bond proceeds which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the Closing Date, would have caused the Bonds to be "arbitrage bonds" within the meaning of section 148 of the Code. The Agency shall take all actions necessary to assure the exclusion of interest on the Bonds from the gross income of the Owners of the Bonds to the same extent as such interest is permitted to be excluded from gross income under the Code as in effect on the date of issuance of the Bonds.

Continuing Disclosure. The Agency covenants and agrees that it will comply with and

carry out all of the provisions of the Continuing Disclosure Certificate. Notwithstanding any other provision of the Indenture, failure of the Agency to comply with the Continuing Disclosure Certificate will not be an Event of Default thereunder. However, any Participating Underwriter or

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any holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate, including seeking specific performance by court order, to cause the Agency to comply with its obligations under the Continuing Disclosure Agreement.

The Trustee

Duties, Immunities and Liabilities of Trustee.

(a) The Trustee shall, prior to the occurrence of an Event of Default (as defined below

under the heading “Events Of Default”), and after the curing or waiver of all Events of Default which may have occurred, perform such duties and only such duties as are specifically set forth in the Indenture and no implied covenants, duties or obligations shall be read into the Indenture against the Trustee. The Trustee shall, during the existence of any Event of Default (which has not been cured or waived), exercise such of the rights and powers vested in it by the Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.

(b) The Agency may remove the Trustee at any time, unless an Event of Default shall

have occurred and then be continuing, and shall remove the Trustee (i) if at any time requested to do so by an instrument or concurrent instruments in writing signed by the Owners of not less than a majority in aggregate principal amount of the Bonds then Outstanding (or their attorneys duly authorized in writing) or (ii) if at any time the Agency has knowledge that the Trustee shall cease to be eligible in accordance with subsection (e) of this Section, or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or its property shall be appointed, or any public officer shall take control or charge of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation. In each case such removal shall be accomplished by the giving of written notice of such removal by the Agency to the Trustee, whereupon the Agency shall appoint a successor Trustee by an instrument in writing.

(c) The Trustee may at any time resign by giving written notice of such resignation to

the Agency and by giving the Owners notice of such resignation by first class mail, postage prepaid, at their respective addresses shown on the Registration Books. Upon receiving such notice of resignation, the Agency shall promptly appoint a successor Trustee by an instrument in writing.

(d) Any removal or resignation of the Trustee and appointment of a successor Trustee

shall become effective upon acceptance of appointment by the successor Trustee. If no successor Trustee shall have been appointed and have accepted appointment within forty-five (45) days of giving notice of removal or notice of resignation as aforesaid, the resigning Trustee or any Owner (on behalf of such Owner and all other Owners) may petition any court of competent jurisdiction at the expense of the Agency for the appointment of a successor Trustee, and such court may thereupon, after such notice (if any) as it may deem proper, appoint such successor Trustee. Any successor Trustee appointed under the Indenture shall become vested with all the moneys, estates, properties, rights, powers, trusts, duties and obligations of such predecessor Trustee, with like effect as if originally named Trustee under the Indenture.

(e) Any Trustee appointed under the provisions of the Indenture in succession to the

Trustee shall be a financial institution having a trust office in the State, having (or in the case of a corporation or trust company included in a bank holding company system, the related bank holding company shall have) a combined capital and surplus of at least $75,000,000, and subject to supervision or examination by federal or state authority. In case at any time the

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Trustee shall cease to be eligible in accordance with the provisions of this subsection (e), the Trustee shall resign immediately in the manner and with the effect specified in the Indenture.

No Trustee Liability or Duty. The Trustee shall have no liability or obligation to the

Bondowners with respect to the payment of debt service on the Bonds by the Agency or with respect to the observance or performance by the Agency of the other conditions, covenants and terms contained in the Indenture, or with respect to the investment of any moneys in any fund or account established, held or maintained by the Agency pursuant to the Indenture or otherwise.

No provision of the Indenture shall require the Trustee to expend or risk its own funds or

otherwise incur any financial liability in the performance of any of its duties under the Indenture, or in the exercise of any of its rights or powers. The Trustee shall be entitled to interest on all amounts advanced by it at the maximum rate permitted by law.

The Trustee may execute any of the trusts or powers under the Indenture or perform any

duties thereunder either directly or by or through agents, attorneys or receivers and the Trustee shall not be responsible for any intentional misconduct or negligence on the part of any agent, attorney or receiver appointed with due care by it under the Indenture.

The Trustee shall have no responsibility, opinion, or liability with respect to any

information, statements or recital in any offering memorandum or other disclosure material prepared or distributed with respect to the issuance of the Bonds.

Before taking any action under the Indenture at the request of the Owners, the Trustee

may require that a satisfactory indemnity bond be furnished by the Owners for the reimbursement of all expenses to which it may be put and to protect it against all liability, except liability which is adjudicated to have resulted from its negligence or willful misconduct in connection with any action so taken.

Compensation and Indemnification. The Agency shall pay to the Trustee from time to

time reasonable compensation for all services rendered under the Indenture and also all reasonable expenses, charges, legal and consulting fees and other disbursements and those of its attorneys (including the allocated costs and disbursement of in-house counsel to the extent such services are not redundant with those provided by outside counsel), agents and employees, incurred in and about the performance of its powers and duties under the Indenture. The Trustee shall have a first lien on the Tax Revenues and all funds and accounts held by the Trustee under the Indenture to secure the payment to the Trustee of all fees, costs and expenses, including reasonable compensation to its experts, attorneys and counsel (including the allocated costs and disbursement of in-house counsel to the extent such services are not redundant with those provided by outside counsel). Amendment of Indenture

The Indenture and the rights and obligation of the Agency and of the Owners may be

modified or amended at any time by a Supplemental Indenture with the written consent of the Owners of a majority in aggregate principal amount of the Bonds then outstanding delivered to the Trustee. 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 Agency 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

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such Bond or, (b) reduce the percentage of Bonds required for the written consent to any such amendment or modification.

The Indenture and the rights and obligation of the Agency and of the Owners may also

be modified or amended at any time by a Supplemental Indenture which shall become binding upon adoption, without the consent of any Owners, to the extent permitted by law, but only for any one or more of the following purposes:

(a) to add additional covenants and agreements of the Agency or to limit or

surrender any rights or power reserved to or conferred upon the Agency; or (b) to make such provisions for the purpose of curing any ambiguity, or of curing,

correcting or supplementing any defective provision contained in the Indenture, 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 in the opinion of Bond Counsel; or

(c) to make such additions, deletions or modifications as may be necessary or

desirable to assure exemption from federal income taxation of interest on the Bonds.

Events of Default and Remedies Events of Default. The following events constitute Events of Default under the

Indenture:

(a) if default shall be made by the Agency in the due and punctual payment of the principal of or interest or redemption premium (if any) on any Bond when and as the same shall become due and payable, whether at maturity as therein expressed, by declaration or otherwise;

(b) if default shall be made by the Agency in the observance of any of the

covenants, agreements or conditions on its part in the Indenture or in the Bonds contained, other than a default described in the preceding clause (a), and such default shall have continued for a period of thirty (30) days following receipt by the Agency of written notice from the Trustee or any Owner of the occurrence of such default provided that if in the reasonable opinion of the Agency the failure stated in the notice can be corrected, but not within such thirty (30) day period, such failure will not constitute an event of default if corrective action is instituted by the Agency within such thirty (30) day period and the Agency thereafter diligently and in good faith cures such failure in a reasonable period of time; or

(c) If the Agency files a petition seeking reorganization or arrangement under the

federal bankruptcy laws or any other applicable law of the United States of America, or if a court of competent jurisdiction will approve a petition seeking reorganization under the federal bankruptcy laws or any other applicable law of the United States of America, or, if under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction will approve a petition, seeking reorganization under the federal bankruptcy laws or any other applicable law of the United States of America, or, if under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction will assume custody or control of the Agency or of the whole or any substantial part of its property.

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Remedies. Upon the occurrence and during the continuance of any Event of Default,

the Trustee may, or, at the direction of the Owners of a majority in aggregate principal amount of the Bonds at the time outstanding, the Trustee shall, (a) declare the principal of all of the Bonds, and the interest accrued thereon, to be due and payable immediately, will become immediately due and payable, anything in the Indenture or in the Bonds to the contrary notwithstanding, and (b) exercise any other remedies available to the Trustee and the Owners in law or at equity.

Immediately upon becoming aware of the occurrence of an Event of Default, the Trustee

is required to give notice of such Event of Default to the Agency by telephone promptly confirmed in writing. Such notice is also required to state whether the principal of the Bonds has been declared to be or have immediately become due and payable. With respect to any Event of Default described in clauses (a) or (b) above the Trustee shall, and with respect to any Event of Default described in clause (c) above the Trustee in its sole discretion may, also give such notice to the Owners in the same manner as provided for notices of redemption of the Bonds, which is required to include the statement that interest on the Bonds will cease to accrue from and after the date, if any, on which the Trustee declared the Bonds to become due and payable pursuant to the preceding paragraph (but only to the extent that principal and any accrued, but unpaid, interest on the Bonds is actually paid on such date).

The foregoing is subject to the condition that if, at any time after the principal of the

Bonds has been so declared due and payable, and before any judgment or decree for the payment of the moneys due have been obtained or entered, the Agency deposits with the Trustee a sum sufficient to pay all principal on the Bonds matured prior to such declaration and all matured installments of interest (if any) upon all the Bonds, with interest on such overdue installments of principal and interest (to the extent permitted by law) at the net effective rate then borne by the Outstanding Bonds, and the fees and expenses of the Trustee, including any fees and expenses of its attorneys, and any and all other defaults known to the Trustee (other than in the payment of principal of and interest on the Bonds due and payable solely by reason of such declaration) have 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, and in every such case, with the prior written consent of the Owners of a majority in aggregate principal amount of the Bonds then Outstanding, as applicable, by written notice to the Agency and to the Trustee, may, on behalf of the Owners of all of the Bonds, rescind and annul such declaration and its consequences. However, no such rescission and annulment extends to or affects any subsequent default, or impairs or exhausts any right or power consequent thereon.

Application of Funds Upon Acceleration. If an Event of Default has occurred and is

continuing, all Tax Revenues and all sums in the funds and accounts established and held by the Trustee under the Indenture upon the date of the declaration of acceleration and all sums thereafter received by the Trustee under any of the provisions of the Indenture will be applied by the Trustee as follows and in the following order:

(a) 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) incurred in and about the performance of its powers and duties under the Indenture and the payment of all fees, costs and expenses owing to the Trustee; and

(b) 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

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of interest borne by the Outstanding Bonds, and in case such moneys are insufficient to pay in full the whole amount so owing and unpaid upon the Bonds, then to the payment of such interest and principal without preference or priority among such interest and principal ratably to the aggregate of such interest, principal.

Limitation on 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 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 Bonds then Outstanding have requested the Trustee in writing to exercise its powers under the Indenture granted or to institute such action, suit or proceeding 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; and (d) the Trustee has refused or failed to comply with such request for a period of sixty (60) days after such written request has been received by the Trustee and said tender of indemnity is made to the Trustee.

Defeasance of Bonds

The Agency may pay and discharge the indebtedness on any Bonds in any one or

more of the following ways:

(a) by paying or causing to be paid the principal of and interest on such Bonds, as and when the same become due and payable; or

(b) by irrevocably depositing with the Trustee or another fiduciary, in trust, at or

before maturity, money which, together with the available amounts then on deposit in the funds and accounts established pursuant to the Indenture, in the opinion or report of an Independent Accountant or Bond Counsel is fully sufficient to pay such Bonds, including all principal, interest and redemption premium, if any; or

(c) by irrevocably depositing with the Trustee or another fiduciary, in trust,

Defeasance Obligations in such amount as an Independent Accountant or Bond Counsel determines will, together with the interest to accrue thereon and available moneys then on deposit in any of the funds and accounts established pursuant to the Indenture, be fully sufficient to pay and discharge the indebtedness on such Bonds (including all principal, interest and redemption premium, if any) at or before maturity;

and, if such Bonds are to be redeemed prior to the maturity thereof notice of such redemption have been duly given or provision satisfactory to the Trustee have been made for the giving of such notice, then, at the election of the Agency and notwithstanding that any Bonds have not been surrendered for payment, the pledge of the Tax Revenues and other funds provided for in the Indenture and all other obligations of the Trustee and the Agency under the Indenture with respect to such Bonds, will cease and terminate, except only the obligation of the Agency under the Indenture, the obligation of the Trustee to transfer and exchange Bonds under the Indenture, the obligation of the Agency to pay or cause to be paid to the Owners of such Bonds, from the amounts so deposited with the Trustee, all sums due thereon, and the obligation of the Agency to compensate and indemnify the Trustee pursuant to the Indenture. Notice of such election shall be filed with the Trustee. In the event the Agency shall, pursuant to the foregoing provision, pay and discharge any portion or all of the Bonds then outstanding, the Trustee shall be authorized to take such actions and execute and deliver to the Agency all such instruments as may be necessary or desirable to evidence such discharge, including, without limitation,

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selection by lot of Bonds of any maturity of the Bonds that the Agency has determined to pay and discharge in part.

In the case of a defeasance or payment of all of the Bonds outstanding, any funds thereafter held by the Trustee which are not required for said purpose or for payment of amounts due the Trustee shall be paid over to the Agency.


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APPENDIX E

THE BOOK-ENTRY SYSTEM

The information in this Appendix E concerning The Depository Trust Company ("DTC"),

New York, New York, and DTC’s book-entry system has been obtained from DTC and the Authority takes no responsibility for the completeness or accuracy thereof. The Authority cannot and does not give any assurances that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the Bonds, (b) certificates representing ownership interest in or other confirmation or ownership interest in the Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Bonds, or that they will so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Appendix. The current "Rules" applicable to DTC are on file with the Securities and Exchange Commission and the current "Procedures" of DTC to be followed in dealing with DTC Participants are on file with DTC.

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 security certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC.

DTC, the world's largest depository, is a limited-purpose trust company organized under

the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 85 countries that DTC’s participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation, (respectively, "NSCC", "GSCC", "MBSCC", 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"). DTC 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.

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

To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC

are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of the Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by

Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of the Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.

Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue

are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with

respect to the Bonds unless authorized by a Direct Participant in accordance with DTC’s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Payments of principal of, premium, if any, and interest evidenced by the Bonds will be

made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the 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

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practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC (nor its nominee), the Trustee, or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal of, premium, if any, and interest evidenced by the Bonds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as depository with respect to the Bonds at

any time by giving reasonable notice to the County or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered.

The Authority may decide to discontinue use of the system of book-entry transfers

through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered.

In the event that the book-entry system is discontinued as described above, the

requirements of the Indenture will apply. The foregoing information concerning DTC concerning and DTC’s book-entry system has been provided by DTC, and neither the Authority or the Trustee take any responsibility for the accuracy thereof.

Neither the Authority or the Underwriters can and do not give any assurances that DTC,

the Participants or others will distribute payments of principal, interest or premium, if any, evidenced by the Bonds paid to DTC or its nominee as the registered owner, or will distribute any redemption notices or other notices, to the Beneficial Owners, or that they will do so on a timely basis or will serve and act in the manner described in this Official Statement. Neither the Authority or the Underwriter is responsible or liable for the failure of DTC or any Participant to make any payment or give any notice to a Beneficial Owner with respect to the Bonds or an error or delay relating thereto.

The information in this section concerning DTC and DTC's book-entry system has been

obtained from sources that the Authority believes to be reliable, but the Authority takes no responsibility for the accuracy thereof.


APPENDIX F

FORM OF OPINION OF BOND COUNSEL

March 8, 2011

Redevelopment Agency For the City of Goleta 130 Cremona Drive, Suite B Goleta, California 93117

OPINION: $16,085,000 Redevelopment Agency For the City of Goleta, Goleta Old Town Redevelopment Project, 2011 Tax Allocation Bonds

Members of the Agency: We have acted as bond counsel in connection with the issuance by the Redevelopment

Agency For the City of Goleta (the “Agency”) of $16,085,000 Redevelopment Agency For the City of Goleta, Goleta Old Town Redevelopment Project, 2011 Tax Allocation Bonds (the “Bonds”), pursuant to the Community Redevelopment Law, constituting Part 1 (commencing with Section 33000) of Division 24 of the Health and Safety Code of the State of California (the “Law”), and an Indenture of Trust, dated as of March 1 2011, by and between the Agency and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Indenture”). 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 Agency contained in the Indenture and in certified proceedings and other certifications of public officials furnished to us, without undertaking to verify such facts by independent investigation.

Based upon the foregoing, we are of the opinion, under existing law, as follows: 1. The Agency is duly created and validly existing as a public body, corporate and

politic, with the power to enter into the Indenture, perform the agreements on its part contained therein, and issue the Bonds.

2. The Indenture has been duly approved by the Agency, and constitutes a valid and

binding obligation of the Agency enforceable upon the Agency. 3. Pursuant to the Law, the Indenture creates a valid lien on the funds pledged by the

Indenture for the security of the Bonds, on a parity with other obligations (if any) issued or to be issued under the Indenture, subject to no prior lien granted under the Law.

Redevelopment Agency For the City of Goleta March 8, 2011 Page 2

4. The Bonds have been duly authorized, executed and delivered by the Agency, and

are valid and binding special obligations of the Agency, payable solely from the sources provided therefor in the Indenture.

5. The 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 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 is subject to the condition that the Agency comply with all requirements of the Internal Revenue Code of 1986, that 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 Agency has covenanted to comply with each such requirement. Failure to 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.

6. The interest on the Bonds is exempt from personal income taxation imposed by the

State of California. The rights of the owners of the Bonds, and the enforceability of the Bonds and the

Indenture, may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted, and may also be subject to the exercise of judicial discretion in appropriate cases.

Respectfully submitted, A Professional Law Corporation

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APPENDIX G

FORM OF CONTINUING DISCLOSURE CERTIFICATE

This CONTINUING DISCLOSURE CERTIFICATE (this “Disclosure Certificate”) is executed and delivered by the REDEVELOPMENT AGENCY FOR THE CITY OF GOLETA (the “Agency”) in connection with the issuance of its Redevelopment Agency For the City of Goleta, Goleta Old Town Redevelopment Project 2011 Tax Allocation Bonds, (the “Bonds”). The Bonds are being issued pursuant to an Indenture of Trust dated as of March 1, 2011, by and between the Agency and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”). Pursuant to Section 5.18 of the Indenture, the Agency covenants and agrees as follows:

Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being

executed and delivered by the Agency for the benefit of the holders and beneficial owners of the Bonds and in order to assist the Participating Underwriters in complying with S.E.C. Rule 15c2-12(b)(5).

Section 2. Definitions. In addition to the definitions set forth in the Indenture, which apply

to any capitalized term used in this Disclosure Certificate, unless otherwise defined, the following capitalized terms shall have the following meanings:

“Annual Report” shall mean any Annual Report provided by the Agency pursuant to, and

as described in, Sections 3 and 4 of this Disclosure Certificate. “Annual Report Date” means the date that is nine (9) months after the end of the

Agency’s fiscal year (currently March 31 based on the Agency’s fiscal year end of June 30). “Dissemination Agent” shall mean the Agency, or any successor Dissemination Agent

designated in writing by the Agency and which has filed with the Agency and the Trustee a written acceptance of such designation.

“Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure

Certificate. “MSRB” means the Municipal Securities Rulemaking Board, which has been designated

by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other repository of disclosure information that may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future.

"Official Statement" shall mean the Official Statement dated March 3, 2011, relating to

the Bonds. “Participating Underwriter” shall mean any of the original underwriters of the Bonds

required to comply with the Rule in connection with offering of the Bonds. “Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange

Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.

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Section 3. Provision of Annual Reports. (a) The Agency shall, or shall cause the Dissemination Agent to, not later than the

Annual Report Date, commencing with the report for the 2010-11 fiscal year, provide to the MSRB, in an electronic format as prescribed by the MSRB, an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. Not later than fifteen (15) Business Days prior to said date, the Agency shall provide the Annual Report to the Dissemination Agent (if other than the Agency). If by 15 Business Days prior to the Annual Report Date the Dissemination Agent (if other than the Agency) has not received a copy of the Annual Report, the Dissemination Agent shall contact the Agency to determine if the Agency is in compliance with the previous sentence. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the 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 if 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(c). The Agency shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by the Agency hereunder.

(b) If the Agency is unable to provide to the Repositories an Annual Report by the date

required in subsection (a), the Agency shall to the MSRB, in an electronic format as prescribed by the MSRB, a notice in substantially the form attached as Exhibit A.

(c) The Dissemination Agent shall:

(i) determine each year prior to the Annual Report Date the then-applicable rules and electronic format prescribed by the MSRB for the filing of annual continuing disclosure reports; and

(ii) if the Dissemination Agent is other than the Agency, file a report with the

Agency certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided.

Section 4. Content of Annual Reports. The Agency’s Annual Report shall contain or

incorporate by reference the following: (a) Audited Financial Statements 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 are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available.

(b) The following financial information and operating data set forth in the final Official

Statement for the preceding fiscal year:

(i) Ten major secured taxpaying assessees in the Reedley Redevelopment Project, including name, type of use, secured value and percent of total value, substantially in the format set forth as Table 3 of the Official Statement;

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(ii) Discussion of any property tax appeals by any of the ten major secured

assessees which could have a material adverse effect on Tax Revenues (as defined in the Indenture);

(iii) Annual tax increment revenues, Tax Revenues and coverage ratio of Tax

Revenues to debt service on the Bonds and all Parity Debt (as defined in the Indenture), in substantially the format set forth as Table 5 and Table 6 of the Official Statement.

(c) In addition to any of the information expressly required to be provided under this

Disclosure Certificate, the Agency shall provide such further material information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading.

(d) 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 are available to the public on the MSRB’s Internet web site or filed with the Securities and Exchange Commission. The Agency shall clearly identify each such other document so included by reference.

Section 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5, the Agency shall give, or cause to be

given, notice of the occurrence of any of the following Listed Events with respect to the Bonds:

(i) Principal and interest payment delinquencies. (ii) Non-payment related defaults, if material. (iii) Unscheduled draws on debt service reserves reflecting financial difficulties. (iv) Unscheduled draws on credit enhancements reflecting financial difficulties. (v) Substitution of credit or liquidity providers, or their failure to perform. (vi) Adverse tax opinions, the issuance by the Internal Revenue Service of

proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax-exempt status of the security.

(vii) Modifications to rights of security holders, if material. (viii) Bond calls, if material, and tender offers. (ix) Defeasances. (x) Release, substitution, or sale of property securing repayment of the

securities, if material. (xi) Rating changes. (xii) Bankruptcy, insolvency, receivership or similar event of the obligated

person. (xiii) The consummation of a merger, consolidation, or acquisition involving an

obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material.

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(xiv) Appointment of a successor or additional trustee or the change of name of a trustee, if material.

(b) Whenever the Agency obtains knowledge of the occurrence of a Listed Event, and, if

the Listed Event is described in subsections (a)(ii), (a)(vi), (a)(vii), (a)(viii) (if the event is a bond call), (a)(x), (a)(xii) or (a)(xiv) above, the Agency determines that knowledge of the occurrence of that Listed Event would be material under applicable Federal securities law, the Agency shall file a notice of such occurrence with the MSRB in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 business days after the occurrence of the Listed Event. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(viii) and (ix) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to holders of affected Bonds pursuant to the Indenture.

Section 6. Identifying Information for Filings with the MSRB. All documents provided to

the MSRB under the Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB.

Section 7. Termination of Reporting Obligation. The Agency’s obligations under this

Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds or upon the delivery to the Dissemination Agent of an opinion of nationally recognized bond counsel to the effect that continuing disclosure is no longer required. 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(c).

Section 8. Dissemination Agent. (a) The Agency may, from time to time, appoint or engage a Dissemination Agent to

assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. 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 Certificate. The initial Dissemination Agent shall be the Trustee. If at any time there is no designated Dissemination Agent appointed by the Agency, or if the Dissemination Agent so appointed is unwilling or unable to perform the duties of Dissemination Agent hereunder, the Agency shall be the Dissemination Agent and undertake or assume its obligations hereunder.

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. The Dissemination Agent may resign its duties hereunder at any time upon written notice to the Agency.

(b) The Dissemination Agent shall be paid compensation by the Agency for its services

provided hereunder in accordance with its schedule of fees as agreed to between the Dissemination Agent and for all expenses, legal fees and advances reasonably made or incurred by the Dissemination Agent in the performance of its duties hereunder and the Agency from time to time. The Dissemination Agent (if other than the Agency) shall have no duty or obligation to review any information provided to it by the Agency hereunder and shall not be deemed to be acting in any fiduciary capacity for the Agency, holders or beneficial owners or any other party. The Dissemination Agent may rely and act or refrain from acting upon any direction from the Agency or an opinion of nationally recognized bond counsel.

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Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Agency may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied:

(a) if the amendment or waiver relates to the provisions of 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 an obligated person with respect to the Bonds, or type of business conducted;

(b) the undertakings herein, as proposed to be amended or waived, would, in the opinion

of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and

(c) the proposed amendment or waiver either (i) is approved by holders of the Bonds in

the manner provided in the Indenture for amendments to the Indenture with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Bonds.

If the annual financial information or operating data to be provided in the Annual Report

is amended pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided.

If an amendment is made to the undertaking specifying the accounting principles to be

followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the Agency to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to the Repositories in the same manner as for a Listed Event under Section 5(c).

Section 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed

to prevent the Agency from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Agency chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Agency shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

Section 11. Default. In the event of a failure of the Agency to comply with any provision

of this Disclosure Certificate, any Participating Underwriter or any holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Agency to comply with its

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obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Certificate in the event of any failure of the Agency to comply with this Disclosure Certificate shall be an action to compel performance.

Section 12. Duties, Immunities and Liabilities of Dissemination Agent. All of the

immunities, indemnities, and exceptions from liability in Article VI of the Indenture insofar as they relate to the Trustee shall apply to the Trustee and the Dissemination Agent in this Disclosure Certificate. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and shall have no liability arising out of performance of such duties except due to the Dissemination Agent’s negligence or willful misconduct. The Dissemination Agent may rely and act or refrain from acting upon any direction from the Agency or an opinion of nationally recognized bond counsel. This Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. No person shall have any right to commence any action against the Trustee or Dissemination Agent seeking any remedy other than to compel specific performance of this Disclosure Certificate.

Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of

the Agency, the Dissemination Agent, the Participating Underwriters and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity.

Dated: March 8, 2011


By

Executive Director

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EXHIBIT A

NOTICE TO MUNICIPAL SECURITIES RULEMAKING

BOARD OF FAILURE TO FILE ANNUAL REPORT

Name of Issuer: Redevelopment Agency For the City of Goleta

Name of Bond Issue: $16,085,000 Redevelopment Agency For the City of Goleta, Goleta Old Town Redevelopment Project 2011 Tax Allocation Bonds

Date of Issuance: March 8, 2011 NOTICE IS HEREBY GIVEN that the Redevelopment Agency For the City of Goleta (the

“Issuer”) has not provided an Annual Report with respect to the above-named Bonds as required by Section 5.18 of the Indenture of Trust, dated as of March 1, 2011, by and between the Issuer and The Bank of New York Mellon Trust Company, N.A., as trustee. The Issuer anticipates that the Annual Report will be filed by _____________.

Dated: ______________________


By Title


Documents

$16,085,000 Redevelopment Agency For the City of …cdiacdocs.sto.ca.gov/2011-0167.pdfThe Bonds are not a debt, liability or obligation of the City of Goleta, the County of Santa Barbara,