City of Dana Point Department of Administrative Services September 29, 2015 The Honorable Glenda Sanders Presiding*

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SYNTHESIS OF PROCEEDINGS The Mello-Roos Community Facilities Act ("Act") of 1982 came about as a response to the lack of adequate financing for public capital facilities and services in the post-Proposition 13 era. State Legislators Mello and Roos sponsored this Bill, which was enacted into law by the California Legislature and is now Sections 53311 through 53363 of the California Government Code. The Act authorizes a local governmental agency, such as a school district or city, to form a Community Facilities District ("CFD") within a defined set of boundaries for the purposes of providing public facilities and services. A CFD is formed for financing purposes only, and is governed by the agency that formed it. The Community Facilities District No. 2006-1 (the "District") was formed pursuant to the Act and Resolution No. 06-06-14-11 adopted on June 14, 2006 by the City Council of the City of Dana Point (the "City") in order to finance the acquisition and construction of certain public improvements. The land within the District is CFD 2006-1 Refunding Fiscal Year 2014/15 Annual Report being developed with a total of 118 custom residential homes, 1.6 acres of commercial property and 2.8 acres of hotel property. THE BONDS The project site is comprised of approximately 121.3 gross acres within Tract No. 16331 located east of and generally bordered by the Pacific Ocean, north of Scenic Drive, and west of Pacific Coast Highway and Street of the Green Lantern in the City of Dana Point. THE BONDS The District issued its first series of bonds, the Community Facilities District No. 2006-1, 2008 Special Tax Bonds (the "2008 Bonds"), on July 2, 2008 pursuant to Resolution 08-06-03-03, adopted on June 3, 2008, by the City Council, in the aggregate amount of $8,710,000. The District issued its second series of Parity Bonds, the Community Facilities District No. 2006-1, 2013 Special Tax Bonds (the "2013 Bonds"), pursuant to Resolution 13-05-07-03, adopted on May 7, 2013, by the City Council, in the aggregate amount of $17,885,000. Taking into account the principal amount of authorization allocable to the 2008 Bonds ($7,840,000), together with the non-refunding portion of the 2013 Bonds in the aggregate amount of $10,045,000 would leave, based on an original authorization of $45,000,000, a remaining authorization of $26,245,000 for the principal amount of future Parity Bonds. The District has authorized a not-to-exceed amount of $45,000,000 of bonded indebtedness. The authorized bonded indebtedness was reduced to $40,000,000 by operation of the First Amendment to Acquisition Agreement entered into by Headlands Reserve LLC and the City on November 8, 2006; however, this action was not formalized by proceedings under the Act and not approved by the qualified electors, thus the reduction in authorization could be rescinded by a future City Council. It is anticipated that additional bonds will be issued on parity with the Bonds up to the full authorization as the debt service is supported by the sale of the lots now held by the Developer and the development of the commercial and hotel property. As the total authorization is reached by the issuance of Parity Bonds, the District and the Developer may agree to request reinstatement of all or a portion of the higher authorization. On March 13, 2014, the Parity Bonds referenced above were issued in the amount of $26,245,000 with a maturity date of September 1, 2045. CFD 2006-1 Refunding Fiscal Year 2014/15 Annual Report COVENANT FOR JUDICIAL FORECLOSURE The District has covenanted with and for the benefit of the owners of the Bonds that it will order, and cause to be commenced as provided in the Fiscal Agent Agreement, and thereafter diligently prosecute to judgment (unless such delinquency is brought current), an action in the superior court to foreclosure the lien of any Special Tax or installment thereof not paid when due. On or about February 15 and June 15 of each fiscal year, an Authorized Officer shall compare the amount of Special Taxes to be collected on the December 10 and April 10 installments of the secured property tax bills to the amount of Special Tax Revenues actually received by the District in said installments, and proceed as set forth below: If the Authorized Officer determines that any single parcel subject to the Special Tax in the District is delinquent in the payment of Special Taxes, then the Authorized Officer shall send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to the property owner of such determination. If the delinquency remains uncured, foreclosure proceeding shall be commenced by the District by October 1 following such determination. FINANCED FACILITIES The Facilities financed by the District include street, sewer, water, storm drain, park, landscaping and dry utility improvements; sewer annexation charges, and all appurtenances and appurtenant work. The Facilities include the facilities listed below, and other facilities of the same type or types as may be substituted in the place of one or more of the specific facilities listed below in accordance with the Acquisition Agreement between the City and Headlands Reserve LLC relating to the District. Any of the Facilities to be constructed shall be constructed, whether or not acquired in their completed states, pursuant to plans and specifications approved by the City or the County of Orange or the South Coast Water District ("SCWD"), as applicable and the officials thereof, including the City Engineer. The final nature and location of the Facilities will be determined upon the preparation of final plans and specifications for such Facilities. The Facilities proposed to be financed by the District are listed below: City Facilities 1. Storm drain system, including, but not limited to, storm drain lines, catch basins, storm water treatment BMPs, energy dissipation and diversion structures and outfall facilities. CFD 2006-1 Refunding Fiscal Year 2014/15 Annual Report 2. Selva Road street improvements, including, but not limited to, retaining walls, curb, gutter, paving, sidewalks, landscaping median, street lights and public utility conversion and relocation and new public utilities within right- of-way. 3. Dana Strand Road cul-de-sac improvements, including, but not limited to, curb, gutter, paving, retaining walls, public utilities, landscaping and streetlights. 4. Scenic Drive and Green Lantern street improvements, including, but not limited to, retaining walls, curb, gutter, sidewalks, paving, landscaping, street lights, public utilities and signage. 5. Pacific Coast Highway improvements, including, but not limited to, curb, gutter, sidewalks, streetlights, public utilities and traffic signals. 6. Hilltop Park and greenbelt/linkage improvements (Lots S and BB)1, including, but not limited to, trails, stairs, walkways, fencing, benches, signage, irrigation, landscaping, precise grading, area drainage. hardscape, walls, utility conversion and relocation and public utilities. 7. Strand Vista Park (Lots G, Q and R)1, including, but not limited to, hardscape, landscape, retaining and shoring walls, stairways, public art, irrigation, funicular, fencing, trails, stairs, overlooks, beach restroom, benches, picnic tables and signage. 8. Strand Beach Park improvements (Lots N, P and portion of Lot 59), including, but not limited to, hardscape, landscape, retaining walls, fencing, irrigation, trails, stairs, fencing, ramps, railings, signage, precise grading, area drainage, picnic tables, benches and public utilities. 9. North Strand Beach Access improvements (City portion), including, but not limited to, landscape, hardscape and irrigation. 10. Conservation Park improvements (Lots V and AA)1, including, but not limited to, trails, fencing and overhead utility relocation and pavement. 11. Harbor Point Park improvements (Lots 126, U and T)1, including, but not limited to, landscape, hardscape, nature interpretative center, irrigation, trails, stairs, overlooks, fencing, signage, precise grading, area drainage, walls and public utilities. Public Utilities 1. Phase 12 dry utilities. CFD 2006-1 Refunding Fiscal Year 2014/15 Annual Report 2. Phase 22 dry utilities. 3. Phase 32 dry utilities. 4. Phase 42 dry utilities. County Facilities 1. Harbor parking lot storm water treatment BMPs improvements, including, but not limited to, screens, filters, diversions, storm drain, man holes and structures. 2. Selva parking lot storm water treatment BMPs improvements, including, but not limited to, screens, filters, diversions, storm drain, man holes and structures. 3. Cove Road storm drain line and appurtenances from Green Lantern to Dana Point Harbor parking lot. 4. North Strand Beach access improvements, including, but not limited to, walkway, stairs, overlooks, restroom, landscaping, irrigation, fencing, signage, precise grading, area drainage, hardscape, walls, public utilities and benches. Water District Facilities 1. Sewer system improvements, including, but not limited to, sewer lines, manholes, clearouts, structure, walls, equipment, force main, backfill, pavement, R/R and testing. Annexation charges. 3. Water system improvements, including, but not limited to, water mains, valves, hydrants, pressure reducing station, man holes, laterals, backfill and testing. Note: The descriptions of the Facilities in Exhibit A of the Acquisition Agreement are preliminary and general. The Facilities to be acquired shall be as described in the approved Plans, as such Plans may be revised and approved by the City or applicable public agency. Habitat restoration and revegetation is not included and will not be financed with CFD Proceeds. CFD 2006-1 Refunding Fiscal Year 2014/15 Annual Report 2 Phase 1 consists of Oceanfront Lane, Beach View Avenue, White Water Lane, Strand Beach Drive, Scenic Drive, Street of the Green Lantern and off-site improvements on Magellan Isle, Cabrillo Isle and Ritz Carlton Drive. Phase 2 consists of Shoreline Drive, Pacific Ridge Place and Seabreeze Terrace. Phase 3 consists of Pacific Wave Circle, Beach View Avenue, Strand Beach Drive and Selva Road. Phase 4 consists of Shoreline Drive and Coral Cove Way. SERVICES The Services proposed to be financed by the District include the maintenance and operation of park facilities consisting of a public funicular (inclined elevator) and landscaped slopes in Lot Q and a portion of Lot BB, maintenance of the revetment walkway and revetment, and certain storm drain water quality BMP improvements located on adjoining County of Orange property, and related appurtenances. The cost of the Services shall include incidental expenses, determination of the amount of the Maintenance special tax, collection of the Maintenance special tax, costs incurred in order to carry out the authorized purposes of the District with respect to the Services, and the costs of inspecting, coordinating, completing, planning and designing the Services, including the costs of environmental evaluations, if applicable. Any of the Services shall be provided, pursuant to plans and specifications approved by the City or the County of Orange, as applicable and the officials thereof, including the City Engineer. The final nature of the Services will be determined upon the preparation of final plans and specifications for such Services. The Services proposed to be financed by the District are listed below: City Facilities 1. Strand Vista Park slope and landscape maintenance (Lot Q and portion of Lot BB of Tract Map No. 16331) as further described in that certain "Landscaping Irrigation and Maintenance Agreement" by and between the City and Developer dated December 1, 2005 and recorded in the Official Records of the County of Orange on December 20, 2005 as Instrument No. 2005001015930. Funicular Improvements within Strand Vista Park as further described in that certain "Revetment and Funicular Maintenance Agreement" by and between the City and Developer dated December 1, 2005 and recorded in the Official Records of the County of Orange on December 20, 2005 as Instrument No. 2005001015931. CFD 2006-1 Refunding Fiscal Year 2014/15 Annual Report Financial Services 3. Revetment, revetment walkway (including stairs) and railing within Strand Beach Park (Lot N) as further described in the Revetment and Funicular Maintenance Agreement described above. County Facilities 1. Harbor parking lot storm water filter/diversion improvements. 2. Selva parking lot storm water/filter/diversion improvements. ATTACHMENT 3 ,7 CITY OF DANA POINT . Statement of Revenues, Expenditures and 41 Changes in Fund Balances ,7 Governmental Funds VI 0 For the Year Ended June 30, 2014 4 0 1 17 Special Revenue Fund Capital Projects Funds V Headlands Headlands 13 General CFD 2006-1 Capital CFD 2006-1 4 Improvements Fund Maintenance Acquisition 0 Revenues: 63 Taxes $ $ 27,358,728 S S ·vi Licenses, fees and permits 1,112,116 A Fines, forfeitures and penalties 262,425 1 Intergovernmental 402,206 317,906 4 Charges for services 1,743,311 115,967 Investment earnings 4 239,727 906 W Contributions from property owners 23,935,028 6 Other 81,112 6,157 W Total Revenues 31,199,625 116,873 324,063 A. 23,935,028 43 Þ? Expenditures: 4 Current: 4 General government 4,744,758 Public safety 9,941,164 471 V Community development 3,038,144 63 Parks and recreation 4,988,891 V. Public works 5,090,863 151,425 256,160 63 Capital outlay 308,865 6,600,515 23,736,528 40 6 Total Expenditures 151,425 28,112,685 6,600,515 23,992,688 Excess (deficiency) of revenues 4 over (under) expenditures 3,086,940 (34,552) (6,276,452) (57,660) 1 Other Financing Sources (Uses): 0 Transfers in 769,370 30,000 8,744,010 Transfers out (7,748,859) N. Sale of capital assets 3,625,000 0 Total Other Financing Sources (Uses) 30,000 8,744,010 (3,354,489) 0 Net Changes in Fund Balances (267,549) (4,552) 2,467,558 (57,660) e Fund Balances, Beginning of Year 141,036 21,970,393 6,386,453 57,660 ( Fund Balances, End of Year 21,702,844 $ 136,484 8,854,011 $ S $ 0 0 6 V 1 - 0 C e

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Audit report information, as delineated in California Government Code, 1982 Section 53343.1, should be made available to the CFD taxpayer on a website after each fiscal year for each CFD number. This recommendation has already been implemented. The link to the CAFR documents is located on the City's website at http://www.danapoint.org/index.aspx?page=200. Respectfully, had A. Killih Michael A. Killebrew Assistant City Manager/Director of Administrative Services Dana Point City Council Cc: Dana Point City Attorney ATTACHMENTS: 1. FY 2014 - 2015 CFD 2006-1 Maintenance Fund Revenue and Expenses 2. FY 2014 - 2015 CFD 2006-1 Annual Fiscal Year Report 3. FY 2013 - 2014 City of Dana Point CAFR, Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds ATTACHMENT 1 CFD 2006-1 Maintenance Fund FY15 Group Summary City of Dana Point, CA For Fiscal: 2014-2015 Period Ending: 06/30/2015 Original Current Budget RevenueObject Total Budget MTD Activity YTD Activity Total Budget Remaining RevenueType: 40 - Use Of Money & Property 6403 - Investment Income 1,400.00 0.00 1,400.00 1,940.02 -540.02 RevenueType: 40 - Use Of Money & Property Total: 1,400.00 1,400.00 0.00 1,940.02 -540.02 RevenueType: 60 - Charges For Services 6686 - Charges for Services 90,000.00 0.00 492,295.92 324,000.00 -168,295.92 RevenueType: 60 - Charges For Services Total: 90,000.00 324,000.00 0.00 492,295.92 -168,295.92 RevenueType: 90 - Transfers 6901 - Tsfs In - Fr General Fund 30,000.00 330,000.00 0.00 330,000.00 0.00 RevenueType: 90 - Transfers Total: 30,000.00 330,000.00 0.00 330,000.00 0.00 Total Surplus (Deficit): 121,400.00 655,400.00 0.00 824,235.94 -168,835.94 0.00 . . CFD 2006-1 Maintenance Fund FY15 City of Dana Point, CA Group Summary For Fiscal: 2014-2015 Period Ending: 06/30/2015 Original Current YTD Activity + Budget ExpenseObject Total Budget Total Budget MTD Activity YTD Activity Encumbrances Remaining ExpenseType: 20 - Materials & Services 2030 - Equipment Maintenance 97,800.00 97,800.00 0.00 35,723.39 35,723.39 62,076.61 2210 - Utilities 45,000.00 65,000.00 0.00 43,167.47 43,167.47 21,832.53 2230 - Professional Services 7,000.00 7,000.00 0.00 7,270.70 7,270.70 -270.70 2650 - County Facilities 16,000.00 16,000.00 0.00 10,015.25 10,015.25 5,984.75 ExpenseType: 20 - Materials & Services Total: 165,800.00 96,176.81 185,800.00 0.00 96,176.81 89,623.19 ExpenseType: 30 - Capital Outlay 3010 - Furniture & Equipment 0.00 742,000.00 0.00 517,976.79. 517,976.79 224,023.21 ExpenseType: 30 - Capital Outlay Total: 0.00 742,000.00 0.00 517,976.79 517,976.79 224,023.21 ExpenseType: 40 - Insurance 4030 - Property Insurance Premiums 500.00 500.00 0.00 0.00 0.00 500.00 ExpenseType: 40 - Insurance Total: 500.00 500.00 0.00 0.00 0.00 500.00 ExpenseType: 70 - Other Financing Expenses 7050 - Debt Service 0.00 0.00 0.00 552.95 552.95 -552.95 ExpenseType: 70 - Other Financing Expenses Total: 0.00 0.00 0.00 552.95 552.95 -552.95 Total Surplus (Deficit): -166,300.00 -928,300.00 0.00 -614,706.55 -614,706.55 -313,593.45 2 2 2.5 9/11/-015 21:01 7 3 1 . ATTACHMENT 2 inancial Services City of Dana Point Community Facilities District No. 2006-1 Refunding FRAMEWORK