$35,055,000 SUCCESSOR AGENCY TO THE LA …cdiacdocs.sto.ca.gov/2016-3524.pdfSUCCESSOR AGENCY TO THE...

Dated: November 30, 2016

NEW ISSUE — BOOK-ENTRY ONLY

S&P: “AA-”(See “CONCLUDING INFORMATION — Rating”)

In the opinion of Rutan & Tucker, LLP, Costa Mesa, California, Bond Counsel, interest on the Bonds is exempt from State of California personal income taxes. The Agency does not intend for interest on the Bonds to be excluded from gross income for federal income tax purposes, but such interest is exempt from State of California personal income taxes. See “CONCLUDING INFORMATION — Tax Matters” herein.

$35,055,000 SUCCESSOR AGENCY TO THE

LA QUINTA REDEVELOPMENT AGENCY La Quinta Redevelopment Project Areas No. 1 and 2

Subordinate Tax Allocation Refunding Bonds 2016 Taxable Series A

Dated: Delivery Date Due: September 1, as shown on the inside front coverThe $35,055,000 Successor Agency to the La Quinta Redevelopment Agency, La Quinta Redevelopment Project Areas No. 1 and 2,

Subordinate Tax Allocation Refunding Bonds, 2016 Taxable Series A (the “Bonds”) will be delivered as fully registered bonds, registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York (“DTC”), and will be available to ultimate purchasers (“Beneficial Owners”) in the denomination of $5,000 or any integral multiple thereof, under the book-entry system maintained by DTC. Beneficial Owners will not be entitled to receive delivery of bonds representing their ownership interest in the Bonds. The interest on the Bonds (due March 1 and September 1 of each year, commencing March 1, 2017) will be payable by U.S. Bank National Association, as Trustee, to DTC for subsequent disbursement to DTC participants, so long as DTC or its nominee remains the registered owner of the Bonds (see “THE BONDS — Book-Entry System” herein).

The Bonds are being issued by the Successor Agency to the La Quinta Redevelopment Agency (the “Agency”) to refinance on an advance basis the La Quinta Redevelopment Agency’s (the “Prior Agency”) previously issued $6,000,000 La Quinta Redevelopment Project Area No. 2, Subordinate Taxable Tax Allocation Bonds, Series 2011 (the “2011 Project Area No. 2 Taxable Bonds”) of which $5,810,000 are currently outstanding and the Prior Agency’s loan obligation under the Loan Agreement, dated February 3, 2004 as supplemented by the Second Supplemental Loan Agreement, dated as of March 1, 2011 (the “2011 Loan Obligation”) in connection with the La Quinta Financing Authority’s previously issued $28,850,000 Local Agency Subordinate Taxable Revenue Bonds, 2011 Series A (the “2011 Taxable Housing Bonds”) of which $26,635,000 are currently outstanding. The 2011 Project Area No. 2 Taxable Bonds and the 2011 Taxable Housing Bonds are sometimes collectively referred to herein as the “Refunded Bonds.”

The Bonds are subject to optional and mandatory sinking fund redemption prior to maturity as described under “THE BONDS — Redemption” herein.

The Bonds are being issued on a subordinate basis to the $65,600,000 Successor Agency to the La Quinta Redevelopment Agency, La Quinta Redevelopment Project Areas No. 1 and 2, Tax Allocation Refunding Bonds, 2014 Series A (the “2014 Bonds”), of which $61,670,000 are currently outstanding.

The Agency previously issued $97,190,000 La Quinta Redevelopment Project Areas No. 1 and 2, Subordinate Tax Allocation Refunding Bonds, 2013 Series A (the “2013 Series A Bonds”), of which $85,590,000 are currently outstanding, and the $23,055,000 La Quinta Redevelopment Project Areas No. 1 and 2, Subordinate Tax Allocation Refunding Bonds, 2013 Taxable Series B (the “2013 Series B Bonds”), of which $20,130,000 are currently outstanding. The Bonds are being issued on a parity with the 2013 Series A Bonds and the 2013 Series B Bonds.

The Bonds are payable from and secured by the Pledged Tax Revenues, as defined herein, to be derived from the La Quinta Redevelopment Project Area No. 1 and La Quinta Redevelopment Project Area No. 2 (the “Project Areas”). Taxes levied on the property within the Project Areas on that portion of the taxable valuation over and above the taxable valuation of the base year property tax rolls deposited in the Redevelopment Property Tax Trust Fund and, to the extent they constitute Pledged Tax Revenues, shall be deposited in the Redevelopment Obligation Retirement Fund, and administered by the Agency and the Trustee in accordance with the Indenture (as herein defined).

This cover page of the Official Statement contains information for quick reference only. It is not a complete summary of the Bonds. Investors should read the entire Official Statement to obtain information essential to the making of an informed investment decision. Attention is hereby directed to certain risk factors more fully described herein.

The Bonds are not a debt of the City of La Quinta, the State of California or any of its political subdivisions (except the Agency) and neither said City, said State or any of its political subdivisions (except the Agency) is liable therefor. The principal of and interest on the Bonds are payable solely from the Pledged Tax Revenues allocated to the Agency from the Project Areas (all as defined herein and in the Indenture) and other funds as set forth in the Indenture. The Bonds do not constitute an indebtedness within the meaning of any constitutional or statutory debt limitation or restriction.

The Bonds are offered, when, as and if issued, subject to the approval of Rutan & Tucker, LLP, Costa Mesa, California, Bond Counsel. Certain legal matters will be passed on for the Agency by Norton Rose Fulbright US LLP, Los Angeles, California, Disclosure Counsel. Certain legal matters will be passed on for the Agency by Rutan & Tucker, LLP, Costa Mesa, California, as Agency Counsel, and for the Underwriter by Best Best & Krieger, LLP, Riverside, California, as Underwriter’s Counsel. It is anticipated that the Bonds will be available for delivery through the facilities of DTC on or about December 22, 2016.

HilltopSecurities

SUCCESSOR AGENCY TO THE LA QUINTA REDEVELOPMENT AGENCY La Quinta Redevelopment Project Areas No. 1 and 2


Maturity Schedule

Maturity Date (September 1)

Principal Amount

Interest Rate Yield Price

CUSIP† (Base 50420B)

2017 $1,670,000 1.410% 1.410% 100.00% CS9 2018 1,310,000 1.760 1.760 100.00 CG5 2019 1,330,000 2.034 2.034 100.00 CH3 2020 1,365,000 2.379 2.379 100.00 CJ9 2021 1,395,000 2.679 2.679 100.00 CK6 2022 1,430,000 2.923 2.923 100.00 CL4 2023 1,465,000 3.123 3.123 100.00 CM2 2024 1,510,000 3.217 3.217 100.00 CN0 2025 1,565,000 3.367 3.367 100.00 CP5 2026 1,620,000 3.517 3.517 100.00 CQ3 2027 1,675,000 3.617 3.617 100.00 CT7 2028 1,730,000 3.767 3.767 100.00 CU4 2029 1,800,000 3.967 3.967 100.00 CV2 2030 1,870,000 4.067 4.067 100.00 CW0 2031 1,945,000 4.117 4.117 100.00 CZ3 2032 2,030,000 4.217 4.217 100.00 CX8

$4,740,000 4.367% Term Bonds due September 1, 2034 Yield: 4.367%, Price: 100.00% CUSIP† 50420BCY6

$4,605,000 4.527% Term Bonds due September 1, 2039 Yield: 4.527%, Price: 100.00%

CUSIP† 50420BCR1

† CUSIP® is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by S&P Capital IQ on behalf of the American Bankers Association. CUSIP numbers have been assigned by an independent company not affiliated with the Agency, the Municipal Advisor or the Underwriter and are included solely for the convenience of the holders of the Bonds. None of the Agency, the Municipal Advisor or the Underwriter is responsible for the selection or use of these CUSIP numbers, and no representation is made as to their correctness on the Bonds or as indicated above. The CUSIP number for a specific maturity is subject to being changed after the issuance of the Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part of such maturity or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the Bonds.

SUCCESSOR AGENCY TO THE LA QUINTA REDEVELOPMENT AGENCY

LA QUINTA, CALIFORNIA

BOARD OF DIRECTORS

Linda Evans, Chair John Peña, Vice-Chair

Kathleen Fitzpatrick, Member Steve Sanchez, Member Robert Radi, Member

AGENCY/CITY STAFF

Frank J. Spevacek, Agency Executive Director/City Manager Susan Maysels, Agency Secretary/City Clerk

Karla Campos, Agency Finance Director/City Treasurer William Ihrke, Agency Counsel/City Attorney

SPECIAL SERVICES

Bond Counsel/Agency Counsel Rutan & Tucker LLP

Costa Mesa, California

Disclosure Counsel Norton Rose Fulbright US LLP

Los Angeles, California

Trustee and Escrow Bank U.S. Bank National Association

Los Angeles, California

Municipal Advisor Harrell & Company Advisors, LLC

Orange, California

Dissemination Agent Willdan Financial Services

Temecula, California

Underwriter Hilltop Securities Inc.

Cardiff by the Sea, California

GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT

No Offering May Be Made Except by this Official Statement. No dealer, broker, salesperson or other person has been authorized by the Agency to give any information or to make any representations with respect to the Bonds other than as contained in this Official Statement, and, if given or made, such other information or representation must not be relied upon as having been given or authorized by the Agency or the Underwriter.

Use of Official Statement. This Official Statement is submitted in connection with the sale of the Bonds described in this Official Statement and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement does not constitute a contract between any Bond owner and the Agency or the Underwriter.

Preparation of this Official Statement. The information contained in this Official Statement has been obtained from sources that are believed to be reliable, but this information is not guaranteed as to accuracy or completeness. The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the 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.

Estimates and Forecasts. When used in this Official Statement and in any continuing disclosure made by the Agency, 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.

This Official Statement speaks only as of its date, and the information and expressions of opinion contained in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement nor any sale of the Bonds will, under any circumstances, create any implication that there has been no change in the affairs of the Agency or the other parties described in this Official Statement, since the date of this Official Statement.

Document Summaries. All summaries of the Indenture or other documents contained in this Official Statement are made subject to the provisions of such documents and do not purport to be complete statements of any or all such provisions. All references in this Official Statement to the Indenture and such other documents are qualified in their entirety by reference to such documents, which are on file with the Agency.

No Unlawful Offers or Solicitations. This Official Statement does not constitute an offer to sell or a solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation.

No Registration with the SEC. The issuance and sale of the Bonds have not been registered under the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, in reliance upon exemptions provided thereunder by Sections 3(a)(2) and 3(a)(12), respectively, for the issuance and sale of municipal securities.

Public Offering Prices. The Underwriter may offer and sell the Bonds to certain dealers and dealer banks and banks acting as agent at prices lower than the public offering prices stated on the inside cover page of this Official Statement, and the Underwriter may change those public offering prices from time to time.

Web Page. The City of La Quinta maintains a website. However, the information maintained on the website is not a part of this Official Statement and should not be relied upon in making an investment decision with respect to the Bonds.

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TABLE OF CONTENTS

Page

INTRODUCTORY STATEMENT ............................................................................................................. 1

Changes Since the Preliminary Official Statement ......................................................................... 1 Authority and Purpose .................................................................................................................... 1 The City and The Successor Agency .............................................................................................. 2 The Redevelopment Plans ............................................................................................................... 2 Tax Allocation Financing ............................................................................................................... 3 Security for the Bonds .................................................................................................................... 3 Senior Bonds and Parity Bonds ...................................................................................................... 4 Reserve Account ............................................................................................................................. 5 Further Information ......................................................................................................................... 5

SOURCES AND USES OF FUNDS ........................................................................................................... 6

THE BONDS ............................................................................................................................................... 7

Authority for Issuance ..................................................................................................................... 7 Description of the Bonds ................................................................................................................ 7 Book-Entry System ......................................................................................................................... 7 Redemption ..................................................................................................................................... 8

SECURITY FOR THE BONDS .................................................................................................................. 9

Tax Increment Financing .............................................................................................................. 11 Redevelopment Property Tax Trust Fund ..................................................................................... 12 Recognized Obligation Payment Schedule ................................................................................... 13 Reserve Account ........................................................................................................................... 16 Parity Bonds .................................................................................................................................. 17

THE INDENTURE .................................................................................................................................... 19

Allocation of Tax Revenues .......................................................................................................... 19 Pledged Tax Revenues – Application ........................................................................................... 19 Investment of Moneys in Funds and Accounts ............................................................................. 21 Covenants of the Agency .............................................................................................................. 22 Events of Default and Remedies ................................................................................................... 25 Application of Funds Upon Acceleration ..................................................................................... 26 Amendments ................................................................................................................................. 26

THE SUCCESSOR AGENCY TO THE LA QUINTA REDEVELOPMENT AGENCY ....................... 27

Members and Officers ................................................................................................................... 28 Agency Powers ............................................................................................................................. 28

RISK FACTORS ....................................................................................................................................... 29

Reduction in Taxable Value .......................................................................................................... 29 Risks to Real Estate Market .......................................................................................................... 29 Reduction in Inflationary Rate ...................................................................................................... 30 Development Risks ....................................................................................................................... 30 Levy and Collection of Taxes ....................................................................................................... 30 State Budget Issues ....................................................................................................................... 31 Recognized Obligation Payment Schedule ................................................................................... 31

TABLE OF CONTENTS (Continued)

Page

ii

Bankruptcy and Foreclosure ......................................................................................................... 34 Estimated Revenues ...................................................................................................................... 34 Hazardous Substances ................................................................................................................... 35 Natural Disasters ........................................................................................................................... 35 Changes in the Law ....................................................................................................................... 35 Investment Risk ............................................................................................................................ 35 Additional Obligations .................................................................................................................. 36 No Validation Proceeding Undertaken ......................................................................................... 36 Secondary Market ......................................................................................................................... 37

PROPERTY TAXATION IN CALIFORNIA ........................................................................................... 37

Property Tax Collection Procedures ............................................................................................. 37 Unitary Property ........................................................................................................................... 39 Article XIIIA of the State Constitution ......................................................................................... 39 Appropriations Limitation – Article XIIIB ................................................................................... 40 Articles XIIIC and XIIID of the State Constitution ...................................................................... 41 Proposition 87 ............................................................................................................................... 41 Redevelopment Time Limits ......................................................................................................... 41 Appeals of Assessed Values ......................................................................................................... 41 Proposition 8 ................................................................................................................................. 42 Propositions 218 and 26 ................................................................................................................ 42 Future Initiatives ........................................................................................................................... 43

THE PROJECT AREAS ............................................................................................................................ 43

Project Area No. 1 – Background ................................................................................................. 43 Project Area No. 2 – Background ................................................................................................. 43 Redevelopment Plan Limitations .................................................................................................. 44 Location and Surrounding Area .................................................................................................... 44 Pass-Through Agreements and Obligations with Various Taxing Agencies ................................ 45 Largest Local Secured Taxpayers ................................................................................................. 46 Teeter Plan and Delinquency Rates .............................................................................................. 46

PLEDGED TAX REVENUES .................................................................................................................. 47

Schedule of Historical Pledged Tax Revenues ............................................................................. 47 Annual Debt Service ..................................................................................................................... 49 Projected Taxable Valuation and Pledged Tax Revenues ............................................................. 50 Debt Service Coverage ................................................................................................................. 52

CONCLUDING INFORMATION ............................................................................................................ 53

Underwriting ................................................................................................................................. 53 Verification of Mathematical Accuracy ........................................................................................ 54 Legal Opinion ............................................................................................................................... 54 Tax Matters ................................................................................................................................... 54 Litigation ....................................................................................................................................... 58 Legality for Investment in California............................................................................................ 58 Rating ......................................................................................................................................... 58 Continuing Disclosure .................................................................................................................. 59 Miscellaneous ............................................................................................................................... 59

TABLE OF CONTENTS (Continued)

Page

iii

APPENDIX A DEFINITIONS ................................................................................................................ A-1

APPENDIX B FORM OF BOND COUNSEL OPINION ...................................................................... B-1

APPENDIX C BOOK-ENTRY ONLY SYSTEM .................................................................................. C-1

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

APPENDIX E COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR FISCAL YEAR ENDED JUNE 30, 2016 (EXCLUDING SUPPLEMENTARY INFORMATION) ...... E-1

APPENDIX F PROJECTED TAX REVENUES REPORT .................................................................... F-1

APPENDIX G SUPPLEMENTAL INFORMATION – THE CITY OF LA QUINTA .......................... G-1

[THIS PAGE INTENTIONALLY LEFT BLANK]

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OFFICIAL STATEMENT

$35,055,000 SUCCESSOR AGENCY TO THE

LA QUINTA REDEVELOPMENT AGENCY La Quinta Redevelopment Project Areas No. 1 and 2


INTRODUCTORY STATEMENT

This Official Statement, including the cover page, is provided to furnish information in connection with the sale by the Successor Agency to the La Quinta Redevelopment Agency (the “Agency”) of its $35,055,000 La Quinta Redevelopment Project Areas No. 1 and 2, Subordinate Tax Allocation Refunding Bonds, 2016 Taxable Series A (the “Bonds”).

Changes Since the Preliminary Official Statement

Since the publication of the Preliminary Official Statement, the City of La Quinta (the “City”) finalized its Comprehensive Annual Financial Report for fiscal year ended June 30, 2016. A copy of which is included as Appendix E. See Appendix E — “COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR FISCAL YEAR ENDED JUNE 30, 2016 (EXCLUDING SUPPLEMENTARY INFORMATION)”.

Authority and Purpose

The Bonds are being issued pursuant to the Constitution and laws of the State of California (the “State”), including Article 11 (commencing with Section 53580) of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code (the “Bond Law”) and an Indenture of Trust dated as of December 1, 2013 (the “Original Indenture”), as supplemented by a Second Supplemental Indenture of Trust (the “Second Supplemental Indenture” and, together with the Original Indenture, the “Indenture”), dated as of October 1, 2016, each by and between the Agency and U.S. Bank National Association, as trustee (the “Trustee”). See “THE BONDS — Authority for Issuance.”

The Bonds are being issued by the Successor Agency to the La Quinta Redevelopment Agency (the “Agency”) to refinance on an advance basis the La Quinta Redevelopment Agency’s (the “Prior Agency”) previously issued $6,000,000 La Quinta Redevelopment Project Area No. 2, Subordinate Taxable Tax Allocation Bonds, Series 2011 (the “2011 Project Area No. 2 Taxable Bonds”) of which $5,810,000 are currently outstanding and the Prior Agency’s loan obligation under the Loan Agreement, dated February 3, 2004 as supplemented by the Second Supplemental Loan Agreement, dated as of March 1, 2011 (the “2011 Loan Obligation”) in connection with the La Quinta Financing Authority (the “Authority”) previously issued $28,850,000 Local Agency Subordinate Taxable Revenue Bonds, 2011 Series A (the “2011 Taxable Housing Bonds”) of which $26,635,000 are currently outstanding. The 2011 Project Area No. 2 Taxable Bonds and the 2011 Taxable Housing Bonds are sometimes collectively referred to herein as the “Refunded Bonds.”

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The City and The Successor Agency

The City is located 127 miles east of Los Angeles and 20 miles east of Palm Springs in Riverside County (the “County”). The City was originally a general law city incorporated on May 1, 1982, became a charter city in November, 1996 and provides for a Council-City Manager form of government consisting of five Council Members elected to four-year overlapping terms. The Mayor is directly elected by the citizens to a two year term. The City encompasses an area of approximately 35.31 square miles. The population of the City was estimated to be 39,977 as of January 1, 2016. See Appendix G — “SUPPLEMENTAL INFORMATION — THE CITY OF LA QUINTA.”

The Prior Agency was established on July 5, 1983 by the City Council of the City with the adoption of Ordinance No. 34, pursuant to the Community Redevelopment Law (Part 1, Division 25, commencing with Section 33000 of the Health and Safety Code of the State) (the “Redevelopment Law”). On June 29, 2011, Assembly Bill No. 26 (“ABx1 26”) was enacted as Chapter 5, Statutes of 2011, together with a companion bill, Assembly Bill No. 27 (“ABx1 27”). A lawsuit was brought in the California Supreme Court, California Redevelopment Association, et al. v. Matosantos, et al., 53 Cal. 4th 231 (Cal. Dec. 29, 2011), challenging the constitutionality of ABx1 26 and ABx1 27. The California Supreme Court largely upheld ABx1 26, invalidated ABx1 27, and held that ABx1 26 may be severed from ABx1 27 and enforced independently. As a result of ABx1 26 and the decision of the California Supreme Court in the California Redevelopment Association case, as of February 1, 2012, all redevelopment agencies in the State were dissolved, including the Prior Agency, and successor agencies were designated as successor entities to the former redevelopment agencies to wind down the affairs of the former redevelopment agencies.

The primary provisions enacted by ABx1 26 relating to the dissolution and wind down of former redevelopment agency affairs are Parts 1.8 (commencing with Section 34161) and 1.85 (commencing with Section 34170) of Division 24 of the Health and Safety Code of the State, as amended on June 27, 2012 by Assembly Bill No. 1484 (“AB 1484”), enacted as Chapter 26, Statutes of 2012 and as further amended on September 22, 2015 by Senate Bill 107 (“SB 107”), enacted as Chapter 325, Statutes of 2015 (collectively, as amended from time to time, the “Dissolution Act”).

On January 3, 2012, the City Council of the City elected to serve as the Agency, pursuant to Resolution No. 2012-002, adopted by the City as the governing body of the Agency and Section 34173 of the Dissolution Act. Subdivision (g) of Section 34173 of the Dissolution Act, added by AB 1484, expressly affirms that the Agency is a separate public entity from the City, that the two entities shall not merge, and that the liabilities of the Prior Agency will not be transferred to the City nor will the assets of the Prior Agency become assets of the City.

The Redevelopment Plans

The Redevelopment Plan for the La Quinta Redevelopment Project Area No. 1 was approved by Ordinance No. 43 adopted by the City Council on November 29, 1983, and has been amended several times. The La Quinta Redevelopment Project Area No. 1 (“Project Area No. 1”) encompasses 17.9 square miles (11,475 acres) of commercial, public and residential properties.

The Redevelopment Plan for the La Quinta Redevelopment Project Area No. 2 was approved by Ordinance No. 139 adopted by the City Council on May 16, 1989, and has also been amended several times. The La Quinta Redevelopment Project Area No. 2 (“Project Area No. 2”) encompasses 4.9 square miles (3,130 acres) of commercial, public and residential properties.

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Project Area No. 1 and Project Area No. 2 are referred to herein as the “Project Areas,” and the Redevelopment Plans for Project Area No. 1 and Project Area No. 2 are referred to herein as the “Redevelopment Plans.”

Tax Allocation Financing

Prior to the enactment of ABx1 26, the Redevelopment Law authorized the financing of redevelopment projects through the use of tax increment revenues. This method provided that the taxable valuation of the property within a redevelopment 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. Assuming the taxable valuation never drops below the base year level, the taxing agencies thereafter received that portion of the taxes produced by applying then current tax rates to the base year valuation, and the redevelopment agency was allocated the remaining portion produced by applying then current tax rates to the increase in valuation over the base year. Such incremental tax revenues allocated to a redevelopment agency were authorized to be pledged to the payment of redevelopment agency obligations.

The Dissolution Act authorizes refunding bonds, including the Bonds, to be secured by a pledge of monies deposited from time to time in a Redevelopment Property Tax Trust Fund (the “Redevelopment Property Tax Trust Fund”) held by a county auditor-controller with respect to a successor agency, which are equivalent to the tax increment revenues that were formerly allocated under the Redevelopment Law to the redevelopment agency and formerly authorized under the Redevelopment Law to be used for the financing of redevelopment projects. Under the Indenture, Pledged Tax Revenues consist of the amounts deposited from time to time in the Redevelopment Property Tax Trust Fund established pursuant to and as provided in the Dissolution Act less certain payments to taxing agencies but subject to any adjustments thereto pursuant to Section 34183(b) of the Dissolution Act and amounts required to pay debt service on the Senior Bonds, as defined below. See “SECURITY FOR THE BONDS — Tax Increment Financing” herein for additional information.

Security for the Bonds

The Dissolution Act requires the County Auditor-Controller to determine the amount of property taxes that would have been allocated to the Prior Agency had the Prior Agency not been dissolved pursuant to the operation of ABx1 26, using current assessed values on the last equalized roll on August 20, and to deposit that amount in the Redevelopment Property Tax Trust Fund for the Agency established and held by the County Auditor-Controller pursuant to the Dissolution Act. The Dissolution Act provides that any bonds authorized thereunder to be issued by the Agency will be considered indebtedness incurred by the dissolved Prior Agency, with the same legal effect as if the bonds had been issued prior to effective date of ABx1 26, in full conformity with the applicable provision of the Redevelopment Law that existed prior to that date, and will be included in the Agency’s Recognized Obligation Payment Schedule (see Appendix A — “DEFINITIONS” and “SECURITY FOR THE BONDS — Recognized Obligation Payment Schedule”).

The Dissolution Act further provides that bonds authorized thereunder to be issued by the Agency will be secured by a pledge of, and lien on, and will be repaid from moneys deposited from time to time in the Redevelopment Property Tax Trust Fund, and that property tax revenues pledged to any bonds authorized under the Dissolution Act, such as the Bonds, are taxes allocated to the Agency pursuant to the provisions of the Redevelopment Law and the State Constitution which provided for the allocation of tax increment revenues under the Redevelopment Law, as described in the foregoing paragraph.

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In accordance with the Dissolution Act, “Pledged Tax Revenues” are defined under the Indenture as the portion of the monies deposited from time to time in the Redevelopment Property Tax Trust Fund, as provided in paragraph (2) of subdivision (a) of Section 34183 of the Dissolution Act less the amount required to pay debt service on the Senior Bonds, as defined below. In accordance with the Dissolution Act, the Bonds shall be payable from and secured by the Pledged Tax Revenues. If, and to the extent, that the provisions of Section 34172 or paragraph (2) of subdivision (a) of Section 34183 are invalidated by a final judicial decision, then Pledged Tax Revenues shall include all tax revenues allocated to the payment of indebtedness pursuant to Health & Safety Code Section 33670 or such other section as may be in effect at the time providing for the allocation of tax increment revenues in accordance with Article XVI, Section 16 of the California Constitution.

The Agency believes that pursuant to the Dissolution Act that the Subordinated Pass-Through Amounts in Project Area No. 1, in certain circumstances, would be available pursuant to Health & Safety Code Section 34183(b) to pay debt service on the Bonds and the 2013 Parity Bonds (as defined herein). The Pledged Tax Revenues, before deducting the amounts for debt service on the Senior Bonds, plus the Subordinated Pass-Through Amounts in Project Area No. 1, are referred to herein as “Available Revenues.” The Municipal Advisor has included the Available Revenues in calculating the amounts available to pay debt service shown in the table entitled “SUCCESSOR AGENCY PROJECTED PLEDGED TAX REVENUES” and the tables under the heading “Debt Service Coverage” herein.

The Bonds and the 2013 Parity Bonds are payable from and secured by the Pledged Tax Revenues to be derived from the Project Areas, all of the monies in the Redevelopment Obligation Retirement Fund established and held by the Agency pursuant to the Dissolution Act after payment of debt service on the Senior Bonds, as defined below, and all of the monies in the Debt Service Fund (including the Interest Account, the Principal Account, and the Reserve Account therein) established and held by the Trustee under the Indenture on a subordinate basis to the Senior Bonds. Taxes levied on the property within the Project Areas on that portion of the taxable valuation over and above the taxable valuation of the applicable base year property tax roll with respect to the various territories within the Project Areas, will be deposited in the Redevelopment Property Tax Trust Fund for transfer by the County Auditor-Controller to the Agency’s Redevelopment Obligation Retirement Fund on January 2 and June 1 of each year to the extent required for payments listed in the Agency’s Recognized Obligation Payment Schedule in accordance with the requirements of the Dissolution Act (see “SECURITY FOR THE BONDS — Recognized Obligation Payment Schedule”). Monies deposited by the County Auditor-Controller into the Agency’s Redevelopment Obligation Retirement Fund, after payment of the Senior Bonds, will be transferred by the Agency to the Trustee for deposit in the Debt Service Fund established under the Indenture and administered by the Trustee in accordance with the Indenture.

Successor agencies have no power to levy property taxes and must look specifically to the allocation of taxes as described above. See “RISK FACTORS.”

Senior Bonds and Parity Bonds

The Bonds are being issued by the Agency on a subordinate basis to the $65,600,000 Successor Agency to the La Quinta Redevelopment Agency, La Quinta Redevelopment Project Areas No. 1 and 2, Tax Allocation Refunding Bonds, 2014 Series A (the “2014 Bonds” or the “Senior Bonds”) of which $61,670,000 are currently outstanding.

The Agency previously issued $97,190,000 La Quinta Redevelopment Project Areas No. 1 and 2, Subordinate Tax Allocation Refunding Bonds, 2013 Series A (the “2013 Series A Bonds”), of which $85,590,000 are currently outstanding, and the $23,055,000 La Quinta Redevelopment Project Areas No. 1 and 2, Subordinate Tax Allocation Refunding Bonds, 2013 Taxable Series B (the “2013 Series B

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Bonds”), of which $20,130,000 are currently outstanding. The Bonds are being issued on a parity with the 2013 Series A Bonds and the 2013 Series B Bonds (collectively, the “2013 Parity Bonds”).

Reserve Account

The Indenture provides that in lieu of a cash deposit, the Agency may satisfy all or a portion of a Reserve Requirement by means of a Reserve Account Surety Bond (see “THE INDENTURE” herein). In order to further secure the payment of the principal of and interest on the Bonds, the Agency intends to satisfy the Reserve Requirement for the Bonds by using a portion of the proceeds of the Bonds to purchase a Reserve Account Surety Bond (see “Reserve Account Surety Bond” below) which is equal to the Reserve Requirement of the Bonds. “Reserve Requirement” means, as of the date of computation, an amount equal to the combined lesser of (i) Maximum Annual Debt Service on the Bonds and any Parity Bonds, (ii) 10% of the net proceeds of the Bonds and any Parity Bonds, or (iii) 125% of the Annual Debt Service on all Bonds and any Parity Bonds Outstanding.

Reserve Account Surety Bond. Concurrently with the issuance of the Bonds, Assured Guaranty Municipal Corp. (the “Insurer”) will issue a Reserve Account Municipal Bond Insurance Policy (the “Reserve Account Municipal Bond Insurance Policy”) with respect to the Bonds. The Reserve Account Municipal Bond Insurance Policy provides that the Insurer will make payment to the Trustee on the later of the Business Day on which principal and interest becomes due for Payment or the Business Day next following the Business Day on which the Insurer shall have received Notice of Nonpayment, not to exceed the Policy Limit of $2,805,354.25.

Further Information

Brief descriptions of the Bonds, the Indenture, the Agency, the Prior Agency and the City are included in this Official Statement. Such descriptions and information do not purport to be comprehensive or definitive. All references herein to the Indenture, the Bond Law, the Redevelopment Law, the Dissolution Act, the Constitution and the laws of the State as well as the proceedings of the Prior Agency, the Agency, and the City are qualified in their entirety by reference to such documents. References herein to the Bonds are qualified in their entirety by the form thereof included in the Indenture and the information with respect thereto included herein, copies of which are all available for inspection at the offices of the Agency. During the period of the offering of the Bonds, copies of the forms of all documents are available at the offices of Hilltop Securities, Inc., 2533 South Coast Hwy 101, Suite 250, Cardiff by the Sea, California 92007, and thereafter from the City Clerk’s office, City of La Quinta, 78-495 Calle Tampico, La Quinta, California 92253.

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SOURCES AND USES OF FUNDS

The estimated sources and uses of funds is summarized as follows:

Sources: Principal Amount of Bonds $35,055,000.00 Underwriter’s Discount (244,683.90) Transfers from 2011 Project Area No. 2 Taxable Bonds 3,020,366.21 Transfers from 2011 Taxable Housing Bonds 2,694,518.75 Total Sources $40,525,201.06 Uses: Escrow Fund No. 1 (1) $ 7,281,359.95 Escrow Fund No. 2 (2) 32,955,965.89 Costs of Issuance Fund(3) 287,875.22 Total Uses $40,525,201.06

(1) Amount sufficient to pay principal, redemption price and interest on the 2011 Project Area No. 2 Taxable Bonds through

and including September 1, 2020. (2) Amount sufficient to pay principal, redemption price and interest on the 2011 Taxable Housing Bonds through and including

on September 1, 2020. (3) Costs of Issuance include fees and expenses for Bond Counsel, Disclosure Counsel, Municipal Advisor, Trustee, printing

expenses, rating fee, Reserve Account Surety Bond premium and other costs. Under operative agreements, payment of fees and expenses for Bond Counsel, Disclosure Counsel, and Municipal Advisor are not contingent upon the issuance of the Bonds.

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THE BONDS

Authority for Issuance

The Bonds were authorized for issuance pursuant to the Indenture, the Bond Law, and the Dissolution Act. The issuance of the Bonds and the Indenture were authorized by the Agency pursuant to Resolution No. SA 2016-004 adopted on July 5, 2016 (the “Resolution”), and by the Oversight Board for the Agency pursuant to Resolution No. OB 2016-005 adopted on July 6, 2016 (the “Oversight Board Action”).

Written notice of the Oversight Board Resolution was provided to the California Department of Finance (“DOF”) pursuant to the Dissolution Act, and the DOF requested a review within five business days of such written notice. On September 12, 2016, the DOF provided a letter to the Agency stating that based on the DOF’s review and application of the law, the Oversight Board Action approving the Bonds is approved by the DOF. A copy of the letter from DOF can be obtained from the Agency.

Description of the Bonds

The Bonds will be executed and delivered as one fully-registered Bond in the denomination of $5,000 or any integral multiple thereof for each maturity, initially in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York (“DTC”), as registered owner of all Bonds. See “Book-Entry System” below. The initially executed and delivered Bonds will be dated the Delivery Date and mature on September 1 in the years and in the amounts shown on the inside cover page of this Official Statement. Interest on the Bonds will be calculated at the rates shown on the inside cover page of this Official Statement, payable semiannually on March 1 and September 1 in each year, commencing on March 1, 2017, by check mailed to the registered owners thereof or upon the request of the Owners of $1,000,000 or more in principal amount of Bonds, by wire transfer to an account in the United States which shall be designated in written instructions by such Owner to the Trustee on or before the Record Date preceding the Interest Payment Date.

Book-Entry System

DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. See Appendix C — “BOOK-ENTRY ONLY SYSTEM.”

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Redemption

Optional Redemption. The Bonds may be called before maturity and redeemed at the option of the Agency, in whole or in part, from the proceeds of refunding bonds or other available funds, on September 1, 2026 or on any date thereafter prior to maturity at a redemption price equal to the principal amount of Bonds to be redeemed, without premium, plus accrued interest to the redemption date.

Mandatory Sinking Fund Redemption. The Bonds maturing on September 1, 2034 (the “2034 Term Bond”) will be subject to mandatory redemption in part, by lot, on September 1, 2033 and on September 1, 2034, at a redemption price equal to the principal amount thereof together with accrued interest thereon to the redemption date, without premium, from minimum sinking fund payments on hand in the Debt Service Fund in the years and amounts as follows:

2034 TERM BONDS

Year Amount

2033 $2,110,000 2034 (maturity) 2,630,000

The Bonds maturing on September 1, 2039 (the “2039 Term Bond”) will be subject to mandatory redemption in part, by lot, on September 1, 2035 and on each September 1 until maturity, at a redemption price equal to the principal amount thereof together with accrued interest thereon to the redemption date, without premium, from minimum sinking fund payments on hand in the Debt Service Fund in the years and amounts as follows:

2039 TERM BONDS

Year Amount

2035 $2,740,000 2036 575,000 2037 600,000 2038 630,000 2039 (maturity) 60,000

Purchase In Lieu of Redemption. In lieu of optional or sinking fund redemption of the Bonds, amounts on deposit in the Redevelopment Obligation Retirement Fund (to the extent not required to be transferred to the Trustee during the current Bond Year) may also be used and withdrawn by the Agency at any time for the purchase of the Bonds at public or private sale as and when and at such prices (including brokerage and other charges and including accrued interest) as the Agency may in its discretion determine, as long as it complies with ROPS authorization for expenditure of such amounts. 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 August 15, in any year will be credited towards and will reduce the principal amount of the Bonds otherwise required to be redeemed on the following September 1 pursuant to the Indenture.

Notice of Redemption; Conditional Notice. The Trustee on behalf and at the expense of the Agency shall mail (by first class mail) notice of any redemption to the respective Owners of any Bonds designated for redemption at their respective addresses appearing on the Registration Books, at least 30 but not more than 60 days prior to the date fixed for redemption. Such notice shall state the date of the notice, the redemption date, the redemption place and the redemption price and shall designate the CUSIP

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numbers, if any, the Bond numbers and the maturity or maturities of the Bonds to be redeemed (except in the event of redemption of all of the Bonds of such maturity or maturities in whole), and shall require that such Bonds be then surrendered at the 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 date fixed for redemption. Neither the failure to receive any notice so mailed, nor any defect in such notice, shall affect the validity of the proceedings for the redemption of the Bonds or the cessation of accrual of interest thereon from and after the date fixed for redemption.

With respect to any notice of any optional redemption of Bonds, unless at the time such notice is given the Bonds to be redeemed shall be deemed to have been paid, such notice shall state that such redemption is conditional upon receipt by the Trustee, on or prior to the date fixed for such redemption, of moneys that, together with other available amounts held by the Trustee, are sufficient to pay the redemption price of, and accrued interest on, the Bonds to be redeemed, and that if such moneys shall not have been so received said notice shall be of no force and effect and the Successor Agency shall not be required to redeem such Bonds. In the event a notice of redemption of Bonds contains such a condition and such moneys are not so received, the redemption of Bonds as described in the conditional notice of redemption shall not be made and the Trustee shall, within a reasonable time after the date on which such redemption was to occur, give notice to the Persons and in the manner in which the notice of redemption was given, that such moneys were not so received and that there shall be no redemption of Bonds pursuant to such notice of redemption.

SECURITY FOR THE BONDS

The Dissolution Act requires the County Auditor-Controller to determine the amount of property taxes that would have been allocated to the Prior Agency (pursuant to subdivision (b) of Section 16 of Article XVI of the State Constitution) had the Prior Agency not been dissolved pursuant to the operation of ABx1 26, using current assessed values on the last equalized roll on August 20, and to deposit that amount in the Redevelopment Property Tax Trust Fund for the Agency established and held by the County Auditor-Controller pursuant to the Dissolution Act. The Dissolution Act provides that any bonds authorized thereunder to be issued by the Agency will be considered indebtedness incurred by the dissolved Prior Agency, with the same legal effect as if the bonds had been issued prior to effective date of ABx1 26, in full conformity with the applicable provision of the Redevelopment Law that existed prior to that date, and will be included in the Agency’s Recognized Obligation Payment Schedule (see Appendix A — “DEFINITIONS” and “SECURITY FOR THE BONDS — Recognized Obligation Payment Schedule”).

The Dissolution Act further provides that bonds authorized thereunder to be issued by the Agency will be secured by a pledge of, and lien on, and will be repaid from moneys deposited from time to time in the Redevelopment Property Tax Trust Fund, and that property tax revenues pledged to any bonds authorized to be issued by the Agency under the Dissolution Act, including the Bonds, are taxes allocated to the Agency pursuant to the subdivision (b) of Section 33670 of the Redevelopment Law and Section 16 of Article XVI of the State Constitution.

Pursuant to subdivision (b) of Section 33670 of the Redevelopment Law and Section 16 of Article XVI of the Constitution of the State and as provided in the Redevelopment Plans, taxes levied upon taxable property in the Project Areas each year by or for the benefit of the State, any city, county, city and county, district, or other public corporation (herein sometimes collectively called “taxing agencies”) after the effective date of the ordinance approving the Redevelopment Plans, or the respective effective dates of ordinances approving amendments to the Redevelopment Plans that added territory to the Project Areas, as applicable, are to be divided as follows:

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(a) To 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 the taxing agencies upon the total sum of the assessed value of the taxable property in the Project Areas as shown upon the assessment roll used in connection with the taxation of such property by such taxing agency last equalized prior to the effective date of the ordinance adopting the Redevelopment Plans, or the respective effective dates of ordinances approving amendments to the Redevelopment Plans that added territory to the Project Areas, as applicable (each, a “base year valuation”), will be allocated to, and when collected will be paid into, the funds of the respective taxing agencies as taxes by or for the taxing agencies on all other property are paid; and

(b) To the Prior Agency/Agency: Except for that portion of the taxes in excess of the amount identified in (a) above which are attributable to a tax rate levied by a taxing agency for the purpose of producing revenues in an amount sufficient to make annual repayments of the principal of, and the interest on, any bonded indebtedness approved by the voters of the taxing agency on or after January 1, 1989 for the acquisition or improvement of real property, which portion shall be allocated to, and when collected shall be paid into, the fund of that taxing agency, that portion of the levied taxes each year in excess of such amount, annually allocated within the Plan Limit following the Delivery Date, when collected will be paid into a special fund of the Prior Agency. Section 34172 of the Dissolution Act provides that, for purposes of Section 16 of Article XVI of the State Constitution, the Redevelopment Property Tax Trust Fund shall be deemed to be a special fund of the Agency to pay the debt service on indebtedness incurred by the Prior Agency or the Agency to finance or refinance the redevelopment projects of the Prior Agency.

That portion of the levied taxes described in paragraph (b) above, less amounts deducted pursuant to Section 34183(a) of the Dissolution Act for permitted administrative costs of the County Auditor-Controller, constitute the amounts required under the Dissolution Act to be deposited by the County Auditor-Controller into the Redevelopment Property Tax Trust Fund. In addition, Section 34183 of the Dissolution Act effectively eliminates the January 1, 1989 date from paragraph (b) above. Additionally, effective September 22, 2015, debt service override revenues approved by the voters for the purpose of supporting pension programs, capital projects, or programs related to the State Water Project, that are not pledged to or needed for debt service on successor agency obligations are allocated and paid to the entity that levies the override and will not be deposited into the Redevelopment Property Tax Trust Fund. Further, also effective September 22, 2015, Redevelopment Plan limits relating to the amount of taxes that could be paid to the Prior Agency/ Agency and the time that such taxes could be paid was eliminated for the purpose of paying debt service on bonds of the Prior Agency or the Agency.

“Pledged Tax Revenues” are defined under the Indenture as the portion of the monies deposited from time to time in the Redevelopment Property Tax Trust Fund, as provided in paragraph (2) of subdivision (a) of Section 34183 of the Dissolution Act less the amount required to pay debt service on the Senior Bonds. If, and to the extent, that the provisions of Section 34172 or paragraph (2) of subdivision (a) of Section 34183 are invalidated by a final judicial decision, then Pledged Tax Revenues shall include all tax revenues allocated to the payment of indebtedness pursuant to Health & Safety Code Section 33670 or such other section as may be in effect at the time providing for the allocation of tax increment revenues in accordance with Article XVI, Section 16 of the California Constitution.

On a subordinate basis to the Senior Bonds (see “INTRODUCTORY STATEMENT — Senior Bonds and Parity Bonds”) the Bonds and the 2013 Parity Bonds are payable from and secured by (i) an irrevocable pledge of the Pledged Tax Revenues to be derived from the Project Areas, (ii) an irrevocable pledge of all of the monies in the Redevelopment Obligation Retirement Fund established and held by the Agency pursuant to the Dissolution Act after payment of the Senior Bonds, and (iii) an irrevocable first pledge and lien on all of the monies in the Debt Service Fund (including the Interest Account, the

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Principal Account and the Reserve Account therein) established and held by the Trustee in trust for the Bondowners under the Indenture.

The Agency believes that pursuant to the Dissolution Act that the Subordinated Pass-Through Amounts in Project Area No. 1, in certain circumstances, would also be available pursuant to Health & Safety Code Section 34183(b) to pay debt service on the Bonds and the 2013 Parity Bonds.

Taxes levied on the property within the Project Areas on that portion of the taxable valuation over and above the taxable valuation of the applicable base year property tax roll with respect to the various territories within the Project Areas, after deducting the county administration costs will be deposited in the Redevelopment Property Tax Trust Fund for transfer by the County Auditor-Controller to the Agency’s Redevelopment Obligation Retirement Fund on January 2 and June 1 of each year to the extent required for payments listed in the Agency’s Recognized Obligation Payment Schedule in accordance with the requirements of the Dissolution Act (see “SECURITY FOR THE BONDS — Recognized Obligation Payment Schedule”). Monies deposited by the County Auditor-Controller into the Agency’s Redevelopment Obligation Retirement Fund will be transferred by the Agency to the Trustee for deposit in the Debt Service Fund for the Senior Bonds and then for deposit in the Debt Service Fund established under the Indenture and administered by the Trustee in accordance with the Indenture.

The Agency has no power to levy and collect taxes, and various factors beyond its control could affect the amount of Pledged Tax Revenues available in any six-month period to pay the principal of and interest on the Bonds and the 2013 Parity Bonds (see “SECURITY FOR THE BONDS — Tax Increment Financing” and “— Recognized Obligation Payment Schedule” and “RISK FACTORS”).

If the amount of Pledged Tax Revenues (available after payment of debt service on the Senior Bonds) is not sufficient to pay the Bonds, the 2013 Parity Bonds and any Parity Bonds outstanding, any such insufficiency shall be allocated among the Bonds, the 2013 Parity Bonds and any Parity Bonds on a pro rata basis (based on the amount of debt service coming due during any such period of insufficiency).

The Bonds are not a debt of the City, the State or any of its political subdivisions (except the Agency), and none of the City, the State or any of its political subdivisions (except the Agency) is liable therefor. The Bonds do not constitute an indebtedness within the meaning of any constitutional or statutory debt limitation or restriction.

Tax Increment Financing

Prior to the enactment of ABx1 26, the Redevelopment Law authorized the financing of redevelopment projects through the use of tax increment revenues. This method provided that the taxable valuation of the property within a redevelopment 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. Assuming the taxable valuation never drops below the base year level, the taxing agencies thereafter received that portion of the taxes produced by applying then current tax rates to the base year valuation, and the redevelopment agency was allocated the remaining portion produced by applying then current tax rates to the increase in valuation over the base year. Such incremental tax revenues allocated to a redevelopment agency were authorized to be pledged to the payment of redevelopment agency obligations.

The Dissolution Act authorizes refunding bonds, including the Bonds, to be secured by a pledge of monies deposited from time to time in a Redevelopment Property Tax Trust Fund held by a county auditor-controller with respect to a successor agency, which are equivalent to the tax increment revenues that were formerly allocated under the Redevelopment Law to the redevelopment agency and formerly

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authorized under the Redevelopment Law to be used for the financing of redevelopment projects, less amounts deducted pursuant to Section 34183(a)(1) of the Dissolution Act for payments to other taxing agencies, but subject to prior deduction from such amounts pursuant to Section 34183(b) of Subordinated Pass-Through Amounts. Under the Indenture, Pledged Tax Revenues consist of the amounts distributed semi-annually from the Redevelopment Property Tax Trust Fund pursuant to Section 34183(a)(2) of the Dissolution Act after payment of the Senior Bonds (see “INTRODUCTORY STATEMENT — Senior Bonds and Parity Bonds”). Successor agencies have no power to levy property taxes and must look specifically to the allocation of taxes as described above. See “RISK FACTORS.”

Prior to the dissolution of redevelopment agencies, tax increment revenues from one project area could not be used to repay indebtedness incurred for another project area. However, the Dissolution Act has only required that county auditor-controllers establish a single Redevelopment Property Tax Trust Fund with respect to each former redevelopment agency within the respective county. Additionally, the Dissolution Act now requires that all revenues equivalent to the amount that would have been allocated as tax increment to the former redevelopment agency will be allocated to the Redevelopment Property Tax Trust Fund of the applicable successor agency, and this requirement does not require funds derived from separate project areas of a former redevelopment agency to be separated. In effect, in situations where a former redevelopment agency had established more than one redevelopment project area, the Dissolution Act combines the property tax revenues derived from all project areas into a single trust fund, the Redevelopment Property Tax Trust Fund, to repay indebtedness of the former redevelopment agency or the successor agency. To the extent the documents governing outstanding bonds of a redevelopment agency have pledged revenues derived from a specific project area, the Dissolution Act states, “It is the intent ... that pledges of revenues associated with enforceable obligations of the former redevelopment agencies are to be honored. It is intended that the cessation of any redevelopment agency shall not affect either the pledge, the legal existence of that pledge, or the stream of revenues available to meet the requirements of the pledge.” The implications of these provisions of the Dissolution Act are not entirely clear when a former redevelopment agency has established more than one redevelopment project area. The Prior Agency established two redevelopment project areas which are referred to herein as the Project Areas. The Pledged Tax Revenues will include tax revenues derived from the Project Areas. The Agency will continue to administer moneys in the Redevelopment Obligation Retirement Fund in accordance with the provisions of the Senior Bond Indenture.

Redevelopment Property Tax Trust Fund

The Redevelopment Law authorized redevelopment agencies to make payments to school districts and other taxing agencies to alleviate any financial burden or detriments to such taxing agencies caused by a redevelopment project. The Prior Agency entered into several agreements for this purpose (the “Pass-Through Agreements”). Some, but not all, of the Pass-Through Agreements in Project Area No. 1 expressly provide that payments thereunder are subordinate to payments on the Prior Agency’s bonds. (See “THE PROJECT AREAS — Pass Through Agreements and Obligations with Various Taxing Agencies”). Additionally, Section 33607.5 and 33607.7 of the Redevelopment Law required mandatory tax sharing applicable to redevelopment projects adopted after January 1, 1994, or amended thereafter in certain manners specified in such statutes (the “Statutory Pass-Through Amounts”). The Dissolution Act requires the County Auditor-Controller to distribute from the Redevelopment Property Tax Trust Fund amounts required to be distributed under the Pass-Through Agreements and for Statutory Pass-Through Amounts to the taxing entities for each six-month period before amounts are distributed to the Agency’s Redevelopment Obligation Retirement Fund each January 2 and June 1, unless (i) pass through payment obligations have previously been made subordinate to debt service payments for the bonded indebtedness of the Prior Agency, as succeeded by the Agency, (ii) the Agency has reported, no later than the December 1 and May 1 preceding the January 2 or June 1 distribution date, that the total amount available to the Agency from the Redevelopment Property Tax Trust Fund allocation to the

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Agency’s Redevelopment Obligation Retirement Fund, from other funds transferred from the Prior Agency, and from funds that have or will become available through asset sales and all redevelopment operations is insufficient to fund the Agency’s enforceable obligations, pass-through payments, and the Agency’s administrative cost allowance for the applicable six-month period, and (iii) the State Controller has concurred with the Agency that there are insufficient funds for such purposes for the applicable six month period.

If the requirements stated in clauses (i) through (iii) of the foregoing paragraph have been met, the Dissolution Act provides for certain modifications in the distributions otherwise calculated to be distributed for such six-month period. To provide for calculated shortages to be paid to the Agency for enforceable obligations, the amount of the deficiency will first be deducted from the residual amount otherwise calculated to be distributed to the taxing entities under the Dissolution Act after payment of the Agency’s enforceable obligations, pass-through payments, and the Agency’s administrative cost allowance. If such residual amount is exhausted, the amount of the remaining deficiency will be deducted from amounts available for distribution to the Agency for administrative costs for the applicable six month period in order to fund the enforceable obligations. Finally, funds required for servicing bond debt, in an amount not to exceed the Subordinated Pass-Through Amounts may be deducted from the amounts to be distributed under Section 34183(a)(1) to other Taxing Agencies, in order to be paid to the Agency for enforceable obligations, but only after the amounts described in the previous two sentences have been exhausted. The Agency has not made any report pursuant to Section 34183(b) and therefore has not included any Subordinated Pass-Through Amounts for the purpose of determining debt service coverage. The Dissolution Act also provides for a procedure by which the Agency may make non subordinated Pass-Through Agreements and Statutory Tax Sharing Amounts subordinate to the Bonds; however, the Agency has determined not to undertake such procedure, and therefore, such non subordinated Pass-Through Agreements and Statutory Tax Sharing Amounts are not subordinate to the Bonds.

The Agency cannot guarantee that the process prescribed by the Dissolution Act of administering the Pledged Tax Revenues and the subordinations provided in the Pass-Through Agreements will effectively result in adequate Pledged Tax Revenues for the payment of principal and interest on the Bonds and the 2013 Parity Bonds when due. See “SECURITY FOR THE BONDS — Recognized Obligation Payment Schedule.” See also “THE PROJECT AREAS — Pass Through Agreements and Obligations with Various Taxing Agencies” for additional information regarding the Pass-Through Agreements and the Statutory Tax Sharing Amounts applicable to the Agency and the revenues derived from the Project Areas.

Recognized Obligation Payment Schedule

ROPS Process Under the Dissolution Act – Commencing Fiscal Year 2016-17

As amended by SB 107, enacted on September 22, 2015 and effective immediately upon its enactment, the Dissolution Act requires successor agencies to prepare and submit to the successor agency’s oversight board and the DOF for approval a Recognized Obligation Payment Schedule (the “Recognized Obligation Payment Schedule” or “ROPS”) before each annual fiscal period covered by such schedule (i.e., July 1 through June 30), commencing with the Recognized Obligation Payment Schedule for the period from July 1, 2016 through June 30, 2017. Distributions from the Redevelopment Property Tax Trust Fund are made by the County Auditor-Controller to successor agencies (and tax sharing entities) each January 2 and June 1, within each annual Recognized Obligation Payment Schedule period.

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Pursuant to a Recognized Obligation Payment Schedule, “enforceable obligations” of the successor agency coming due and payable in the fiscal period covered by such schedule are listed, together with the source of funds to be used to pay for each enforceable obligation. As defined in the Dissolution Act, “enforceable obligation” includes bonds, including the required debt service, reserve setasides, and any other payments required under the indenture or similar documents governing the issuance of the outstanding bonds of the former redevelopment agency, as well as other obligations such as loans judgments or settlements against the former redevelopment agency, any legally binding and enforceable agreement that is not otherwise void as violating the debt limit or public policy, contracts necessary for the administration or operation of the successor agency, and amounts borrowed from the Low and Moderate Income Housing Fund. A reserve may be included on the Recognized Obligation Payment Schedule and held by the successor agency when required by the bond indenture or when the next property tax allocation will be insufficient to pay all obligations due under the provisions of the bond for the next payment due in the following half of the calendar year (see “THE INDENTURE — Covenants of the Agency”).

Under the Dissolution Act, the categories of sources of payments for enforceable obligations listed on a Recognized Obligation Payment Schedule are the following: (i) the Low and Moderate Income Housing Fund, (ii) bond proceeds, (iii) reserve balances, (iv) administrative cost allowance, (v) the Redevelopment Property Tax Trust Fund (but only to the extent no other funding source is available or when payment from property tax revenues is required by an enforceable obligation or otherwise required under the Dissolution Act), or (vi) other revenue sources (including rents, concessions, asset sale proceeds, interest earnings, and any other revenues derived from the former redevelopment agency, as approved by the oversight board). Other than amounts deposited in the Redevelopment Property Tax Trust Fund and amounts held in certain funds and accounts under the Indenture, the Agency does not expect to have any other funds available to pay the Bonds.

The Dissolution Act provides that, commencing on the date the first Recognized Obligation Payment Schedule is valid thereunder, only those payments listed in the Recognized Obligation Payment Schedule may be made by the Agency from the funds specified in the Recognized Obligation Payment Schedule.

Commencing with the Recognized Obligation Payment Schedule for the period from July 1, 2016 through June 30, 2017, the Agency is required to submit each annual Recognized Obligation Payment Schedule, after approval by the Oversight Board, to the County Auditor-Controller and the DOF no later than February 1, 2016, and each February 1 thereafter for subsequent annual Recognized Obligation Payment Schedules. For each annual Recognized Obligation Payment Schedule, the DOF must make its determination of the enforceable obligations and the amounts and funding sources of the enforceable obligations no later than April 15 (commencing April 15, 2016 with the Recognized Obligation Payment Schedule for the period from July 1, 2016 through June 30, 2017). Within five business days of the determination by the DOF, the Agency may request additional review by the department and an opportunity to meet and confer on disputed items, if any, except those that are the subject of litigation disputing the department’s previous or related determination. The DOF must notify the Agency and the County Auditor-Controller as to the outcome of its review at least 15 days before the June 1 property tax distribution, with respect to items disputed on the originally submitted annual Recognized Obligation Payment Schedule.

The County Auditor-Controller may review a submitted Recognized Obligation Payment Schedule and object to the inclusion of any items that are not demonstrated to be enforceable obligations and may object to the funding source proposed for any items, provided that the County Auditor- Controller must provide notice of any such objections to the Agency, the Oversight Board, and the DOF at least 60 days prior to the January 2 or June 1 date of property tax distribution, as applicable.

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If the Agency does not submit an annual Recognized Obligation Payment Schedule by the February 1 deadline, the City will be subject to a civil penalty equal to $10,000 per day for every day the schedule is not submitted to the DOF. Additionally, the Agency’s administrative cost allowance is reduced by 25% if the Agency does not submit an annual Recognized Obligation Payment Schedule within 10 days after the February 1 deadline. The Agency timely submitted to the DOF its Oversight Board-approved Recognized Obligation Payment Schedule for the first annual period of July 1, 2016 through June 30, 2017.

Once per Recognized Obligation Payment Schedule period, and no later than October 1 of the applicable year, the Agency may submit one amendment to the annual Recognized Obligation Payment Schedule previously approved by the DOF, if the Oversight Board makes a finding that a revision is necessary for the payment of approved enforceable obligations during the second half of the Recognized Obligation Payment Schedule period (i.e., during January 1 through June 30), and the Agency may only amend the amount requested for payment of approved enforceable obligations. The DOF must notify the Agency and the County Auditor-Controller as to the outcome of its review of a requested amendment to an approved annual Recognized Obligation Payment Schedule at least 15 days before the applicable property tax distribution date.

In connection with the allocation and distribution by the County Auditor-Controller of property tax revenues deposited in the Redevelopment Property Tax Trust Fund, under the Dissolution Act the County Auditor-Controller must prepare estimates of the amounts of (i) property tax to be allocated and distributed and (ii) the amounts of pass-through payments to be made in the upcoming six-month period, and provide those estimates to the entities receiving the distributions and the DOF no later than October 1 and April 1 of each year, as applicable.

If, after receiving such estimate from the County Auditor-Controller, the Agency determines and reports to the County Auditor-Controller, no later than December 1 or May 1, as applicable (i.e., by December 1, 2016 with respect to the January 2, 2017 Redevelopment Property Tax Trust Fund distribution date), that the total amount available to the Agency from the Redevelopment Property Tax Trust Fund allocation to the Agency’s Redevelopment Obligation Retirement Fund, from other funds transferred from the Prior Agency, and from funds that have or will become available through asset sales and all redevelopment operations, is insufficient to fund the payment of pass-through obligations, for Agency enforceable obligations listed on the Recognized Obligation Payment Schedule for the corresponding six-month fiscal period and for the Agency’s administrative cost allowance, the County Auditor-Controller must notify the State Controller and the DOF no later than 10 days from the date of the Agency’s notification. If the State Controller concurs that there are insufficient funds to pay required debt service, the Dissolution Act provides for certain adjustments to be made to the estimated distributions, as described in more detail under “SECURITY FOR THE BONDS – Tax Increment Financing” above.

ROPS Process Under the Dissolution Act – Prior to Fiscal Year 2016-17

With respect to obligations required to be paid prior to July 1, 2016, the Dissolution Act required successor agencies to prepare and submit to the successor agency’s oversight board and the DOF for approval a Recognized Obligation Payment Schedule before each six-month fiscal period covered by such schedule (i.e., January 1 through June 30, or July 1 through December 31).

The Recognized Obligation Payment Schedule with respect to the six-month period of January 1, 2013 through June 30, 2013 was required to be submitted by the Agency, after approval by the Oversight Board, to the County Administrative Officer, the County Auditor-Controller, the DOF, and the State Controller no later than September 1, 2012. For each subsequent six-month period through the six-month

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period ending June 30, 2016, the Agency was required to submit the Recognized Obligation Payment Schedule, after approval by the Oversight Board, to the County Administrative Officer, the County Auditor-Controller, the DOF, and the State Controller by 90 days before the date of the next January 2 or June 1 property tax distribution. If the Agency did not submit a Recognized Obligation Payment Schedule by such deadlines, the City would be subject to a civil penalty equal to $10,000 per day for every day the schedule is not submitted to the DOF. Additionally, the Agency’s administrative cost allowance would be reduced by 25% if the Agency did not submit a Recognized Obligation Payment Schedule by September 11, 2012, with respect to the Recognized Obligation Payment Schedule for the six-month period of January 1, 2013 through June 30, 2013, or by the 80th day before the date of the next January 2 or June 1 property tax distribution, as applicable, with respect to the Recognized Obligation Payment Schedule for subsequent six-month periods commencing with the period of July 1, 2013 through December 1, 2013.

Prior to the enactment of SB 107, the Dissolution Act required the DOF to make a determination of the enforceable obligations and the amounts and funding sources of the enforceable obligations no later than 45 days after the Recognized Obligation Payment Schedule is submitted. Within five business days of the determination by the DOF, the Agency could request additional review by the department and an opportunity to meet and confer on disputed items, if any. The DOF would notify the Agency and the County Auditor-Controller as to the outcome of its review at least 15 days before the January 2 or June 1 date of property tax distribution, as applicable.

Option to File Last and Final ROPS

Effective January 1, 2016, at the option of a successor agency, the Dissolution Act allows a successor agency to submit a “Last and Final ROPS” for approval by the oversight board. The following conditions must be met: (i) the remaining debt is limited to administrative costs and payments pursuant to enforceable obligations with defined payment schedules including, but not limited to, debt service, loan agreements and contracts, (ii) all remaining obligations have been previously listed on a Recognized Obligation Payment Schedule and approved by the DOF, and (iii) the successor agency is not a party to outstanding or unresolved litigation. The DOF will have 100 days to review a Last and Final ROPS submitted for approval. The DOF may make changes to the Last and Final ROPS with the successor agency’s agreement or issue a letter denying the Last and Final ROPS. If the DOF approves the Last and Final ROPS, it will establish the maximum amount of Redevelopment Property Tax Trust Fund to be distributed to the successor agency for each remaining fiscal year until the obligations have been fully paid. The successor agency can submit no more than two requests to amend an approved Last and Final ROPS. The oversight board must first approve each amendment request, and the DOF will then have 100 days to approve or deny the request. After the DOF approves Last and Final ROPS, the successor agency will no longer prepare or submit Recognized Obligation Payment Schedules, and the county auditor-controller will make distributions from the Redevelopment Property Tax Trust Fund to the successor agency pursuant to the Last and Final ROPS in a prescribed order of priority until the aggregate amount of property tax allocated to the successor agency equals the total outstanding obligation approved in the Last and Final ROPS. The City expects to file a Last and Final ROPS for approval by the Oversight Board after the Recognized Obligation Payment Schedule for Fiscal Year 2017-18 is filed by February 1, 2017.

See the caption “RISK FACTORS – Recognized Obligation Payment Schedule” for a discussion of certain risks associated with the Last and Final Recognized Obligation Payment Schedule.

Reserve Account

To secure the payment of principal of and interest on the Bonds, a Reserve Account is established in the Indenture in an amount equal to the initial Reserve Requirement. The Indenture provides that in lieu

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of a cash deposit, the Agency may satisfy all or a portion of a Reserve Requirement by means of a Reserve Account Surety Bond (see “THE INDENTURE” herein). The Agency intends to satisfy the Reserve Requirement for the Bonds by using a portion of the proceeds of the Bonds to purchase a Reserve Account Surety Bond (see “Reserve Account Surety Bond” below) which is equal to the Reserve Requirement of the Bonds.

Reserve Account Surety Bond. Concurrently with the issuance of the Bonds, the Insurer will issue a Reserve Account Municipal Bond Insurance Policy (the “Reserve Account Municipal Bond Insurance Policy”) with respect to the Bonds. The Reserve Account Municipal Bond Insurance Policy provides that the Insurer will make payment to the Trustee on the later of the Business Day on which principal and interest becomes due for Payment or the Business Day next following the Business Day on which the Insurer shall have received Notice of Nonpayment, not to exceed the Policy Limit of $2,805,354.25.

The Reserve Account Municipal Bond Insurance Policy is not available to pay debt service on the 2013 Parity Bonds. The reserve account surety bond issued in connection with the 2013 Parity Bonds is not available to pay debt service on the Bonds.

Parity Bonds

Under the Indenture, in addition to the Bonds, the Agency may issue or incur additional tax allocation bonds (including, without limitation, bonds, notes, interim certificates, debentures or other obligations) secured by a pledge and lien on Pledged Tax Revenues on a parity with the Bonds (“Parity Bonds”) in such principal amount as shall be determined by the Agency, pursuant to a separate or Supplemental Indenture adopted or entered into by the Agency and Trustee and for such purposes as are permitted under the Dissolution Act, including without limitation Section 34177.5 thereof.

Section 34177.5 of the Dissolution Act presently permits successor agencies to issue bonds or incur other indebtedness secured by property tax revenues comprised of former tax increment and required to be deposited into the respective Redevelopment Property Tax Trust Fund for the applicable successor agency under limited circumstances:

(i) to provide debt service savings to the successor agency;

(ii) for the purpose of financing debt service spikes, including balloon maturities; provided, (A) the existing indebtedness is not accelerated, except to the extent necessary to achieve substantially level debt service, and (B) the principal amount of the refunding bonds or the indebtedness will not exceed the amount required to defease the refunded bonds or other indebtedness, to establish customary debt service reserves, and to pay related costs of issuance;

(iii) for the purpose of amending an existing enforceable obligation under which the successor agency is obligated to reimburse a political subdivision of the state for the payment of debt service on a bond or other obligation of the political subdivision or to pay all or a portion of the debt service on the bond or other obligation of the political subdivision to provide savings to the successor agency, when such amendment is in connection with a refunding of the bonds or other obligations of the separate political subdivision so that the enforceable obligation will apply to the refunding obligations of the political subdivision; or

(iv) for the purpose of making payments under an existing enforceable obligation when the enforceable obligation includes the irrevocable pledge of property tax increment (i.e.,

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formerly tax increment revenues prior to the effective date of the Dissolution Act) or other funds and the obligation to issue bonds secured by that pledge.

When bonds are issued pursuant to the situations contemplated in clauses (i) and (iii), the following two constraints apply to the size of the financing: (A) the total interest cost to maturity on the refunding bonds or indebtedness plus the principal amount of the refunding bonds or other indebtedness shall not exceed the total remaining interest cost to maturity on the bonds or other indebtedness to be refunded plus the remaining principal of the bonds or other indebtedness to be refunded, and (B) the principal amount of the refunding bonds or the indebtedness will not exceed the amount required to defease the refunded bonds or other indebtedness, to establish customary debt service reserves, and to pay related costs of issuance. If the foregoing conditions are satisfied, the initial principal amount of the refunding bonds or indebtedness may be greater than the outstanding principal amount of the bonds or other indebtedness to be refunded. The successor agency may pledge to the refunding bonds or other indebtedness the revenues pledged to the bonds or other indebtedness being refunded, having the same lien priority as the pledge of the bonds or other obligations to be refunded.

Subject to the foregoing, the Agency may issue or incur such Parity Bonds subject to the following additional specific conditions precedent:

(a) The Agency will be in compliance with all covenants set forth in the Indenture;

(b) The Oversight Board shall have approved the issuance of Parity Bonds;

(c) The Parity Bonds will be on such terms and conditions as may be set forth in a separate or Supplemental Indenture, which will provide for (i) bonds substantially in accordance with the Indenture, and (ii) the deposit of moneys or Alternate Reserve Account Security into the Reserve Account in an amount sufficient, together with the balance of the Reserve Account, to equal the Reserve Requirement on all Bonds and the 2013 Parity Bonds expected to be outstanding including the Bonds;

(d) Receipt of a certificate or opinion of an Independent Financial Consultant stating:

(i) For the current and each future Bond Year the debt service for each such Bond Year with respect to all Bonds and other Parity Bonds reasonably expected to be outstanding following the issuance of the Parity Bonds;

(ii) For the then current Fiscal Year, the Pledged Tax Revenues to be received by the Agency based upon the most recently certified assessed valuation of taxable property in the Project Areas provided by the appropriate officer of the County;

(iii) For each future Fiscal Year, the Pledged Tax Revenues referred to in item (ii) together with (a) the amount determined in accordance with Section 51(a) of the California Revenue and Taxation Code (2% inflationary growth) and (b) the amount of Pledged Tax Revenues to be payable with respect to construction completed but not yet on the tax roll, and taking into account the expiration of the time to receive Pledged Tax Revenues with respect to any portion of the Project Areas and any amounts to be paid pursuant to the Pass-Through Agreements and the Statutory Pass-Through Amounts; and

(iv) That for `the then current Fiscal Year, the Pledged Tax Revenues referred to in item (ii) and for each future Fiscal Year the Pledged Tax Revenues referred to in item (iii) are at least equal to the sum of 125% of the Maximum Annual Debt Service with respect to the amounts referred to in item (i) above, and, for the then current Fiscal Year, 100% of Annual Debt Service with respect to any subordinate debt and that the Agency is entitled under the Dissolution Act, the Redevelopment Law and

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the Redevelopment Plans to receive taxes under Section 33670 of the Redevelopment Law in an amount sufficient to meet expected debt service with respect to all Bonds, and other Parity Bonds.

(e) The Parity Bonds will mature on and interest will be payable on the same dates as the Bonds (except the first interest payment may be from the date of the Parity Bonds until the next succeeding March 1 or September l) provided, however, nothing herein shall preclude the Agency from issuing and selling Parity Bonds which do not pay current interest.

THE INDENTURE

The following is a summary of certain provisions of the Indenture and does not purport to be complete. Reference is hereby made to the Indenture and to Appendix A for the definition of certain terms used herein. Copies of the Indenture are available from the Agency upon request. All capitalized terms used herein and not otherwise defined will have the same meaning as used in the Indenture.

Allocation of Tax Revenues

Under the Dissolution Act, the Agency has previously established a special trust fund called the Redevelopment Obligation Retirement Fund (the “Redevelopment Obligation Retirement Fund”), which is held by the Agency and into which the County Auditor-Controller distributes property tax revenues each January 2 and June 1 from the Redevelopment Property Tax Trust Fund for the payment by the Agency of enforceable obligations pursuant to the Recognized Obligation Payment Schedule. From the amounts deposited in the Redevelopment Obligation Retirement Fund, the Agency will first transfer to the Senior Bonds Trustee accounts required to be depicted in the Special Fund established under the Senior Bonds Indenture.

There is established by the Indenture a special trust fund known as the “Debt Service Fund,” and the accounts therein referred to below, which will be held by the Trustee. The Agency will deposit all of the Pledged Tax Revenues received in any Bond Year from the Redevelopment Property Tax Trust Fund in accordance with the Dissolution Act in the Redevelopment Obligation Retirement Fund promptly upon receipt thereof by the Agency, and promptly thereafter shall deposit amounts received therein to the Debt Service Fund established and held under the Indenture until such time during such Bond Year as the amounts so transferred to the Debt Service Fund under the Indenture equal the aggregate amounts required to be transferred to the Trustee for deposit into the Interest Account, the Principal Account and the Reserve Account of the Debt Service Fund in such Bond Year pursuant to the Indenture and for deposit in such Bond Year in the funds and accounts established with respect to the 2013 Parity Bonds and any other Parity Bonds, as provided in any Supplemental Indenture.

Pledged Tax Revenues – Application

There are established under the Indenture accounts within the Debt Service Fund as set forth below, to be known respectively as the Interest Account, the Principal Account and the Reserve Account. Moneys in the Redevelopment Obligation Retirement Fund will be transferred by the Agency to the Trustee in the following amounts at the following times, for deposit by the Trustee in the following respective accounts within the Debt Service Fund, which are continued with the Trustee, in the following order of priority:

(a) Interest Account. On or before the 5th Business Day preceding each Interest Payment Date, the Agency will withdraw from the Redevelopment Obligation Retirement Fund and transfer to the Trustee for 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

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payable on the Outstanding Bonds and the 2013 Parity Bonds on such Interest Payment Date and the next following Interest Payment Date. No such transfer and deposit need to be made to the Interest Account if the amount contained therein is at least equal to the interest to become due on the next succeeding Interest Payment Date upon all of the Outstanding Bonds and the 2013 Parity Bonds. Subject to the Indenture, 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 becomes due and payable (including accrued interest on any Bonds redeemed prior to maturity pursuant to the Indenture).

(b) Principal Account. On or before the 5th Business Day preceding September 1 in each year beginning September 1, 2017, the Agency will withdraw from the Redevelopment Obligation Retirement Fund and transfer to the Trustee for deposit in the Principal Account an amount equal to the principal payments and sinking account payments becoming due and payable on the Outstanding Bonds and the 2013 Parity Bonds on such September 1, to the extent monies on deposit in the Redevelopment Obligation Retirement Fund are available therefor. No such transfer and deposit need be made to the Principal Account if the amount contained therein is at least equal to the principal payments and sinking account payments to become due on such September 1 on all Outstanding Bonds and the 2013 Parity Bonds. Subject to the Indenture, all moneys in the Principal Account will be used and withdrawn by the Trustee solely for the purpose of paying the principal payments of the Bonds as it becomes due and payable.

(c) Reserve Account. In the event that the Agency fails to deposit with the Trustee no later than five (5) Business Days before any Interest Payment Date the full amount of the interest, principal payments required to be deposited pursuant to the Indenture, the Trustee will, five (5) Business Days before such Interest Payment Date, withdraw from the Reserve Account an amount equal to any such deficiency and will notify the Agency of any such withdrawal. Promptly upon receipt of any such notice, the Agency will withdraw from the Redevelopment Obligation Retirement Fund and transfer to the Trustee for deposit in the Reserve Account that will be sufficient to maintain the Reserve Requirement on deposit in the Reserve Account and the Reserve Account of any additional Parity Bonds. If there is not sufficient moneys in the Redevelopment Obligation Retirement Fund to transfer an amount that will be sufficient to maintain the Reserve Requirement on deposit in the Reserve Account and the Reserve Account of any additional Parity Bonds, the Agency shall have an obligation to continue making transfers of Pledged Tax Revenues into the Redevelopment Obligation Retirement Fund, as such revenues become available, and thereafter, as moneys become available in the Redevelopment Obligation Retirement Fund, shall make transfers to the Reserve Account and the Reserve Account for any additional Parity Bonds until there is an amount sufficient to maintain the Reserve Requirement on deposit in the Reserve Account and the Reserve Account for any additional Parity Bonds on a combined basis. No such transfer and deposit need be made to the Reserve Account (or any subaccount therein) so long as there is on deposit therein a sum at least equal to the Reserve Requirement. Subject to the Indenture, 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 and the Principal Account (and subaccounts therein, as the case may be), 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, any amount in the Reserve Account in excess of the Reserve Requirement will be withdrawn from the Reserve Account semiannually on or before the 5th Business Day preceding March 1 and September 1 by the Trustee and deposited in the Interest Account. The prior written consent of the Insurer shall be condition precedent to the deposit of any credit instrument provided in lieu of a cash deposit into the Reserve Account. Notwithstanding anything to the contrary set forth in the Indenture, amounts on deposit in the Reserve Account shall be applied solely to the payment of debt service due on the Bonds.

Reserve Account Surety Bond. The Reserve Requirement will be initially maintained in the form of the issuance of the Reserve Account Surety Bond. Under the terms and conditions of the Reserve

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Account Surety Bond, the Trustee shall deliver to the Insurer a demand for payment under the Reserve Account Surety Bond in the required form prior to the date on which funds are required for the purposes set forth above. The Trustee shall comply with all of the terms and provisions of the Reserve Account Surety Bond for the purpose of assuring that funds are available thereunder when required for the purposes of the Reserve Account, within the limits of the coverage amount provided by the Reserve Account Surety Bond. All amounts drawn by the Trustee under the Reserve Account Surety Bond will be deposited into the Reserve Account and applied for the purposes thereof.

Draws on all surety bonds (including the Reserve Account Surety Bond) on which there is available coverage will be made on a pro rata basis (calculated by reference to the coverage then available thereunder). Payment of amounts owed by the Agency under the Financial Guaranty Agreement as necessary to reimburse any draw on the Reserve Account Surety Bond and reimbursement of amounts with respect to other surety bonds will be made on a pro rata basis.

The Bonds Indenture also creates a Bonds Rebate Fund for the purpose of collecting the amounts required, if any, to be rebated to the United States in accordance with the requirements of Section 148(f) of the Code. Section 148 of the Code requires, among other things and with certain exceptions, that any amounts earned on nonpurpose investments in excess of the amount which would have been earned if such investments were made at a rate equal to the yield on the Bonds be rebated to the United States. The Indenture requires the Agency to calculate such amount and deposit it into the Rebate Fund for eventual rebate to the United States Treasury.

Investment of Moneys in Funds and Accounts

Subject to the provisions of the Indenture, all moneys held by the Trustee in the Debt Service Fund, the Costs of Issuance Fund, the Reserve Account or the Rebate Fund will be invested at the written direction of the Agency only in Permitted Investments. If the Trustee receives no written directions from the Agency as to the investment of moneys held in any Fund or Account, the Trustee shall request such written direction from the Agency and, pending receipt of instructions, will invest such moneys only in Permitted Investments described in subsection (5) of the definition thereof.

(a) Moneys in the Redevelopment Obligation Retirement Fund will be invested by the Agency only in obligations permitted by the Redevelopment Law which will by their terms mature not later than the date the Agency estimates the moneys represented by the particular investment will be needed for withdrawal from the Redevelopment Obligation Retirement Fund.

(b) Moneys in the Interest Account and the Principal Account of the Debt Service Fund will be invested only in obligations which will by their terms mature on such dates as to ensure that before each interest and principal payment date there will be in such Account, from matured obligations and other moneys already in such Account, cash equal to the principal and interest payable on such payment date.

(c) Moneys in the Reserve Account will be invested in (i) obligations which will by their terms mature on or before the date of the final maturity of the Bonds or five (5) years from the date of investment, whichever is earlier or (ii) an investment agreement or Reserve Account Surety Bond which permits withdrawals or deposits without penalty at such time as such moneys will be needed or in order to replenish the Reserve Account.

(d) Moneys in the Rebate Fund will be invested in Defeasance Securities which mature on or before the date such amounts are required to be paid to the United States.

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Except as otherwise provided in the Indenture, obligations purchased as an investment of moneys in any of the Funds or Accounts will be deemed at all times to be a part of such respective Fund or Account, and the interest accruing thereon and any gain realized from an investment will be credited to such Fund or Account and any loss resulting from any authorized investment will be charged to such Fund or Account without liability to the Trustee. The Agency or the Trustee, as the case may be, will sell or present for redemption any obligation purchased whenever it will be necessary to do so in order to provide moneys to meet any payment or transfer from such Fund or Account as required by the Indenture and will incur no liability for any loss realized upon such a sale. All interest earnings received on any moneys invested in the Interest Account, Principal Account or Reserve Account, to the extent they exceed the amount required to be in such Account, will be transferred on each Interest Payment Date to the Debt Service Fund. All interest earnings on moneys invested in the Rebate Fund will be retained in such Fund and applied as set forth in the Indenture.

Covenants of the Agency

As long as the Bonds are outstanding and unpaid, the Agency will (through its proper members, officers, agents or employees) faithfully perform and abide by all of the covenants, undertakings and provisions contained in the Indenture or in any Bond issued under the Indenture, including the following covenants and agreements for the benefit of the Bondowners which are necessary, convenient and desirable to secure the Bonds and will tend to make them more marketable; provided, however, that the covenants do not require the Agency to expend any funds other than the Pledged Tax Revenues.

Covenant 1. Use of Proceeds; Management and Operation of Properties. The Agency covenants and agrees that the proceeds of the sale of the Bonds will be deposited and used as provided in the Indenture and that it will manage and operate all properties owned by it comprising any part of the Project Areas in a sound and businesslike manner.

Covenant 2. No Priority. The Agency covenants and agrees that it will not issue any obligations payable, either as to principal or interest, from the Pledged Tax Revenues which have any lien upon the Pledged Tax Revenues prior or superior to the lien of the Bonds. Except as permitted by the Indenture, it will not issue any obligations, payable as to principal or interest, from the Pledged Tax Revenues, which have any lien upon the Pledged Tax Revenues on a parity with the Bonds and the 2013 Parity Bonds authorized in the Indenture. Notwithstanding the foregoing, nothing in the Indenture shall prevent the Agency (i) from issuing and selling pursuant to law, refunding obligations payable from and having any lawful lien upon the Pledged Tax Revenues, if such refunding obligations are issued for the purpose of, and are sufficient for the purpose of, refunding all of the Outstanding Bonds or the 2013 Parity Bonds, (ii) from issuing and selling obligations which have, any lien upon the Pledged Tax Revenues which is junior to the Bonds and the 2013 Parity Bonds, or (iii) from issuing and selling bonds or other obligations which are payable in whole or in part from sources other than the Pledged Tax Revenues. As used in the Indenture “obligations” includes, without limitation, bonds, notes, interim certificates, debentures or other obligations.

Covenant 3. Punctual Payment. The Agency covenants and agrees that it will duly and punctually pay, or cause to be paid, the principal of and interest on each of the Bonds on the date, at the place and in the manner provided in the Bonds. Further, it will take all actions required under the Dissolution Act to include on the Recognized Obligation Payment Schedules for each six-month period all payments to the Trustee to satisfy the requirements of the Indenture, including any amounts required under the Indenture to replenish the Reserve Account of the Debt Service Fund to the full amount of the Reserve Requirement.

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Covenant 4. Payment of Taxes and Other Charges. The Agency covenants and agrees that it will from time to time pay and discharge, or cause to be paid and discharged, all payments in lieu of taxes, service charges, assessments or other governmental charges which may lawfully be imposed upon the Agency or any of the properties then owned by it in the Project Areas, or upon the revenues and income therefrom, and will pay all lawful claims for labor, materials and supplies which if unpaid might become a lien or charge upon any of the properties, revenues or income or which might impair the security of the Bonds or the use of Pledged Tax Revenues or other legally available funds to pay the principal of and interest on the Bonds all to the end that the priority and security of the Bonds shall be preserved; provided, however, that nothing in this covenant shall require the Agency to make any such payment so long as the Agency in good faith shall contest the validity of the payment.

Covenant 5. Books and Accounts; Financial Statements. The Agency covenants and agrees that it will at all times keep, or cause to be kept, proper and current books and accounts (separate from all other records and accounts) in which complete and accurate entries shall be made of all transactions relating to the Pledged Tax Revenues and other funds relating to the Agency. The Agency will prepare within one hundred eighty (180) days, after the close of each of its Fiscal Years a complete financial statement or statements for such year, in reasonable detail covering the Pledged Tax Revenues and other funds, accompanied by an opinion of an Independent Certified Public Accountant appointed by the Agency, and will furnish a copy of the statement or statements to the Trustee and any rating agency which maintains a rating on the Bonds, and, upon written request, to any Bondowner. The Trustee shall have no duty to review the Agency’s financial statements. The Agency’s financial statements may be included as part of the City’s Comprehensive Annual Financial Report.

Covenant 6. Eminent Domain Proceeds. The Agency covenants and agrees that if all or any part of the Redevelopment Project Areas should be taken from it without its consent, by eminent domain proceedings or other proceedings authorized by law, for any public or other use under which the property will be tax exempt, it shall take all steps necessary to adjust accordingly the base year property tax roll of the Project Areas.

Covenant 7. Disposition of Property. The Agency covenants and agrees that it will not dispose of more than ten percent (10%) of the land area in the Project Areas (except property shown in the Redevelopment Plans in effect on the date the Indenture is adopted as planned for public use, or property to be used for public streets, public off-street parking, sewage facilities, parks, easements or right-of-way for public utilities, or other similar uses) to public bodies or other persons or entities whose property is tax exempt, unless such disposition will not result in Pledged Tax Revenues to be less than the amount required for the issuance of Parity Bonds as provided in the Indenture, based upon the certificate or opinion of an Independent Financial Consultant appointed by the Agency.

Covenant 8. Protection of Security and Rights of Bondowners. The Agency covenants and agrees to preserve and protect the security of the Bonds and the rights of the Bondowners and to contest by court action or otherwise (a) the assertion by any officer of any government unit or any other person whatsoever against the Agency that (i) the Redevelopment Law is unconstitutional or (ii) that the Pledged Tax Revenues pledged under the Indenture cannot be paid to the Agency for the debt service on the Bonds or (b) any other action affecting the validity of the Bonds or diluting the security therefor.

Covenant 9. Compliance with Dissolution Act. The Agency shall comply with all of the requirements of the Dissolution Act. The Agency shall take all actions required under the Dissolution Act to prepare and file Recognized Obligation Payment Schedules so as to enable the Riverside Auditor Controller to distribute from the Redevelopment Property Tax Trust Fund for deposit in the Redevelopment Obligation Retirement Fund all amounts as shall be required to enable the Agency to pay

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timely principal of, and interest on, the Bonds and all outstanding Senior Bonds coming due in such Bond Year.

Without limiting the generality of the foregoing paragraph, the Agency will take all actions required under the Dissolution Act to include on the Recognized Obligation Payment Schedules for each semiannual period all payments to the Trustee to satisfy the requirements of the Senior Bonds Indentures and the Indenture, including any amounts required to replenish the respective reserve accounts established for the Bonds, the 2013 Parity Bonds Parity Bonds, and the Senior Bonds. In addition, the Agency will take all actions required under the Dissolution Act to include scheduled debt service on the Bonds, the 2013 Parity Bonds, the Parity Bonds, and the Senior Bonds, as well as any amount required to replenish the respective reserve accounts established for the Bonds, and the 2013 Parity Bonds, and the Senior Bonds, in Recognized Obligation Payment Schedules for each semiannual period so as to enable the County Auditor-Controller to distribute from the Redevelopment Property Tax Trust Fund to the Redevelopment Obligation Retirement Fund on each January 2 and June 1, the amounts required to pay principal of and interest on the Bonds, the 2013 Parity Bonds, Parity Bonds (if any), and the Senior Bonds coming due in the respective semiannual period. These actions will include, without limitation, placing on the periodic Recognized Obligation Payment Schedule for approval by the Oversight Board and the DOF, to the extent required, the amounts to be held by the Agency as a reserve until the next semiannual period that are required to provide for the payment of principal of and interest on the Bonds and the Senior Bonds. Further, to the extent that the Subordinated Pass-Through Amounts are necessary to pay debt service on the Bonds and the 2013 Parity Bonds, the Agency covenants to comply with the requirements of Health & Safety Code Section 34183(b) to ensure that the Subordinated Pass-Through Amounts are paid to the Agency.

With regard to each semiannual period ending on June 30 of a calendar year, the Agency shall include in the Recognized Obligation Payment Schedule for such semiannual period an amount which is at least equal to the sum of (a) the full amount of principal and interest on the Senior Bonds coming due and payable on the succeeding March 1 and September 1, plus (b) the full amount of interest coming due and payable on the Bonds, the 2013 Parity Bonds and any obligations issued on a parity with the Bonds on the next succeeding March 1.

Covenant 10. Limitation on Indebtedness. The Agency covenants and agrees that it has not and will not incur any loans, obligations or indebtedness repayable from Pledged Tax Revenues such that the total aggregate debt service on said loans, obligations or indebtedness incurred from and after the date of adoption of the Redevelopment Plans, when added to the total aggregate debt service on the Bonds, will exceed the maximum amount of Pledged Tax Revenues to be divided and allocated to the Agency pursuant to the Redevelopment Plans. The Agency shall file annually with the Trustee on or prior to August 1 of each year a Written Certificate of the Agency certifying that Pledged Tax Revenues received by the Agency through the date of the certificate combined with the amount remaining to be paid on all outstanding obligations of the Agency will not exceed the Plan Limits. To the extent it does, all Pledged Tax Revenues will be deposited in an escrow account and applied to the payment of such outstanding obligations.

Covenant 11. Further Assurances. The Agency covenants and agrees to adopt, make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of the Indenture, and for the better assuring and confirming unto the Owners of the rights and benefits provided in the Indenture.

Covenant 12. Continuing Disclosure. The Agency covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Agreement dated the Closing Date. Notwithstanding any other provision of the Indenture, failure of the Agency to comply with the

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Continuing Disclosure Agreement shall not be considered an Event of Default; however, any participating underwriter, holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate to compel performance, including seeking mandate or specific performance by court order.

Events of Default and Remedies

The following events will constitute Events of Default under the Indenture:

(a) if default is made in the due and punctual payment of the principal of or interest on any Bond when and as the same becomes due and payable, whether at maturity as therein expressed, by declaration or otherwise;

(b) if default is made by the Agency in the observance of any of the covenants, agreements (including default by the obligor on any underlying agreement) 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 is 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; or

(c) if the Agency commences a voluntary action under Title 11 of the United States Code or any substitute or successor statute.

If an Event of Default has occurred and is continuing, the Trustee may, or if requested in writing by the Owners of the majority in aggregate principal amount of the Bonds then Outstanding, the Trustee will by written notice to the Agency, (a) declare the principal of the Bonds, together with the accrued interest thereon, to be due and payable immediately, and upon any such declaration the same will become immediately due and payable, and (b) upon receipt of indemnity to its satisfaction 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 will give notice of such Event of Default to the Agency by telephone confirmed in writing. Such notice will also state whether the principal of the Bonds will have been declared to be or have immediately become due and payable. With respect to any Event of Default described in clauses (a) or (c) above the Trustee will, and with respect to any Event of Default described in clause (b) above the Trustee in its sole discretion may, also give such notice to the Agency and the Owners in the manner provided for in the Indenture, which will include the statement that interest on the Bonds will cease to accrue from and after the date, if any, on which the Trustee has 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).

This provision, however, 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 has 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 reasonable fees and expenses of the Trustee, including but not limited to attorneys’ fees, 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) has been made good or cured to the satisfaction of the Trustee or provisions deemed by the Trustee to be adequate has been made therefor, then, and in every such case, the Owners of at least a majority in aggregate principal amount of the Bonds then Outstanding, by written notice to the Agency and to the Trustee, may, on behalf of the Owners of all the Bonds, rescind and annul

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such declaration and its consequences. However, no such rescission and annulment will extend to or will affect any subsequent default, or will impair or exhaust any right or power consequent thereon.

Upon the occurrence of an event of default, the Trustee may, with the consent of a majority of the Holders, by written notice to the Agency, declare the principal of the Bonds and Parity Bonds to be immediately due and payable, whereupon that portion of the principal of the Bonds thereby coming due and the interest thereon accrued to the date of payment shall, without further action, become and be immediately due and payable, anything in the Indenture or in the Bonds to the contrary notwithstanding.

Application of Funds Upon Acceleration

All of the Pledged Tax Revenues and all sums in the funds and accounts established and held by the Trustee upon the date of the declaration of acceleration as provided in the Indenture, and all sums thereafter received by the Trustee thereunder, will be applied by the Trustee in the order following, upon presentation of the Bonds, and the stamping thereon of the payment if only partially paid, or upon the surrender thereof if fully paid:

First, to the payment of the fees, costs and expenses of the Trustee in declaring such Event of Default and in exercising the rights and remedies set forth in the Indenture, including reasonable compensation to its agents, attorneys and counsel; and

Second, to the payment of the whole amount then owing and unpaid upon the Bonds and the 2013 Parity Bonds for principal and interest, with interest on the overdue principal and installments of interest at the net effective rate then borne by the Outstanding Bonds, the 2013 Parity Bonds, and Parity Bonds (to the extent that such interest on overdue installments of principal and interest has been collected), and in case such moneys will be insufficient to pay in full the whole amount so owing and unpaid upon the Bonds, the 2013 Parity Bonds, and Parity Bonds, then to the payment of such principal and interest without preference or priority of principal over interest, or interest over principal, or of any installment of interest over any other installment of interest, ratably to the aggregate of such principal and interest or any Bond, the 2013 Parity Bonds, or Parity Bond over any other Bond, 2013 Parity Bond, or Parity Bond.

Amendments

Subject to the terms of the Indenture, the Indenture and the rights and obligations of the Agency and of the Owners may be modified or amended at any time by a Supplemental Indenture which will become binding upon adoption, without consent of any Owners, to the extent permitted by law and any for any one or more of the following purposes:

(a) to add to the covenants and agreements of the Agency in the Indenture contained, other covenants and agreements thereafter to be observed or to limit or surrender any rights or powers therein 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 will not materially adversely affect the interests of the Owners; or

(c) to provide the issuance of Parity Bonds pursuant to the Indenture, and to provide the terms and conditions under which such Parity Bonds may be issued, including but not limited to the establishment of special funds and accounts relating thereto and any other provisions relating solely thereto, subject to and in accordance with the provisions of the Indenture; or

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(d) to amend any provision thereof relating to the requirements of or compliance with the Code to any extent whatsoever but only if and to the extent such amendment will not adversely affect the exclusion from gross income for purposes of federal income taxation of interest on any of the Bonds, in the opinion of a nationally recognized bond counsel.

Except as set forth in the preceding paragraph and subject to the terms of the Indenture and the rights and obligations of the Agency and of the Owners may be modified or amended at any time by a Supplemental Indenture which will become binding when the written consent of the Owners of a majority in aggregate principal amount of the Bonds then Outstanding are filed with the Trustee. No such modification or amendment will (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 or interest at the time and place and at the rate and in the currency provided therein or any Bond without the express written consent of the Owner of such Bond, (b) reduce the percentage of Bonds required for the written consent to any such amendment or modification, or (c) without its written consent thereto, modify any of the rights or obligations of the Trustee.

THE SUCCESSOR AGENCY TO THE LA QUINTA REDEVELOPMENT AGENCY

The Prior Agency was established on July 5, 1983 by the City Council of the City with the adoption of Ordinance No. 34, pursuant to the Redevelopment Law. On June 29, 2011, ABx1 26 was enacted as Chapter 5, Statutes of 2011, together with a companion bill, ABx1 27. A lawsuit was brought in the California Supreme Court, California Redevelopment Association, et al. v. Matosantos, et al., 53 Cal. 4th 231 (Cal. 2011), challenging the constitutionality of ABx1 26 and ABx1 27. In its December 29, 2011 decision, the California Supreme Court largely upheld ABx1 26, invalidated ABx1 27, and held that ABx1 26 may be severed from ABx1 27 and enforced independently. As a result of ABx1 26 and the decision of the California Supreme Court in the California Redevelopment Association case, as of February 1, 2012, all redevelopment agencies in the State were dissolved, including the Prior Agency, and successor agencies were designated as successor entities to the former redevelopment agencies to wind down the affairs of the former redevelopment agencies.

On January 3, 2012, pursuant to Resolution No. 2012-002 and Section 34173 of the Dissolution Act, the City Council of the City elected to serve as successor agency to the Prior Agency. Subdivision (g) of Section 34173 of the Dissolution Act, added by AB 1484, expressly affirms that the Agency is a separate public entity from the City, that the two entities shall not merge, and that the liabilities of the Prior Agency will not be transferred to the City nor will the assets of the Prior Agency become assets of the City.

The Agency is governed by a five-member Board of Directors (the “Board”) which consists of the members of the City Council of the City of La Quinta. The Mayor acts as the Chair of the Board, the City Manager as its Executive Director, the City Clerk as its Secretary and the Finance Director of the City as the Treasurer of the Agency.

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Members and Officers

The members and officers of the Agency and the expiration dates of their terms are as follows:

Name and Office Expiration of Term

(November)

Linda Evans, Chair 2018 John Peña, Vice-Chair 2018 Kathleen Fitzpatrick, Member 2020 Steve Sanchez, Member 2020 Robert Radi, Member 2018

Agency Powers

All powers of the Agency are vested in its five-members who are elected members of the City Council. Pursuant to the Dissolution Act, the Agency is a separate public body from the City and succeeds to the organizational status of the Prior Agency but without any legal authority to participate in redevelopment activities, except to complete any work related to an approved enforceable obligation. The Agency is tasked with winding down the affairs of the Prior Agency, pursuant to the procedures and provisions of the Dissolution Act. Under the Dissolution Act, many Agency actions are subject to approval by the Oversight Board, as well as review by the DOF. California has strict laws regarding public meetings (known as the Ralph M. Brown Act) which generally make all Agency and Oversight Board meetings open to the public in similar manner as City Council meetings.

Under a State initiative enacted in 1974, public officials are required to make disclosures regarding their financial interests by filing such disclosures as public records. As of the date of this Official Statement, the members of the City Council and the Agency, and other City and Agency officials have made the required filings.

Section 34179.5 of the Dissolution Act established a due diligence review process for determining the unobligated balances that redevelopment agencies had available as of June 30, 2012 to remit to their respective county auditor-controllers for distribution to affected taxing entities within the project areas of the former redevelopment agencies. This determination process was required to be completed by November 9, 2012 with respect to affordable housing funds and by April 1, 2013 with respect to non-housing funds. Within five business days of receiving notification from the State Department of Finance, the Agency must remit to the county auditor-controller the amount of unobligated balances determined by the DOF, or it may request a meet and confer with the DOF to resolve any disputes. If there is a meet and confer process, the Agency must remit the amount of unobligated balances within five working days of receiving a subsequent notification from the DOF of the amount of unobligated balances at the conclusion of that process.

If the Agency fails to remit the amounts determined by the State Department of Finance by the respective deadlines, certain penalties and remedies apply under Section 34179.6 of the Dissolution Act. The Agency has remitted to the County Auditor-Controller all of the unobligated balances as determined by the DOF. On November 6, 2013, the Agency received its Finding of Completion from the DOF. Receipt of the Finding of Completion allows the Agency to do several things, among them, developing a plan for the disposition of any properties held by the Agency, reinstating loans previously made by the City to the Prior Agency and spending proceeds of bonds issued prior to December 31, 2010, all requiring approval of the Oversight Board.

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RISK FACTORS

The following information should be considered by prospective investors in evaluating the Bonds. However, the following does not purport to be an exhaustive listing of risks and other considerations which may be relevant to investing in the Bonds. In addition, the order in which the following information is presented is not intended to reflect the relative importance of any such risks.

The various legal opinions to be delivered concurrently with the issuance of the Bonds will be qualified as to the enforceability of the various legal instruments by limitations imposed by State and federal laws, rulings and decisions affecting remedies, and by bankruptcy, reorganization or other laws of general application affecting the enforcement of creditors’ rights, including equitable principles.

Reduction in Taxable Value

Pledged Tax Revenues allocated to the Redevelopment Property Tax Trust Fund are determined by the amount of incremental taxable value in the Project Areas and the current rate or rates at which property in the Project Areas is taxed. The reduction of taxable values of property in the Project Areas caused by economic factors beyond the Agency’s control, such as relocation out of the Project Areas by one or more major property owners, sale of property to a non-profit corporation exempt from property taxation, or the complete or partial destruction of such property caused by, among other eventualities, earthquake or other natural disaster, could cause a reduction in the Pledged Tax Revenues that provide for the repayment of and secure the Bonds. Such reduction of Pledged Tax Revenues could have an adverse effect on the Agency’s ability to make timely payments of principal of and interest on the Bonds.

As described in greater detail under the heading “PROPERTY TAXATION IN CALIFORNIA — Article XIIIA of the State Constitution,” Article XIIIA 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 two percent 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 (as described above). Such measure is computed on a calendar year basis. Any resulting reduction in the full cash value base over the term of the Bonds could reduce Pledged Tax Revenues securing the Bonds.

In addition to the other limitations on, and required application under the Dissolution Act of Pledged Tax Revenues on deposit in the Redevelopment Property Tax Trust Fund, described herein under the heading “RISK FACTORS,” the State electorate or Legislature could adopt a constitutional or legislative property tax reduction with the effect of reducing Pledged Tax Revenues allocated to the Redevelopment Property Tax Trust Fund and available to the Agency. Although the federal and State Constitutions include clauses generally prohibiting the Legislature’s impairment of contracts, there are also recognized exceptions to these prohibitions. There is no assurance that the State electorate or Legislature will not at some future time approve additional limitations that could reduce the Pledge Tax Revenues and adversely affect the source of repayment and security of the Bonds.

Risks to Real Estate Market

The Agency’s ability to make payments on the Bonds will be dependent upon the economic strength of the Project Areas. The general economy of the Project Areas will be subject to all of the risks generally associated with urban real estate markets. Real estate prices and 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 Areas could be adversely affected by limitations of infrastructure or future

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governmental policies, including governmental policies to restrict or control development. In addition, if there is a decline in the general economy of the Project Areas, the owners of property within the Project Areas may be less able or less willing to make timely payments of property taxes or may petition for reduced assessed valuation causing a delay or interruption in the receipt of Pledged Tax Revenues by the Agency from the Project Areas.

Reduction in Inflationary Rate

As described in greater detail below, Article XIIIA of the State Constitution provides that the full cash value 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 percent increase for any given year, 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 percent, there have been years in which the assessed values were adjusted by actual inflationary rates, which were less than 2 percent. Since Article XIIIA was approved, the annual adjustment for inflation has fallen below the 2 percent limitation several times but in Fiscal Year 2010-11 the inflationary value adjustment was negative for the first time at -0.237%. In Fiscal Year 2014-15, Fiscal Year 2015-16, and Fiscal Year 2016-17, the inflationary value adjustments were 0.454%, 1.998%, and 1.525%, respectively, which are also below the 2 percent limitation. The Agency is unable to predict if any adjustments to the full cash value of real property within the Project Areas, whether an increase or a reduction, will be realized in the future.

Development Risks

The general economy of the Project Areas will be subject to all the risks generally associated with real estate development. Future development within the Project Areas may be subject to unexpected delays, disruptions and changes. Real estate development operations 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 operations within the Project Areas could be adversely affected by future governmental policies, including governmental policies to restrict or control development. If future development in the Project Areas are delayed or halted, the economy of the Project Areas could be affected. If such events lead to a decline in assessed values they could cause a reduction in Pledged Tax Revenues. In addition, if there is a decline in the general economy of the Project Areas, the owners of property within the Project Areas may be less able or less willing to make timely payments of property taxes causing a delay or stoppage of the Pledged Tax Revenues received by the Agency from the Project Areas. In addition, the insolvency or bankruptcy of one or more large owners of property within the Project Areas could delay or impair the receipt of Pledged Tax Revenues by the Agency.

Levy and Collection of Taxes

The Agency has no independent power to levy or collect property taxes. Any reduction in the tax rate or the implementation of any constitutional or legislative property tax decrease could reduce the Pledged Tax Revenues, and accordingly, could have an adverse impact on the security for and the ability of the Agency to repay the Bonds.

Likewise, if the County no longer deposits funds to the Redevelopment Property Tax Trust Fund on first collection, delinquencies in the payment of property taxes by the owners of land in the Project Areas, and the impact of bankruptcy proceedings on the ability of taxing agencies to collect property taxes, could have an adverse effect on the Agency’s ability to make timely payments on the Bonds. Any reduction in Pledged Tax Revenues, whether for any of these reasons or any other reasons, could have an

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adverse effect on the Agency’s ability to pay the principal of and interest on the Bonds. The Agency is not on the County’s “Teeter Plan”; however, as discussed below under the heading “PROJECT AREAS — Teeter Plan and Delinquency Rates” the deposits to the Redevelopment Property Tax Trust Fund are payable on first collection so delinquent taxes do not impact the Agency’s tax revenue.

State Budget Issues

ABx1 26 and AB 1484 were enacted by the State Legislature and Governor as trailer bills necessary to implement provisions of the State’s budget acts for its fiscal years 2011-12 and 2012-13, respectively. The 2011-12 State budget included projected State savings estimated to aggregate $1.7 billion in 2011-12 associated with ABx1 27, which would have allowed redevelopment agencies to continue in operation provided their establishing cities or counties agreed to make an aggregate $1.7 billion in payments to K-12 schools. However, ABx1 27 was found in December 2011 by the California Supreme Court to violate the State Constitution, which altered this budgetary plan of the State. According to the State’s Summary of the 2012-13 State budget, AB 1484 implements a framework to transfer cash assets previously held by redevelopment agencies to cities, counties, and special districts to fund core public services, with assets transferred to schools offsetting State general fund costs (projected savings of $1.5 billion). The State’s budget for fiscal year 2016-17 was enacted on June 27, 2016 and did not include any additional legislation dealing with dissolution of redevelopment agencies. There can be no assurance that additional legislation will not be enacted in the future to additionally implement provisions relating to the State budget or otherwise that may affect successor agencies or Pledged Tax Revenues. The full text of each State Assembly bill cited above may be obtained from the “Official California Legislative Information” website maintained by the Legislative Counsel of the State of California pursuant to State law, at the following web link: http://www.leginfo.ca.gov/bilinfo.html.

Information about the State budget and State spending is available at various State maintained websites. Text of the 2016-17 Budget Summary, the current State budget, and other documents related to the State budget may be found at the website of the DOF, www.dof.ca.gov. A nonpartisan analysis of the budget is posted by the Legislative Analyst’s Office at www.lao.ca.gov. In addition, various State official statements, many of which contain a summary of the current and past State budgets may be found at the website of the State Treasurer, www.treasurer.ca.gov.

None of the websites or webpages referenced above is in any way incorporated into this Official Statement. They are cited for informational purposes only. The Agency makes no representation whatsoever as to the accuracy or completeness of any of the information on such websites.

Recognized Obligation Payment Schedule

The Dissolution Act provides that, commencing on the date the first Recognized Obligation Payment Schedule is valid thereunder, only those payments listed in the Recognized Obligation Payment Schedule may be made by the Agency from the funds specified in the Recognized Obligation Payment Schedule. Before each annual period, the Dissolution Act requires successor agencies to prepare and approve, and submit to the successor agency’s oversight board and the DOF for approval, a Recognized Obligation Payment Schedule pursuant to which enforceable obligations (as defined in the Dissolution Act) of the successor agency are listed, together with the source of funds to be used to pay for each enforceable obligation. Pledged Tax Revenues will not be distributed from the Redevelopment Property Tax Trust Fund by the County Auditor-Controller to the Agency’s Redevelopment Obligation Retirement Fund without a duly approved and effective Recognized Obligation Payment Schedule obtained in sufficient time prior to the January 2 or June 1 distribution dates, as applicable. See “SECURITY FOR THE BONDS — Recognized Obligation Payment Schedule” and “PROPERTY TAXATION IN CALIFORNIA — Property Tax Collection Procedures — Recognized Obligation Payment Schedule.” In

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the event the Agency were to fail to file a Recognized Obligation Payment Schedule with respect to an annual period, the availability of Pledged Tax Revenues to the Agency could be adversely affected for such period.

In the event a successor agency fails to submit to the DOF an oversight board-approved Recognized Obligation Payment Schedule complying with the provisions of the Dissolution Act within five business days of the date upon which the Recognized Obligation Payment Schedule is to be used to determine the amount of property tax allocations, the DOF may determine if any amount should be withheld by the applicable county auditor-controller for payments for enforceable obligations from distribution to taxing entities pursuant to clause (iv) in the following paragraph, pending approval of a Recognized Obligation Payment Schedule. Upon notice provided by the DOF to the county auditor controller of an amount to be withheld from allocations to taxing entities, the county auditor controller must distribute to taxing entities any monies in the Redevelopment Property Tax Trust Fund in excess of the withholding amount set forth in the notice, and the county auditor-controller must distribute withheld funds to the successor agency only in accordance with a Recognized Obligation Payment Schedule when and as approved by the DOF.

Typically, under the Redevelopment Property Tax Trust Fund distribution provisions of the Dissolution Act, the County Auditor-Controller is to distribute funds semiannually in the following order specified in Section 34183 of the Dissolution Act: (i) first, subject to certain adjustments for subordinations to the extent permitted under the Dissolution Act (as described above under “SECURITY FOR THE BONDS — Tax Increment Financing”) and no later than each January 2 and June 1, to each local agency and school entity, to the extent applicable, amounts required for pass-through payments such entity would have received under provisions of the Redevelopment Law, as those provisions read on January 1, 2011, including pursuant to the Pass-Through Agreements and Statutory Pass-Through Amounts; (ii) second, on each January 2 (with respect to approved enforceable obligations payable during January 1 through June 30) and June 1 (with respect to approved enforceable obligations payable during July 1 through December 31), to the Agency for payments listed in its Recognized Obligation Payment Schedule, with debt service payments scheduled to be made for tax allocation bonds having the highest priority over payments scheduled for other debts and obligations listed on the Recognized Obligation Payment Schedule; (iii) third, on each January 2 and June 1, to the Agency for the administrative cost allowance, as defined in the Dissolution Act; and (iv) fourth, on each January 2 and June 1, to taxing entities any moneys remaining in the Redevelopment Property Tax Trust Fund after the payments and transfers authorized by clauses (i) through (iii), in an amount proportionate to such taxing entity’s share of property tax revenues in the tax rate area in that fiscal year (without giving effect to any pass-through obligations that were established under the Redevelopment Law).

If the Agency does not submit an Oversight-Board approved Recognized Obligation Payment Schedule within five business days of the date upon which the Recognized Obligation Payment Schedule is to be used to determine the amount of property tax allocations and the DOF does not provide a notice to the County Auditor-Controller to withhold funds from distribution to taxing entities, amounts in the Redevelopment Property Tax Trust Fund for such six-month period would be distributed to taxing entities pursuant to clause (iv) above. However, the Agency has covenanted to take all actions required under the Dissolution Act to include (a) scheduled debt service on the Bonds and any Parity Bonds and as well as any amount required under the Indenture and any Supplemental Indenture to replenish the Reserve Account of the Debt Service Fund established thereunder, and (b) amounts due to any bond insurer (including the Insurer) in connection with an insurance or surety bond agreement, in Recognized Obligation Payment Schedules for each annual period beginning on July 1 of any calendar year and ending on June 30 of the next calendar year, or such other period as provided in the Dissolution Act (a “ROPS Period”), so as to enable the County Auditor-Controller to distribute from the Redevelopment Property Tax Trust Fund to the Agency’s Redevelopment Obligation Retirement Fund by each June 1

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amounts required for the Agency to pay principal of, and interest on, the Bonds coming due on the next two Interest Payment Dates and to pay amounts owed to any bond insurer (including the Insurer), as well as the other amounts set forth above. (see “THE INDENTURE — Covenants of the Agency”).

To accomplish the foregoing, on or before each February 1 (or at such earlier time as may be required by the Dissolution Act), for so long as any Bonds or Parity Bonds are outstanding, the Agency shall submit an Oversight Board-approved Recognized Obligation Payment Schedule to the State Department of Finance and to the Auditor-Controller of the County of Riverside that shall include a request that the Agency receive on the following June 1 ROPS distribution date (i) all debt service due on the Bonds and the Parity Bonds coming due during the subsequent ROPS Period as well as all amounts due and owing to any bond insurer, and (ii) any amount required to cure any deficiency in the Reserve Account pursuant to the Indenture or any Supplemental Indenture (including any amounts due and owing to the Insurer under the Indenture).

In the event the provisions set forth in the Dissolution Act as of the Closing Date of the Bonds that relate to the filing of Recognized Obligation Payment Schedules are amended or modified in any manner, the Agency agrees in the Indenture to take all such actions as are necessary to comply with such amended or modified provisions so as to ensure the timely payment of debt service on the Bonds and the Parity Bonds and, if the timing of distributions of the Redevelopment Property Tax Trust Fund is changed, the receipt of all debt service due during each calendar year on all Outstanding Bonds and Parity Bonds on or prior to June 1 of such calendar year.

The Dissolution Act, as amended by AB 1484, also provides for certain penalties in the event the Agency does not timely submit a Recognized Obligation Payment Schedule for an annual period. Specifically, a Recognized Obligation Payment Schedule is required to be submitted by the Agency, after approval by the Oversight Board, to the County Administrative Officer, the County Auditor-Controller, the State Department of Finance, and the State Controller no later than each February 1 (commencing with the Recognized Obligation Payment Schedule for the period from July 1, 2016 through June 30, 2017). If the Agency does not submit a Recognized Obligation Payment Schedule by such deadlines, the City will be subject to a civil penalty equal to $10,000 per day for every day the schedule is not submitted to the State Department of Finance. Additionally, the Dissolution Act provides that the Agency’s administrative cost allowance is reduced by 25% if the Agency does not submit an annual Recognized Obligation Payment Schedule within 10 days after the February 1 deadline.

Last and Final Recognized Obligation Payment Schedule

SB 107 amended the Dissolution Act to permit certain successor agencies with limited remaining obligations to submit a voluntary and optional Last and Final ROPS for approval by the oversight board and DOF. The Last and Final ROPS must list the remaining enforceable obligations of the successor agency, including the total outstanding obligation amount and a schedule of remaining payments for each enforceable obligation to be funded from the Redevelopment Property Tax Trust Fund, bond proceeds, or other legally or contractually dedicated or restricted funding sources. The Last and Final ROPS will also establish the maximum amount of Redevelopment Property Tax Trust Fund to be distributed to the successor agency for each remaining fiscal year until all obligations have been fully paid.

Any revenues, interest, and earnings of the successor agency that are not authorized for use pursuant to the approved Last and Final ROPS shall be remitted to the county auditor-controller for distribution to the affected taxing entities. Notwithstanding provisions in the Dissolution Act concerning disposition of real property pursuant to a successor agency’s long-range property management plan, proceeds from the disposition of real property subsequent to the approval of the Last and Final ROPS that are not necessary for the payment of an enforceable obligation shall be remitted to the county auditor

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controller for distribution to the affected taxing entities. A successor agency may not expend more than the amount approved for each enforceable obligation listed on the approved Last and Final ROPS, and once the successor agency has received Redevelopment Property Tax Trust Fund moneys equal to the amount of the total outstanding obligations approved in the Last and Final ROPS, the county auditor controller will not allocate further Redevelopment Property Tax Trust Fund moneys to the successor agency’s Redevelopment Property Tax Trust Fund.

Successor agencies may only amend an approved Last and Final ROPS twice. If the Agency receives insufficient funds in any given period after a Last and Final ROPS has been approved, the Dissolution Act provides that the County treasurer may loan, and the City may loan or grant, funds to the Agency for the payment of enforceable obligations. Any such loans may not include an interest component and must be repaid from the source of funds approved for payment of the underlying enforceable obligation once sufficient funds become available. The Dissolution Act further provides that any such loan may not increase the total amount of Redevelopment Property Tax Trust Fund received by the Agency as approved on the Last and Final ROPS. In any event, if the Agency prepares and obtains DOF approval of a Last and Final ROPS and subsequently amends the Last and Final ROPS two times, the Agency may be unable to make unexpected or unscheduled reserve deposits or payments due to any the Insurer of Parity Bonds or provider of any surety bonds.

The City expects to file a Last and Final ROPS for approval by the Oversight Board after the Recognized Obligation Payment Schedule for Fiscal Year 2017-18 is filed by February 1, 2017.

Bankruptcy and Foreclosure

The payment of the property taxes from which Pledged Tax Revenues are derived and the ability of the County to foreclose the lien of a delinquent unpaid tax may be limited by bankruptcy, insolvency, or other laws generally affecting creditors’ rights or by the laws of the State relating to judicial foreclosure. The various legal opinions to be delivered concurrently with the delivery of the Bonds (including Bond Counsel’s approving legal opinion) will be qualified as to the enforceability of the various legal instruments by bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting creditors’ rights, by the application of equitable principles and by the exercise of judicial discretion in appropriate cases.

Although bankruptcy proceedings would not cause the liens to become extinguished, bankruptcy of a property owner could result in a delay in prosecuting superior court foreclosure proceedings. Such delay would increase the possibility of delinquent tax installments not being paid in full and thereby increase the likelihood of a delay or default in payment of the principal of and interest on the Bonds.

Estimated Revenues

In estimating that Pledged Tax Revenues will be sufficient to pay debt service on the Bonds after payment of the Senior Bonds, the Agency has made certain assumptions with regard to, among other things, future assessed valuation in the Project Areas, future tax rates and percentage of taxes collected. The Agency believes these assumptions to be reasonable, but there is no assurance these assumptions will be realized and to the extent that the assessed valuation and the tax rates are less than expected, the Pledged Tax Revenues available to pay debt service on the Bonds will be less than those projected and such reduced Pledged Tax Revenues may be insufficient to provide for the payment of principal of, premium (if any) and interest on the Bonds.

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Hazardous Substances

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

Natural Disasters

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

The City, like most communities in California, is an area of unpredictable seismic activity, and therefore, is subject to potentially destructive earthquakes. Numerous active and inactive fault lines pass through or near the City. The occurrence of severe seismic activity in the City could result in substantial damage to property located in the Project Areas, and could lead to successful appeals for reduction in assessed values of such property. Such a reduction could result in a decrease in Pledged Tax Revenues.

Approximately 0.4% of the Project Areas is located in a 100-Year Flood Plain. Additionally, significant localized flooding events have occurred affecting a limited number of properties in the Project Areas. The Agency cannot guarantee that flooding events in future years, if any, will not impact the value of properties within the Project Area.

Changes in the Law

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 Dissolution Act, the Redevelopment Law or other laws or the Constitution of the State resulting in a reduction of Pledged Tax Revenues, which could have an adverse effect on the Agency’s ability to pay debt service on the Bonds.

Investment Risk

Funds held under the Indenture are required to be invested in Permitted Investments as provided under the Indenture. See Appendix A attached hereto for a summary of the definition of Permitted Investments. The funds and accounts of the Agency into which Pledged Tax Revenues are 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 municipalities,

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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.

Further, the Agency cannot predict the effects on the receipt of Pledged Tax Revenues if the County were to suffer significant losses in its portfolio of investments or if the County or the City were to become insolvent or declare bankruptcy. See Appendix E — “COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR FISCAL YEAR ENDED JUNE 30, 2016 (EXCLUDING SUPPLEMENTARY INFORMATION)” regarding the City’s finances. See also “RISK FACTORS — Bankruptcy and Foreclosure.”

Additional Obligations

The potential for the issuance of additional Parity Bonds could, in certain circumstances, increase the risks associated with the Agency’s payment of debt service on the Bonds and the 2013 Parity Bonds in the event of a decrease in the Agency’s collection of Pledged Tax Revenues. However, Section 34177.5 of the Dissolution Act provides limited authority for successor agencies to issue bonds, and the Agency’s ability to issue Parity Bonds is subject to the requirements of the Dissolution Act as in effect from time to time. For additional information, see described “SECURITY FOR THE BONDS — Parity Bonds.”

No Validation Proceeding Undertaken

California Code of Civil Procedure Section 860 authorizes public agencies to institute a process, otherwise known as a “validation proceeding,” for purposes of determining the validity of a resolution or any action taken pursuant thereto. Section 860 authorizes a public agency to institute validation proceedings in cases where another statute authorizes its use. Relevant to the Bonds, California Government Code Section 53511 authorizes a local agency to “bring an action to determine the validity of its bonds, warrants, contracts, obligations or evidences of indebtedness.” Pursuant to Code of Civil Procedure Section 870, a final favorable judgment issued in a validation proceeding shall, notwithstanding any other provision of law, be forever binding and conclusive, as to all matters herein adjudicated or which could have been adjudicated, against all persons: “The judgment shall permanently enjoin the institution by any person of any action or proceeding raising any issue as to which the judgment is binding and conclusive.”

The Agency has not undertaken or endeavored to undertake any validation proceeding in connection with the issuance of the Bonds. The Agency and Bond Counsel have relied on the provisions of AB 1484 authorizing the issuance of the Bonds and specifying the related deadline for any challenge to the Bonds to be brought. Specifically, Section 34177.5(e) of the Dissolution Act provides that notwithstanding any other law, an action to challenge the issuance of bonds (such as the Bonds), the incurrence of indebtedness, the amendment of an enforceable obligation, or the execution of a financing agreement authorized under Section 34177.5, must be brought within thirty (30) days after the date on which the oversight board approves the resolution of the successor agency approving the such financing. Such challenge period expired with respect to the Bonds and the Oversight Board Resolution.

It is possible a lawsuit challenging the Dissolution Act or specific provisions thereof could be successful and that the mechanisms currently provided for under the Dissolution Act to provide for distribution of Pledged Tax Revenues to the Agency for payment on the Bonds could be impeded and result in a delinquency or default in the timely payment of principal of, and interest on, the Bonds.

However, the Indenture additionally provides that if, and to the extent, that the provisions of Section 34172 or paragraph (2) of subdivision (a) of Section 34183 of the Dissolution Act (upon which

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the distribution of Pledged Tax Revenues to the Agency rely) are invalidated by a final judicial decision, then Pledged Tax Revenues shall include all tax revenues allocated to the payment of indebtedness pursuant to Health & Safety Code Section 33670 or such other section as may be in effect at the time providing for the allocation of tax increment revenues in accordance with Article XVI, Section 16 of the California Constitution. Additionally, any action by a court to invalidate provisions of the Dissolution Act required for the timely payment of principal of, and interest on, the Bonds could be subject to the same issues regarding unconstitutional impairment of contracts and unconstitutional taking without just compensation. The Agency believes that the aforementioned considerations would provide some protections against the adverse consequences upon the Agency and the availability of Pledged Tax Revenues for the payment of debt service on the Bonds in the event of successful challenges to the Dissolution Act or portions thereof. However, the Agency does not guarantee that any lawsuit challenging the Dissolution Act or portions thereof will not result in an outcome that may have a detrimental effect on the Agency’s ability to timely pay debt service on the Bonds.

Secondary Market

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

PROPERTY TAXATION IN CALIFORNIA

Property Tax Collection Procedures

Classification. In the State, 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 a county becomes a lien on that property. A tax levied on unsecured property does not become a lien against the taxed unsecured property, but may become a lien on certain other property owned by the taxpayer. Every tax which becomes a lien on secured property has priority over all other liens on the secured property arising pursuant to State law, regardless of the time of the creation of other liens.

Generally, ad valorem taxes are collected by a county (the “Taxing Authority”) for the benefit of the various entities (cities, schools and special districts) that share in the ad valorem tax (each a taxing entity) and successor agencies eligible to receive distributions from the respective Redevelopment Property Tax Trust Fund.

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

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Penalty. A 10% penalty is added to delinquent taxes which have been levied with respect to property on the secured roll. In addition, property on the secured roll on which taxes are delinquent is declared in default by operation of law and declaration of the tax collector on or about June 30 of each fiscal year. Such property may thereafter be redeemed by payment of the delinquent taxes and a delinquency penalty, plus a redemption penalty of 1.5% per month to the time of redemption. If taxes are unpaid for a period of five years or more, the property is deeded to the State and then is subject to sale by the county tax collector. A 10% penalty also applies to delinquent taxes with respect to property on the unsecured roll, and further, an additional penalty of 1.5% per month accrues with respect to such taxes beginning on varying dates related to the tax bill mailing date.

Delinquencies. The valuation of property is determined as of the January 1 lien date as equalized in August of each year and equal installments of taxes levied upon secured property become delinquent on the following December 10 and April 10. Taxes on unsecured property are due January 1 and become delinquent August 31.

Supplemental Assessments. California Revenue and Taxation Code Section 75.70 provides for the supplemental assessment and taxation of property as of the occurrence of a change of ownership or completion of new construction. Prior to the enactment of this law, the assessment of such changes was permitted only as of the next tax lien date following the change, and this delayed the realization of increased property taxes from the new assessments for up to 14 months. This statute provides increased revenue to the Redevelopment Property Tax Trust Fund to the extent that supplemental assessments of new construction or changes of ownership occur within the boundaries of redevelopment projects subsequent to the January 1 lien date. To the extent such supplemental assessments occur within the Project Areas, Pledged Tax Revenues may increase.

Property Tax Administrative 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 in proportion to the tax-derived revenues allocated to each. SB 1559 (Chapter 697, Statutes of 1992) explicitly includes redevelopment agencies among the jurisdictions which are subject to such charges. In addition, Sections 34182(e) and 34183(a) of the Dissolution Act allow administrative costs of the County Auditor-Controller for the cost of administering the provisions of the Dissolution Act, as well as the foregoing SB 1559 amounts, to be deducted from property tax revenues before monies are deposited into the Redevelopment Property Tax Trust Fund. For Fiscal Year 2015-16, the County’s administrative charge to the Agency was $822,067.

Negotiated Pass-Through Agreements. Prior to 1994, under the Redevelopment Law, a redevelopment agency could enter into an agreement to pay increment revenues to any taxing agency that has territory located within a redevelopment project in an amount which in the agency’s determination is appropriate to alleviate any financial burden or detriment caused by the redevelopment project. These agreements normally provide for payment or pass-through of tax increment revenue directed to the affected taxing agency, and, therefore, are commonly referred to as pass-through agreements or tax sharing agreements. The Agency agreements with affected taxing agencies are referred to herein as “Pass-Through Agreements.” See “THE PROJECT AREAS — Pass Through Agreements and Obligations with Various Taxing Agencies.” See also “SECURITY FOR THE BONDS — Tax Increment Financing” for additional discussion of the treatment of Pass-Through Agreements under the Dissolution Act.

Statutory Pass-Throughs. The payment of Statutory Pass-Through Amounts (defined in Appendix A) results from (i) plan amendments which add territory in existing project areas on or after January 1, 1994 and (ii) from plan amendments which eliminates one or more limitations within a redevelopment plan (such as the removal of the time limit on the establishment of loans, advances and

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indebtedness). The calculation of the amount due affected taxing entities is described in Sections 33607.5 and 33607.7 of the Redevelopment Law. See “THE PROJECT AREAS — Pass-Throughs Agreements and Obligations with Various Taxing Agencies” and “SECURITY FOR THE BONDS — Tax Increment Financing” for further information regarding the applicability of the statutory pass-through provisions of the Redevelopment Law and the Dissolution Act to the various sub-areas of the Project Areas.

Recognized Obligation Payment Schedule. The Dissolution Act provides that, commencing on the date the first Recognized Obligation Payment Schedule is valid thereunder, only those payments listed in the Recognized Obligation Payment Schedule may be made by the Agency from the funds specified in the Recognized Obligation Payment Schedule. Annually by each February 1, the Dissolution Act requires successor agencies to prepare and approve, and submit to the successor agency’s oversight board and the DOF for approval, a Recognized Obligation Payment Schedule pursuant to which enforceable obligations (as defined in the Dissolution Act) of the successor agency are listed, together with the source of funds to be used to pay for each enforceable obligation. Pledged Tax Revenues will not be distributed from the Redevelopment Property Tax Trust Fund by the County Auditor-Controller to the Agency’s Redevelopment Obligation Retirement Fund without a duly approved and effective Recognized Obligation Payment Schedule obtained in sufficient time prior to the January 2 or June 1 distribution dates, as applicable. See “SECURITY FOR THE BONDS — Recognized Obligation Payment Schedule” and “RISK FACTORS — Recognized Obligation Payment Schedule.”

Unitary Property

Assembly Bill (“AB”) 2890 (Statutes of 1986, Chapter 1457) provides that, commencing with fiscal year 1988-89, assessed value derived from State-assessed unitary property (consisting mostly of operational property owned by utility companies) is to be allocated county-wide as follows: (i) each tax rate area will receive that same amount from each assessed utility received in the previous fiscal year unless the applicable county-wide values are insufficient to do so, in which case values will be allocated to each tax rate area on a pro-rata basis; and (ii) if values to be allocated are greater than in the previous fiscal year, each tax rate area will receive a pro-rata share of the increase from each assessed utility according to a specified formula. Additionally, the lien date on State-assessed property is changed from March 1 to January 1.

AB 454 (Statutes of 1987, Chapter 921) further modifies chapter 1457 regarding the distribution of tax revenues derived from property assessed by the State Board of Equalization. Chapter 921 provides for the consolidation of all State-assessed property, except for regulated railroad property, into a single tax rate area in each county. Chapter 921 further provides for a new method of establishing tax rates on State-assessed property and distribution of property tax revenue derived from State-assessed property to taxing jurisdictions within each county in accordance with a new formula. Railroads will continue to be assessed and revenues allocated to all tax rate areas where railroad property is sited.

Article XIIIA of the State Constitution

Article XIIIA limits the amount of ad valorem taxes on real property to 1% of “full cash value” of such property, as determined by the county assessor. Article XIIIA defines “full cash value” to mean “the County Assessor’s valuation of real property as shown on the 1975-76 tax bill under ‘full cash value,’ or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment.” Furthermore, the “full cash value” of all real property may be increased to reflect the rate of inflation, as shown by the consumer price index, not to exceed 2% per year, or may be reduced. (See “RISK FACTORS — Reduction in Inflationary Rate.”)

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Article XIIIA has subsequently been amended to permit reduction of the “full cash value” base in the event of declining property values caused by substantial damage, destruction or other factors, and to provide that there would be no increase in the “full cash value” base in the event of reconstruction of property damaged or destroyed in a disaster and in other special circumstances.

Article XIIIA (i) exempts from the 1% tax limitation taxes to pay debt service on (a) indebtedness approved by the voters prior to July 1, 1978 or (b) bonded indebtedness for the acquisition or improvement of real property approved on or after July 1, 1978, by two-thirds of the votes cast by the voters voting on the proposition; (ii) requires a vote of two-thirds of the qualified electorate to impose special taxes, or certain additional ad valorem taxes; and (iii) requires the approval of two-thirds of all members of the State Legislature to change any State tax laws resulting in increased tax revenues.

The validity of Article XIIIA has been upheld by both the California Supreme Court and the United States Supreme Court.

In the general election held November 4, 1986, voters of the State approved two measures, Propositions 58 and 60, which further amended Article XIIIA. Proposition 58 amended Article XIIIA to provide that the terms “purchase” and “change of ownership,” for the 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. This amendment to Article XIIIA may reduce the rate of growth of local property tax revenues.

Proposition 60 amended Article XIIIA to permit the Legislature to allow persons over the age of 55 who sell their residence and buy or build another of equal or lesser value within two years in the same county, to transfer the old residence assessed value to the new residence. As a result of the Legislature’s action, the growth of property tax revenues may decline.

Legislation enacted by the Legislature to implement Article XIIIA provides that all taxable property is shown at full assessed value as described above. In conformity with this procedure, all taxable property value included in this Official Statement is shown at 100% of assessed value and all general tax rates reflect the $1 per $100 of taxable value (except as noted). Tax rates for voter-approved bonded indebtedness and pension liabilities are also applied to 100% of assessed value.

Appropriations Limitation – Article XIIIB

Article XIIIB limits the annual appropriations of the State and its political subdivisions to the level of appropriations for the prior fiscal year, as adjusted for changes in the cost of living, population and services rendered by the government entity. The “base year” for establishing such appropriations limit is the 1978/79 fiscal year, and the limit is to be adjusted annually to reflect changes in population, consumer prices and certain increases in the cost of services provided by these public agencies.

Section 33678 of the Redevelopment Law provides 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 an agency of proceeds of taxes levied by or on behalf of an agency within the meaning of Article XIIIB, 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, including Section 33678 of the Redevelopment Law. The constitutionality of Section 33678 has been upheld in two California appellate court decisions. On the basis of these decisions, the Agency has not adopted an appropriations limit.

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Articles XIIIC and XIIID of the State Constitution

At the election held on November 5, 1996, Proposition 218 was passed by the voters of California. The initiative added Articles XIIIC and XIIID to the State Constitution. Provisions in the two articles affect the ability of local government to raise revenues. The Bonds are secured by sources of revenues that are not subject to limitation by Proposition 218. See also “— Propositions 218 and 26” below.

Proposition 87

On November 8, 1988, the voters of the State approved Proposition 87, which amended Article XVI, Section 16 of the State Constitution to provide that property tax revenue attributable to the imposition of taxes on property within a redevelopment project area for the purpose of paying debt service on certain bonded indebtedness issued by a taxing entity (not the Prior Agency or the Agency) and approved by the voters of the taxing entity after January 1, 1989 will be allocated solely to the payment of such indebtedness and not to redevelopment agencies. SB 107 amended Section 34183(a)(1) of the Dissolution Act to provide that such debt service override revenues approved by the voters for the purpose of supporting pension programs, capital projects, or programs related to the State Water Project that are not pledged to or not needed for debt service on successor agency obligations will be allocated and paid to the entity that levies the override.

Redevelopment Time Limits

In 1993, the State legislature passed AB 1290, which, among other things, required redevelopment agencies to adopt time limits in each redevelopment plan specifying: 1) the last date to incur debt for a redevelopment project; 2) the last date to undertake redevelopment activity within a project area; and 3) the last date to collect tax increment revenue from a project area to repay debt. Pursuant to AB 1290, which took effect January 1, 1994, the City Council adopted ordinances amending the Redevelopment Plans in the Project Areas to impose limits on plan activity in each area, as well as a date past which tax increment revenue could not be collected.

SB 107 amended the Dissolution Act to provide that the time limits for receiving property tax revenues and the limitation on the maximum amount of property tax revenues that may be received by the Agency for the Project Areas are not effective for purposes of paying the Agency’s enforceable obligations. As a result, the time and amount limits with respect to property tax revenues described under the caption “THE PROJECT AREAS” will be disregarded to the extent that property tax revenues are required to pay debt service on the Bonds.

Appeals of Assessed Values

Pursuant to California law, a property owner may apply for a reduction of the property tax assessment for such owner’s property by filing a written application, in a form prescribed by the State Board of Equalization, with the appropriate county board of equalization or assessment appeals board.

In the County, a property owner desiring to reduce the assessed value of such owner’s property in any one year must submit an application to the County Assessment Appeals Board (the “Appeals Board”). Applications for any tax year must be submitted by September 15 of such tax year. Following a review of each application by the staff of the County Assessor’s Office, the staff makes a recommendation to the Appeals Board on each application which has not been rejected for incompleteness or untimeliness or withdrawn. The Appeals Board holds a hearing and either reduces the assessment or confirms the assessment. The Appeals Board generally is required to determine the

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outcome of appeals within two years of each appeal’s filing date. Any reduction in the assessment ultimately granted applies only to the year for which application is made and during which the written application is filed. The assessed value increases to its pre-reduction level for fiscal years following the year for which the reduction application is filed. However, if the taxpayer establishes through proof of comparable values that the property continues to be overvalued (known as “ongoing hardship”), the Assessor has the power to grant a reduction not only for the year for which application was originally made, but also for the then current year as well. Appeals for reduction in the “base year” value of an assessment, which generally must be made within three years of the date of change in ownership or completion of new construction that determined the base year, if successful, reduce the assessment for the year in which the appeal is taken and prospectively thereafter. Moreover, in the case of any reduction in any one year of assessed value granted for “ongoing hardship” in the then current year, and also in any cases involving stipulated appeals for prior years relating to base year and personal property assessments, the property tax revenues from which Pledged Tax Revenues are derived attributable to such properties will be reduced in the then current year. In practice, such a reduced assessment may remain in effect beyond the year in which it is granted. See “THE PROJECT AREAS — Largest Local Secured Taxpayers” for information regarding the assessed valuations of the top ten property owners within the Project Areas. (See “Appendix F — PROJECTED TAX REVENUES REPORT” herein for a discussion of pending appeals.)

Proposition 8

Proposition 8, approved in 1978 (California Revenue and Taxation Code Section 51(b)), provides for the assessment of real property at the lesser of its originally determined (base year) full cash value compounded annually by the inflation factor, or its full cash value as of the lien date, taking into account reductions in value due to damage, destruction, obsolescence or other factors causing a decline in market value. Reductions under this code section may be initiated by the County Assessor or requested by the property owner.

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

Propositions 218 and 26

On November 5, 1996, California voters approved Proposition 218—Voter Approval for Local Government Taxes—Limitation on Fees, Assessments, and Charges—Initiative Constitutional Amendment. Proposition 218 added Articles XIIIC and XIIID to the State Constitution, imposing certain vote requirements and other limitations on the imposition of new or increased taxes, assessments and property-related fees and charges. On November 2, 2010, California voters approved Proposition 26, the “Supermajority Vote to Pass New Taxes and Fees Act.” Proposition 26 amended Article XIIIC of the California Constitution by adding an expansive definition for the term “tax,” which previously was not defined under the California Constitution. Pledged Tax Revenues securing the Bonds are derived from property taxes which are outside the scope of taxes, assessments and property-related fees and charges which are limited by Proposition 218 and outside of the scope of taxes which are limited by Proposition 26.

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Future Initiatives

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

THE PROJECT AREAS

Project Area No. 1 – Background

On November 29, 1983, following requisite studies and hearing by the Planning Commission and the Agency, the City Council passed Ordinance No. 43 which approved and adopted the Redevelopment Plan for Project Area No. 1. The Ordinance became effective December 29, 1983. The Project Area No. 1 Redevelopment Plan provides for the elimination of blight and deterioration which were found to exist in Project Area No. 1. In December, 1994 and March, 1995, the Prior Agency amended the Project Area No. 1 Redevelopment Plan in order to better address infrastructure and economic development needs within Project Area No. 1. The Project Area No. 1 Redevelopment Plan was further amended on August 19, 2003 pursuant to Ordinance No. 388 and again on March 16, 2004 pursuant to Ordinance No. 402. The Plan Amendments (a) increased the aggregate tax increment limit for the Project Area No. 1 to $2 billion and the outstanding bonded indebtedness limit to $200 million, (b) expanded the list of infrastructure and public facility projects the Agency may fund with tax increment revenues and (c) established new time frames within which the Agency may incur indebtedness for Project Area No. 1, use eminent domain for property acquisition and undertake redevelopment projects, and receive tax increment revenue. For additional Project Area No. 1 information, see Appendix F — “PROJECTED TAX REVENUES REPORT” herein.

Project Area No. 2 – Background

On May 16, 1989, following requisite studies and hearing by the Planning Commission and the Prior Agency, the City Council passed Ordinance No. 139 which approved and adopted the Redevelopment Plan for Project Area No. 2. The Ordinance became effective June 15, 1989. The Project Area No. 2 Redevelopment Plan was amended on February 3, 2004 pursuant to Ordinance No. 399 to amend financial limits, on March 16, 2004 pursuant to Ordinance Nos. 403 and 404 to eliminate the time limit to incur debt as authorized by SB 211 and to extend the Redevelopment Plan for Project Area No. 2 duration by one year as authorized by SB 1045, and again on February 1, 2011 pursuant to Ordinance No. 485 to add territory for purposes of affordable housing. The Project Area No. 2 Redevelopment Plan provides for the elimination of physical blight and economic obsolescence which was found to exist in Project Area No. 2. For additional Project Area No. 2 information, see Appendix F — “PROJECTED TAX REVENUES REPORT” herein.

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Redevelopment Plan Limitations

The Redevelopment Plans set forth various limitations that are no longer operative with the passage of SB 107. SB 107, which became effective September 22, 2015, amended the Dissolution Act to provide that the time limits for receiving property tax revenues and the limitation on the amount of property tax revenues that may be received by the Prior Agency and the Agency set forth in the Redevelopment Plans are not effective for purposes of paying the Agency’s enforceable obligations. The projections set forth in this Official Statement were prepared with the time and financial limitations set forth in the Redevelopment Plans described below. Tax Revenues received from Project Area No. 1, however, will continue to be available after November 29, 2034 if needed to pay enforceable obligations.

As amended, the Project Area No. 1 Redevelopment Plan was scheduled to terminate on November 29, 2024, with the Agency collecting tax increment revenues through November 29, 2034 in compliance with Section 33333.6 of the Redevelopment Law.

Project Area No. 1

Redevelopment Plan Limit Bonded Indebtedness Cumulative Amount (principal) $ 200,000,000 Tax Increment Cumulative Limit $ 2,000,000,000(1) Final Date to Collect Tax Increment November 29, 2034(1) (1) Pursuant to SB 107, this limit is no longer effective for purposes of paying the Bonds.

As amended, the Project Area No. 2 Redevelopment Plan was scheduled to terminate on May 16, 2030, with the Agency collecting tax increment revenues through May 16, 2040 in compliance with Section 33333.6 of the Redevelopment Law.

Project Area No. 2

Redevelopment Plan Limit Bonded Indebtedness Cumulative Amount (principal) $ 187,860,000

Tax Increment Cumulative Limit $ 1,500,000,000(1) Final Date to Collect Tax Increment May 16, 2040(1) (1) Pursuant to SB 107, this limit is no longer effective for purposes of paying the Bonds.

Location and Surrounding Area

Project Area No. 1 encompasses approximately 17.9 square miles (11,475 acres) accounting for approximately fifty percent (50%) of the total current corporate area of the City.

Project Area No. 2 encompasses approximately 4.9 square miles (3,130 acres) accounting for approximately fourteen percent (14%) of the total current corporate area of the City.

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Pass-Through Agreements and Obligations with Various Taxing Agencies

Project Area No. 1. Pursuant to the Redevelopment Law, the Prior Agency entered into tax sharing agreements or is required to make statutory pass-through payments with affected taxing agencies in Project Area No. 1. Although some of these pass-through agreements are expressly subordinated to the pledge of Pledged Tax Revenues to the payment of the Bonds, the Agency may receive such amounts only upon satisfaction of conditions set forth in the Dissolution Act as described under the heading “SECURITY FOR THE BONDS — Tax Increment Financing” and such payments are excluded from the calculation of Pledged Tax Revenues shown in the table “SUCCESSOR AGENCY PROJECTED PLEDGED TAX REVENUES” and under shown under the heading “Debt Service Coverage” below.

(1) Coachella Valley Unified School District***; (2) Coachella Valley Mosquito and Vector Control District**; (3) Coachella Valley Water District**; (4) County of Riverside; (5) Desert Sands Unified School District; (6) Desert Community College District; (7) County Superintendent of Schools/Office of Education*; (8) Coachella Valley Public Cemetery District*; (9) Desert Recreation District*; (10) Coachella Valley Resource Conservation District*; and (11) City of La Quinta*.

* Statutory, See Appendix F for anticipated start dates. ** Not subordinate. *** Obligation paid in full.

Project Area No. 2. Pursuant to the Redevelopment Law, the Prior Agency entered into tax sharing agreements or is required to make statutory pass-through payments with affected taxing agencies in Project Area No. 2. These pass-through agreements are not subordinated to the pledge of Pledged Tax Revenues to the payment of the Bonds.

(1) County of Riverside; (2) Desert Community College District; (3) Riverside County Superintendent of Schools/Office of Education; (4) Coachella Valley Water District; (5) Desert Recreation District; (6) Desert Sands Unified School District; (7) Coachella Valley Mosquito and Vector Control District; (8) Coachella Valley Resource Conservation District*; (9) Coachella Valley Public Cemetery District*; and (10) City of La Quinta*.

* Statutory, See Appendix F for anticipated start dates.

For additional information regarding Pass-Through Agreements and other obligations with taxing entities, see Appendix F — “PROJECTED TAX REVENUES REPORT” herein.

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Largest Local Secured Taxpayers

Set forth below are the ten largest secured property taxpayers in Project Area No. 1 based on the 2016-17 secured assessed value. These taxpayers represent approximately 6.7% of the 2016-17 secured assessed value in Project Area No. 1.

Property Owner Land Use Secured Value % of Total

LQR Properties Hotel $132,940,101 2.7% LQR Golf Country Club 51,929,864 1.0 RREF II CWC LAQ Residential Properties 31,386,819 0.6 Silverhawk Apartments LP Apartments 24,091,776 0.5 Village Resort Hotel 22,859,534 0.5 Old Town La Quinta LLC (1) Commercial 18,513,878 0.4 LQ Investment (1) Commercial 15,727,770 0.3 Tradition Golf Club Country Club 14,110,451 0.3 Quarry at La Quinta Inc. Country Club 12,132,478 0.2 Beazer Homes Holdings Corp Residential Properties 9,729,198 0.2 Total $333,421,869 6.7% (1) Appeal pending. See “PROPERTY TAXATION IN CALIFORNIA – Appeals of Assessed Values.”

Source: Harrell & Company Advisors, LLC.

Set forth below are the ten largest secured property taxpayers in Project Area No. 2 based on the 2016-17 secured assessed value. These taxpayers represent approximately 8.8% of the 2016-17 secured assessed value in Project Area No. 2.

Property Owner Land Use Secured Value % of Total

Inland American La Quinta Pavilion (1) Commercial $ 46,422,245 1.7% Wal Mart Real Estate Business Trust(1) Commercial 26,561,700 1.0 Health Care REIT Inc. (1) Commercial 25,381,249 0.9 Aventine Development Apartments 25,295,268 0.9 CSRA Komar Desert Center Commercial 24,150,763 0.9 Costco Wholesale Corp. Commercial 23,842,715 0.9 La Quinta Residence Senior Apartments 20,523,563 0.7 TD Desert Development LP Country Club 19,437,517 0.7 Target Corp. (1) Commercial 17,156,040 0.6 Culver Center Partners La Quinta Commercial 16,500,000 0.6 Total $245,271,060 8.8% (1) Appeal pending. See “PROPERTY TAXATION IN CALIFORNIA – Appeals of Assessed Values.”

Source: Harrell & Company Advisors, LLC.

Teeter Plan and Delinquency Rates

The Riverside County property tax delinquency rate has ranged from approximately 8% in 2009-10 decreasing to 1.52% in 2014-15. According to the County Auditor-Controller, the delinquency rate Countywide in Fiscal Year 2015-16 was 1.43%.

The City participates in the County’s “Teeter Plan,” which stabilizes property tax payments at 100 percent of anticipated receipts although deposits to the RPTTF are not part of the Teeter Plan. These

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deposits are payable based on first collection so consequently, delinquent property taxes do not impact the Agency’s tax increment revenues.

PLEDGED TAX REVENUES

Pledged Tax Revenues (as described in the section “SECURITY FOR THE BONDS” herein) are to be deposited in the Redevelopment Obligation Retirement Fund, and after transfers have been made by the Agency to the Debt Service Fund, administered by the Trustee and applied to the payment of the principal of and interest on the Bonds.

Schedule of Historical Pledged Tax Revenues

The following tables are a schedule of the taxable valuations for Fiscal Years 2012-13 through 2016-17 and Pledged Tax Revenues in the Project Areas for the Fiscal Years 2011-12 through 2015-16.

PROJECT AREA NO. 1 HISTORICAL ASSESSED VALUATIONS AND GROSS TAX INCREMENT REVENUES

2012-13 2013-14 2014-15 2015-16 2016-17

Secured Assessed Value $4,220,927,365 $4,376,573,490 $4,634,034,985 $4,835,885,419 $4,977,966,406 Unsecured Assessed Value 33,872,601 29,894,413 28,724,053 36,642,726 34,377,191 Total Assessed Valuation(1) 4,254,799,966 4,406,467,903 4,662,759,038 4,872,528,145 5,012,343,597 Base Year Valuation (199,398,233) (199,398,233) (199,398,233) (199,398,232) (199,398,232) Incremental Valuation $4,055,401,733 $4,207,069,670 $4,463,360,805 4,673,129,913 4,812,945,365 1% Tax Rate 1.000% 1.000% 1.000% 1.000% 1.000% Tax Increment Revenues 40,554,017 42,070,697 44,633,608 46,731,299 48,129,454 Unitary Revenue 468,931 499,528 498,721 521,106 521,000 Gross Tax Revenues $41,022,948 $42,570,225 $45,132,329 $47,252,405 $48,650,454 Actual Tax Revenues $41,220,251 $42,763,689 $45,882,054 $47,641,632 N/A

(1) Taxable Valuation as of August 20 equalized roll. Source: Harrell & Company Advisors LLC.

PROJECT AREA NO. 2 HISTORICAL ASSESSED VALUATIONS AND GROSS TAX INCREMENT REVENUES

2012-13 2013-14 2014-15 2015-16 2016-17

Secured Assessed Value $2,318,312,944 $2,426,052,754 $2,537,426,288 $2,671,084,328 $2,777,740,583 Unsecured Assessed Value 62,055,089 67,195,981 59,204,039 56,545,664 58,960,131 Total Assessed Valuation(1) 2,380,368,033 2,493,248,735 2,596,630,327 2,727,629,992 2,836,700,714 Base Year Valuation (95,182,755) (95,182,755) (95,182,755) (95,182,755) (95,182,755) Incremental Valuation $2,285,185,278 $2,398,065,980 $2,501,447,572 $2,632,447,237 $2,741,517,959 Basic Tax Rate/$100 1.000% 1.000% 1.000% 1.000% 1.000% Tax Increment Revenues 22,851,853 23,980,660 25,014,476 26,324,472 27,415,180 Unitary Revenue 174,162 188,891 190,272 199,116 199,000 Gross Tax Revenues $23,026,015 $24,169,551 $25,204,748 $26,523,588 $27,614,180 Actual Tax Revenues $22,893,004 $24,281,764 $25,548,831 $26,846,075 N/A

(1) Taxable Valuation as of August 20 equalized roll. Source: Harrell & Company Advisors LLC.

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Actual Tax Revenues and deductions for housing and tax sharing obligations for the Project Areas are shown below:

PROJECT AREA NO. 1 HISTORICAL PLEDGED TAX REVENUES

2011-12 2012-13 2013-14 2014-15 2015-16

Actual Tax Revenues $41,157,343 $41,220,251 $42,763,689 $45,882,054 $47,641,632 Housing Obligations (1) (5,480,234) (5,555,434) (5,512,447) (5,104,641) (5,092,590) Senior Tax Sharing (1,661,527) (1,382,643) (1,463,564) (1,674,926) (2,568,952) Available for Debt Service $34,015,582 $34,282,174 $35,787,678 $39,102,487 $39,980,090 Subordinate Tax Sharing (2) (16,702,023) (16,671,443) (17,395,260) (18,640,060) (19,393,004) Net Deposit to RPTTF $17,313,559 $17,610,731 $18,392,418 $20,462,427 $20,587,086

(1) Prorata share of the 2004 Loan and the 2011 Loan based on amounts from each Project Area that would have been required to be set aside

for Low and Moderate Income Housing. (1) Available if needed to pay debt service pursuant to Section 34183(b) of the Dissolution Act. Source: Harrell & Company Advisors LLC.

PROJECT AREA NO. 2 HISTORICAL PLEDGED TAX REVENUES

2011-12 2012-13 2013-14 2014-15 2015-16

Actual Tax Revenues $23,513,859 $22,893,004 $24,281,764 $25,548,831 $26,846,075 Housing Obligations (1) (3,130,947) (3,055,747) (3,130,125) (2,850,804) (2,858,627) Senior Tax Sharing (15,854,843) (15,684,399) (16,619,279) (17,473,783) (18,097,066) Available for Debt Service $ 4,528,069 $ 4,152,858 $ 4,532,360 $ 5,224,244 $ 5,890,382

(1) Prorata share of the 2004 Loan and the 2011 Loan based on amounts from each Project Area that would have been required to be set aside

for Low and Moderate Income Housing. Source: Harrell & Company Advisors LLC.

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Annual Debt Service

Set forth below is the annualized debt service for the term of the Bonds.

Bond Year Ending September 1 Principal Interest Debt Service

2017 $1,670,000.00 $860,194.54 $2,530,194.54 2018 1,310,000.00 1,220,107.76 2,530,107.76 2019 1,330,000.00 1,197,051.76 2,527,051.76 2020 1,365,000.00 1,169,999.56 2,534,999.56 2021 1,395,000.00 1,137,526.20 2,532,526.20 2022 1,430,000.00 1,100,154.16 2,530,154.16 2023 1,465,000.00 1,058,355.26 2,523,355.26 2024 1,510,000.00 1,012,603.30 2,522,603.30 2025 1,565,000.00 964,026.60 2,529,026.60 2026 1,620,000.00 911,333.06 2,531,333.06 2027 1,675,000.00 854,357.66 2,529,357.66 2028 1,730,000.00 793,772.92 2,523,772.92 2029 1,800,000.00 728,603.82 2,528,603.82 2030 1,870,000.00 657,197.80 2,527,197.80 2031 1,945,000.00 581,144.90 2,526,144.90 2032 2,030,000.00 501,069.26 2,531,069.26 2033 2,110,000.00 415,464.16 2,525,464.16 2034 2,630,000.00 323,320.46 2,953,320.46 2035 2,740,000.00 208,468.36 2,948,468.36 2036 575,000.00 84,428.56 659,428.56 2037 600,000.00 58,398.30 658,398.30 2038 630,000.00 31,236.30 661,236.30 2039 60,000.00 2,716.20 62,716.20 Total $35,055,000.00 $15,871,530.90 $50,926,530.90

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Set forth below is the combined annualized debt service for the term of the Senior Bonds, Parity Bonds, and Bonds.

Bond Year Ending

September 1 Senior Bonds 2013 Series A

Bonds 2013 Series B

Bonds Bonds Combined

Debt Service

2017 $5,260,350.00 $7,839,262.50 $1,907,528.00 $2,530,194.54 $17,537,335.04 2018 5,262,250.00 7,838,462.50 1,904,578.00 2,530,107.76 17,535,398.26 2019 5,263,650.00 7,843,962.50 1,906,058.00 2,527,051.76 17,540,722.26 2020 5,261,250.00 7,839,712.50 1,908,188.00 2,534,999.56 17,544,150.06 2021 5,264,750.00 7,840,712.50 1,908,788.00 2,532,526.20 17,546,776.70 2022 5,266,750.00 7,841,212.50 1,908,175.50 2,530,154.16 17,546,292.16 2023 5,262,000.00 7,840,712.50 1,907,457.50 2,523,355.26 17,533,525.26 2024 5,265,500.00 7,838,712.50 1,907,689.50 2,522,603.30 17,534,505.30 2025 5,261,500.00 7,839,712.50 1,906,119.50 2,529,026.60 17,536,358.60 2026 5,260,000.00 7,842,962.50 1,906,405.50 2,531,333.06 17,540,701.06 2027 5,260,500.00 7,842,712.50 1,908,285.50 2,529,357.66 17,540,855.66 2028 5,262,500.00 7,841,312.50 1,907,250.50 2,523,772.92 17,534,835.92 2029 5,260,500.00 7,839,812.50 1,902,053.00 2,528,603.82 17,530,969.32 2030 5,264,250.00 7,843,062.50 1,902,693.00 2,527,197.80 17,537,203.30 2031 5,263,000.00 7,840,062.50 1,909,282.00 2,526,144.90 17,538,489.40 2032 5,261,500.00 7,840,312.50 1,910,051.00 2,531,069.26 17,542,932.76 2033 5,259,250.00 392,812.50 - 2,525,464.16 8,177,526.66 2034 5,265,750.00 - - 2,953,320.46 8,219,070.46 2035 - - - 2,948,468.36 2,948,468.36 2036 - - - 659,428.56 659,428.56 2037 - - - 658,398.30 658,398.30 2038 - - - 661,236.30 661,236.30 2039 - - - 62,716.20 62,716.20 Total $94,725,250.00 $125,845,512.50 $30,510,602.50 $50,926,530.90 $302,007,895.90

Projected Taxable Valuation and Pledged Tax Revenues

The Agency has retained Harrell & Company Advisors LLC of Orange, California to provide projections of taxable valuation and Pledged Tax Revenues from developments in the Project Areas. The Agency believes the assumptions (set forth in the footnotes below and Appendix F — “PROJECTED TAX REVENUES REPORT”) upon which the projections are based are reasonable; however, some assumptions may not materialize and unanticipated events and circumstances may occur (see “RISK FACTORS”). Therefore, the actual Pledged Tax Revenues and Available Revenues received during the forecast period may vary from the projections and the variations may be material. The projected Pledged Tax Revenues and Available Revenues are as follows:

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SUCCESSOR AGENCY PROJECTED PLEDGED TAX REVENUES

Fiscal Year

Project No. 1 Net RPTTF Deposit(1) (2)

Project No. 2 Net RPTTF

Deposit

Tax RevenuesBefore

Senior Bonds Senior Bonds Debt Service

Pledged Tax

Revenues

Project No. 1 Subordinate

Tax Sharing(3) Net

Revenues

2017 $25,772,000 $8,635,000 $ 34,407,000 $(5,260,350 ) $29,146,650 $20,532,000 $ 49,678,650 2018 26,266,000 8,807,000 35,073,000 (5,262,250) 29,810,750 20,953,000 50,763,750 2019 26,771,000 8,985,000 35,756,000 (5,263,650) 30,492,350 21,381,000 51,873,350 2020 27,287,000 9,160,000 36,447,000 (5,261,250) 31,185,750 21,818,000 53,003,750 2021 27,812,000 9,336,000 37,148,000 (5,264,750) 31,883,250 22,264,000 54,147,250 2022 28,348,000 9,520,000 37,868,000 (5,266,750) 32,601,250 22,719,000 55,320,250 2023 28,894,000 9,704,000 38,598,000 (5,262,000) 33,336,000 23,184,000 56,520,000 2024 29,452,000 9,841,000 39,293,000 (5,265,500) 34,027,500 23,656,000 57,683,500 2025 30,022,000 10,026,000 40,048,000 (5,261,500) 34,786,500 24,139,000 58,925,500 2026 30,602,000 10,215,000 40,817,000 (5,260,000) 35,557,000 24,631,000 60,188,000 2027 31,193,000 10,407,000 41,600,000 (5,260,500) 36,339,500 25,134,000 61,473,500 2028 31,798,000 10,601,000 42,399,000 (5,262,500) 37,136,500 25,645,000 62,781,500 2029 32,414,000 10,804,000 43,218,000 (5,260,500) 37,957,500 26,167,000 64,124,500 2030 33,042,000 11,005,000 44,047,000 (5,264,250) 38,782,750 26,700,000 65,482,750 2031 33,681,000 11,214,000 44,895,000 (5,263,000) 39,632,000 27,244,000 66,876,000 2032 34,336,000 11,425,000 45,761,000 (5,261,500) 40,499,500 27,799,000 68,298,500 2033 35,001,000 11,641,000 46,642,000 (5,259,250) 41,382,750 28,365,000 69,747,750 2034 35,681,000 11,861,000 47,542,000 (5,265,750) 42,276,250 28,941,000 71,217,250 2035 - 12,087,000 12,087,000 - 12,087,000 - 12,087,000 2036 - 12,316,000 12,316,000 - 12,316,000 - 12,316,000 2037 - 12,549,000 12,549,000 - 12,549,000 - 12,549,000 2038 - 12,788,000 12,788,000 - 12,788,000 - 12,788,000 2039 - 13,030,000 13,030,000 - 13,030,000 - 13,030,000 2040 - 13,273,000 13,273,000 - 13,273,000 - 13,273,000

(1) Tax Revenues received from Project Area No. 1 will continue to be available after November 29, 2034, if needed, to pay enforceable obligations. See “THE PROJECT

AREAS – Redevelopment Plan Limitations.” (2) After deductions for subordinate Tax Sharing Agreements. (1) Available if needed to pay debt service pursuant to Section 34183(b) of the Dissolution Act. Source: Harrell & Company Advisors LLC and Hilltop Securities Inc.

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Debt Service Coverage

Set forth below is the estimated debt service coverage of the Bonds, the 2013 Parity Bonds, and the Senior Bonds using Available Revenues based on Fiscal Year 2016-17 assessed value without additional inflationary growth or new construction.

Bond Year Ending September 1

No Growth Available Revenues Before Senior Bonds

Debt Service (1) (2) Combined Annual

Debt Service(3) Combined Debt

Service Coverage

2017 $54,939,000 $17,537,335 3.13x 2018 54,939,000 17,535,398 3.13x 2019 54,939,000 17,540,722 3.13x 2020 54,939,000 17,544,150 3.13x 2021 54,939,000 17,546,777 3.13x 2022 54,939,000 17,546,292 3.13x 2023 54,939,000 17,533,525 3.13x 2024 54,939,000 17,534,505 3.13x 2025 54,939,000 17,536,359 3.13x 2026 54,939,000 17,540,701 3.13x 2027 54,939,000 17,540,856 3.13x 2028 54,939,000 17,534,836 3.13x 2029 54,939,000 17,530,969 3.13x 2030 54,939,000 17,537,203 3.13x 2031 54,939,000 17,538,489 3.13x 2032 54,939,000 17,542,933 3.13x 2033 54,939,000 8,177,527 6.72x 2034 54,939,000 8,219,070 6.68x 2035 8,635,000 2,948,468 2.93x 2036 8,635,000 659,429 13.09x 2037 8,635,000 658,398 13.12x 2038 8,635,000 661,236 13.06x 2039 8,635,000 62,716 137.68x

(1) Available Revenues before Senior Bonds include No Growth Available Revenues without netting Senior Bonds Debt

Service. (2) Includes amounts payable under Subordinate Tax Sharing Agreements which would be available if needed to pay debt

service pursuant to Section 38183(b) of the Dissolution Act. (3) Includes the Senior Bonds, 2013 Parity Bonds and Bonds. Source: Harrell & Company Advisors LLC and Hilltop Securities Inc.

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Set forth below is the estimated debt service coverage of the Bonds and the Senior Bonds using Pledged Tax Revenues based on Fiscal Year 2016-17 assessed value and 2% annual inflationary growth thereafter through maturity.

Bond Year Ending September 1

Available Revenues Before Senior Bonds (1) (2)

Combined Annual Debt Service(3)

Combined Debt Service Coverage

2017 $54,939,000 $17,537,335 3.13x 2018 56,026,000 17,535,398 3.20x 2019 57,137,000 17,540,722 3.26x 2020 58,265,000 17,544,150 3.32x 2021 59,412,000 17,546,777 3.39x 2022 60,587,000 17,546,292 3.45x 2023 61,782,000 17,533,525 3.52x 2024 62,949,000 17,534,505 3.59x 2025 64,187,000 17,536,359 3.66x 2026 65,448,000 17,540,701 3.73x 2027 66,734,000 17,540,856 3.80x 2028 68,044,000 17,534,836 3.88x 2029 69,385,000 17,530,969 3.96x 2030 70,747,000 17,537,203 4.03x 2031 72,139,000 17,538,489 4.11x 2032 73,560,000 17,542,933 4.19x 2033 75,007,000 8,177,527 9.17x 2034 76,483,000 8,219,070 9.31x 2035 12,087,000 2,948,468 4.10x 2036 12,316,000 659,429 18.68x 2037 12,549,000 658,398 19.06x 2038 12,788,000 661,236 19.34x 2039 13,030,000 62,716 207.76x

(1) Available Revenues before Senior Bonds include No Growth Available Revenues without netting Senior Bonds Debt

Service. (2) Includes amounts payable under Subordinate Tax Sharing Agreements which would be available if needed to pay debt

service pursuant to Section 38183(b) of the Dissolution Act. (3) Includes the Senior Bonds, 2013 Parity Bonds and Bonds. Source: Harrell & Company Advisors LLC and Hilltop Securities Inc.

CONCLUDING INFORMATION

Underwriting

Hilltop Securities Inc. (the “Underwriter”), has agreed, subject to certain customary conditions precedent to closing, to purchase the Bonds from the Agency at a price equal to $34,810,316.10 (which equals the par amount of the Bonds, less an underwriting discount of $244,683.90). The Underwriter intends to offer the Bonds to the public initially at the prices set forth on the inside cover page of this Official Statement, plus accrued interest from the dated date of the Bonds to their date of delivery, which prices may subsequently change without any requirement of prior notice.

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The Underwriter reserves the right to join with dealers and other underwriters in offering the Bonds to the public. The Underwriter may offer and sell the Bonds to certain dealers (including dealers depositing Bonds into investment trusts) at prices lower than the public offering prices, and such dealers may reallow any such discounts on sales to other dealers.

Verification of Mathematical Accuracy

Grant Thornton LLP (the “Verification Agent”), an independent accountant, upon delivery of the Bonds, will deliver a report on the mathematical accuracy of certain computations, contained in schedules provided to them that were prepared by the Underwriter, relating to the sufficiency of moneys deposited into the Escrow Fund created under each of the Escrow Agreements, to pay, when due, the principal, whether at maturity or upon prior redemption, interest and redemption premium requirements with respect to the Refunded Bonds.

The report of the Verification Agent will include the statement that the scope of its engagement is limited to verifying the mathematical accuracy of the computations contained in such schedules provided to it, and that it has no obligation to update its report because of events occurring, or date or information coming to its attention, subsequent to the date of its report.

Legal Opinion

The opinion of Rutan & Tucker LLP, Costa Mesa, California, Bond Counsel, approving the validity of the Bonds and stating that interest on the Bonds is excluded from personal income taxes of the State of California under present State income tax laws, will be furnished to the purchaser at the time of delivery of the Bonds at the expense of the Agency.

A copy of the proposed form of Bond Counsel’s final approving opinion with respect to the Bonds is attached hereto as Appendix B. The legal opinion is only as to legality and is not intended to be nor is it to be interpreted or relied upon as a disclosure document or an express or implied recommendation as to the investment quality of the Bonds.

In addition, certain legal matters will be passed on by Norton Rose Fulbright US LLP, Los Angeles, California, as Disclosure Counsel.

Tax Matters

State Tax Exemption. In the opinion of Rutan & Tucker, LLP, Costa Mesa, California, Bond Counsel, under existing law interest on the Bonds is exempt from personal income taxes of the State of California. Except as stated in the immediately preceding sentence, Bond Counsel will express no opinion as to any federal or state tax consequence of the receipt of interest on, or the ownership or disposition of, the Bonds. A copy of the form of opinion of Bond Counsel relating to the Bonds is included in “APPENDIX B.”

Federal Income Tax Considerations. The following is a general summary of certain United States federal income tax consequences of the purchase and ownership of the Bonds. The discussion is not specific as to any potential or actual investor. The discussion is based upon the Internal Revenue Code of 1986 (the “Code”), United States Treasury Regulations, rulings and decisions now in effect, all of which are subject to change (possibly, with retroactive effect) or possibly differing interpretations. No assurances can be given that future changes in the law will not alter the conclusions reached herein.

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The discussion below does not purport to deal with United States federal income tax consequences applicable to all categories of investors and generally does not address consequences relating to the disposition of a Bond by the owner thereof for federal income tax purposes. Further, the discussion below does not discuss all aspects of federal income taxation that may be relevant to a particular investor in the Bonds in light of the investor’s particular circumstances or to certain types of investors subject to special treatment under the federal income tax laws (including insurance companies, tax exempt organizations and other entities, financial institutions, broker-dealers, persons who have hedged the risk of owning the Bonds, traders in securities that elect to use a mark to market method of accounting, thrifts, regulated investment companies, pension and other employee benefit plans, partnerships and other pass through entities, certain hybrid entities and owners of interests therein, persons who acquire Bonds in connection with the performance of services, or persons deemed to sell Bonds under the constructive sale provisions of the Code). The discussion below also does not discuss any aspect of state, local, or foreign law or United States federal tax laws other than United States federal income tax law. The discussion below is limited to certain issues relating to initial investors who will hold the Bonds as “capital assets” within the meaning of section 1221 of the Code, and acquire such Bonds for investment and not as a dealer or for resale. The discussion below addresses certain federal income tax consequences applicable to owners of the Bonds who are United States persons within the meaning of section 7701(a)(30) of the Code (“United States persons”) and, except as discussed below, does not address any consequences to persons other than United States persons.

Prospective investors should note that no rulings have been or will be sought from the Internal Revenue Service (the “Service”) with respect to any of the United States federal income tax consequences discussed below, and no assurance can be given that the Service will not take contrary positions.

ALL PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS IN DETERMINING THE FEDERAL, STATE, LOCAL, FOREIGN AND ANY OTHER TAX CONSEQUENCES TO THEM FROM THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE BONDS.

Interest on the Bonds. Bond Counsel will rendered no opinion regarding the exclusion pursuant to section 103(a) of the Code of interest on the Bonds from gross income for federal income tax purposes. The Agency has taken no action to cause, and does not intend, interest on the Bonds to be excluded pursuant to section 103(a) of the Code from the gross income of the owners thereof for federal income tax purposes. The Agency intends to treat the Bonds as debt instruments for all federal income tax purposes, including any applicable reporting requirements under the Code. THE AGENCY EXPECTS THAT THE INTEREST PAID ON A BOND GENERALLY WILL BE INCLUDED IN THE GROSS INCOME OF THE OWNER THEREOF FOR FEDERAL INCOME TAX PURPOSES WHEN RECEIVED OR ACCRUED, DEPENDING UPON THE TAX ACCOUNTING METHOD OF THAT OWNER.

Disposition of Bonds, Inclusion of Acquisition Discount and Treatment of Market Discount. An owner of Bonds will generally recognize gain or loss on the sale or exchange of the Bonds equal to the difference between the sales price (exclusive of the amount paid for accrued interest), and the owner’s adjusted tax basis in the Bonds. Generally, the owner’s adjusted tax basis in the Bonds will be the owner’s initial cost, increased by original issue discount (if any) previously included in the owner’s income to the date of disposition. Any gain or loss generally will be capital gain or loss and will be long-term or short-term, depending on the owner’s holding period for the Bonds.

Under current law, a purchaser of a Bond who did not purchase that Bond in the initial public offering (a “subsequent purchaser”) generally will be required, on the disposition (or earlier partial principal payment) of such Bond, to recognize as ordinary income a portion of the gain (or partial principal payment), if any, to the extent of the accrued “market discount.” In general, market discount is

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the amount by which the price paid for such Bond by such a subsequent purchaser is less than the stated redemption price at maturity of that Bond (or, in the case of a Bond bearing original issue discount, is less than the “revised issue price” of that Bond (as defined below) upon such purchase), except that market discount is considered to be zero if it is less than one quarter of one percent of the principal amount times the number of complete remaining years to maturity. The Code also limits the deductibility of interest incurred by a subsequent purchaser on funds borrowed to acquire Bonds with market discount. As an alternative to the inclusion of market discount in income upon disposition, a subsequent purchaser may elect to include market discount in income currently as it accrues on all market discount instruments acquired by the subsequent purchaser in that taxable year or thereafter, in which case the interest deferral rule will not apply. The recharacterization of gain as ordinary income on a subsequent disposition of such Bonds could have a material effect on the market value of such Bonds.

Stated Interest and Reporting of Interest Payments. The stated interest on the Bonds will be included in the gross income, as defined in section 61 of the Code, of the owners thereof as ordinary income for federal income tax purposes at the time it is paid or accrued, depending on the tax accounting method applicable to the owners thereof. Subject to certain exceptions, the stated interest on the Bonds will be reported to the Service. Such information will be filed each year with the Service on Form 1099-INT (or other appropriate reporting form) which will reflect the name, address, and taxpayer identification number of the owner. A copy of such Form 1099-INT will be sent to each owner of a Bond for federal income tax purposes.

Original Issue Discount. If the first price at which a substantial amount of the Bonds of any stated maturity is sold (the “Issue Price”) is less than the face amount of those Bonds, the excess of the face amount of each Bond of that maturity over the Issue Price of that maturity is “original issue discount.” If the original issue discount on a Bond is less than the product of one quarter of one percent of its face amount times the number of complete years to its maturity, the original issue discount on that Bond will be treated as zero. Original issue discount on a Bond will be amortized over the life of the Bond using the “constant yield method” provided in the Treasury Regulations. As the original issue discount on a Bond accrues under the constant yield method, the owner of that Bond, regardless of its regular method of accounting, will be required to include such accrued amount in its gross income as interest. This can result in taxable income to the owners of the Bonds that exceeds actual cash distributions to the owners in a taxable year. To the extent that a Bond is purchased at a price that exceeds the sum of the Issue Price of that Bond and all original issue discount previously includible by any holder in gross income (the “revised issue price” of that Bond), the subsequent accrual of original issue discount to that purchaser must be reduced to reflect that premium.

The amount of the original issue discount that accrues on the Bonds each taxable year will be reported annually to the Service and to the owners. The portion of the original issue discount included in each owner’s gross income while the owner holds the Bonds will increase the adjusted tax basis of the Bonds in the hands of such owner.

Amortizable Bond Premium. An owner that purchases a Bond for an amount that is greater than its stated redemption price at maturity will be considered to have purchased the Bond with “amortizable bond premium” equal in amount to such excess. The owner may elect to amortize such premium using a constant yield method over the remaining term of the Bond and may offset interest otherwise required to be included in respect of the Bond during any taxable year by the amortized amount of such excess for the taxable year. Bond premium on a Bond held by an owner that does not make such an election will decrease the amount of gain or increase the amount of loss otherwise recognized on the sale, exchange, redemption or retirement of a Bond. However, if the Bond may be optionally redeemed after the beneficial owner acquires it at a price in excess of its stated redemption price at maturity, special rules would apply under the Treasury Regulations which could result in a deferral of the amortization of some

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bond premium until later in the term of the Bond. Any election to amortize bond premium applies to all taxable debt instruments held by the beneficial owner on or after the first day of the first taxable year to which such election applies and may be revoked only with the consent of the IRS.

Medicare Contribution Tax. Pursuant to Section 1411 of the Code, as enacted by the Health Care and Education Reconciliation Act of 2010, an additional tax is imposed on individuals beginning January 1, 2013. The additional tax is 3.8% of the lesser of (i) net investment income (defined as gross income from interest, dividends, net gain from disposition of property not used in a trade or business, and certain other listed items of gross income), or (ii) the excess of “modified adjusted gross income” of the individual over $200,000 for unmarried individuals ($250,000 for married couples filing a joint return and a surviving spouse). Owners of the Bonds should consult with their own tax advisor concerning this additional tax, as it may apply to interest earned on the Bonds as well as gain on the sale of a Bond.

Defeasance. Persons considering the purchase of a Bond should be aware that the bond documents permit the Authority under certain circumstances to deposit monies or securities with the Trustee, resulting in the release of the lien of the Indenture (a “defeasance”). A defeasance could result in the realization of gain or loss by the owner of a Bond for federal income tax purposes, without any corresponding receipt of monies by the owner. Such gain or loss generally would be subject to recognition for the tax year in which such realization occurs, as in the case of a sale or exchange. Owners of Bonds are advised to consult their own tax advisers with respect to the tax consequences resulting from such events.

Backup Withholding. Under section 3406 of the Code, an owner of the Bonds who is a United States person may, under certain circumstances, be subject to “backup withholding” of current or accrued interest on the Bonds or with respect to proceeds received from a disposition of the Bonds. This withholding applies if such owner of Bonds: (i) fails to furnish to the payor such owner’s social security number or other taxpayer identification number (“TIN”); (ii) furnishes the payor an incorrect TIN; (iii) fails to properly report interest, dividends, or other “reportable payments” as defined in the Code; or (iv) under certain circumstances, fails to provide the payor with a certified statement, signed under penalty of perjury, that the TIN provided to the payor is correct and that such owner is not subject to backup withholding.

Backup withholding will not apply, however, with respect to payments made to certain owners of the Bonds. Owners of the Bonds should consult their own tax advisors regarding their qualification for exemption from backup withholding and the procedures for obtaining such exemption.

Withholding on Payments to Nonresident Alien Individuals and Foreign Corporations. Under sections 1441 and 1442 of the Code, nonresident alien individuals and foreign corporations are generally subject to withholding at the current rate of 30% (subject to change) on periodic income items arising from sources within the United States, provided such income is not effectively connected with the conduct of a United States trade or business. Assuming the interest income of such an owner of the Bonds is not treated as effectively connected income within the meaning of section 864 of the Code, such interest will be subject to 30% withholding, or any lower rate specified in an income tax treaty, unless such income is treated as portfolio interest. Interest will be treated as portfolio interest if: (i) the owner provides a statement to the payor certifying, under penalties of perjury, that such owner is not a United States person and providing the name and address of such owner; (ii) such interest is treated as not effectively connected with the owner’s United States trade or business; (iii) interest payments are not made to a person within a foreign country that the Service has included on a list of countries having provisions inadequate to prevent United States tax evasion; (iv) interest payable with respect to the Bonds is not deemed contingent interest within the meaning of the portfolio debt provision; (v) such owner is not a controlled foreign corporation, within the meaning of section 957 of the Code; and (vi) such owner is

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not a bank receiving interest on the Bonds pursuant to a loan agreement entered into in the ordinary course of the bank’s trade or business.

Assuming payments on the Bonds are treated as portfolio interest within the meaning of sections 871 and 881 of the Code, then no withholding under section 1441 and 1442 of the Code and no backup withholding under section 3406 of the Code is required with respect to owners or intermediaries who have furnished Form W-8 BEN, Form W-8 EXP or Form W-8 IMY, as applicable, provided the payor does not have actual knowledge or reason to know that such person is a United States person.

The preceding discussion of certain United States federal income tax consequences is for general information only and is not tax advice. Accordingly, each investor should consult its own tax advisor as to particular tax consequences to it of purchasing, owning, and disposing of the Bonds, including the applicability and effect of any state, local, or foreign tax laws, and of any proposed changes in applicable laws.

Litigation

There is no action, suit or proceeding known to the Agency to be pending and notice of which has been served upon and received by the Agency, or threatened, restraining or enjoining the execution or delivery of the Bonds or the Indenture or in any way contesting or affecting the validity of the foregoing or any proceedings of the Agency taken with respect to any of the foregoing.

Legality for Investment in California

The Redevelopment Law provides that obligations authorized and issued under the Redevelopment Law will be legal investments for all banks, trust companies and savings banks, insurance companies, and various other financial institutions, as well as for trust funds. The Bonds are also authorized security for public deposits under the Redevelopment Law.

The Superintendent of Banks of the State of California has previously ruled that obligations of a redevelopment agency are eligible for savings bank investment in California.

Rating

S&P Global Ratings (“S&P”) has assigned its municipal bond rating of “AA-” on the Bonds. This rating reflects the view of S&P as to the credit quality of the Bonds. The rating reflects only the view of S&P, and explanation of the significance of the rating may be obtained from S&P Global Ratings, 55 Water Street, New York, New York 10041 (212) 438-2124. There is no assurance that the rating will continue for any given period of time or that it will not be revised downward or withdrawn entirely by S&P, if in the judgment of S&P, circumstances so warrant. Any such downward revision or withdrawal of the rating may have an adverse effect on the market price of the Bonds.

A securities rating is not a recommendation to buy, sell or hold securities and may be subject to withdrawal or revision at any time.

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Continuing Disclosure

Pursuant to a Continuing Disclosure Agreement with Willdan Financial Services, as Dissemination Agent (the “Disclosure Agreement”), the Agency has agreed to provide, or cause to be provided, to the Municipal Securities Rulemaking Board (“MSRB”) certain annual financial information and operating data relating to the Agency (the “Annual Report”) no later than March 31 of each year, commencing March 31, 2017, and to provide notices of the occurrence of certain enumerated events. The Annual Report and the notices of enumerated events will be filed by the Agency or its Dissemination Agent with the Municipal Securities Rulemaking Board through the Electronic Municipal Marketplace Access (“EMMA”) website. The specific nature of the information to be contained in the Annual Report and the notice of material events is set forth in “APPENDIX D – FORM OF CONTINUING DISCLOSURE AGREEMENT” herein.

During the last five years, the Agency has complied in all material respects with its continuing disclosure undertakings.

Miscellaneous

All of the preceding summaries of the Indenture, the Bond Law, the Dissolution Act, the Redevelopment Law, other applicable legislation, the Redevelopment Plans for the Project Areas, agreements and other documents are made subject to the provisions of such documents respectively and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the Agency for further information in connection therewith.

This Official Statement does not constitute a contract with the purchasers of the Bonds. Any statements made in this Official Statement involving matters of opinion or estimates, whether or not so expressly 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.

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


By: /s/ Frank J. Spevacek Executive Director

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APPENDIX A

DEFINITIONS

The following are definitions of certain terms contained in the Indenture and use in this Official Statement.

“Act” means Article 11 (commencing with Section 53580) of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code.

“AGM” means Assured Guaranty Municipal Corp.

“Alternative Reserve Account Security” means an irrevocable standby or direct pay letter of credit or surety bond issued by a commercial bank or insurance company and deposited with the Trustee pursuant to the Indentures, provided that all of the following requirements are met at the time the Successor Agency determines delivery thereof to the Trustee: (a) the long-term credit rating of such bank or the claims paying rating of such insurance company is, at the time of commencement, A+ or better from S & P; (b) such letter of credit or surety bond has a term of at least 12 months; (c) such letter of credit or surety bond has a stated amount at least equal to the portion of the Reserve Requirement with respect to which funds are proposed to be released pursuant to the Indentures; and (d) the Trustee is authorized pursuant to the terms of such letter of credit or surety bond to draw thereunder an amount equal to any deficiencies which may exist from time to time in the Interest Account and the Principal Account or the purpose of making payments required pursuant to the Indentures.

“Annual Debt Service” means, for any Bond Year, the principal and interest, including scheduled sinking fund payments, payable on the Outstanding Bonds in such Bond Year.

“Bond” or “Bonds” means, collectively, the Successor Agency to the La Quinta Redevelopment Agency, La Quinta Redevelopment Project Areas No. 1 and 2, Subordinate Tax Allocation Refunding Bonds, 2016 Taxable Series A and any refunding bonds or obligations issued therefor.

“Bond Counsel” means Rutan & Tucker, LLP, an attorney or firm of attorneys acceptable to the Successor Agency of nationally recognized standing in matters pertaining to the federal tax exemption of interest on bonds issued by states and political subdivisions.

“Bondowner” or “Owner”, or any similar term, means any person who shall be the registered owner or his duly authorized attorney, trustee or representative of any Outstanding Bond.

“Bond Year” means the twelve (12) month period commencing on September 2 of each year, provided that the first Bond Year shall extend from the Delivery Date to September l, 2017.

“Business Day” means any day other than (i) a Saturday or Sunday or legal holiday or a day on which banking institutions in the city in which the corporate trust office of the Trustee is located are authorized to close, or (ii) a day on which the New York Stock Exchange is closed.

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“Certificate” or “Certificate of the Successor Agency” means a Written Certificate of the Successor Agency.

“Chair” means the chair of the Successor Agency or other duly appointed officer of the Successor Agency authorized by the Successor Agency by resolution or bylaw to perform the functions of the chair in the event of the chair’s absence or disqualification.

“City” means the City of La Quinta, State of California.

“Code” means the Internal Revenue Code of 1986, as amended, and any regulations, rulings, judicial decisions, and notices, announcements, and other releases of the United States Treasury Department or Internal Revenue Service interpreting and construing it.

“Computation Year” means, with respect to the Bonds, the period beginning on the Delivery Date and ending on September l, 2017, and each 12-month period ending on September 1 thereafter until there are no longer any Bonds Outstanding.

“Continuing Disclosure Agreement” means that certain Continuing Disclosure Agreement among the Successor Agency and Willdan Financial Services dated the Delivery Date as originally executed and as it may be amended from time to time in accordance with the terms thereof.

“Corporate Trust Office” means the corporate trust office of the Trustee, currently at U.S. Bank National Association, except for exchange, surrender and payment of the Bonds, in which case “Trust Office” shall refer to the corporate trust office of U.S. Bank National Association in St. Paul, Minnesota, or such other or additional offices as may be specified to the Successor Agency by the Trustee in writing.

“Costs of Issuance” means the costs and expenses incurred in connection with the issuance and sale of the Bonds including the initial fees and expenses of the Trustee, rating agency fees, legal fees and expenses, costs of printing the Bonds and Official Statement, staff time and costs, fees of financial consultants, escrow fees and costs, bond insurance premiums, and other fees and expenses set forth in a Written Certificate of the Successor Agency.

“County” means the County of Riverside, California.

“Defeasance Securities” means (1) cash, (2) non-callable direct obligations of the United States of America (“Treasuries”), (3) evidences of ownership of proportionate interests in future interest and principal payments on Treasuries held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying Treasuries are not available to any person claiming through the custodian or to whom the custodian may be obligated, (4) subject to the prior written consent of the Insurer, pre-refunded municipal obligations rated “AAA” and “Aaa” by S&P and Moody’s, respectively, or (5) subject to the prior written consent of the Insurer, securities eligible for “AAA” defeasance under then existing criteria of S & P or any combination, unless the Insurer otherwise approves.

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“Delivery Date” means the date on which the Bonds are delivered to the initial purchaser thereof.

“Dissolution Act” means Parts 1.8 (commencing with Section 34161) and 1.85 (commencing with Section 34170) of Division 24 of the Health and Safety Code of the State of California.

“DOF” means the California Department of Finance.

“DTC” means The Depository Trust Company, New York, New York, and its successors and assigns.

“Escrow Agreements” means, collectively, the escrow agreements, and each of them, for each of the Refunded Bonds.

“Escrow Bank” means U.S. Bank National Association.

“Escrow Fund” means the Escrow Fund created pursuant to each of the Escrow Agreements for each of the Refunded Bonds.

“First Supplemental Indenture” or “First Supplement” means the First Supplemental Indenture of Trust, dated as of December 1, 2013, by and between the Successor Agency and U.S. Bank National Association.

“Fiscal Year” means any twelve (12) month period beginning on July 1st and ending on the next following June 30th.

“Fund or Account” means any of the funds or accounts referred to in the Indenture.

“Indenture” means that certain Indenture of Trust dated as of December 1, 2013, as supplemented by a Second Supplemental Indenture of Trust, dated as of October 1, 2016, between the Successor Agency and U.S. Bank National Association, as amended or supplemented from time to time.

“Independent Financial Consultant” “Independent Engineer” “Independent Certified Public Accountant” or “Independent Redevelopment Consultant” means any individual or firm engaged in the profession involved, appointed by the Successor Agency, and who, or each of whom, has a favorable reputation in the field in which his/her opinion or certificate will be given, and:

(1) is in fact independent and not under domination of the Successor Agency;

(2) does not have any substantial interest, direct or indirect, with the Successor Agency, other than as original purchaser of the Bonds; and

(3) is not connected with the Successor Agency as an officer or employee of the Successor Agency, but who may be regularly retained to make reports to the Successor Agency.

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“Insurance Policy” means the insurance policy issued by the Insurer guaranteeing the scheduled payment of principal of and interest on the Insured Series 2013 Bonds when due.

“Insured 2013 Series Bonds” means any and all, as the case may be, of the 2013 Series A Bonds maturing on September 1 of the years 2032 and 2033 and all of the 2013 Series B Bonds.

“Insurer” means Assured Guaranty Municipal Corp., a New York State Insurance Company, or any successor thereto or assignee thereof.

“Interest Payment Date” means March 1 and September 1, commencing March 1, 2017 so long as any of the Bonds remain Outstanding hereunder.

“La Quinta Redevelopment Agency” or “La Quinta Agency” means the La Quinta Redevelopment Agency.

“Law” means the Community Redevelopment Law of the State of California as cited in the recitals hereof.

“2011 Loan Agreement” means, collectively, that Loan Agreement by and between the La Quinta Redevelopment Agency and La Quinta Financing Authority, dated as of February 3, 2004, as amended and modified pursuant to the First Supplemental Loan Agreement, by and among the La Quinta Redevelopment Agency, the La Quinta Financing Authority, and U.S. Bank National Association, as Fiscal Agent, dated as of June 1, 2004 and the Second Supplemental Loan Agreement, by and among the La Quinta Redevelopment Agency, the La Quinta Financing Authority, and U.S. Bank National Association, as Fiscal Agent, dated as of March 1, 2011, relating to $28,850,000 2011 Project Areas No. 1 and 2 Subordinate Housing Loan.

“Maximum Annual Debt Service” means the largest of the sums obtained for any Bond Year after the computation is made, by totaling the following for each such Bond Year:

(1) The principal amount of all Bonds and Parity Bonds, if any, and the amount of any sinking account payments payable in such Bond Year; and

(2) The interest which would be due during such Bond Year on the aggregate principal amount of Bonds and Parity Bonds which would be outstanding in such Bond Year if the Bonds and Parity Bonds outstanding on the date of such computation were to mature or be redeemed in accordance with the maturity schedules for the Bonds and Parity Bonds. At the time and for the purpose of making such computation, the amount of term Bonds and term Parity Bonds already retired in advance of the above-mentioned schedules shall be deducted pro rata from the remaining amounts thereon.

“Opinion of Counsel” means a written opinion of an attorney or firm of attorneys of favorable reputation in the field of municipal bond law. Any opinion of such counsel may be based upon, insofar as it is related to factual matters, information which is in the possession of the Successor Agency as shown by a certificate or opinion of, or representation by, an officer or officers of the Successor Agency, unless such counsel knows, or in the exercise of reasonable

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care should have known, that the certificate, opinion or representation with respect to the matters upon which his or her opinion may be based, as aforesaid, is erroneous.

“Outstanding” means, when used as of any particular time with reference to Bonds, subject to the provisions of this Indenture, all Bonds theretofore issued and authenticated under this Indenture except:

(a) Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation;

(b) Bonds paid or deemed to have been paid; and

(c) Bonds in lieu of or in substitution for which other Bonds shall have been authorized, executed, issued and authenticated pursuant to this Indenture.

“Oversight Board” means the oversight board duly constituted from time to time pursuant to Section 34179 of the Dissolution Act.

“Parity Bonds” means the 2013 Series A Bonds and the 2013 Series B Bonds and any additional tax allocation bonds (including, without limitation, bonds, notes, loans, interim certificates, debentures or other obligations) issued by the Successor Agency as permitted by Section 3.4 of the Indenture.

“Pass-Through Agreements” means the agreements entered into on or prior to the date hereof pursuant to Section 33401 of the Health and Safety Code with (i) the County of Riverside; (ii) Desert Sands Unified School District; (iii) Coachella Valley Water District; (iv) Desert Community College District; (v) County of Riverside Superintendent of Schools; (vi) Coachella Valley Mosquito and Vector Control District; and (vii) Desert Recreation District.

“Paying Agent” means any paying agent appointed by the Successor Agency pursuant to the Indenture.

“Permitted Investments” means:

(a) For all purposes, including defeasance investments in refunding escrow accounts.

(1) Defeasance Securities

(b) For all purposes other than defeasance investments in refunding escrow accounts.

(1) Obligations of any of the following federal agencies which obligations represent the full faith and credit of the United States of America, including:

- Export-Import Bank

- Rural Economic Community Development Administration

- U.S. Maritime Administration

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- Small Business Administration

- U.S. Department of Housing & Urban Development (PHAs)

- Federal Housing Administration -Federal Financing Bank

(2) Direct obligations of any of the following federal agencies which obligations are not fully guaranteed by the full faith and credit of the United States of America:

- Senior debt obligations issued by the Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC).

- Obligations of the Resolution Funding Corporation (REFCORP)

- Senior debt obligations of the Federal Home Loan Bank System

- Senior debt obligations of other Government Sponsored Agencies

(3) U.S. dollar denominated deposit accounts, federal funds and bankers’ acceptances with domestic commercial banks, which may include the Trustee, its parent holding company, if any, and their affiliates, which have a rating on their short term certificates of deposit on the date of purchase of “P-1” by Moody’s and “A-1” or “A-1+” by S&P and maturing not more than 360 calendar days after the date of purchase. (Ratings on holding companies are not considered as the rating of the bank);

(4) Commercial paper which is rated at the time of purchase in the single highest classification, “P-1” by Moody’s and “A-1+” by S&P and which matures not more than 270 calendar days after the date of purchase;

(5) Investments in a money market fund, including those of an affiliate of the Trustee rated “AAAm” or “AAAm-G” or better by S&P;

(6) Pre-refunded Municipal Obligations defined as follows: any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice; and

(A) which are rated, based on an irrevocable escrow account or fund (the “escrow”), in the highest rating category of Moody’s or S&P or any successors thereto; or

(B) (i) which are fully secured as to principal and interest and redemption premium, if any, by an escrow consisting only of cash or obligations described in paragraph (2) of the definition of Defeasance Securities, which escrow may be applied only to the payment of such principal of and interest and redemption premium, if any, on such bonds or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate, and (ii) which escrow is sufficient, as verified by a nationally recognized independent certified public accountant, to pay principal of and interest

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and redemption premium, if any, on the bonds or other obligations described in this paragraph on the maturity date or dates specified in the irrevocable instructions referred to above, as appropriate.

(7) Municipal Obligations rated “Aaa/AAA” or general obligations of States with a rating of “A2/A” or higher by both Moody’s and S&P.

(8) Investment Agreements with an entity rated “A” or higher by S&P and otherwise acceptable to the Insurer; and;

(9) The Local Agency Investment Fund of the State or any state administered pooled investment fund in which the Successor Agency is statutorily permitted or required to invest will be deemed a permitted investment.

(c) The value of the above investments shall be determined as follows:

(1) For the purpose of determining the amount in any fund, all Permitted Investments credited to such fund shall be valued at fair market value. The Trustee shall determine the fair market value based on accepted industry standards and from accepted industry providers. Accepted industry providers shall include but are not limited to pricing services provided by Financial Times Interactive Data Corporation, and Bank of America Merrill Lynch.

(2) As to certificates of deposit and bankers’ acceptances: the face amount thereof, plus accrued interest thereon; and

(3) As to any investment not specified above: the value thereof established by prior agreement among the Successor Agency and the Trustee.

“Pledged Tax Revenues” means the portion of the monies deposited from time to time in the Redevelopment Property Tax Trust Fund as provided in paragraph (2) of subdivision (a) of Section 34183 of the Dissolution Act less the amount required to pay debt service on the Senior Bonds. If, and to the extent, that the provisions of Section 34172 or paragraph (2) of subdivision (a) of Section 34183 are invalidated by a final judicial decision, then Pledged Tax Revenues shall include all tax revenues allocated to the payment of indebtedness pursuant to Health & Safety Code Section 33670 or such other section as may be in effect at the time providing for the allocation of tax increment revenues in accordance with Article XVI, Section 16 of the California Constitution.

“Prior Law” means the Community Redevelopment Law of the State of California (commencing with Health and Safety Code Section 33000) as it existed on or before June 29, 2011.

“Real Property Tax Trust Fund” or “RPTTF” means the fund by that name established pursuant to Health & Safety Code Section 34170.5 (b) and administered by the County auditor-controller.

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“Recognized Obligation Payment Schedule” means a Recognized Obligation Payment Schedule, each prepared and approved from time to time pursuant to subdivision (l) of Section 34177 of the Dissolution Act.

“Redevelopment Obligation Retirement Fund” means the fund by that name established pursuant to Health & Safety Code Section 34170.5 (b) and administered by the Successor Agency.

“Redevelopment Project Area No. 1 Plan” means the La Quinta Redevelopment Plan for the project designated as the “La Quinta Redevelopment Project Area No. 1,” adopted and approved by Ordinance No. 43, which became effective on December 29, 1983, together with any amendments thereof heretofore or hereafter duly enacted pursuant to the law.

“Redevelopment Project Area No. 2 Plan” means the La Quinta Redevelopment Plan for the project designated as the “La Quinta Redevelopment Project Area No. 2,” approved and adopted by the City Council of the City by Ordinance No. 139, on May 16, 1989, and includes any amendments thereof heretofore or hereafter made pursuant to the law.

“Redevelopment Project Area No. 1,” means the project area formed by the Redevelopment Project Area No. 1 Plan.

“Redevelopment Project Area No. 2,” means the project area formed pursuant to the Redevelopment Project Area No. 2 Plan.

“Redevelopment Project Areas” or “Redevelopment Projects” or “Project Areas” means the Project Areas defined and described in the Redevelopment Plan for Redevelopment Project Area No. 1 and Redevelopment Project Area No. 2.

“Refunded Bonds” means, collectively, the 2011 Project Area No. 2 Taxable Bonds and the 2011 Taxable Housing Bonds.

“Regular Record Date” means the fifteenth day of the month preceding any Interest Payment Date whether or not such day is a Business Day.

“Report” means a document in writing signed by an Independent Financial Consultant and including:

(a) A statement that the person or firm making or giving such Report has read the pertinent provisions of the Indenture to which such Report relates;

(b) A brief statement as to the nature and scope of the examination or investigation upon which the Report is based; and

(c) A statement that, in the opinion of such person or firm, sufficient examination or investigation was made as is necessary to enable said consultant to express an informed opinion with respect to the subject matter referred to in the Report.

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“Reserve Account Surety Bond” or “Reserve Policy” means the Municipal Bond Debt Service Insurance Policy issued by the Insurer for the credit of the Bonds Reserve Account.

“Reserve Requirement” means, as of the date of computation, an amount equal to the combined lesser of (i) Maximum Annual Debt Service on the Bonds and any Parity Bonds, (ii) 10% of the net proceeds of the Bonds and any Parity Bonds, or (iii) 125% of the Annual Debt Service on all Bonds and Parity Bonds Outstanding.

“S&P” or “Standard and Poor’s” means Standard & Poor’s Ratings Group, New York, New York, and its successors and assigns.

“Senior Bonds” means the 2014 Bonds and any refunding bonds or obligations issued therefor.

“Senior Bond Indenture” means the 2014 Bonds Indenture.

“Senior Bonds Reserve Account” means the Reserve Account created in relation to the Senior Bonds.

“State” means the State of California, United States of America.

“Subordinated Pass-Through Agreements” means all of the Pass-Through Agreements except those with the Coachella Valley Mosquito and Vector Control District and the Coachella Valley Water District.

“Subordinated Pass-Through Amounts” means tax revenues allocated to the taxing entities identified in the Subordinated Pass-Through Agreements.

“Supplemental Indenture” means any indenture then in full force and effect which has been duly adopted by the Successor Agency under the Dissolution Act, or any act supplementary thereto or amendatory thereof, at a meeting of the Successor Agency duly convened and held, of which a quorum was present and acted thereon, amendatory of or supplemental to this Indenture or any indebtedness entered into in connection with the issuance of Parity Bonds; but only if and to the extent that such Supplemental Indenture is specifically authorized hereunder.

“Tax Certificate” means that certain Tax Certificate executed by the Successor Agency with respect to the 2013 Series A Bonds.

“Trustee” means U.S. Bank National Association, a national banking association, its successors and assigns, and any other corporation or association which may at any time be substituted in its place, as provided in this Indenture.

“2011 Loan Obligation” means the Prior Agency’s loan obligation under the Loan Agreement, dated February 3, 2004 as supplemented by the Second Supplemental Loan Agreement, dated as of March 1, 2011.

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“2011 Project Area No. 2 Taxable Bonds” means the $6,000,000 La Quinta Redevelopment Agency, La Quinta Redevelopment Project Area No. 2 Subordinate Taxable Tax Allocation Bonds, Series 2011.

“2011 Taxable Housing Bonds” means the $28,850,000 La Quinta Financing Authority, Local Agency Subordinate Taxable Revenue Bonds, 2011 Series A.

“2011 Project Area No. 2 Taxable Bonds Indenture” means the Indenture of Trust dated as of March 1, 2011, by and between the La Quinta Redevelopment Agency and U.S. Bank National Association, as Trustee, relating to $6,000,000 La Quinta Redevelopment Agency, La Quinta Redevelopment Project Area No. 2 Subordinate Taxable Tax Allocation Bonds, Series 2011.

“2011 Taxable Housing Bonds Indenture” means that Indenture of Trust, dated as of March 1, 2011, by and between the La Quinta Financing Authority and U.S. Bank National Association, as Trustee, relating to $28,850,000 La Quinta Financing Authority Local Agency Subordinate Taxable Revenue Bonds, 2011 Series A.

“2013 Series A Bonds” means the Successor Agency to the La Quinta Redevelopment Agency, La Quinta Redevelopment Project Areas No. 1 and 2, Subordinate Tax Allocation Refunding Bonds, 2013 Series A of which $85,590,000 are currently outstanding.

“2013 Series B Bonds” means the Successor Agency to the La Quinta Redevelopment Agency, La Quinta Redevelopment Project Areas No. 1 and 2, Subordinate Tax Allocation Refunding Bonds, 2013 Taxable Series B of which $20,130,000 are currently outstanding.

“2014 Bonds” means the $65,600,000 Successor Agency to the La Quinta Redevelopment Agency, La Quinta Redevelopment Project Areas No. 1 and 2, Tax Allocation Refunding Bonds, 2014 Series A of which $61,670,000 are currently outstanding.

“2014 Bonds Indenture” means the Indenture of Trust, dated as of June 1, 2014, by and between the Successor Agency and the Trustee relating to the 2014 Bonds.

“Written Request of the Successor Agency” or “Written Certificate of the Successor Agency” means a request or certificate, in writing signed by the Executive Director, Secretary or Finance Officer of the Successor Agency or by any other officer of the Successor Agency duly authorized by the Successor Agency for that purpose.

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APPENDIX B

FORM OF BOND COUNSEL OPINION

Upon issuance of the Bonds, Rutan & Tucker LLP, Bond Counsel, proposes to render its final approving opinion in substantially the following form:

December 22, 2016

Successor Agency to the La Quinta Redevelopment Agency La Quinta, California

Re: $35,055,000 Successor Agency to the La Quinta Redevelopment Agency, La Quinta Redevelopment Project Areas No. 1 and 2, Subordinate Tax Allocation Refunding Bonds, 2016 Taxable Series A

Honorable Members of the Agency:

We have examined certified copies of proceedings of the Successor Agency to the La Quinta Redevelopment Agency (the “Successor Agency”), the Oversight Board to the Successor Agency (the “Oversight Board”), the Department of Finance of the State of California (“DOF”) and other information and documents submitted to us relative to the issuance and sale by the Successor Agency of its La Quinta Redevelopment Project Areas No. 1 and 2, Subordinate Tax Allocation Refunding Bonds, 2016 Taxable Series A in the aggregate principal amount of $35,055,000 (the “Bonds”) and such other information and documents as we consider necessary to render this opinion. In rendering this opinion, we also have relied upon certain representations of fact and certifications made by the Successor Agency, the Trustee, the Underwriter of the Bonds and others. We have not undertaken to verify through independent investigation the accuracy of the representations and certifications relied upon by us.

The Bonds have been issued pursuant to the Constitution and laws of the State of California (the “State”), including Article 11 of Chapter 3 (commencing with Section 53580) of Part 1 of Division 2 of Title 5 of the California Government Code (the “Bond Law”), the provisions of Health & Safety Code Section 34177.5, a resolution of the Successor Agency adopted on July 5, 2016 (the “Successor Agency Resolution”) and a resolution of the Oversight Board adopted on July 6, 2016 (the “Oversight Board Resolution”), which action was approved by the DOF on September 12, 2016, and in accordance with the terms and conditions of a Second Supplemental Indenture of Trust, dated as of October 1, 2016 (the “Indenture”), by and between the Successor Agency and U.S. Bank National Association (the “Trustee”). All terms not defined herein have the meanings ascribed to those terms in the Indenture.

The Bonds are dated the date of delivery, and mature on the dates and bear interest at the rates per annum set forth in the Indenture. The Bonds are registered Bonds in the form set forth in the Indenture, redeemable in the amounts, at the times and in the manner provided for in the Indenture.

Based upon our examination of all of the foregoing, and in reliance thereon, and on all matters of fact as we deem relevant under the circumstances, and upon consideration of applicable laws, we are of the opinion that:

1. The Bonds have been duly and validly authorized by the Successor Agency and constitute valid and binding special obligations of the Successor Agency, are issued on a subordinate basis to the $65,600,000 Successor Agency to the La Quinta Redevelopment Agency, La Quinta Project

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Areas Nos. 1 and 2, Tax Allocation Refunding Bonds, 2014 Series A (the “2014 Bonds or the “Senior Bonds”) and on a parity basis with the $97,190,000 Successor Agency to the La Quinta Redevelopment Agency La Quinta Redevelopment Project Areas No. 1 and 2, Subordinate Tax Allocation Refunding Bonds, 2013 Series A (the “2013 Series A Bonds”) and the $23,055,000 Successor Agency to the La Quinta Redevelopment Agency, La Quinta Redevelopment Project Areas No. 1 and 2, Subordinate Tax Allocation Refunding Bonds, 2013 Taxable Series B (the “2013 Series B Bonds”) (collectively, the “2013 Series A Bonds and the 2013 Series B Bonds, the “2013 Bonds” or the “Parity Bonds”).

The Bonds are being issued to refinance the Prior Agency’s $6,000,000 La Quinta Redevelopment Agency, La Quinta Redevelopment Project Area No. 2 Subordinate Taxable Tax Allocation Bonds, Series 2011 (the “2011 Project Area No. 2 Bonds”) and the $28,850,000 La Quinta Financing Authority, Local Agency Subordinate Taxable Revenue Bonds, 2011 Series A (the “2011 Taxable Housing Bonds”) the proceeds of which were loaned to the Prior Agency pursuant to the terms of a loan agreement dated February 3, 2004 and a Second Supplemental Indenture, dated as of March 1, 2011 (the “2011 Loan Obligation”) (collectively, the “Refunded Bonds”).

The Bonds are payable from and secured by the Pledged Tax Revenues, as defined in the Indenture, to be derived from the La Quinta Redevelopment Project Area No. 1 and La Quinta Redevelopment Project Area No. 2 (the “Project Areas”). Taxes levied on the property within the Project Areas on that portion of the taxable valuation over and above the taxable valuation of the base year property tax rolls deposited in the Redevelopment Property Tax Trust Fund and, to the extent they constitute Pledged Tax Revenues, shall be deposited in the Redevelopment Obligation Retirement Fund, and administered by the Agency and the Trustee in accordance with the Indenture.

The Bonds are enforceable in accordance with their terms and the terms of the Indenture, except to the extent that enforceability may be limited by moratorium, bankruptcy, reorganization, fraudulent conveyance or transfer, insolvency or other similar laws affecting creditors’ rights to the application of equitable principles if equitable remedies are sought, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against public agencies in the State of California. The Bonds are special obligations of the Successor Agency but are not a debt of the City of La Quinta, the State of California or any other political subdivisions thereof within the meaning of any constitutional or statutory limitation, and neither the City of La Quinta, the State of California, nor any other of its political subdivisions, except the Successor Agency, is liable for the payment thereof.

2. The Indenture has been duly authorized by the Successor Agency, is valid and binding upon the Successor Agency and is enforceable in accordance with its terms, except to the extent that enforceability may be limited by moratorium, bankruptcy, reorganization, fraudulent conveyance or transfer, insolvency or other similar laws affecting creditors’ rights to the application of equitable principles if equitable remedies are sought, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against public agencies in the State of California.

3. The Indenture creates a valid pledge of that which the Indenture purports to pledge, including, without limitation, the Pledged Tax Revenues and subject to the provisions of the Indenture, except to the extent that such pledge may be limited by moratorium, bankruptcy, reorganization, fraudulent conveyance or transfer, insolvency or other similar laws affecting creditors’ rights to the application of equitable principles if equitable remedies are sought, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against public agencies in the State of California.

4. Interest on the Bonds is exempt from State of California personal income tax.

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The opinions expressed herein are based on an analysis of existing statutes, regulations, rulings and judicial decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. Such actions or events may adversely affect the value or tax treatment of the Bonds and we express no opinion with respect thereto.

We call attention to the fact that the rights and obligations under the Indenture and the Bonds are subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws affecting creditors’ rights, to the application of equitable principles if equitable remedies are sought, to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against public agencies in the State of California.

Our opinion is limited to matters governed by the laws of the State of California and federal law. We assume no responsibility with respect to the applicability or the effect of the laws of any other jurisdiction.

We express no opinion herein as to the accuracy, completeness or sufficiency of the Official Statement relating to the Bonds or other offering material relating to the Bonds and purchasers of the Bonds should not assume that we have reviewed the Official Statement on their behalf.

Respectfully submitted,


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APPENDIX C

BOOK-ENTRY ONLY SYSTEM

The information in this Appendix C concerning The Depository Trust Company (“DTC”), New York, New York, and DTC’s book-entry system has been obtained from DTC and the Agency takes no responsibility for the completeness or accuracy thereof. The Agency 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 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 securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with 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 is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. 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 a S&P Global Ratings rating of AA+. 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.

Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and 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

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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 Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.

To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other 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 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 Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.

Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.

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

Principal, premium (if any), and interest payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Agency or the Trustee, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Trustee, or the Agency, subject to any statutory or regulatory requirements as may be in effect from time to time. Principal, premium (if any), and interest payments with respect to the Bonds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Agency 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 Agency or the Trustee. Under such circumstances, in the event that a

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successor depository is not obtained, certificates representing the Bonds are required to be printed and delivered.

The Agency may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, representing the Bonds will be printed and delivered to DTC in accordance with the provisions of the Indenture.

The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the Agency believes to be reliable, but the Agency takes no responsibility for the accuracy thereof.


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APPENDIX D

FORM OF CONTINUING DISCLOSURE AGREEMENT

This Continuing Disclosure Agreement (the “Disclosure Agreement”), dated as of December 22, 2016, is executed and delivered by the Successor Agency to the La Quinta Redevelopment Agency (the “Successor Agency”) and Willdan Financial Services as dissemination agent (the “Dissemination Agent”), in connection with the issuance of the $35,055,000 Successor Agency to the La Quinta Redevelopment Agency, La Quinta Redevelopment Project Areas No. 1 and 2, Subordinate Tax Allocation Refunding Bonds, 2016 Taxable Series A (the “Bonds”). The Bonds are being issued pursuant to provisions of an Indenture of Trust dated as of December 1, 2013, as supplemented by a Second Supplemental Indenture of Trust, dated as of October 1, 2016 (collectively, the “Indenture”), by and between the Successor Agency and U.S. Bank National Association, as trustee (the “Trustee”). The Successor Agency and the Dissemination Agent covenant and agree as follows:

SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the Successor Agency and the Dissemination Agent for the benefit of the Beneficial Owners of the Bonds and in order to assist the Participating Underwriter 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 Agreement unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:

“Annual Report” shall mean any Annual Report or any addendum thereto provided by the Successor Agency pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement.

“Beneficial Owner” shall mean any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal income tax purposes.

“Disclosure Representative” shall mean the City Manager of the City or his or her designee, or such other officer or employee as the City shall designate in writing to the Trustee and Dissemination Agent from time to time.

“Dissemination Agent” shall mean Willdan Financial Services, acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the Successor Agency and which has filed with the Trustee a written acceptance of such designation.

“Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure Agreement.

“MSRB” shall mean the Municipal Securities Rulemaking Board established pursuant to Section 15B(b)(1) of the Securities Exchange Act of 1934 or any other entity designated or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Until otherwise designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB are to be made through the Electronic Municipal Marketplace Access (EMMA) website of the MSRB, currently located at http://emma.msrb.org.

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“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 SEC under the Securities Exchange Act of 1934, as the same may be amended from time to time.

“SEC” shall mean the United States Securities and Exchange Commission.

“State” shall mean the State of California.

SECTION 3. Provision of Annual Reports.

(a) The Successor Agency shall, or shall cause the Dissemination Agent to, not later than March 31 of each year, commencing March 31, 2017, provide to the MSRB and the Participating Underwriter an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Agreement.

(b) Not later than fifteen days prior to the date specified in subsection (a) for providing the Annual Report to the MSRB, the Successor Agency shall provide the Annual Report to the Dissemination Agent. If by such date, the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall notify the Successor Agency of such failure to receive the Annual Report. The Successor 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 it hereunder. The Dissemination Agent may conclusively rely upon such certification of the Successor Agency and shall have no duty or obligation to review such Annual Report.

(c) If the Dissemination Agent is unable to verify that an Annual Report has been provided to the MSRB by the date required in subsection (a), the Dissemination Agent shall send a notice to the MSRB in substantially the form attached as Exhibit A.

(d) The Dissemination Agent shall, to the extent information is known to it, file a report with the Successor Agency and (if the Dissemination Agent is not the Trustee) the Trustee certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided.

SECTION 4. Content of Annual Reports. The Successor Agency’s Annual Report shall contain or include by reference the following (unless otherwise stated, such information shall be as of the end of the most recent Fiscal Year and shall be with respect to the Successor Agency):

(i) A postaudit of the financial transactions and records of the Successor Agency for the Fiscal Year to be made by an Independent Certified Public Accountant appointed by the Successor Agency 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 Successor Agency’s postaudit is not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain an unaudited statement of financial transactions and records of the Successor Agency in a format required by Section 34177(n) of the Dissolution Act, and the postaudit shall be filed in the same manner as the Annual Report when they become available.

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(ii) Financial information and operating data relating to the Project Areas contained in the Official Statement for the Bonds under the headings “THE PROJECT AREAS – Largest Local Secured Taxpayers,” and “PLEDGED TAX REVENUES – Schedule of Historical Pledged Tax Revenues.”

(iii) An update of the debt service coverage table shown in the Official Statement using the most recent Fiscal Year.

(iv) A listing of the amount of each distribution from the Riverside County Auditor-Controller of property tax revenues from the Redevelopment Property Tax Trust Fund received by the Successor Agency for its enforceable obligations for the most recent Fiscal Year, as reasonably available 15 days prior to the due date of each Annual Report.

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 Successor Agency or related public entities, which are available to the public on the MSRB’s EMMA Website or filed with the SEC.

SECTION 5. Reporting of Listed Events.

(a) Pursuant to the provisions of this section, upon the occurrence of any of the following events (in each case to the extent applicable) with respect to the Bonds, the Successor Agency shall give, or cause to be given by so notifying the Dissemination Agent in writing and instructing the Dissemination Agent to give, notice of the occurrence of such event, in each case, pursuant to Section 5(c) hereof:

1. principal or interest payment delinquencies;

2. non-payment related defaults, if material;

3. modifications to the rights of the Bondholders, if material;

4. optional, contingent or unscheduled calls, if material, and tender offers;

5. defeasances;

6. rating changes;

7. adverse tax opinions or 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 Bonds or other material events affecting the tax status of the Bonds;

8. unscheduled draws on the debt service reserves reflecting financial difficulties;

9. unscheduled draws on the credit enhancements reflecting financial difficulties;

10. substitution of the credit or liquidity providers or their failure to perform;

11. release, substitution or sale of property securing repayment of the Bonds, if material;

12. bankruptcy, insolvency, receivership or similar proceedings of the Successor Agency, which shall occur as described below;

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13. appointment of a successor or additional trustee or the change of name of a trustee, if material, or;

14. the consummation of a merger, consolidation, or acquisition involving the Successor Agency or the sale of all or substantially all of the assets of the Successor Agency 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.

For these purposes, any event described in item 12 of this Section 5(a) is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the Successor Agency in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the Agency, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the Successor Agency.

(b) Upon receipt of notice from the Successor Agency and instruction by the Successor Agency to report the occurrence of any Listed Event, the Dissemination Agent shall provide notice thereof to the MSRB in accordance with Section 5(c) hereof. In the event the Dissemination Agent shall obtain actual knowledge of the occurrence of any of the Listed Events, the Dissemination Agent shall, immediately after obtaining such knowledge, contact the Disclosure Representative, inform such person of the event, and request that the Successor Agency promptly notify the Dissemination Agent in writing whether or not to report the event pursuant to Section 5(c). For purposes of this Disclosure Agreement, “actual knowledge” of the occurrence of such Listed Event shall mean actual knowledge by the Dissemination Agent, if other than the Trustee, and if the Dissemination Agent is the Trustee, then by the officer at the corporate trust office of the Trustee with regular responsibility for the administration of matters related to the Indenture. The Dissemination Agent shall have no responsibility to determine the materiality, if applicable, of any of the Listed Events.

(c) The Successor Agency, or the Dissemination Agent, if the Dissemination Agent has been instructed by the Successor Agency to report the occurrence of a Listed Event, shall file a notice of such occurrence with the MSRB in a timely manner not more than ten business days after the occurrence of the event.

SECTION 6. Termination of Reporting Obligation. The Successor Agency’s obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the Successor Agency shall give notice of such termination in the same manner as for a Listed Event under Section 5(c).

SECTION 7. Dissemination Agent. The Successor Agency may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the Successor Agency pursuant to this Disclosure Agreement. The initial Dissemination Agent shall be Willdan Financial Services. The Dissemination Agent may resign by providing thirty days’ written notice to the Successor Agency and the Trustee. The Dissemination Agent shall not be responsible for the content of any report or notice prepared by the Successor Agency. The

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Dissemination Agent shall have no duty to prepare any information report nor shall the Dissemination Agent be responsible for filing any report not provided to it by the Successor Agency in a timely manner and in a form suitable for filing.

SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Successor Agency and the Dissemination Agent may amend this Disclosure Agreement (and the Dissemination Agent shall agree to any amendment so requested by the Successor Agency) provided, the Dissemination Agent shall not be obligated to enter into any such amendment that modifies or increases its duties or obligations hereunder, and any provision of this Disclosure Agreement may be waived, provided that in the opinion of nationally recognized bond counsel, such amendment or waiver is permitted by the Rule. In the event of any amendment or waiver of a provision of this Disclosure Agreement, the Successor Agency shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the Successor Agency.

SECTION 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Successor Agency from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the Successor 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 Agreement, the Successor Agency shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

SECTION 10. Filings with the MSRB. All financial information, operating data, financial statements, notices, and other documents provided to the MSRB in accordance with this Disclosure Agreement shall be provided in an electronic format prescribed by the MSRB and shall be accompanied by identifying information as prescribed by the MSRB.

SECTION 11. Default. In the event of a failure of the Successor Agency to comply with any provision of this Disclosure Agreement, the Trustee (at the written request of any Participating Underwriter or the holders of at least 25% aggregate principal amount of Outstanding Bonds, shall, but only to the extent funds in an amount satisfactory to the Trustee have been provided to it or it has been otherwise indemnified to its satisfaction from any cost, liability, expense or additional charges and fees of the Trustee whatsoever, including, without limitation, fees and expenses of its attorneys), or any 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 Successor Agency or the Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the Successor Agency or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance.

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SECTION 12. Duties, Immunities and Liabilities of Trustee and Dissemination Agent. Article VIII of the Indenture pertaining to the Trustee is hereby made applicable to this Disclosure Agreement as if this Disclosure Agreement were (solely for this purpose) contained in the Indenture and the Trustee and Dissemination Agent shall be entitled to the protections, limitations from liability and indemnities afforded the Trustee thereunder. The Dissemination Agent and the Trustee shall have only such duties as are specifically set forth in this Disclosure Agreement, and the Successor Agency agrees to indemnify and save the Dissemination Agent and Trustee, their officers, directors, employees and agents, harmless against any loss, expense and liabilities which they may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys’ fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s or Trustee’s respective negligence or willful misconduct. The Dissemination Agent shall be paid compensation by the Successor Agency for its services provided hereunder in accordance with its schedule of fees as amended from time to time and all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent and the Trustee shall have no duty or obligation to review any information provided to them hereunder and shall not be deemed to be acting in any fiduciary capacity for the Successor Agency, the Bondholders, or any other party. Neither the Trustee nor the Dissemination Agent shall have any liability to the Bondholders or any other party for any monetary damages or financial liability of any kind whatsoever related to or arising from this Disclosure Agreement. The obligations of the Successor Agency under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.

SECTION 13. Notices. Any notices or communications to or among any of the parties to this Disclosure Agreement may be given as follows:

To the Successor Agency: Successor Agency to the La Quinta Redevelopment Agency 78-495 Calle Tampico La Quinta, CA 92253 Attn: Executive Director Phone: (760) 777-7030

To the Dissemination Agent: Willdan Financial Services 27368 Via Industria, Suite 110 Temecula, California 92590 Attn: Disclosure Group Phone: (951) 587-3500

To the Trustee: U.S. Bank, National Association 633 West Fifth Street, 24th Floor Los Angeles, California 90071 Attention: Corporate Trust Services Phone: (213) 615-6047

Any person may, by written notice to the other persons listed above, designate a different address or telephone number(s) to which subsequent notices or communications should be sent.

SECTION 14. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Successor Agency, the Trustee, the Dissemination Agent, the Participating Underwriter and holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity.

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SECTION 15. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.


By Executive Director

WILLDAN FINANCIAL SERVICES, as Dissemination Agent

By Authorized Representative

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EXHIBIT A

NOTICE TO MSRB OF FAILURE TO FILE ANNUAL REPORT

Name of Obligated Party: Successor Agency to La Quinta Redevelopment Agency

Name of Bond Issue: Successor Agency to La Quinta Redevelopment Agency, Redevelopment Project Areas No. 1 and 2, Subordinate Tax Allocation Refunding Bonds, 2016 Taxable Series A

Date of Issuance: December 22, 2016

NOTICE IS HEREBY GIVEN that the Successor Agency has not provided an Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Agreement, dated as of [Closing Date], 2016, with respect to the Bonds. [The Successor Agency anticipates that the Annual Report will be filed by ___________________________.]

Dated:

WILLDAN FINANCIAL SERVICES., on behalf of the Successor Agency

cc: Successor Agency

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APPENDIX E

COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR FISCAL YEAR ENDED JUNE 30, 2016 (EXCLUDING SUPPLEMENTARY INFORMATION)

CITY OF LA QUINTA

La Quinta, California

Comprehensive Annual Financial Report

Year Ended June 30, 2016

Prepared By Finance Department

CITY OF LA QUINTA, CALIFORNIA

COMPREHENSIVE ANNUAL FINANCIAL REPORT

YEAR ENDED JUNE 30, 2016

Prepared By

FINANCE DEPARTMENT

THIS PAGE INTENTIONALLY LEFT BLANK

CITY OF LA QUINTA


JUNE 30, 2016

TABLE OF CONTENTS

Page Number INTRODUCTORY SECTION

Letter of Transmittal ................................................................................................................................. i

List of Principal Officials .......................................................................................................................... v

Organizational Chart .............................................................................................................................. vi

Certificate of Achievement for Excellence in Financial Reporting (GFOA) ........................................... vii

FINANCIAL SECTION

Independent Auditors’ Report ................................................................................................................. 1

Management’s Discussion and Analysis ................................................................................................. 5

Basic Financial Statements:

Government-Wide Financial Statements: Statement of Net Position ............................................................................................................... 17

Statement of Activities .................................................................................................................... 18

Fund Financial Statements: Balance Sheet – Governmental Funds .......................................................................................... 20

Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position ..................................................................................................... 23

Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds ................................................................................................... 24 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities ....................... 27

Statement of Net Position – Proprietary Funds .............................................................................. 28

Statement of Revenues, Expenses and Changes in Fund Net Position – Proprietary Funds ........................................................................................................................... 29

Statement of Cash Flows – Proprietary Funds ............................................................................... 30

Statement of Fiduciary Net Position - Fiduciary Funds .................................................................. 32

CITY OF LA QUINTA


JUNE 30, 2016

TABLE OF CONTENTS

Page Number FINANCIAL SECTION (CONTINUED)

Statement of Changes in Fiduciary Net Position - Fiduciary Funds ............................................... 33

Notes to Financial Statements .............................................................................................................. 35

REQUIRED SUPPLEMENTARY INFORMATION

Budgetary Comparison Schedule by Department – General Fund ................................................ 79

Budgetary Comparison Schedules – Major Special Revenue Funds Housing Authority PA No. 1 ..................................................................................................... 80 Housing Authority PA No. 2 ..................................................................................................... 81

Schedule of Proportionate Share of Net Pension Liability – Miscellaneous Plans ........................ 82 Schedule of Plan Contributions – Miscellaneous Plans ................................................................. 83 Notes to Required Supplementary Information .............................................................................. 85

COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES

Combining Balance Sheet - Non-Major Governmental Funds ....................................................... 88

Combining Statement of Revenues, Expenditures and Changes in Fund Balance - Non-Major Governmental Funds ....................................................................... 96

Budgetary Comparison Schedules – Special Revenue Funds State Gas Tax ....................................................................................................................... 103 Library .................................................................................................................................... 104 Federal Assistance ................................................................................................................. 105 SLEBG ................................................................................................................................... 106 Lighting and Landscaping ...................................................................................................... 107 Quimby ................................................................................................................................... 108 Public Safety .......................................................................................................................... 109 Art In Public Places ................................................................................................................ 110 South Coast Air Quality .......................................................................................................... 111 AB 939 ................................................................................................................................... 112 Law Enforcement ................................................................................................................... 113 Justice Assistance Grant........................................................................................................ 114 Measure A .............................................................................................................................. 115

CITY OF LA QUINTA


JUNE 30, 2016

TABLE OF CONTENTS

Page Number COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES (CONTINUED)

Budgetary Comparison Schedules – Capital Projects Funds

Capital Improvement .............................................................................................................. 116 Civic Center ............................................................................................................................ 117 Transportation ........................................................................................................................ 118 Parks and Recreation ............................................................................................................. 119 Library Development .............................................................................................................. 120 Community Center ................................................................................................................. 121 Street Facility .......................................................................................................................... 122 Park Facility ............................................................................................................................ 123 Fire Facility ............................................................................................................................. 124

Budgetary Comparison Schedules – Debt Service Funds

Financing Authority ................................................................................................................ 125 Combining Statement of Net Position – Internal Service Funds .................................................. 128

Combining Statement of Revenues, Expenses and Changes in Fund Net Position – Internal Service Funds ............................................................................. 129

Combining Statement of Cash Flows – Internal Service Funds ................................................... 130

Combining Statement of Net Position – All Agency Funds .......................................................... 132

Combining Statement of Changes in Assets and Liabilities – All Agency Funds ......................... 133

STATISTICAL SECTION

Net Position by Component (Table 1) .......................................................................................... 136

Changes in Net Position (Table 2)................................................................................................ 138

Changes in Net Position – Governmental Activities (Table 3) ..................................................... 140

Changes in Net Position – Business-type Activities (Table 4) ..................................................... 142

Fund Balances of Governmental Funds (Table 5) ....................................................................... 144

Changes in Fund Balances of Governmental Funds (Table 6) .................................................... 146

Tax Revenue by Source (Table 7) ................................................................................................ 148

Top 25 Sales Tax Producers (Table 8) ........................................................................................ 149

Taxable Sales by Category (Table 9) ........................................................................................... 150

Assessed Value and Estimated Actual Value of Taxable Property (Table 10) ............................ 153

CITY OF LA QUINTA


JUNE 30, 2016

TABLE OF CONTENTS

Page Number STATISTICAL SECTION (CONTINUED)

Direct and Overlapping Property Tax Rates (Table 11) ............................................................... 154

Principal Property Taxpayers (Table 12) ...................................................................................... 156

Property Tax Levies and Collections (Table 13) .......................................................................... 157

Ratios of Outstanding Debt by Type (Table 14) ........................................................................... 158

Ratio of General Bonded Debt Outstanding (Table 15) ............................................................... 160

Direct and Overlapping Debt (Table 16) ....................................................................................... 161

Legal Debt Margin Information (Table 17) .................................................................................... 162

Pledged-Revenue Coverage (Table 18) ....................................................................................... 164

Demographic and Economic Statistics (Table 19) ....................................................................... 165

Principal Employers (Table 20) .................................................................................................... 166

Full-time City Employees (Table 21) ............................................................................................ 167

Operating Indicators (Table 22) .................................................................................................... 168

Capital Asset Statistics (Table 23) ................................................................................................ 169

Schedule of Insurance in Force (Table 24) .................................................................................. 170

December 6, 2016

To the Citizens of the City of La Quinta, the Honorable Mayor and Members of the City Council

Enclosed is the City of La Quinta Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2016. This transmittal letter provides a nontechnical summary of the City's finances, services, achievements and economic outlook. A more detailed discussion of the City's finances can be found in the Management's Discussion and Analysis section (MD&A) that immediately follows the independent auditor's report. The MD&A provides a narrative introduction, overview, and analysis of the basic financial statements. The MD&A complements this transmittal and should be read in conjunction with it.

Ensuring the financial integrity of our public institutions is crucial to maintain the public's trust. Responsibility for the accuracy and the completeness of all disclosures, rests with the City of La Quinta. To the best of our knowledge and belief, the enclosed data is accurate in all material respects and is reported in a manner designed to fairly present the financial position and results of City operations and funds. Disclosures to enable the reader to gain an understanding to the City's financial activities have been included.

This CAFR was prepared in conformance with Generally Accepted Accounting Principles (GAAP). The City's financial reporting is based upon all Governmental Accounting Standards Board (GASB) pronouncements.

Government Code Section 26909 (a) requires that the City, as a local agency of the County, contract with a certified public accountant to perform an annual audit of the accounts and records of the City and that the audit conform to generally accepted auditing standards. Further, Government Code Section 26909 (b) states that an audit report shall be filed with the State Controller and with the County Auditor of the County in which the district is located within 12 months of the end of the fiscal year. In addition, City Ordinance 2.12.040 requires an annual audit be performed by a certified public accountant. This CAFR fulfills these requirements for the fiscal year ending June 30, 2016.

Management assumes f u II responsibility for the completeness and reliability of the information contained in this report, based upon a comprehensive framework of internal controls that has been established for this purpose. Because

78-495 Calle Tampico I La Quinta I California 92253 I 760.777.7000 I www.La-Quinta.org

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the cost of internal control should not exceed anticipated benefits, the objective is to provide reasonable, rather than absolute, assurance that the financial statements are free of any material misstatements.

The independent auditor's report is located at the front of the financial section of this report. Lance Soll & Lunghard LLP Certified Public Accountants have issued an unmodified ("clean") opinion on the City of La Quinta's financial statements for the year ended June 30, 2016. The independent audit involved examining evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and estimates made by management, and evaluating the overall financial statement presentation. The independent auditor concluded based on the audit that there was a reasonable basis for rendering an unmodified opinion that the City of La Quinta's financial statements for the fiscal year ended June 30, 2016 are fairly presented in conformity with GAAP. This is the most favorable conclusion and commonly known as a "clean" opinion.

Profile of the Government

The City of La Quinta is located 120 miles east of Los Angeles in the eastern portion of Riverside County known as the Coachella Valley. The City motto is "The Gem of the Desert." The City is governed by a five-member City Council under the Council/Manager form of government. The Mayor is directly elected by the citizens. The Mayor serves a two-year term and the four Council Members serve four-year terms, with two Council Members elected every two years. The Mayor and four Council Members are elected at large.

The City was originally incorporated in 1982 as a general law City and became a charter City in November 1996.

The Council appoints the City Manager, who in turn appoints the heads of the various departments. The City of La Quinta provides a range of services, which include construction and maintenance of streets and other infrastructure; community development and planning; construction and code compliance; recreational and cultural activities; and general municipal services.

The City also contracts with other government agencies and organizations for specific services, including police and fire protection, library and museum services, water and sewer service, electricity service, refuse collection, public transit, and cable television service.

The City of La Quinta is also financially accountable for a legally separate Successor Agency for the former Redevelopment Agency, a Financing Authority, and a Housing Authority. Additional information on these legally separate entities can be found in the notes to the financial statements.

Pursuant to City Ordinance 2.08.060 and 2.12.030, the City Manager and Finance Director are responsible for the preparation of the annual budget for City Council consideration prior to the start of the fiscal year. The annual budget serves as the foundation for the City's financial planning and control.

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The budget is prepared by fund, function, department, and line item. Department heads may transfer line item resources within a division with the approval of the City Manager. The City Manager may authorize transfers between divisions and departments.

Local Economy

The City of La Quinta comprises an area of approximately 36 square miles and, as of January 2016 has a full time population of 39,977 according to California Department of Finance records. Nearly 18,000 seasonal residents also call La Quinta home from October through May each year.

According to the State of California Employment Development Department, as of October 2016, the unemployment rate for La Quinta was 4%, which was much lower than Riverside County's at 6.3% and the statewide average of 5.3%. The City's dominant industries are comprised of recreation, tourism and retailers with the following major employers: La Quinta Resort and Club, Desert Sands Unified School District, Wal-Mart Super Center, Costco, Home Depot, Imperial Irrigation District, Lowe's Home Improvement, Rancho La Quinta and Stater Brothers.

Long-term Financial Planning

The City of La Quinta is committed to sound financial governance. The City has a long history of providing a superior level of public safety services, life enrichment opportunities, and a quality environment to its residents, businesses and visitors. In June of 2016 the City Council adopted a conservative budget for fiscal year 2016-17 based on the current economic conditions. The adopted budget had operating expenses exceeding revenues by $83,500. The voters of the City of La Quinta approved a one percent sales and use tax increase in November 2016 which will become effective on April 1, 2017. This combined with other cost saving measures and additional revenue from a recently updated fee schedule will ensure the City's financial stability and capacity to provide current service levels in the future.

Included in the 2016-17 budget is the use of $750,000 from the Successor Agency loan repayment to fund the North La Quinta turf conversion improvements and $1,552,000 for other capital improvement projects. Included in the CIP budget is a General Fund contribution of $1 million for the pavement management program. Other projects include Civic Center campus irrigation upgrades and sidewalk improvements.

La Quinta has cultivated a sound foundation of general fund revenues including sales tax, transient occupancy (hotel) tax, and property tax. Due to the timing of the City of La Quinta's incorporation in 1982 (after the passage of Proposition 13, the landmark property tax reform legislation enacted in 1978) the City receives a smaller share of property tax than cities incorporated prior to 1978; therefore the City relies heavily on sales tax and transient occupancy (hotel) tax.

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The Future

In November 2014, the City entered into a purchase, sale and development agreement with SilverRock Development Company to construct a luxury hotel and spa, a conference center, a lifestyle hotel, luxury and lifestyle branded residential, resort and mixed use villages, and a permanent golf clubhouse. Mass grading and ground breaking of the luxury hotel is scheduled to start in the spring of 2017.

In addition to this development project, the residents of La Quinta have entrusted the City with additional funds from the recently approved sales tax measure. An oversight committee appointed by the City Council will serve to assist the City in determining how additional funds will be allocated in future years and ensure ongoing City operational and residential needs are met while also promoting growth and long-term prosperity.

Awards and Acknowledgements

The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of La Quinta for its comprehensive annual financial report (CAFR) for the fiscal year ended June 30, 2015. This was the nineteenth consecutive year that the City has received this prestigious award. In order to be awarded a Certificate of Achievement, the government had to publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only. We believe that our current CAFR continues to meet the Certificate of Achievement Program's requirements and we are submitting it to the GFOA to determine its eligibility for another certificate.

The preparation of this report would not have been possible without the efficient and dedicated service of the finance department staff. Credit also must be given to the Mayor and City Council for their support in maintaining the highest standards of professionalism in the management of the City of La Quinta's finances.

Respectfully submitted,

Karla Campos Finance Director

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City of La Quinta

Directory of Officials

June 30, 2016

CITY COUNCIL

Linda Evans, Mayor John Peña, Mayor Pro Tem

Lee Osborne, Council Member Kristy Franklin, Council Member

Robert Radi, Council Member

ADMINISTRATION

Frank J. Spevacek, City Manager Karla Campos, Finance Director

Christopher Escobedo, Community Resources Director William H. Ihrke, City Attorney

Steve Howlett, Facilities Director Tim Jonasson, Design and Development Director/City Engineer

Susan Maysels, City Clerk

v

City Manager

Community ResourcesDirector

Community ResourcesManager

Community Programs &Wellness Supervisor

Community ServicesCoordinator

Community ServicesCoordinator

Office Assistant

Part Time Staff

Marketing & EventsSupervisor Management Assistant

Human Resources Analyst

Human Resources Analyst

Administrative Technician

Part Time Office Assistant

Public Safety Manager Code/Animal Supervisor

Code/Animal Officer

Code/Animal Officer

Code/Animal Officer

Code/Animal Officer

Office Assistant

City Clerk

Deputy City Clerk

Deputy City Clerk

Part Time AdministrativeTechnician

Facilities Director

Buildings Superintendent

Buildings Coordinator

Buildings Worker

Parks Superintendent

Parks Foreman

Parks Worker

Administrative Technician

Maintenance Manager

Maintenance Foreman

Maintenance Worker II

Maintenance Worker I



Maintenance Foreman

Maintenance Worker II




Design & DevelopmentDirector

Development ServicesPrincipal Engineer Associate Engineer

Building Official Inspect/Plan ReviewSupervisor

Inspector

Inspector

Planning Manager Principal Planner Associate Planner

CIP Principal Engineer

ConstructionManager

Construction Inspector

Management Assistant

Traffic Signal TechSupervisor Traffic Signal Technician

Management Analyst

OfficeAssistant/Receptionist

Executive Assistant Office Assistant

Customer ServiceManager

Management Specialist

Permit Tech Supervisor

Permit Technician

Permit Technician

Permit Technician

Vacation Rental/LicenseAssistant

Finance Director

Accounting Manager

Accountant

Account Technician

Account TechnicianManagement Assistant

Financial Services AnalystManagement Specialist

Business Analyst

Management Specialist

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Government Finance Officers Association

Certificate of Achievement for Excellence

in Financial Reporting

Presented to

City of La Quinta

California

For its Comprehensive Annual Financial Report

for the Fiscal Year Ended

June 30, 2015

Executive Director/CEO

'


INDEPENDENT AUDITORS’ REPORT

To the Honorable Mayor and Members of the City CouncilCity of La Quinta, California

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of City of La Quinta, California, (the City) as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

203 N. Brea Blvd., Suite 203 Brea, CA 92821 Phone: 714.672.0022

An Association of Independent Accounting Firms

To the Honorable Mayor and Members of the City Council City of La Quinta, California

Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of La Quinta, California, as of June 30, 2016, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, the budgetary comparison schedules for the General Fund, Housing Authority PA No. 1, and Housing Authority PA No. 2, the schedule of proportionate share of the net pension liability, and the schedule of plan contributions be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The introductory section, combining and individual nonmajor fund financial statements and schedules and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements and schedules are fairly stated in all material respects in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them.

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To the Honorable Mayor and Members of the City Council City of La Quinta, California

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 29, 2016 on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and 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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.

Brea, California November 29, 2016

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Management's Discussion and Analysis As management of the City of La Quinta, we offer readers of the City of La Quinta’s financial statements this narrative, overview and analysis of the financial activities for the fiscal year ended June 30, 2016. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found in an earlier section of this report. All amounts, unless otherwise indicated, are rounded to the nearest thousands of dollars and dates are represented by fiscal year. Financial Highlights • The primary government assets of the City of La Quinta exceeded its liabilities at the

close of the most recent fiscal year by $700,899,000 (net position). Of this amount, $79,352,000 (unrestricted net position) may be used to meet the government's ongoing obligations to citizens and creditors. Of the net position, approximately $560,397,000 or 80% was invested in capital assets and is not available to meet ongoing obligations.

• The governmental activities total net position increased by $1,758,000 and the

Business-Type total net position decreased by $414,000 which is attributable to the SilverRock Golf Course.

• As of the close of the current fiscal year, the City of La Quinta’s governmental funds,

which include the General Fund, Housing Authority, Capital Improvement Fund, Civic Center Fund, sixteen Special Revenue Funds, and the Finance Authority Fund, reported combined ending fund balances of $111,471,000, an increase of $8,241,000 in comparison with the prior year. The primary reason for this increase is a $5 million principal loan repayment for the Coral Mountain housing project, $882,000 one-time sales tax triple flip wind down payment from the State and a decrease of $1.2 million in public works expenses.

• At the end of the current fiscal year, the unassigned General Fund Balance comprised

$13,822,000, or 15%, of the total $89,997,000 General Fund Balance and represented 31% of total final General Fund budgeted expenditures including transfers.

• The total governmental activities debt decreased by $565,000 during the current fiscal

year from $5,399,000 to $4,833,000. This decrease is mainly due to scheduled debt service payments that occurred during the fiscal year. (Note 6)

Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City of La Quinta’s basic financial statements. The City of La Quinta’s basic financial statements are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves.

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Government-wide financial statements The government-wide financial statements are designed to provide readers with a broad overview of the City of La Quinta’s finances, in a manner similar to a private-sector business. The statement of net position presents information on all of the City of La Quinta’s assets, deferred outflows of resources, liabilities, and deferred inflows of resources, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City of La Quinta is improving or deteriorating. The statement of activities presents information showing how the government's net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods, for example, earned but unused vacation leave. Both of the government-wide financial statements mentioned above distinguish functions of the City of La Quinta that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City of La Quinta include general government, public safety, community services, community development and public works. The business-type activities of the City of La Quinta include the SilverRock Golf course operations. The government-wide financial statements include not only the City of La Quinta itself (known as the primary government), but also the La Quinta Financing Authority and the La Quinta Housing Authority. Although legally separate entities, they function for all practical purposes as departments of the City of La Quinta, and therefore have been included as an integral part of the primary government. The government-wide financial statements can be found in the table of contents under the Financial Section of this report. Fund financial statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of La Quinta, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City of La Quinta can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds.

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Governmental funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near-term financing

requirements.

Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City of La Quinta maintains thirty (30) individual governmental funds, which are distinguished between major and non-major funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund, two (2) capital project funds, and two (2) special revenue funds. These five (5) funds are considered to be major funds. Data from the other twenty-five (25) governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements under Other Governmental Funds. The City of La Quinta adopts an annual appropriated budget for its general fund. A budgetary comparison schedule has been provided for the general fund to demonstrate compliance with this budget. The basic governmental fund financial statements can be found in the table of contents under the heading Basic Financial Statements. Proprietary funds Proprietary funds can be broken down into enterprise and internal service funds. The City of La Quinta maintains one (1) enterprise fund. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City of La Quinta uses an enterprise fund to account for its SilverRock Golf Course operations, which is considered to be a major fund. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City of La Quinta’s various functions. The City of La Quinta has four (4) internal service funds to account for its major equipment replacement including vehicles, information technology systems, park equipment and facility needs and an insurance fund. Because these

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four (4) services predominantly benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. The internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining statements on the combining and individual fund statements and schedules.

The basic proprietary fund financial statements can be found on the pages listed in the table of contents for Proprietary Funds: Statement of Net Position, Statement of Revenues, Expenses and Changes in Fund Net Position, and Statement of Cash Flows. Fiduciary funds Fiduciary funds, also called agency funds, are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City of La Quinta’s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary fund financial statements can be found on the pages listed in the table of contents for Fiduciary Funds: Statement of Fiduciary Net Position – Fiduciary Funds. Notes to the financial statements The notes to the financial statements provide additional information that is essential to obtain a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on the pages listed in the table of contents for Notes to Financial Statements.

Other information In addition to the basic financial statements and accompanying notes, this report also presents the combining statements referred to earlier in connection with non-major governmental funds, internal service funds, and agency funds. The non-major governmental funds’ combining statements are presented immediately following the Required Supplementary Information while the combined statements for the internal service funds and agency funds are presented following the budgetary comparison schedules for the debt service funds. Government-wide financial analysis As noted earlier, net position may serve over time as a useful indicator of a government's financial position. In the case of the City of La Quinta, assets exceeded liabilities by $700,899,000 at the close of the most recent fiscal year, which is $1,344,000 more than the previous year. This increase is attributed to an increase of unrestricted net position for governmental activities.

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The largest portion of the City of La Quinta’s Net Position, 80%, for this year and 81% for last year, reflects its investment in capital assets (e.g., land, buildings; machinery, and equipment), net of related debt. The City of La Quinta uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. However, it should be noted that the resources needed to repay the related debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate debt.

City of La Quinta Net Position

An additional portion of the City of La Quinta's net position (9% in 2015 and 2016) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted Net Position $79,353,000 (11%) may be used to meet the government's ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City of La Quinta is able to report positive balances in all three categories of Net Position, both for the government as a whole, as well as for its separate governmental activities; however, the business type Unrestricted Net Position had a deficit in its net position of $5,087,000, which is approximately $194,000 more than the previous year. SilverRock’s negative unrestricted net position reflects the outstanding $5.3 million advance from the General Fund which is decreased by cash, deposits and receivables on hand to met current obligations. Governmental activities Governmental activities Net Position increased by $1,758,000 accounting for a .003% percent change in the Net Position from the previous year. Key elements of these changes are as follows:

% Change % Change % Change2015 2016 2015 2016 2015 2016

Current and other assets $ 169,644,485 $ 171,960,396 0.014 $ (4,567,837) $ (4,694,217) 0.028 $ 165,076,648 $ 167,266,179 0.013 Capital assets 523,599,258 520,479,310 (0.006) 44,118,111 43,898,784 (0.005) 567,717,369 564,378,094 (0.006) Total assets 693,243,743 692,439,706 (0.001) 39,550,274 39,204,567 (0.009) 732,794,017 731,644,273 (0.002)

Deferred outflows of resources 783,364 1,799,679 1.297 - - - 783,364 1,799,679 1.297

Current liabilities 18,834,801 17,069,335 (0.094) 324,810 392,689 0.209 19,159,611 17,462,024 (0.089) Non-current liabilities 12,573,105 14,297,608 0.137 - - - 12,573,105 14,297,608 0.137 Total liabilities 31,407,906 31,366,943 (0.001) 324,810 392,689 0.209 31,732,716 31,759,632 0.001

resources 2,289,402 784,958 (0.657) - - - 2,289,402 784,958 (0.657)

Net position:

Net investment in capital assets 523,495,389 516,498,620 (0.013) 44,118,111 43,898,784 (0.005) 567,613,500 560,397,404 (0.013) Restricted 62,472,221 61,148,731 (0.021) 62,472,221 61,148,731 (0.021) Unrestricted 74,362,189 84,440,133 0.136 (4,892,647) (5,086,906) 0.040 69,469,542 79,353,227 0.142 Total net position $ 660,329,799 $ 662,087,484 0.003 $ 39,225,464 $ 38,811,878 (0.011) $ 699,555,263 $ 700,899,362 0.002

Governmental activities Business-type activities Total

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City of La Quinta Changes in Net Position

2015 2016 Change 2015 2016 Change 2015 2016 ChangeProgram revenues:Charges for services $ 3,771,088 3,559,749 $ (211,339) $ 3,561,857 $ 3,621,495 $ 59,638 $ 7,332,945 $ 7,181,244 $ (151,701)Operating grants and ‐ ‐ ‐ ‐ contributions 16,829,107 12,213,338 (4,615,769) ‐ ‐ ‐ 16,829,107 12,213,338 (4,615,769)Capital grants and ‐ ‐ ‐ ‐ contributions 3,536,444 1,076,145 (2,460,299) 2,872,122 ‐ (2,872,122) 6,408,566 1,076,145 (5,332,421)

General revenues, transfers and extraordinary item: ‐ ‐ ‐ ‐ Property taxes 8,776,491 8,798,296 21,805 ‐ ‐ ‐ 8,776,491 8,798,296 21,805 Other taxes 18,208,067 19,594,158 1,386,091 ‐ ‐ ‐ 18,208,067 19,594,158 1,386,091 Investment income 1,981,343 2,390,468 409,125 2,043 4,282 2,239 1,983,386 2,394,750 411,364 Motor vehicle in lieu 3,486,367 3,651,549 165,182 ‐ ‐ ‐ 3,486,367 3,651,549 165,182 Extraordinary gain/loss on dissolution of RDA ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ Transfers (247,739) (115,400) 132,339 247,739 115,400 (132,339) ‐ ‐ ‐ Miscellaneous 296,346 376,193 79,847 915,164 218,823 (696,341) 1,211,510 595,016 (616,494)

Total revenues 56,637,514 51,544,496 (5,093,018) 7,598,925 3,960,000 (3,638,925) 64,236,439 55,504,496 (8,731,943)

Expenses:

General government 5,166,732 5,645,004 478,272 ‐ ‐ ‐ 5,166,732 5,645,004 478,272 Public safety 21,636,149 22,067,603 431,454 ‐ ‐ ‐ 21,636,149 22,067,603 431,454 Planning and development 2,212,013 3,359,732 1,147,719 ‐ ‐ ‐ 2,212,013 3,359,732 1,147,719 Community services 5,992,362 6,214,098 221,736 ‐ ‐ ‐ 5,992,362 6,214,098 221,736 Public works 18,116,732 12,157,245 (5,959,487) ‐ ‐ ‐ 18,116,732 12,157,245 (5,959,487)Interest on long‐term debt 340,716 343,129 2,413 ‐ ‐ ‐ 340,716 343,129 2,413 Golf course ‐ ‐ ‐ 5,053,360 4,373,586 (679,774) 5,053,360 4,373,586 (679,774)

Total expenses 53,464,704 49,786,811 (3,677,893) 5,053,360 4,373,586 (679,774) 58,518,064 54,160,397 (4,357,667)Increase in net position before restatements 3,172,810 1,757,685 (1,415,125) 2,545,565 (413,586) (2,959,151) 5,718,375 1,344,099 (4,374,276)Restatements (8,033,971) ‐ 8,033,971 ‐ ‐ ‐ (8,033,971) ‐ 8,033,971 Increase in net position (4,861,161) 1,757,685 6,618,846 2,545,565 (413,586) (2,959,151) (2,315,596) 1,344,099 3,659,695 Net position ‐ beginning 665,190,960 660,329,799 (4,861,161) 36,679,899 39,225,464 2,545,565 701,870,859 699,555,263 (2,315,596)Net position ‐ ending $ 660,329,799 662,087,484 $ 1,757,685 $ 39,225,464 $ 38,811,878 $ (413,586) $ 699,555,263 $ 700,899,362 $ 1,344,099

Revenues:

Governmental Activities Business‐Type Activities Total

• Revenues overall decreased by $8,732,000 with the two largest category decreases

being capital grants from unavailable revenues at year end. These revenues will be recognized in 2016/17. In addition, operating transfers for Capital Improvement projects decreased due to multi-year projects. These funding sources will be recognized in future fiscal years as projects are completed.

• Expenses for Governmental Activities overall decreased by $3,678,000 (seven percent decrease). The biggest decreases were in public works which decreased by $5,959,000. Planning and development, public safety, general government, community resources had a combined increase of $2,279,000 and the remaining $2,000 increase is attributed to interest on long-term debt.

• Expenses related to public works governmental activities decreased $5,959,000 as

compared to the previous year. The primary reason for this change was the reallocation of street and lighting and landscape expenses from the general fund to other governmental funds and a decreased of $4.7 million contributed from the City for Capital Projects.

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• Expenses related to planning and development governmental activities were $1,148,000 higher than the previous reporting period. This was due to an increase of $646,000 in planning and development expenses in the capital project fund and $489,000 in the general fund attributed to design contract services.

• The General Fund contributed $115,000 to the business-type activities of the golf

course. Funds were utilized to support operations per the adopted budget. Business-type activities This was the eleventh full year of operations for the SilverRock Golf fund since the golf course began early operation in 2005. Net Position decreased by $414,000 related mostly to lower operating revenues and transfers and offset by lower operating expenses and no capital contributions during 2015/16. Charges for services primarily consisted of green fees which totaled $3,621,000, which was $60,000 higher than the previous year, with golf course expenses of $4,374,000, which was $680,000 less than the previous year. In 2015/16, the General Fund transferred $115,000 to the SilverRock Golf fund in order to support operations.

The total outstanding advance due to the General Fund from the inception of the Golf Course opening is $5,360,000. Financial Analysis of the Government's Funds As noted earlier, the City of La Quinta uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds - The focus of the City of La Quinta’s governmental funds is to provide information on near-term inflows, outflows, and balances of the funds. Such information is useful in assessing the City of La Quinta's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City of La Quinta's governmental funds reported combined ending fund balances of $111,471,000 as follows:

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City of La Quinta Governmental Fund Balances

Category General Fund Percent All Other Funds Percent Total Funds Percent

Nonspendable 48,605,070$ 54% 8,422$ 0% 48,613,492$ 44%Restricted - 0% 33,121,360 154% 33,121,360 30%Committed 27,569,446 31% - 0% 27,569,446 25%Unassigned 13,822,012 15% (11,655,344) -54% 2,166,668 2%Total 89,996,528$ 100% 21,474,438$ 100% 111,470,966$ 100%

Governmental fund balances ended the year totaling $111,471,000, an increase of $8,241,000 in comparison with the prior years’ ending balance of $103,230,000. These collective fund balances include the General Fund (discussed in further detail below), Housing Authority, Financing Authority, Capitial Improvement Fund, Civic Center Fund, and various Special Revenue funds. Nonspendable Of the total amount $48,613,000 or 44% constitutes non-spendable reserves, which means that these reserves are not available to fund operating expenditures of the organization because they are in the form of land and receivables. Restricted $33,121,000 or 30% are restricted fund balances which are the result of external limitations on spending from restricted special purpose funds such Measure A, which can only be used for transportation; Gas Tax Fund restricted for street related purposes; or Quimby Funds restricted for park development and improvements. Committed $27,569,000 or 25% are committed fund balances which are the result of self-imposed limitations placed upon by the City Council. Committed funds include working capital reserves and emergency reserves which by City policy are set at 10% and 40% respectively based on the current adopted budget. Committed funds also include funds that have been approved for Capital Projects, including carryovers for multi-year projects. Unassigned The remaining fund balance or $2,167,000 represents unassigned fund balances or the residual net resources after taking into consideration the other classifications. The Civic Center fund accounted for $7.2 million of the $11.6 million negative unassigned balance in other funds. This amount represents an advance due to the General Fund and is included in the General Fund nonspendable fund balance. General Fund The general fund is the chief operating fund of the City of La Quinta. At the end of the current fiscal year, unassigned fund balance was $13,822,000 while total fund balance reached $89,967,000.

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The City of La Quinta’s general fund balance increased by $3,188,000 in 2015/16. Key factors for this increase are as follows: • The General Fund revenues overall were 1.3% higher than budgeted. The increased

revenue is attributable to higher than expected property tax revenue. The City received $1,223,000 more than budgeted property tax revenue and a one-time triple flip sales tax wind down payment of $882,000.

• Actual expenditures were $6,025,000 less than the final budget, but $511,000 higher

than 2014/15 expenditures. $4,274,000 of expenditure savings has been carried over into 2016/17 for continuing appropriations related to operations and Capital Improvement Project (CIP).

Housing Authority Project Area No. 1 Fund The Housing Authority fund is used to account for the housing activities of the Housing Authority in Project Area No. 1. The primary purpose of this fund is to promote and to provide quality housing. The fund balance decreased by $22,000 to end the year at $10,920,000. Housing Authority Project Area No. 2 Fund The Housing Authority fund is used to account for the housing activities of the Housing Authority in Project Area No. 2. The primary purpose of this fund is to promote and to provide quality housing. The fund balance increased by $5,117,000 to end the year at $6,411,000. The increase is attributed to a $5 million principal loan repayment received for the Coral Mountain housing project. Capital Improvement Fund The Capital Improvement Fund is primarily used to record the expenditure of funds for capital projects. The fund had twenty two (22) active Capital Improvement Projects budgeted during 2015/16. The three most active projects during the year were the pavement management plan street improvements ($1,297,000), Library 10th anniversary improvements ($862,000), and Adams Street signal and street improvements ($638,000). Other major future projects include North La Quinta parkway turf conversion, Madison Street widening, pavement management plan street improvements, Fritz Burns pool improvements, Village circulation improvements, and citywide drainage enhancements. Civic Center Fund The Civic Center fund is primarily used to collect developer impact fees for the 2004 City Hall expansion and to fund a portion of the debt service on the original City Hall construction. The City Hall expansion was completed in 2007/08 and the final repayment of the original City Hall construction bonds is scheduled in 2018/19. A $7.1 million advance from the General Fund is outstanding at the end of 2015/16.

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Proprietary funds The City of La Quinta's proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. The financial activities of the City enterprise fund have already been addressed in the discussion of the City of La Quinta’s business-type activities. In addition, the City has four (4) internal service funds to accumulate resources for equipment and vehicle replacement, information technology activities, insurance and park equipment and facility replacement. General Fund Budgetary Highlights During the year there was a $2,192,000 increase in appropriations and transfers out between the original ($42,066,000) and final amended budget ($44,258,000). Following are the main components of the changes: • $1,728,000 in carryover appropriations from prior fiscal years to 2015/16 to fund

capital improvement projects as approved by City Council.

• $209,000 increase for worker’s compensation insurance premiums • During the fiscal year revenue estimates were increased by $1,122,000 of which

$864,000 was one-time in nature: $529,000 was a one-time insurance reimbursement payment for costs related to flood clean-up activities in 2014/15 and the remaining $335,000 was for a Transient Occupancy Tax (TOT) mitigation payment received for 2014/15 in 2015/16.

The budget increases were possible because of additional anticipated revenues and the availability of unassigned reserves. Capital Asset and Debt Administration Capital assets The City of La Quinta’s capital assets for its governmental and business-type activities as of June 30, 2016, amounts to $564,378,000 (net of accumulated depreciation). This includes land, right of way, buildings and improvements, machinery and equipment, streets and bridges, and construction in progress. The investment in capital assets decreased in 2015/16 due to depreciation expense and removal of street maintenance from construction in progress which exceeded the purchase of capital assets.

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The following chart lists the asset categories for governmental and business like activities net of depreciation:

City of La Quinta Capital Assets (net of depreciation)

Major capital asset events during the 2015/16 fiscal year included the following:

Governmental activities Recording infrastructure improvements, street improvements, street right of way,

street sidewalks and curbs and gutters, traffic signals, and street medians

Wellness Center expansion and improvements $3,392,000 Adams Street signal and street improvements $1,058,000

Library 10th anniversary improvements $939,000

Park ADA (Americans with Disability Act) improvements $549,000

The deletion of $1,689,000 in construction in progress attributed to maintance related

expenses which are not capitalized.

Business-type activities The Golf Course capital asset balance at June 30, 2016, was $43,899,000, net of accumulated depreciation. The balance decreased by $219,000. There were no purchases or disposal of business type assets during 2015/16. Additional information on the City of La Quinta’s capital assets can be found in Note 5 to the financial statements. Long-term debt At the end of the current fiscal year, the City of La Quinta governmental funds had total bonded debt outstanding of $4,833,000. Of the total amount, $1,850,000 of this debt represents the principal outstanding for the 1996 Lease Revenue Bonds used for the construction and improvements of La Quinta Civic Center.

2015 2016 2015 2016 2015 2016Land $ 69,816,674 $ 69,816,674 $ 39,712,954 $ 39,712,955 $ 109,529,628 $ 109,529,629 Buildings and improvements 43,404,761 46,016,651 4,200,754 3,985,914 47,605,515 50,002,565 Equipment and furniture 929,668 1,226,255 204,403 199,915 1,134,071 1,426,170 Vehicles 191,390 188,104 - - 191,390 188,104 Infrastructure 384,832,840 394,539,014 - - 384,832,840 394,539,014 Construction in progress 24,423,925 8,692,612 - - 24,423,925 8,692,612 Total $ 523,599,258 $ 520,479,310 $ 44,118,111 $ 43,898,784 $ 567,717,369 $ 564,378,094

Governmental Business-typeDescription Activities Activities Total

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City of La Quinta Outstanding Debt

The largest portion of long-term debt, $1,975,000 is for Washington Street Apartments and is paid by housing program revenues. The total outstanding debt decreased by $565,000 during 2015/16. The decrease was due to regular scheduled debt service payments. Business-type activities carried no long term debt since 2013/14. Additional information on the City of La Quinta's long-term debt can be found in Note 6 of the financial statements. Economic Factors and Next Year's Budgets and Rates These factors were considered in preparing the City of La Quinta’s budget for Fiscal Year 2016/17: • During the last ten years, the City of La Quinta has been in a growth phase with

assessed values increasing from $10.02 billion in 2006/07 to $11.97 billion or over 16% percent in 2015/16. It is important to note however, that from 2009/10 to 2013/14 assessed values decreased by approximately 8.73% and are below the highest threshold of $12.4 billion in 2008/09.

• Sales tax has been slightly increasing and the budget projects an increase of

$712,000 in 2016/17. Increased economic development is offset by a leakage of sales from businesses within the City to internet based shopping.

• AB1x26 dissolved California Redevelopment Agencies as of January 31, 2012

continues to affect city revenues. Due to the loss of Tax Increment, the City’s ability to fund future capital projects has been severely curtailed. The City placed a one percent sales and use tax for voter consideration on the November 2016 ballot. The tax is anticipated to generate an additional $6 million annually in general fund revenue.

Requests for Information This financial report is designed to provide a general overview of the City of La Quinta’s finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the City of La Quinta, Karla Campos, Finance Director, 78-495 Calle Tampico, La Quinta, CA, 92253 or by telephone at 760-777-7703.

2015 2016Capital Leases $ 103,869 $ 155,396 Compensated Absences 853,497 852,551 General Liability Retrospective Deposit - - Loans Payable 2,036,277 1,975,294 Revenue Bonds 2,405,000 1,850,000 Total $ 5,398,643 $ 4,833,241

Governmental

Debt Type:Activities

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CITY OF LA QUINTA

STATEMENT OF NET POSITION

Governmental Business-TypeActivities Activities Total

Assets:Cash and investments 83,196,452$ 273,116$ 83,469,568$

Receivables:

Accounts 87,061 61,569 148,630

Taxes 3,812,397 - 3,812,397

Notes and loans 26,060,260 - 26,060,260

Accrued interest 3,201,059 683 3,201,742

Internal balances 5,360,151 (5,360,151) -

Prepaid costs 635,304 1,865 637,169

Deposits 14,600 250,000 264,600

Due from other governments 41,273,112 14,976 41,288,088

Inventories - 63,725 63,725

Land held for resale 8,320,000 - 8,320,000

Capital assets not being depreciated 363,438,080 39,712,955 403,151,035

Capital assets, net of depreciation 157,041,230 4,185,829 161,227,059

Total Assets 692,439,706 39,204,567 731,644,273 Deferred Outflows of Resources:Deferred items related to pensions 1,799,679 - 1,799,679

Total Deferred Outflows of Resources 1,799,679 - 1,799,679

Liabilities:Accounts payable 5,339,033 356,555 5,695,588

Accrued liabilities 525,304 634 525,938

Accrued interest 42,540 - 42,540

Unearned revenue 563,536 - 563,536

Deposits payable 8,896,491 35,500 8,931,991

Due to other governments 1,702,431 - 1,702,431

Noncurrent liabilities:

Due within one year 1,585,183 - 1,585,183

Due in more than one year 3,248,058 - 3,248,058

Net OPEB liability 813,077 - 813,077

Net pension liability 8,651,290 - 8,651,290

Total Liabilities 31,366,943 392,689 31,759,632

Deferred Inflows of Resources:Deferred items related to pensions 784,958 - 784,958

Total Deferred Inflows of Resources 784,958 - 784,958

Net Position:Net investment in capital assets 516,498,620 43,898,784 560,397,404

Restricted for:

Planning and development projects 45,277,136 - 45,277,136

Public safety 189,988 - 189,988

Public works 1,250,827 - 1,250,827

Capital projects 3,776,409 - 3,776,409

Community services 10,654,371 - 10,654,371

Unrestricted 84,440,133 (5,086,906) 79,353,227

Total Net Position 662,087,484$ 38,811,878$ 700,899,362$

JUNE 30, 2016

Primary Government

See Notes to Financial Statements 17

CITY OF LA QUINTA

STATEMENT OF ACTIVITIESYEAR ENDED JUNE 30, 2016

Operating CapitalCharges for Contributions Contributions

Expenses Services and Grants and Grants

Functions/ProgramsPrimary Government:Governmental Activities:

General government 5,645,004$ 192,538$ 111,940$ -$ Public safety 22,067,603 1,378,704 6,254,781 - Planning and development 3,359,732 467,053 3,723,526 - Community services 6,214,098 386,824 39,940 - Public works 12,157,245 1,134,630 2,083,151 1,076,145 Interest on long-term debt 343,129 - - -

Total Governmental Activities 49,786,811 3,559,749 12,213,338 1,076,145

Business-Type Activities:Golf Course 4,373,586 3,621,495 - -

Total Business-Type Activities 4,373,586 3,621,495 - -

Total Primary Government 54,160,397$ 7,181,244$ 12,213,338$ 1,076,145$

General Revenues:Taxes: Property taxes, levied for general purpose Transient occupancy taxes Sales taxes Franchise taxes Business licenses taxes Other taxesMotor vehicle in lieu - unrestrictedUse of money and propertyOther

Transfers

Total General Revenues and Transfers

Change in Net Position

Net Position at Beginning of Year

Net Position at End of Year

Program Revenues


Primary Government

Governmental Business-TypeActivities Activities Total

(5,340,526)$ -$ (5,340,526)$ (14,434,118) - (14,434,118)

830,847 - 830,847 (5,787,334) - (5,787,334) (7,863,319) - (7,863,319)

(343,129) - (343,129)

(32,937,579) - (32,937,579)

- (752,091) (752,091)

- (752,091) (752,091)

(32,937,579) (752,091) (33,689,670)

8,798,296 - 8,798,296 7,835,745 - 7,835,745 9,107,046 - 9,107,046 1,799,938 - 1,799,938

334,465 - 334,465 516,964 - 516,964

3,651,549 - 3,651,549 2,390,468 4,282 2,394,750

376,193 218,823 595,016 (115,400) 115,400 -

34,695,264 338,505 35,033,769

1,757,685 (413,586) 1,344,099

660,329,799 39,225,464 699,555,263

662,087,484$ 38,811,878$ 700,899,362$

Net (Expenses) Revenues and Changes in Net Position


CITY OF LA QUINTA

BALANCE SHEETGOVERNMENTAL FUNDS JUNE 30, 2016

Capital Projects Funds

GeneralAssets:Pooled cash and investments 50,372,569$ 2,575,773$ 6,386,856$ 1,689,898$

Receivables:

Accounts 14,375 37,714 34,972 -

Taxes 3,648,066 - - -

Notes and loans - 2,060,260 24,000,000 -

Accrued interest 97,298 2,535,238 527,043 -

Prepaid costs 204,589 - 8,422 -

Deposits - - 14,600 -

Due from other governments 33,916,569 6,276,420 - 391,224

Due from other funds 413,136 - - -

Advances to other funds 14,974,800 - - -

Land held for resale 8,320,000 - - -

Total Assets 111,961,402$ 13,485,405$ 30,971,893$ 2,081,122$

Liabilities, Deferred Inflows of Resources, and Fund Balances:Liabilities:Accounts payable 4,257,347$ 8,244$ -$ 923,736$

Accrued liabilities 467,736 4,748 4,438 3,109

Unearned revenues 63,946 - - 497,797

Deposits payable 7,937,494 22,383 29,182 772,433

Due to other governments 71,430 - - -

Due to other funds - - - -

Advances from other funds - - - -

Total Liabilities 12,797,953 35,375 33,620 2,197,075 Deferred Inflows of Resources:Unavailable revenues 9,166,921 2,530,471 24,527,043 179,188

Total Deferred Inflows of Resources 9,166,921 2,530,471 24,527,043 179,188

Fund Balances: Nonspendable: Prepaid costs 204,589 - 8,422 -

Land held for resale 8,320,000 - - -

Advances to other funds 14,974,800 - - -

Due from other Governments 25,105,681 - - -

Restricted for: Planning and development projects - 10,919,559 6,402,808 -

Public safety - - - -

Community services - - - -

Public works - - - -

Capital Projects - - - -

Committed to: Working capital reserve 3,894,000 - - -

Capital Projects 2,302,000 - - -

Emergency reserve 15,576,000 - - -

Post retirement health benefits 1,523,400 - - -

Carryovers 4,274,046 - - -

Unassigned 13,822,012 - - (295,141)

Total Fund Balances 89,996,528 10,919,559 6,411,230 (295,141) Total Liabilities, Deferred Inflows of Resources, and Fund Balances 111,961,402$ 13,485,405$ 30,971,893$ 2,081,122$

Housing Authority PA

No. 1


No. 2 Capital

Improvement

Special Revenue Funds


CITY OF LA QUINTA

BALANCE SHEETGOVERNMENTAL FUNDSJUNE 30, 2016

Assets:Pooled cash and investments

Receivables:

Accounts

Taxes

Notes and loans

Accrued interest

Prepaid costs

Deposits

Due from other governments

Due from other funds

Advances to other funds

Land held for resale

Total Assets

Liabilities, Deferred Inflows of Resources, and Fund Balances:Liabilities:Accounts payable

Accrued liabilities

Unearned revenues

Deposits payable

Due to other governments

Due to other funds

Advances from other funds

Total LiabilitiesDeferred Inflows of Resources:Unavailable revenues

Total Deferred Inflows of Resources

Fund Balances: Nonspendable: Prepaid costs

Land held for resale

Advances to other funds

Due from other Governments

Restricted for: Planning and development projects

Public safety

Community services

Public works

Capital Projects

Committed to: Working capital reserve

Capital Projects

Emergency reserve

Post retirement health benefits

Carryovers

Unassigned Total Fund Balances Total Liabilities, Deferred Inflows of Resources, and Fund Balances


Other TotalGovernmental Governmental

Funds Funds

-$ 16,006,774$ 77,031,870$

- - 87,061

- 164,331 3,812,397

- - 26,060,260

- 29,736 3,189,315

- - 213,011

- - 14,600

- 688,899 41,273,112

- - 413,136

- - 14,974,800

- - 8,320,000

-$ 16,889,740$ 175,389,562$

-$ 114,753$ 5,304,080$

- 44,589 524,620

- 1,793 563,536

- 134,999 8,896,491

- 1,631,001 1,702,431

92,393 34,526 126,919

7,119,614 2,495,035 9,614,649

7,212,007 4,456,696 26,732,726

- 782,247 37,185,870

- 782,247 37,185,870

- - 213,011

- - 8,320,000

- - 14,974,800

- - 25,105,681

- 888,833 18,211,200

- 189,988 189,988

- 9,872,124 9,872,124

- 1,250,827 1,250,827

- 3,597,221 3,597,221

- - 3,894,000

- - 2,302,000

- - 15,576,000

- - 1,523,400

- - 4,274,046

(7,212,007) (4,148,196) 2,166,668

(7,212,007) 11,650,797 111,470,966

-$ 16,889,740$ 175,389,562$

Civic Center



22

CITY OF LA QUINTA

RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDSTO THE STATEMENT OF NET POSITIONJUNE 30, 2016

Fund balances of governmental funds 111,470,966$

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

Capital assets net of depreciation have not been included as financial resources in governmental fund activity. 505,237,405

Long-term debt and compensated absences that have not been included in the governmental fund activity:

Bonds payable (1,772,385)$ Capital lease payable (54,567) Loans payable (2,036,277) Compensated Absences (852,551) (4,715,780)

Proportionate share of net pension liability (8,651,290)

Deferred outflows related to pensions:Employer contributions made after the measurement date 883,415 Difference between expected and actual experiences 49,494 Differences in propotions 858,566 Difference between actual and the proportionate share of aggregate employer contributions 8,204 1,799,679

Deferred inflows related to pensions:Changes of assumptions (468,260) Adjustment due to difference in proportions (21,037) Net difference between projected and actual plan earnings (234,744)

(60,917) (784,958)

Governmental funds report all OPEB contributions as expenditures, however in the statement of net position any excesses or deficiencies in contributions in relation to the Annual Required Contribution (ARC) are recorded as a asset or liability. (813,077)

Accrued interest payable for the current portion of interest due on Bonds has not been reported in the governmental funds. (42,540)

Revenues reported as unavailable revenue in the governmental funds and recognized in the statement of activities. 37,185,870

Internal service funds are used by management to charge the costs of certain activities, such as equipment replacement and information technology, to individual funds. The assets and liabilities of the internal service funds must be added to the statement of net position. 21,401,209

Net Position of governmental activities 662,087,484$

Difference between actual and the proportionate share of aggregate employer contributions


CITY OF LA QUINTA

STATEMENT OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCESGOVERNMENTAL FUNDSYEAR ENDED JUNE 30, 2016


General Revenues:Taxes 27,345,219$ -$ -$ -$ Assessments - - - - Licenses and permits 1,161,820 - - - Intergovernmental 9,540,038 - 426,134 1,536,683 Charges for services 1,332,541 - - - Use of money and property 1,028,298 367,679 5,216,359 5,172 Fines and forfeitures 283,076 - - - Contributions from other agencies - - - 28,459 Developer participation - - - 493,852 Miscellaneous 702,245 - 5,150 -

Total Revenues 41,393,237 367,679 5,647,643 2,064,166

Expenditures:Current: General government 5,264,591 - - - Public safety 21,842,616 - - - Planning and development 1,863,059 390,072 337,359 646,475 Community services 3,126,861 - - - Public works 1,539,233 - - - Capital outlay 1,050,953 - - 6,065,040 Debt service: Principal retirement 16,632 - 60,983 - Interest and fiscal charges - - 131,863 -

Total Expenditures 34,703,945 390,072 530,205 6,711,515

Excess (Deficiency) of Revenues Over (Under) Expenditures 6,689,292 (22,393) 5,117,438 (4,647,349)

Other Financing Sources (Uses):Transfers in 27,419 - - 5,569,242 Transfers out (3,528,747) - - -

Total Other Financing Sources (Uses) (3,501,328) - - 5,569,242

Net Change in Fund Balances 3,187,964 (22,393) 5,117,438 921,893

Fund Balances, Beginning of Year 86,808,564 10,941,952 1,293,792 (1,217,034)

Fund Balances, End of Year 89,996,528$ 10,919,559$ 6,411,230$ (295,141)$


No. 1


No. 2 Capital

Improvement

Special Revenue Funds


CITY OF LA QUINTA

STATEMENT OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCESGOVERNMENTAL FUNDSYEAR ENDED JUNE 30, 2016

Revenues:TaxesAssessmentsLicenses and permitsIntergovernmentalCharges for servicesUse of money and propertyFines and forfeituresContributions from other agenciesDeveloper participationMiscellaneous

Total Revenues

Expenditures:Current: General government Public safety Planning and development Community services Public worksCapital outlayDebt service: Principal retirement Interest and fiscal charges

Total Expenditures

Excess (Deficiency) of Revenues Over (Under) Expenditures

Other Financing Sources (Uses):Transfers inTransfers out

Total Other Financing Sources (Uses)

Net Change in Fund Balances

Fund Balances, Beginning of Year

Fund Balances, End of Year


Other TotalGovernmental Governmental

Funds Funds

-$ 712,770$ 28,057,989$ - 944,050 944,050 - - 1,161,820 - 3,457,821 14,960,676 - - 1,332,541 - 858,234 7,475,742 - - 283,076 - - 28,459

109,007 838,216 1,441,075 - 1,811 709,206

109,007 6,812,902 56,394,634

- 2,433 5,267,024 - 283,346 22,125,962 - 57,294 3,294,259 - 1,856,177 4,983,038 - 2,561,977 4,101,210 - 93,881 7,209,874

- 555,000 632,615 61,546 152,728 346,137

61,546 5,562,836 47,960,119

47,461 1,250,066 8,434,515

- 823,877 6,420,538 - (3,085,602) (6,614,349)

- (2,261,725) (193,811)

47,461 (1,011,659) 8,240,704

(7,259,468) 12,662,456 103,230,262

(7,212,007)$ 11,650,797$ 111,470,966$

Civic Center



26

CITY OF LA QUINTA

RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDSTO THE STATEMENT OF ACTIVITIESYEAR ENDED JUNE 30, 2016

Net change in fund balances - total governmental funds 8,240,704$

Amounts reported for governmental activities in the statement of activities are

different because:

Governmental 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 depreciation and disposals

exceeded capital outlay in the current period.

Capital outlay 7,194,790$

Depreciation (8,248,026)

Disposal of capital assets (1,688,951) (2,742,187)

The issuance of long-term debt liabilities provides current financial resources in

the governmental funds, but issuing debt increases the long-term liabilities in

the statement of net position. Repayment of bond principal is an expenditure

in the governmental funds, but the repayment reduces long-term liabilities in the

statement of net position.

Principal repayments 555,000

Capital lease repayments 16,632

Loan repayments 60,983 632,615

Accrued interest for long-term liabilities. This is the net change in accrued interest

for the current period. 5,383

Compensated absences 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. 946

Governmental funds report all contributions in relation to the annual required

contribution (ARC) for OPEB as expenditures, however in the statement

of activities only the ARC is an expense. (72,006)

Pension expense recognizes the change in net pension liability and therefore is not recognized

under the current resources measurement and (decreases)/increases from net position 302,860

Revenues reported as unavailable revenue in the governmental funds and recognized

as charges for services and operating contributions and grants in the statement of activities. (4,822,906)

Internal service funds are used by management to charge the costs of certain

activities, such as equipment replacement and information technology, to individual funds.

The net revenues (expenses) of the internal service funds is reported with

governmental activities. 212,276

Change in net position of governmental activities 1,757,685$


CITY OF LA QUINTA

STATEMENT OF NET POSITIONPROPRIETARY FUNDS JUNE 30, 2016

Business-Type Activities -

Enterprise Funds GovernmentalActivities-Internal

Service FundsAssets:Current:

Cash and investments 273,116$ 6,164,582$

Receivables:

Accounts 61,569 -

Accrued interest 683 11,744

Prepaid costs 1,865 422,293

Deposits 250,000 -

Due from other governments 14,976 -

Inventories 63,725 -

Total Current Assets 665,934 6,598,619

Noncurrent:

Capital assets - net of accumulated depreciation 43,898,784 15,241,905

Total Noncurrent Assets 43,898,784 15,241,905

Total Assets 44,564,718$ 21,840,524$

Liabilities and Net Position:

Liabilities:Current:

Accounts payable 356,555$ 34,953$

Accrued liabilities 634 684

Deposits payable 35,500 -

Due to other funds - 286,217

Current portion of capital leases - 63,784

Total Current Liabilities 392,689 385,638

Noncurrent:

Advances from other funds 5,360,151 -

Long-term portion of capital leases - 53,677

Total Noncurrent Liabilities 5,360,151 53,677

Total Liabilities 5,752,840 439,315

Net Position:Net investment in capital assets 43,898,784 15,124,444

Unrestricted (5,086,906) 6,276,765

Total Net Position 38,811,878 21,401,209

Total Liabilities and Net Position 44,564,718$ 21,840,524$

Golf Course


CITY OF LA QUINTA

STATEMENT OF REVENUES, EXPENSESAND CHANGES IN FUND NET POSITIONPROPRIETARY FUNDS YEAR ENDED JUNE 30, 2016


Enterprise Funds GovernmentalActivities-Internal

Service FundsOperating Revenues:Sales and service charges 3,621,495$ 2,192,272$ Miscellaneous 218,823 -

Total Operating Revenues 3,840,318 2,192,272

Operating Expenses:Administration and general 36,221 302,444 Fuel and oil - 57,750 Maintenance and parts - 122,630 Contract services 4,000,246 642,008 Software and supplies - 247,295 Depreciation expense 219,327 772,073 Other 97,157 -

Total Operating Expenses 4,352,951 2,144,200

Operating Income (Loss) (512,633) 48,072

Nonoperating Revenues (Expenses):Interest revenue 4,282 70,413 Interest expense (20,635) (2,375) Gain on disposal of capital assets - 17,755

Total Nonoperating Revenues (Expenses) (16,353) 85,793

Income (Loss) Before Transfers (528,986) 133,865

Transfers in 176,969 209,000 Transfers out (61,569) (130,589)

Changes in Net Position (413,586) 212,276

Net Position:

Beginning of Year 39,225,464 21,188,933

End of Fiscal Year 38,811,878$ 21,401,209$

Golf Course


CITY OF LA QUINTA

STATEMENT OF CASH FLOWSPROPRIETARY FUNDS YEAR ENDED JUNE 30, 2016


Enterprise FundsGovernmental

Activities-Internal

Service FundsCash Flows from Operating Activities:Cash received from customers and users 4,788,138$ -$

Cash received from/(paid to) interfund service provided - 2,056,196

Cash paid to suppliers for goods and services (4,027,896) (1,072,241)

Cash paid to employees for services (37,849) (301,760)

Net Cash Provided (Used for) by Operating Activities 722,393 682,195

Cash Flows from Non-CapitalFinancing Activities:

Cash transfers out (61,569) (130,589)

Cash transfers in 176,969 209,000

Advance from other funds (568,733) -

Net Cash Provided by Non-Capital Financing Activities (453,333) 78,411

Cash Flows from Capital and Related Financing Activities:

Proceeds from capital debt - 131,430

Acquisition and construction of capital assets - (417,493)

Interest paid on capital debt - (2,375)

Capital lease payments - (63,271)

Proceeds from sales of capital assets - 40,936

Net Cash Used for Capital and Related Financing Activities - (310,773)

Cash Flows from Investing Activities:Interest received 3,920 64,770

Net Cash Provided byInvesting Activities 3,920 64,770

Net Increase (Decrease) in Cashand Cash Equivalents 272,980 514,603

Cash and Cash Equivalents at Beginning of Year 136 5,649,979

Cash and Cash Equivalents at End of Year 273,116$ 6,164,582$

Golf Course


CITY OF LA QUINTA

STATEMENT OF CASH FLOWSPROPRIETARY FUNDS YEAR ENDED JUNE 30, 2016


Enterprise FundsGovernmental

Activities-Internal

Service Funds Golf Course

Reconciliation of Operating Income to Net CashProvided (Used for) by Operating Activities:Operating income (loss) (512,633)$ 48,072$

Adjustments to reconcile operating income (loss) net cash provided (used) by operating activities:

Depreciation 219,327 772,073

(Increase) decrease in accounts receivable 35,872 -

(Increase) decrease in inventories 11,760 -

(Increase) decrease in due from other governments 900,188 -

(Increase) decrease in prepaid expense - (422,293)

Increase (decrease) in accounts payable 69,507 (2,558)

Increase (decrease) in accrued liabilities (1,628) 684

Increase (decrease) in due to other funds - 286,217

Total Adjustments 1,235,026 634,123 Net Cash Provided (Used for) by Operating Activities 722,393$ 682,195$


CITY OF LA QUINTA

STATEMENT OF FIDUCIARY NET POSITIONFIDUCIARY FUNDSJUNE 30, 2016

AgencyFunds

Assets:Pooled cash and investments 303,443$ 140,275$ 21,895,992$ Receivables:

Taxes 5,191 - - Notes and loans - - 2,453,585 Accrued interest 294 270 -

Prepaid asset - - 537,113 Due from other governments - - 1,631,001 Restricted assets:

Cash and investments with fiscal agents - - 31,276,109

Total Assets 308,928$ 140,545 57,793,800

Deferred Outflows of Resources:Deferred charge on refunding - 3,703,218

Total Deferred Outflows of Resources - 3,703,218

Liabilities:Accounts payable -$ - 28,026 Accrued interest - - 3,662,288 Deposits payable 308,928 - - Long-term liabilities:

Due in one year - - 9,420,752 Due in more than one year - - 241,570,315

Total Liabilities 308,928$ - 254,681,381

Net Position:Restricted for pensions 140,545 - Held in trust for other purposes - (193,184,363)

Total Net Position 140,545$ (193,184,363)$

Pension Trust Fund

Private-Purpose Trust Fund

Supplemental Pension Plan

Successor Agency of the former RDA


CITY OF LA QUINTA

STATEMENT OF CHANGES IN FIDUCIARY NET POSITIONFIDUCIARY FUNDSYEAR ENDED JUNE 30, 2016

Additions:Taxes -$ 19,363,022$ Interest and change in fair value of investments 1,642 82,303

Total Additions 1,642 19,445,325

Deductions:Administrative expenses 12,833 401,253 Contractual services - 359,719 Interest expense - 10,644,931 Loss on reduction of loan - 317,602

Total Deductions 12,833 11,723,505

Changes in Net Position (11,191) 7,721,820

Net Position - Beginning of the Year 151,736 (200,906,183)

Net Position - End of the Year 140,545$ (193,184,363)$

Pension Trust Fund

Private-Purpose Trust Fund Successor

Agency of the former RDA

Supplemental Pension Plan



34

CITY OF LA QUINTA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Note 1: Summary of Significant Accounting Policies

a. Reporting Entity

The City of La Quinta (City) was incorporated May 1, 1982, under the general laws of the State of California. In November 1996, the City became a charter City. The City operates under the Council – Manager form of government. The City provides many community services including public safety, highway and street maintenance, health and social services, cultural and leisure services, public improvements, planning and zoning services, and community development services. The accounting policies of the City conform to generally accepted accounting principles as applicable to governments. As required by generally accepted accounting principles, these financial statements present the City and its component units, which are entities for which the City is considered to be financially accountable. The City is considered to be financially accountable for an organization if the City appoints a voting majority of that organization’s governing body and the City is able to impose its will on that organization or there is a potential for that organization to provide specific financial benefits to or impose specific financial burdens on the City. The City is also considered to be financially accountable if an organization is fiscally dependent (i.e., it is unable to adopt its budget, levy taxes, set rates or charges, or issue bonded debt without approval from the City). In certain cases, other organizations are included as component units if the nature and significance of their relationship with the City are such that their exclusion would cause the City’s financial statements to be misleading or incomplete. All of the City’s component units are considered to be blended component units. Blended component units, although legally separate entities, are, in substance, part of the City’s operations and so data from these units are reported with the interfund data of the primary government. The following organizations are considered to be component units of the City: City of La Quinta Public Financing Authority

The La Quinta Public Financing Authority (Financing Authority) was established pursuant to a Joint Exercise of Powers Agreement dated November 19, 1991, between the City and the Former Redevelopment Agency (now Successor Agency). The purpose of the Financing Authority is to provide financing necessary for the construction of various public improvements through the issuance of debt. Although the Financing Authority is legally separate, it is reported as if it were part of the City because the City Council also serves as the governing board of the Financing Authority and the management of the City has operational responsibility for the Financing Authority. Separate financial statements of the Financing Authority are not prepared.

City of La Quinta Housing Authority The La Quinta Housing Authority (Housing Authority) was established pursuant to California Housing Authorities Law (Health and Safety Code Sections 34200 et seq.) on September 15, 2009. The purpose of the Housing Authority is to provide safe and

35

CITY OF LA QUINTA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016 Note 1: Summary of Significant Accounting Policies (Continued)

sanitary housing opportunities for La Quinta residents. Although the Housing Authority is legally separate, it is reported as if it were part of the City because the City Council also serves as the governing board of the Housing Authority and the management of the City has operational responsibility for the Housing Authority.

b. Government-Wide and Fund Financial Statements

The basic financial statements of the City are composed of the following: Government-wide financial statements Fund financial statements Notes to the financial statements

Government-wide Financial Statements

The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the primary government and its component units. All fiduciary activities are reported only in the fund financial statements. Governmental activities, which normally are supported by taxes, intergovernmental revenues, and other nonexchange transactions, are reported separately from business-type activities, which rely to a significant extent on fees and charges to external customers for support. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable. The statement of activities demonstrates the degree to which the direct expenses of a given function or segments are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include charges for services, special assessments, and payments made by parties outside of the reporting City’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. Taxes and other items not properly included among program revenues are reported instead as general revenues. Amounts paid to acquire capital assets are capitalized as assets in the government-wide financial statements, rather than reported as expenditures. Proceeds of long-term debt are recorded as a liability in the government-wide financial statements, rather than as other financing sources. Amounts paid to reduce long-term indebtedness of the reporting government are reported as a reduction of the related liability, rather than as expenditures.

Fund Financial Statements

The underlying accounting system of the City 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, deferred outflows of resources, liabilities, deferred inflows of resources, 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 governmental, proprietary, and fiduciary funds are presented after the government-wide financial statements. These statements display information about major funds individually and nonmajor funds in the aggregate for

36


governmental and proprietary funds. Fiduciary statements include financial information for fiduciary funds. Fiduciary funds of the city primarily represent assets held by the City in a custodial capacity for other individuals or organizations.

c. Measurement Focus, Basis of Accounting and Financial Statement Presentation

Government-Wide Financial Statements

While separate government-wide and fund financial statements are presented, they are interrelated. The governmental activities column incorporates data from governmental funds and internal service funds, while business-type activities incorporate data from the government's enterprise funds. Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements.

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 City uses a 60-day availability period. 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 delivered tax revenues are recognized as revenues in the period in which the underlying exchange transaction on which they are based takes place. Imposed nonexchange 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.

Property taxes, franchise taxes, licenses and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the government. In the fund financial statements, governmental funds are presented using the current financial resources measurement focus. This means that only current assets, deferred outflows of resources, current liabilities, and deferred inflows of resources are generally included on their balance sheets. The reported fund balance 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). Accordingly, they are said to present a summary of sources and uses of “available spendable resources” during a period.

37


Noncurrent portions of long-term receivables due to governmental funds are reported on their balance sheets in spite of their spending measurement focus. Special reporting treatments are used to indicate, however, that they should not be considered “available spendable resources”, since they do not represent net current assets. Recognition of governmental fund type revenues represented by noncurrent receivables are deferred until they become current receivables. Noncurrent 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 other financing sources rather than as a fund liability. Amounts paid to reduce long-term indebtedness are reported as fund expenditures.

Proprietary Funds

The City’s enterprise and internal service funds are proprietary funds. In the fund financial statements, proprietary funds are presented using the accrual basis of accounting. Revenues are recognized when they are earned and expenses are recognized when the related goods or services are delivered. In the fund financial statements, proprietary funds are presented using the economic resources measurement focus. This means that all assets, all deferred outflows of resources, all liabilities, and all deferred inflows of resources (whether current or noncurrent) associated with their activity are included on their balance sheets. Proprietary fund type operating statements present increases (revenues) and decreases (expenses) in total net position. Amounts paid to acquire capital assets are capitalized as assets in the proprietary fund financial statements, rather than reported as expenditures. Proceeds of long-term debt are recorded as a liability in the proprietary fund financial statements, rather than as an Other Financing Source. Amounts paid to reduce long-term indebtedness of the proprietary funds are reported as a reduction of the related liability, rather than as expenditures. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the Enterprise Funds are charges to customers for sales and services. Operating expenses for Enterprise Funds include the cost of sales and services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.

38


Fiduciary Funds

The pension and private-purpose trust funds are reported using the economic resources measurement focus and the accrual basis of accounting. The agency fund has no measurement focus but utilizes the accrual basis of accounting for reporting its assets and liabilities.

d. Major Funds, Internal Service Funds and Fiduciary Fund Types

The City’s major governmental funds are as follows:

General Fund – This fund is the primary fund of the City and is used to account for all revenue and expenditures of the City not legally restricted as to use. A broad range of municipal activities are provided through this fund including City Manager, City Attorney, Finance, City Clerk, Community Development, Police Services, Public Works, and Community Services. Housing Authority Project Area No. 1 – This fund accounts for the housing activities of the Housing Authority in Project Area 1 which promotes and provides for quality housing. Revenues will be provided from the receipts and collections of rents, notes and loans. All monies in the Housing Authority must be used in accordance with the applicable housing-related provisions of the California Housing Authorities Law. Housing Authority Project Area No. 2 – This fund accounts for the housing activities of the Housing Authority in Project Area 2 which promotes and provides for quality housing. Revenues will be provided from the receipts and collections of rents, notes and loans. All monies in the Housing Authority must be used in accordance with the applicable housing-related provisions of the California Housing Authorities Law. Capital Improvement Fund – This capital projects fund is used to account for the planning, design and construction of various capital projects throughout the City. Civic Center Fund – This fund accounts for the accumulation of resources provided through developer fees for the acquisition, construction, or improvement of the Civic Center.

The City’s major proprietary fund is as follows:

Golf Course – This fund accounts for the activities of the SilverRock Golf Resort.

Other fund types of the City are as follows: Debt Service Funds – These funds account for the servicing of long-term debt.

Internal Service Funds:

Equipment Replacement Fund – This fund accounts for equipment and vehicle maintenance and replacement services provided to other departments on a cost-reimbursement basis. Information Technology Fund – This fund is used to account for the acquisition for computer equipment, maintenance, and services to support information systems within the City. Costs are reimbursed by the benefiting departments.

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Park Equipment and Facilities Fund – This fund is used to account for the purchase and replacement of City owned park facility infrastructure. Costs are reimbursed by the benefiting departments. Insurance Fund – This fund accounts for City-wide insurances: liability, property, earthquake, workers compensation and risk management. Expenses are shared among departments on an allocation basis.

Fiduciary Funds:

Agency Fund – This fund accounts for assets held by the City as an agent for assessment district bondholders. Pension Trust Fund – This fund accounts for the activities of the Supplemental Pension Savings Plan, which accumulates resources for pension benefit payments to qualified government employees. Private-Purpose Trust Fund – This fund accounts for the assets and liabilities of the Former Agency and its allocated revenue to pay estimated installment payments of enforceable obligations until obligations of the Former Agency are paid in full and assets have been liquidated.

e. Assets, Deferred Outflow of Resources, Liabilities, Deferred Inflow of Resources,

and Net Position or Equity

Investments

For financial reporting purposes, investments are adjusted to their 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, changes in fair value, and any gains or losses realized upon the liquidation or sale of investments. All investments are valued at fair value. The City pools cash and investments of all funds, except for assets held by fiscal agents. 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.

Cash and Cash Equivalents

For purposes of the statement of cash flows, cash equivalents are defined as short-term, highly liquid investments that are both readily convertible to known amounts of cash or so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Cash equivalents also represent the proprietary fund’s share in the City’s cash and investment pool. Cash equivalents have an original maturity date of three months or less from the date of purchase. For purposes of the statement of cash flows, the entire balance of cash and investments on the combined balance sheet for the proprietary funds is considered cash and cash equivalents.

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Inventory

Inventory is valued at cost using the first in/first out (FIFO) method. The City uses the consumption method of accounting for inventories.

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 City utilizes the consumption method, in which prepaid items are accounted for in the period that the benefit was received.

Capital Assets

Capital assets (including infrastructure) are recorded at cost where historical records are available and at an estimated historical cost where no historical records exist. Contributed capital 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. Capital Assets include public domain (infrastructure) consisting of certain improvements including roads, streets, sidewalks, medians, and storm drains.

Capital assets used in operations are depreciated over their estimated useful lives using the straight-line method in the government-wide financial statements and in the fund financial statements of the proprietary funds. Depreciation is charged as an expense against operations and accumulated depreciation is reported on the respective balance sheet.

The following schedule summarizes capital asset useful lives:

Buildings and improvements 10-30 yearsEquipment and furniture 3-20 yearsVehicles 5-10 yearsInfrastructure 10-50 yearsSoftware 5-10 years

Deferred Outflows/Inflows of Resources

In addition to assets, the statements of net position and the governmental fund balance sheet will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/ expenditure) until then. The City has one item which qualifies for reporting in this category; please refer to Note 8 for more details. In addition to liabilities, the statements of net position and governmental fund balance sheet will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The City has two items which qualify for reporting in this category; please refer to Note 8 for more details.

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Compensated Absences

Vacation and sick time is vested on a percentage based on number of years employed at the City. Maximum accumulation of sick and vacation is 30 and 40 days, respectively. Upon termination or retirement, permanent employees are entitled to receive compensation at their current base salary for all unused vacation leave. If an employee terminates with a minimum of two years’ service, the employee is entitled to receive 25% of the value of his unused sick leave. The percentage increases by 25% for each five-year period until the employee is entitled to 75% of the value of their unused sick leave. This will occur upon the completion of ten years of continuous employment. The General Fund resources are used to pay for the accumulated benefits to employees.

Pensions

In government-wide financial statements, retirement plans (pensions) are required to be recognized and disclosed using the accrual basis of accounting (see Note 11 and the required supplementary information (RSI) section immediately following the Notes to Financial Statements), regardless of the amount recognized as pension expenditures on the governmental fund statements, which use the modified accrual basis of accounting. In general, the City recognizes a net pension liability, which represents the City’s proportionate share of the excess of the total pension liability over the fiduciary net position of the pension reflected in the actuarial report provided by the California Public Employees’ Retirement System (CalPERS). The net pension liability is measured as of the City’s prior fiscal year end. Changes in the net pension liability are recorded, in the period incurred, as pension expense or as deferred inflows of resources or deferred outflows of resources depending on the nature of the change. The changes in net pension liability that are recorded as deferred inflows of resources or deferred outflows of resources (that arise from changes in actuarial assumptions or other inputs and differences between expected or actual experience) are amortized over the weighted average remaining service life of all participants in the respective pension plan and are recorded as a component of pension expense beginning with the period in which they are incurred. For purposes of measuring the net pension liability and deferred outflows/inflows or resources relating to pensions and pension expense, information about the fiduciary net position of the City’s pension plan with CalPERS and additions to/deductions from the plan’s fiduciary net position have been determined on the same basis as they are reported by CalPERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefits terms. Investments are reported at fair value. Projected earnings on pension investments are recognized as a component of pension expense. Differences between projected and actual investment earnings are reported as deferred inflows of resources or deferred outflows of resources and amortized as a component of pension expense on a closed basis over a five year period beginning with the period in which the difference occurred. Each subsequent year will incorporate an additional closed basis five year period of recognition.

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Long-Term Obligations

In the government-wide financial statements and proprietary fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities or proprietary fund type statement of net position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.

Fund Balance

In the fund financial statements, governmental funds report the following fund balance classification: Nonspendable includes amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. Restricted includes amounts that are constrained on the use of resources by either (a) external creditors, grantors, contributors, or laws of regulations of other governments or (b) by law through constitutional provisions or enabling legislation. Committed includes amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the City’s highest authority, the City Council. The formal action that is required to be taken to establish, modify, or rescind a fund balance commitment is by a resolution. Assigned includes amounts that are constrained by the City’s intent to be used for specific purposes, but are neither restricted nor committed. City Council is authorized to assign amounts to a specific purpose. The City Council authorizes assigned amounts for specific purposes pursuant to the policy-making powers granted through a resolution. Unassigned includes the residual amounts that have not been restricted, committed, or assigned to specific purposes. The general fund is the only fund that reports a positive unassigned fund balance.

Fund Balance Flow Assumptions – governmental fund financial statements

Sometimes the City of La Quinta will fund outlays for a particular purpose from both restricted and unrestricted resources (the total of committed, assigned, and unassigned fund balance). In order to calculate the amounts to report as restricted, committed, assigned, and unassigned fund balance in the governmental fund financial statements a flow assumption must be made about the order in which the resources are considered to be applied.

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It is the City’s policy to consider restricted fund balance to have been depleted before using any of the components of unrestricted fund balance. Further, when the components of unrestricted fund balance can be used for the same purpose, committed fund balance is depleted first, followed by assigned fund balance. Unassigned fund balance is applied last.

Net Position Flow Assumption – governmental and proprietary fund financial statements

Sometimes the City of La Quinta will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted – net position and unrestricted – net position in the government-wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the City’s policy to consider restricted – net position to have been depleted before unrestricted – net position is applied.

f. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates.

g. Adopted Accounting Standards The City implemented GASB Statement No.72, Fair Value Measurement and Application, during the year ended June 30, 2016. The changes resulting from this implementation are reflected in Note 2.

h. Budgets The Transportation Uniform Mitigation Fee, Development Agreement, Indian Gaming, and Infrastructure Funds did not adopt a budget and therefore are not presented as supplementary information.

II. DETAILED NOTES ON ALL FUNDS

Note 2: Cash and Investments

Cash and investments as of June 30, 2016, are classified in the accompanying financial statements as follows:

Statement of Net Position:

Cash and investments 83,469,568$ Statement of Fiduciary Net Position:

Cash and investments 22,339,710 Cash with fiscal agent 31,276,109

Total cash and investments 137,085,387$

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CITY OF LA QUINTA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016 Note 2: Cash and Investments (Continued)

Cash and investments as of June 30, 2016, consist of the following:

Cash on hand 1,900$ Deposits with financial institutions 2,203,037 Investments 134,880,450

Total cash and investments 137,085,387$

The California Government Code requires California banks and savings and loan associations to secure a City’s deposits by pledging government securities with a value of 110% of a City’s deposits. California law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of a City’s total deposits. The City Treasurer may waive the collateral requirement for deposits which are fully insured up to $250,000 by the FDIC. The collateral for deposits in federal and state chartered banks is held in safekeeping by an authorized Agent of Depository recognized by the State of California Department of Banking. The collateral for deposits with savings and loan associations is generally held in safekeeping by the Federal Home Loan Bank in San Francisco, California as an Agent of Depository. These securities are physically held in an undivided pool for all California public agency depositors. Under Government Code Section 53655, the placement of securities by a bank or savings and loan association with an “Agent of Depository” has the effect of perfecting the security interest in the name of the local governmental agency. Accordingly, all collateral held by California Agents of Depository are considered to be held for, and in the name of, the local governmental agency. Cash Deposits At June 30, 2016, the carrying amount of the City’s deposits was $2,203,037, and the bank balance was $3,951,227. The $1,748,190 difference represents outstanding checks and other reconciling items. Investments Authorized by the California Government Code and the City’s Investment Policy

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

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This table does not address investments of debt proceeds held by bond trustee that are governed by the provisions of debt agreements of the City, rather than the general provisions of the California Government Code or the City’s investment policy.

Investment Types Authorized by State Law

*Maximum Maturity

*Maximum Percentage of

Portfolio

*Maximum Investment In One Issuer

U.S. Treasury Obligations 3 years None $30 millionU.S. Agency Securities 5 years 30% 20 - 30 millionLocal Agency Bonds 10 years 30% 30 millionCalifornia Local Agency Obligations 10 years 30% 30 millionCommercial Paper 90 days 15% 5 millionCertificates of Deposit 5 years 30% 250,000Negotiable Certificates of Deposits 5 years 30% 250,000Corporate Notes 3 years 10% 5 millionMoney Market Mutual Funds On Demand 20% N/ALocal Agency Investment Fund (LAIF) N/A N/A 50 millionInvestment Agreements 3 years 10% N/A

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 City manages its exposure to interest rate risk is by purchasing a combination of short term and long 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.

Information about the sensitivity of the fair values of the City’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 City’s investments by maturity:

Total1 year or Less 1 to 3 Years 3 to 5 Years

Certificates of Deposit 11,067,970$ 978,218$ 8,596,015$ 1,493,737$ Federal agency securities: Federal National Mortgage Association 18,026,280 18,026,280 - - Federal Home Loan Mortgage Corp 10,042,575 - - 10,042,575 U.S Treasury Note 20,036,950 15,004,350 - 5,032,600 State investment pool 44,430,566 44,430,566 - - Held by bond trustee:

Money market funds 31,276,109 31,276,109 - -

Total 134,880,450$ 109,715,523$ 8,596,015$ 16,568,912$

Investment Type

Remaining Maturity (in years)

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Disclosures Relating to Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The City's investment policy limits investments in commercial paper to those rated A-1 and P-1 or higher from Standard and Poor’s (S&P) and money market mutual funds that are rated “AAA”. The quality of U.S. Treasury securities is not analyzed since they are not deemed to have credit risk. As of June 30, 2016, the City had investments with a variety of issuers, all of which were “investment grade” and were legal under state and municipal law. The City's investments in money market mutual funds were all rated “AAA”, and federal agency securities were all rated AA+ by S&P and Moody’s. As of June 30, 2016, the City’s investments in external investment pools were unrated. Concentration of Credit Risk The investment policy of the City contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code, except for U.S. Agency Securities and Commercial Paper. As of June 30, 2016, the City had individual investments that represent 5% or more of total investments in the following securities:

Federal Home Loan Mortgage Corporation 10,042,575$ 7.5%Federal National Mortgage Association 18,026,280 13.4%

Investments guaranteed by the U.S. government and investments in mutual funds and external investment pools are excluded from this requirement. 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 City’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 state or local 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 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits. Investment in State Investment Pool The City is 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’s investment in this pool is reported in the accompanying financial statements at amounts based upon the City’s pro-rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relations 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.

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GASB Statement No. 31 The City adopted GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, as of July 1, 1997. GASB Statement No. 31 establishes fair value standards (e.g. mark to market) for investments in participating interest earning investment contracts, external investment pools, equity securities, option contracts, stock warrants and stock rights that have readily determinable fair values. Accordingly, the City reports its investments at fair value in the statement of net position and balance sheet. All investment income, including changes in the fair value of investments, is recognized as revenue in the operating statement. Fair Value Hierarchy The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. The City has the following recurring fair value measurements as of June 30, 2016:

Totals 1 2 3Investments:

US Treasury Note 20,036,950$ -$ 20,036,950$ -$ Federal Agency Securities 28,068,855 - 28,068,855 - Certificates of Deposit 11,067,970 - 11,067,970 - Local Agency Investment Fund 44,430,566 - 44,430,566 - Total Cash Investments 103,604,341 - 103,604,341 -

Investments with Fiscal Agents: Money Market Funds 31,276,109 - 31,276,109 - Total Investments with Fiscal Agent 31,276,109 - 31,276,109 -

Total Investments 134,880,450$ -$ 134,880,450$ -$

Level

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CITY OF LA QUINTA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016 Note 3: Property Taxes

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 are recorded initially in a pool, and are then allocated to the cities based on complex formulas. Accordingly, the City of La Quinta accrues only those taxes that are received from the County within ninety days after year-end.

Lien date January 1 Levy date July 1 Due dates November 1 and February 1 Collection dates December 10 and April 10

Note 4: Notes Receivable

In September 1994, the Former Agency sold certain real property to LINC Housing for $2,112,847. The property was used to construct single-family homes and rental units to increase the City's supply of low and moderate income housing. The note bears interest at 6% per annum and is due in full on June 15, 2029. On February 1, 2012, this receivable was transferred to the Housing Authority Project Area No. 1 which took over the housing function of the Former Agency upon dissolution. The balance at June 30, 2016, including matured, unpaid interest of $2,530,471 is $4,565,859. In February 2011, the Former Agency entered into Disposition and Development Agreement with Coral Mountain Partners L.P. (“Coral Mountain”) to fund up to $29,000,000 for the construction of a low and moderate income apartment complex with an estimated completion date of the apartment complex of March 2014. The Former Agency’s $29,000,000 loan is evidenced by a Promissory Note executed by Coral Mountain (“Note”). Interest on the outstanding note amount will bear simple interest of 1%. Principal and interest will be repaid on or before May 1st of each year from annual residual receipts as defined in the Note once the project is completed and may be repaid early if the property is refinanced, or if the property is transferred to another entity. On February 1, 2012, this receivable was transferred to the Housing Authority Project Area No. 2 which took over the housing function of the Former Agency upon dissolution. As of June 30, 2016, the outstanding principal portion on the Note is $24,000,000 and the outstanding interest portion is $527,043. Other notes receivable as of February 1, 2012, were transferred to the Housing Authority Project Area No. 1 which took over the housing function of the Former Agency upon dissolution that totaled $24,872 at June 30, 2016.

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CITY OF LA QUINTA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016 Note 5: Capital Assets

Capital asset activity for governmental activities for the year ended June 30, 2016, is as follows:

Beginning EndingBalance at Balance at

July 1, 2015 Additions Deletions Transfers June 30, 2016Governmental Activities:

Capital assets, not being depreciated:Land 69,816,674$ -$ -$ -$ 69,816,674$ Right of way 284,928,794 - - - 284,928,794 Art purchases - - - - - Construction-in-progress 24,423,925 7,025,619 1,688,951 (21,067,981) 8,692,612

Total Capital Assets, Not Being Depreciated 379,169,393 7,025,619 1,688,951 (21,067,981) 363,438,080

Capital assets, being depreciated:Buildings and improvements 69,273,971 - 30,223 4,932,812 74,176,560 Equipment and furniture 2,982,523 503,369 42,927 - 3,442,965 Vehicles 1,696,250 83,294 27,725 - 1,751,819 Infrastructure 202,264,372 - - 16,135,169 218,399,541

Total Capital Assets, Being Depreciated 276,217,116 586,663 100,875 21,067,981 297,770,885

Less accumulated depreciation:Buildings and improvements 25,869,210 2,320,922 30,223 - 28,159,909 Equipment and furniture 2,052,855 206,782 42,927 - 2,216,710 Vehicles 1,504,860 63,400 4,545 - 1,563,715 Infrastructure 102,360,326 6,428,995 - - 108,789,321

Total Accumulated Depreciation 131,787,251 9,020,099 77,695 - 140,729,655

Total Capital Assets, Being Depreciated, Net 144,429,865 (8,433,436) 23,180 21,067,981 157,041,230

Governmental Activities Capital Assets, Net 523,599,258$ (1,407,817)$ 1,712,131$ -$ 520,479,310$

Depreciation expense was charged to the following functions in the Statement of Activities:

General government 345,804$ Community development 115,832 Community services 1,260,434 Public works 6,525,956 Internal service 772,073

9,020,099$

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CITY OF LA QUINTA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016 Note 5: Capital Assets (Continued)

Capital asset activity for business-type activities for the year ended June 30, 2016, is as follows:

Beginning EndingBalance at Balance at

July 1, 2015 Additions Deletions June 30, 2016Business-Type Activities:Capital assets, not being depreciated:Land 39,712,955$ -$ -$ 39,712,955$

Total Capital Assets, Not Being Depreciated 39,712,955 - - 39,712,955

Capital assets, being depreciated:Buildings and improvements 6,636,465 - - 6,636,465 Equipment and furniture 2,303,742 - - 2,303,742 Vehicles 20,348 - - 20,348 Software 20,255 - - 20,255

Total Capital Assets, Being Depreciated 8,980,810 - - 8,980,810

Less accumulated depreciation:Buildings and improvements 2,435,711 214,840 - 2,650,551 Equipment and furniture 2,099,340 4,487 - 2,103,827 Vehicles 20,348 - - 20,348 Software 20,255 - - 20,255

Total Accumulated Depreciation 4,575,654 219,327 - 4,794,981

Total Capital Assets, Being Depreciated, Net 4,405,156 (219,327) - 4,185,829

Governmental Activities Capital Assets, Net 44,118,111$ (219,327)$ -$ 43,898,784$

Depreciation expense was charged to the following function in the Statement of Activities:

Golf Course 219,327$

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CITY OF LA QUINTA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016 Note 6: Changes in Long-Term Liabilities – Governmental Activities Changes in Long-Term Debt

The following is a summary of changes in governmental long-term liabilities of the City for the fiscal year ended June 30, 2016:

Balance at July 1, 2015 Additions Deletions

Balance at June 30, 2016

Due within one year

City:Compensated absences payable $ 853,497 851,605$ 852,551$ 852,551$ 851,606$ Copier Lease Payable 54,567 - 16,632 37,935 18,169 Dell Computer Lease 49,302 17,682 25,355 41,629 25,868 De Lage Landen Public Finance - 113,748 37,916 75,832 37,916 RDA Project Area No. 2:

Provident Loan 1,367,344 - 41,748 1,325,596 45,375 US Department of Agriculture 668,933 - 19,235 649,698 21,249

Financing Authority:Revenue bonds 2,405,000 - 555,000 1,850,000 585,000

Total $ 5,398,643 $ 983,035 $ 1,548,437 $ 4,833,241 $ 1,585,183

A description of individual issues of debt (excluding defeased bonds) outstanding as of June 30, 2016, is as follows: Copier Leases Payable In June 2013, the City entered into a 5-year lease agreement for photocopiers for $71,045 maturing in monthly increments of $1,456, with interest payable monthly at 8.47%. This lease agreement qualifies as a capital lease for accounting purposes and therefore, has been recorded at the present value of the future minimum lease payments at the inception date. On April 1, 2015, the City leased an additional copier for $9,000; this amount was added to the outstanding principal at April 1, 2015 of $49,505 to arrive at a new balance of $58,505 maturing in monthly increments of $1,728, with interest payable monthly at 8.47%. The minimum future lease obligations and the net present value of the lease payments as of June 30, 2016, are as follows:

Year EndingJune 30, Total

2017 20,739$ 2018 20,739

Total Payments 41,478 Less amount representing interest (3,543)

Outstanding Principal 37,935$

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CITY OF LA QUINTA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016 Note 6: Changes in Long-Term Liabilities – Governmental Activities (Continued)

Dell Computer Lease Payable In April 2014, the City entered into a 5-year lease agreement for Dell computers for $90,629 maturing in annual increments ranging from $20,693 to $408, with interest payable annually at 4.79%. In August 2015, the City entered into another 5-year lease for Dell computers for $17,682 maturing in annual increments from $16,620 to $639, with interest payable annually at 4.07%. This lease agreement qualifies as a capital lease for accounting purposes and therefore, has been recorded at the present value of the future minimum lease payments at the inception date. The minimum future lease obligations and the net present value of the lease payments as of June 30, 2016, are as follows:


2017 27,730$ 2018 10,234 2019 5,747 2020 665

Total Payments 44,376 Less amount representing interest (2,747)


Technology Hardware Lease Payable In 2016, the City entered into a 3-year lease agreement for network firewall and switches for $113,748 maturing in three annual installments of $37,916, with no interest. This lease agreement qualifies as a capital lease for accounting purposes and therefore, has been recorded at the present value of the future minimum lease payments at the inception date. The minimum future lease obligations and the net present value of the lease payments as of June 30, 2016, are as follows:


2017 37,916$ 2018 37,916

Total Payments 75,832 Less amount representing interest -


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1996 Lease Revenue Refunding Bonds

On November 15, 1996, the Financing Authority issued $8,790,000 of 1996 Lease Revenue Refunding Bonds to defease the remaining 1991 Local Agency Revenue Bonds in the amount of $8,200,000 and to provide funds for construction of remaining improvements to the La Quinta Civic Center site. The bonds consist of $3,630,000 of serial bonds and $5,150,000 of term bonds. The serial bonds will accrue interest at rates between 3.70% and 5.30% and principal amounts mature between October 1, 1997 and October 1, 2008, in amounts ranging from $285,000 to $380,000. The term bonds accrue interest at a rate of 5.55% and mature on October 1, 2018. A surety agreement has been purchased to satisfy the bond reserve requirement. There are certain limitations regarding the issuance of parity debt as further described in the official statement. The amount of principal outstanding at June 30, 2016, is $1,850,000. The minimum annual requirements to amortize the bond payable as of June 30, 2016, are as follows:

Principal Interest2017 585,000$ 86,441$ 2018 615,000 53,141 2019 650,000 18,038

Totals 1,850,000$ 157,620$

Loans Washington Street Apartments In October 2008, the Former Agency acquired the Washington Street Apartments for cash and the assumption of the following debt: Provident Bank Loan This loan was originally entered into with the previous owner of the Washington Street Apartments and Provident Bank for $1,696,000 in August 2001 at an 8.36% interest rate. The loan is amortized on a thirty-year basis with the outstanding balance due in twenty years or August 2021. The outstanding principal balance in October 2008 when the property was acquired by the Former Agency was $1,572,031. The loan is secured by a deed of trust on the property and is senior to the United States Department of Agriculture (USDA) loan which is also secured by a deed of trust on the property. Repayment of the monthly loan amount of $12,873 is made from tenant rent receipts. The source for the final principal payment due in August 2021, of $1,050,109 will be determined at a future date. The principal balance of this loan at June 30, 2016, is $1,325,596. The minimum annual requirements to amortize the loan payable as of June 30, 2016, are as follows:

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Principal Interest

2017 45,375$ 109,099$ 2018 49,317 105,157 2019 53,602 100,872 2020 58,259 96,216 2021 63,320 91,154 2022 1,055,723 14,670

Totals 1,325,596$ 517,168$

United States Department of Agriculture (USDA) Rural Development Promissory Note This promissory note was originally entered into with the previous owner of the Washington Street Apartments and USDA – Rural Development for $1,500,000 in November 1980 at a 10.00% interest rate. The note is amortized on a fifty-year basis with the outstanding balance due in October 2030. The outstanding principal balance, in October 2008, when the property was acquired by the Former Agency was $760,721. The loan is secured by a deed of trust on the property and is subordinated to the Provident loan which is also secured by a deed of trust on the property. Repayment of the monthly loan amount of $7,107 is made from tenant rent receipts and a rental subsidy from the USDA. Rural Development has agreed to a 9% interest rate subsidy on the Promissory Note as long as the Apartment renters meet certain program eligibility requirements. The principal balance of this note at June 30, 2016, is $649,698.

Principal Interest

2017 21,249$ 64,033$ 2018 23,474 61,807 2019 25,932 59,349 2020 28,648 56,634 2021 31,648 53,634

2022-2026 215,456 210,953 2027-2031 303,291 73,179

Totals 649,698$ 579,589$

Compensated absences Compensated absences are described in Note 1. The liability is typically liquidated by the general fund.

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CITY OF LA QUINTA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 7: Debt Without Governmental Commitment

The City of La Quinta sold Improvement Bonds issued pursuant to the California State Improvement Act of 1915. The Bonds are payable from the annual installments collected on the regular property tax bills sent to owners of property having unpaid assessments levied against land benefited by the projects. The bonds are neither general obligations of the City nor any other political subdivision and the full faith and credit of the City is not pledged for repayment thereof, therefore, they are not included in the long-term liabilities in the accompanying financial statements. The City is not liable for repayment of the debt, but is only acting as agent for the property owners in collecting the assessments and forwarding the collections to bondholders. The following is a summary of Improvement Bonds outstanding at June 30, 2016.

Proceeds Maturity Date Interest Rate Outstanding at June 30, 2016

Assessment District No. 97-1 705,262$ 9/2/2018 4.10% - 5.60% 130,000$

56

CITY OF LA QUINTA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016 Note 8: Deferred Outflows and Inflows of Resources

Pursuant to GASB Statement No. 63, “Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position,” and GASB Statement No. 65, “Items Previously Reported as Assets and Liabilities,” the City recognized deferred outflows of resources in the government-wide financial statements. These items are a consumption of net position by the City that is applicable to a future reporting period. Previous financial reporting standards do not include guidance for reporting those financial statement elements, which are distinct from assets and liabilities. The City has one item that is reportable on the Government-wide Statement of Net Position. It relates to outflows from changes in the net pension liability (Note 11). Deferred outflows of resources that are reported in the proprietary funds are included in the Government-wide Statement of Net Position. Governmental activities recorded deferred outflows of resources related to pensions of $1,799,679. In addition, the City recognized deferred inflows of resources in the government-wide financial statements and governmental fund financial statements. These items are an acquisition of net position by the City that is applicable to a future reporting period. Previous financial reporting standards do not include guidance for reporting those financial statement elements, which are distinct from assets and liabilities. The City has one item that is reportable on the Government-wide Statement of Net Position; inflows from changes in the net pension liability (Note 11). Deferred inflows of resources reported in the Government-wide Statement of Net Position related to pensions of $784,958. Under the modified accrual basis of accounting, it is not enough that revenue is earned; it must also be available to finance expenditures of the current period. Governmental funds will therefore include additional deferred inflows of resources for amounts that have been earned but are not available to finance expenditures in the current period. The City has two items that are reportable on the Governmental Fund Balance Sheet: the first of these items relates to long-term Housing notes receivable and accrued interest recorded in the Housing special revenue funds for a total amount of $27,057,514 (Note 4). The second relates to revenues not yet available from fire credit and grants in the amount of $10,128,356.

Note 9: Interfund Receivables and Payables

The composition of current interfund receivable and payable as of June 30, 2016, are as follows:

Civic Center Fund

Internal Service Funds

Non-Major Governmental Total

Due From Other FundsGeneral Fund 92,393$ 286,217$ 34,526$ 413,136$

Due to Other Funds

The interfund balances were made to cover negative cash balances and other temporary loans at June 30, 2016.

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CITY OF LA QUINTA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016 Note 9: Interfund Receivables and Payables (Continued)

The composition of non-current interfund receivable and payable as of June 30, 2016, are as follows:

Civic Center Non-Major

Governmental Golf Course Total Advances to Other Funds

General Fund 7,119,614$ 2,495,035$ 5,360,151$ 14,974,800$

Advances From Other Funds

a) In September 2006, an advance up to $9,615,094 for the City Hall expansion from the General Fund to the Civic Center Developer Impact Fee Fund was approved. As of June 30, 2016, the Civic Center expansion was completed and the amount of the advance was $7,119,614 outstanding. The advance accrues interest that would have been earned by Local Agency Investment Fund.

b) As of June 30, 2016, the General Fund has advanced to the Golf Course fund

$5,360,151. The advances accrue interest at the City’s investment pool rate and are to be repaid by the golf course out of future profits.

c) In October 2009, an advance up to $2,033,687 for the Phase 1 of the Corporate Yard from the General Fund to the Street and Park Maintenance Facility Funds was approved. As of June 30, 2016, the amount of the outstanding advance was $1,901,551. The advance accrues interest at the earnings rate of the City’s investment pool fund.

d) In February 2003, the Redevelopment Agency Capital Projects PA No. 2 Fund advanced

$1,350,131 to the Fire Facility Fund to provide funding for development of the City’s north Fire Station. On March 1, 2012 the outstanding advance of $925,192 was transferred from the Redevelopment Agency to the General Fund with the Redevelopment Agency receiving $925,192 in cash for the outstanding balance. The advance accrues interest at the earnings rate of the City’s investment pool funds. As of June 30, 2016, the remaining balance of the advance was $593,484.

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CITY OF LA QUINTA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016 Note 10: Interfund Transfers

General Fund Non-Major

Governmental Internal

Service Funds Golf Course

Fund Total Transfers In

General Fund -$ 27,419$ -$ -$ 27,419$ Capital Improvement Fund 2,384,714 3,053,939 130,589 - 5,569,242 Non-Major Governmental 819,633 4,244 - - 823,877 Internal Service Funds 209,000 - - - 209,000 Golf Course Fund 115,400 - - 61,569 176,969

Total: 3,528,747$ 3,085,602$ 130,589$ 61,569$ 6,806,507$

Transfers Out

a) $27,419 was transferred to the General Fund from various non-major funds to fund various program expenses within the City related to operations and grant funded activities.

b) $2,384,714 was transferred from the General Fund to the Capital Improvement Fund to fund various capital projects.

c) $3,053,939 was transferred to Capital Improvement Fund from various non-major funds

whereby available external grant funding was received and appropriated first for various projects.

d) $130,589 was transferred to the Capital Improvement Fund from the internal service funds

to support various capital projects and preventative maintenance.

e) $819,633 was transferred from the General Fund to various non-major funds to support various administrative operations and expenses within the City.

f) $4,244 was transferred between non-major funds to repay the DIF loan liability.

g) $209,000 was transferred from the General Fund to the internal service funds for various

FY15-16 insurance liabilities.

h) $115,400 was transferred from the General Fund to the Golf Course Fund to subsidize operations per the FY15-16 budget.

i) $61,569 was transferred between the Golf Course Fund to the SilverRock reserve as

noted in the contractual management agreement under section 3.10.1 whereby two (2) percent of green fees collected shall be deposited in a separate reserve account.

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CITY OF LA QUINTA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

III. OTHER INFORMATION

Note 11: Defined Benefit Pension Plan Miscellaneous Plan Plan Descriptions

The City of La Quinta Miscellaneous Plans, are cost-sharing multiple-employer defined benefit pension plans administered by the California Public Employees’ Retirement System (CalPERS). All qualified and permanent employees are eligible to participate in the City’s separate Miscellaneous (Tier I, Tier II, and PEPRA) Plans. Benefit provisions under these plans are established by State statue and City resolution.

Benefits Provided

The Plan provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 10 years of service. The death benefit is one of the following: The Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law.

The Public Employees’ Pension Reform Act of 2013 (PEPRA) requires new benefits and member contributions for new members as defined by PEPRA, that are hired after January 1, 2013. These PEPRA members in pooled plans are reflected in the new risk pools created by the CalPERS Board in response to the passage of PEPRA, beginning with the June 30, 2013, risk-pool valuations.

Tier I * Tier II * PEPRA

Hire dateOn and after

December 16, 1983On and after

December 17, 2012On and after

January 1, 2013Benefit formula 2.5% @ 55 2% @ 60 2% @ 62Benefit vesting schedule 5 years service 5 years service 5 years serviceBenefit payments monthly for life monthly for life monthly for lifeRetirement age 50 and up 50 and up 52 and upMonthly benefits, as a % of eligible compensation 2% to 2.5% 1.092% to 2.418% 1% to 2%

Required employee contribution rates 8.00% 7.00% 6.25%Required employer contribution rates 10.069% 7.159% 6.555%

* Miscellaneous Rate Plan is closed to new entrants

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CITY OF LA QUINTA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016 Note 11: Defined Benefit Pension Plan (Continued)

Contribution Description

Section 20814(c) of the California Public Employees’ Retirement Law (PERL) requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. The total plan contributions are determined through the CalPERS’ annual actuarial valuation process. The actuarially determined rate is based on the estimated amount necessary to pay the Plans’ allocated share of the risk pool’s costs of benefits earned by employees during the year, and any unfunded accrued liability. The employer is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. The required employer contribution and the amount paid to CalPERS by the City as a reduction to the net pension liability for the year ended June 30, 2016 was $783,364. The City’s employer contributions were equal to the required employer contributions for the year ended June 30, 2016.

Pension Liabilities, Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions

As of June 30, 2016, the City reported net pension liabilities for its proportionate shares of the net pension liability of each Plan as follows:

Tier I 8,653,739$ Tier II (1,381) PEPRA (1,068) Total Net Pension Liability: 8,651,290$

Proportionate Share of Net Pension Liability

The City’s net pension liability for each Plan is measured as the proportionate share of the net pension liability of the CalPERS Miscellaneous Pool. The net pension liability of each of the Plans is measured as of June 30, 2015, and the total pension liability for each Plan used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2014 rolled forward to June 30, 2015 using standard update procedures. City’s proportion of the net pension liability was based on CalPERS’ Public Agency Cost-Sharing Allocation Methodology Report. The City’s proportionate share of the net pension liability for each Plan as of June 30, 2014 and 2015 was as follows:

Tier I Tier II PEPRA Total Plans

Proportion - June 30, 2014 6,433,125$ 96$ 170$ 6,433,391$ Proportion - June 30, 2015 8,653,739 (1,381) (1,068) 8,651,290 Change - Increase (Decrease) 2,220,614 (1,477) (1,238) 2,217,899

For the year ended June 30, 2016, the City recognized a total pension expense of $580,555 for all plans in total.

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At June 30, 2016, the City reported deferred outflows and deferred inflows of resources related to pensions as follows:

Deferred Outflows of Resources

Deferred Inflows of Resources

Pension contributions made subsequent to measurement date 883,415$ -$ Changes of assumptions - 468,260 Differences between expected and actual experiences 49,494 - Net difference between projected and actual earnings on pension plan investments - 234,744 Differences in proportions 858,566 21,037 Difference in proportionate share in contributions 8,204 60,917

1,799,679$ 784,958$

The $883,415 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2016. Other amounts reported as deferred outflows or deferred inflows of resources related to pensions will be recognized as pension expense as follows:

Measurement Period ended June 30:

Deferred Outflows/(Inflows) of

Resources2016 (63,797)$ 2017 (54,691) 2018 (50,267) 2019 300,061

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Actuarial Methods and Assumptions Used to Determine Total Pension Liability

For the measurement period ended June 30, 2015 (the measurement date), the total pension liability was determined by rolling forward the June 30, 2014 total pension liability. The June 30, 2014 and the June 30, 2015 total pension liabilities were based on the following actuarial methods and assumptions:

Actuarial Cost Method Entry Age Normal Cost Method

Discount Rate 7.65%Inflation 2.75%Salary Increases 3.3% - 14.2% (1)Investment Rate of Return 7.50% (2)Mortality Rate Table Derived using CalPERS’ Membership Data for

all Funds (3)Post Retirement Benefit Increase Contract COLA up to 2.75% until Purchasing

Power Protection Allowance Floor on Purchasing Power applies, 2.75% thereafter

(1) Depending on age, service and type of employement

Actuarial Assumptions

(3) The mortality table used was developed based on CalPERS’ specific data. The table includes 20 years of mortality improvements using Society of Actuaries Scale BB. For more details on this table, please refer to the 2014 experience study report on the CalPERS website.

(2) Net of Pension Plan Investment and Administrative Expenses; includes Inflation

All other actuarial assumptions used in the June 30, 2014 valuation were based on the results of an actuarial experience study for the period from 1997 to 2011, including updates to salary increase, mortality and retirement rates. The Experience Study report can be obtained at CalPERS’ website.

Change of Assumptions GASB 68, paragraph 68 states that the long-term expected rate of return should be determined net of pension plan investment expense but without reduction for pension plan administrative expense. The discount rate of 7.50 percent used for the June 30, 2014 measurement date was net of administrative expenses. The discount rate of 7.65 percent used for June 30, 2015 measurement date is without reduction of pension plan administrative expense. Discount Rate

The discount rate used to measure the total pension liability was 7.65 percent. To determine whether the municipal bond rate should be used in the calculation of a discount rate for each plan, CalPERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, none of the tested plans run out of assets. Therefore, the current 7.65 percent discount rate is adequate and the use of the municipal bond rate calculation is not necessary. The long term expected discount rate of 7.65 percent is applied to all plans in the Public Employees Retirement Fund.

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The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.

In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Such cash flows were developed assuming that both members and employers will make their required contributions on time and as scheduled in all future years. Using historical returns of all the funds’ asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent.

The table below reflects long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. These geometric rates of return are net of administrative expenses.

Asset ClassNew Strategic

AllocationReal Return Years

1 - 10 (1)Real Return

Years 11+ (2)Global Equity 51.0% 5.25% 5.71%Global Fixed Income 19.0 0.99 2.43Inflation Sensitive 6.0 0.45 3.36Private Equity 10.0 6.83 6.95Real Estate 10.0 4.50 5.13Infrastructure and Forestland 2.0 4.50 5.09Liquidity 2.0 (0.55) (1.05)

(1) An expected inflation of 2.5% used for this period (2) An expected inflation of 3.0% used for this period

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Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate

The following presents the City’s proportionate share of the net pension liability for each Plan, calculated using the discount rate for each Plan, as well as what the City’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1% point lower or 1% point higher than the current rate:

Discount Rate - 1% Current Discount Discount Rate +1%

6.50% 7.50% 8.50%Tier I 14,023,360$ 8,653,739$ 4,220,492$ Tier II 2,037 (1,381) (4,203) PEPRA 3,594 (1,068) (4,917) Total 14,028,991$ 8,651,290$ 4,211,372$

Miscellaneous plans Net Pension Liability/(Asset)

Pension Plan Fiduciary Net Position

Detailed information about each pension plan’s fiduciary net position is available in the separately issued CalPERS financial reports. See CalPERS website for additional information.

Note 12: Defined Contribution Plans

Plan Description The Supplemental Pension Savings Plan is a defined contribution pension plan established by the City to provide retirement excess benefits to general employees of the City. At June 30, 2016, there was one plan member. There are no required contributions by plan members. During the 2015-2016 fiscal year the City made no contributions to fund the Supplemental Pension Savings Plan.

Note 13: Post-Employment Health Benefits

Plan Description The City of La Quinta provides other postemployment benefits (OPEB) through a single-employer defined benefit healthcare plan by contributing on behalf of all eligible retirees’ $122/month for calendar 2015 and $125/month for calendar 2016, increased in all future years according to the rate of medical inflation. These benefits are provided per contract between the City and the employee associations. A separate financial report is not available for the plan.

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CITY OF LA QUINTA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016 Note 13: Post-Employment Health Benefits (Continued)

Funding Policy The contribution requirements of plan members and the City are established and may be amended by the City, City Council and/or the employee association. Currently, contributions are not required from plan members. A contribution was made during 2015-2016 fiscal year for $20,885. As a result, the City calculated and recorded a net OPEB obligation, representing the difference between the annual required contribution (ARC) and actual contributions, as presented below:

Annual required contribution (ARC) 106,104$ Interest on net OPEB obligation 29,643 Adjustment to ARC (42,856)

Annual OPEB cost 92,891 Contributions made 20,885

(Decrease) increase in net OPEB obligation 72,006 Net OPEB obligation (asset) - beginning of year 741,071

Net OPEB obligation (asset) - end of year 813,077$

The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan and the net OPEB obligation for 2014-2016 and the two preceding years were as follows:

Actual Percentage

Fiscal Annual Contribution of Annual Net OPEBYear OPEB (Net of OPEB Cost ObligationEnd Cost Adjustments) Contributed (Asset)

6/30/2014 120,039$ 16,253$ 13.54% 663,377$ 6/30/2015 94,106 16,412 17.44% 741,071 6/30/2016 92,891 20,885 22.48% 813,077

Funded Status and Funding Progress Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the City are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress below presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. The information is as of the latest actuarial valuation information available.

Type of Valuation

Actuarial Valuation

Date

Actuarial Value of Assets

Actuarial Accrued Liability Funding Ratio Covered Payroll

Percent of Covered Payroll Interest Rate

Actual 7/1/2011 -$ 428,328$ 0.0% 7,459,445$ 5.7% 5.0%Actual 7/1/2014 - 851,125 0.0% 5,372,588 15.8% 4.0%

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CITY OF LA QUINTA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016 Note 13: Post-Employment Health Benefits (Continued)

Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The required contribution was determined as part of the July 1, 2014, actuarial valuation using the projected unit credit method. The actuarial assumptions included a 4.0% investment rate of return and healthcare trend rate ranging from 5% to 8%. The actuarial value of assets is set equal to the reported market value of assets. The UAAL is being amortized as a level dollar on an open basis. The remaining amortization period at June 30, 2016, was twenty-four years. The number of active participants is 12.

Note 14: Risk Management

Description of Self-Insurance Pool Pursuant to Joint Powers Agreement

The City of La Quinta is a member of the California Joint Powers Insurance Authority (CJPIA). The CJPIA is composed of 116 California public entities and is organized under a joint powers agreement pursuant to California Government Code §6500 et seq. The purpose of the CJPIA is to arrange and administer programs for the pooling of self-insured losses, to purchase excess insurance or reinsurance, and to arrange for group purchased insurance for property and other lines of coverage. The CJPIA began covering claims of its members in 1978. Each member government has an elected official as its representative on the Board of Directors. The Board operates through a nine-member Executive Committee.

Self-Insurance Programs of the CJPIA

Each member pays an annual contribution at the beginning of the coverage period. A retrospective adjustment is then conducted annually thereafter, for coverage years 2012-13 and prior. Retrospective adjustments are scheduled to continue indefinitely on coverage years 2012-13 and prior, until all claims incurred during those coverage years are closed, on a pool-wide basis. This subsequent cost re-allocation among members, based on actual claim development, can result in adjustments of either refunds or additional deposits required. Coverage years 2013-14 and forward are not subject to routine annual retrospective adjustment. The total funding requirement for self-insurance programs is estimated using actuarial models and pre-funded through the annual contribution. Costs are allocated to individual agencies based on exposure (payroll) and experience (claims) relative to other members of the risk-sharing pool. Additional information regarding the cost allocation methodology is provided below.

Liability In the liability program claims are pooled separately between police and general government exposures. (1) The payroll of each member is evaluated relative to the payroll of other members. A variable credibility factor is determined for each member, which establishes the weight applied to payroll and the weight applied to losses within the formula. (2) The first layer of losses includes incurred costs up to $30,000 for each occurrence and is evaluated as a percentage of the pool’s total incurred costs within the first layer.

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CITY OF LA QUINTA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016 Note 14: Risk Management (Continued)

(3) The second layer of losses includes incurred costs from $30,000 to $750,000 for each occurrence and is evaluated as a percentage of the pool’s total incurred costs within the second layer. (4) Incurred costs from $750,000 to $50 million, are distributed based on the outcome of cost allocation within the first and second loss layers. For 2015-16, the CJPIA’s pooled retention is $2 million per occurrence, with reinsurance to $20 million, and excess insurance to $50 million. The CJPIA’s reinsurance contracts are subject to the following additional pooled retentions: (a) $2.5 million annual aggregate deductible in the $3 million x/s $2 million layer, (b) $3 million annual aggregate deductible in the $5 million x/s $10 million layer. There is a third annual aggregate deductible in the amount of $2.5 million in the $5 million x/s $5 million layer, however it is fully covered under a separate policy and therefore not retained by the Authority. The overall coverage limit for each member, including all layers of coverage, is $50 million per occurrence. Costs of covered claims for subsidence losses have a sub-limit of $30 million per occurrence. Workers’ Compensation In the workers’ compensation program claims are pooled separately between public safety (police and fire) and general government exposures. (1) The payroll of each member is evaluated relative to the payroll of other members. A variable credibility factor is determined for each member, which establishes the weight applied to payroll and the weight applied to losses within the formula. (2) The first layer of losses includes incurred costs up to $50,000 for each occurrence and is evaluated as a percentage of the pool’s total incurred costs within the first layer. (3) The second layer of losses includes incurred costs from $50,000 to $100,000 for each occurrence and is evaluated as a percentage of the pool’s total incurred costs within the second layer. (4) Incurred costs from $100,000 to statutory limits are distributed based on the outcome of cost allocation within the first and second loss layers. For 2015-16, the CJPIA’s pooled retention is $2 million per occurrence, with reinsurance to statutory limits under California Workers’ Compensation Law. Employer’s Liability losses are pooled among members to $2 million. Coverage from $2 million to $5 million is purchased as part of a reinsurance policy, and Employer’s Liability losses from $5 million to $10 million are pooled among members. Purchased Insurance Property Insurance - The City of La Quinta participates in the all-risk property protection program of the CJPIA. This insurance protection is underwritten by several insurance companies. City of La Quinta property is currently insured according to a schedule of covered property submitted by the City of La Quinta to the CJPIA. City of La Quinta property currently has all-risk property insurance protection in the amount of $62,668,100. There is a $5,000 deductible per occurrence except for non-emergency vehicle insurance which has a $1,000 deductible. Premiums for the coverage are paid annually and are not subject to retrospective adjustments. Earthquake and Flood Insurance - The City of La Quinta purchases earthquake insurance brokered through a third party. The City of La Quinta property currently has earthquake protection up to $10,000,000 per occurrence. There is a deductible of $25,000 per occurrence. Premiums for the coverage are paid annually in the amount of $96,000 and are not subject to retrospective adjustments.

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CITY OF LA QUINTA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016 Note 14: Risk Management (Continued)

Theft Insurance - The City purchases theft insurance coverage brokered through a third party. The City pays an annual premium of $3,366, which covers thefts up to $1,000,000, with a deductible of $5,000 per occurrence. Pollution Legal Liability Insurance - The City participates in the pollution legal liability insurance program which is available through the CJPIA. The policy covers sudden and gradual pollution of scheduled property, streets, and storm drains owned by the City. Coverage is on a claims-made basis. There is a $50,000 deductible. The CJPIA has a limit of $10 million for the 3-year period from July 1, 2014 through July 1, 2017. Adequacy of Protection

During the past three fiscal years, none of the above programs of protection experienced settlements or judgments that exceeded pooled or insured coverage. Earthquake and Flood insurance was reduced from $20 million to $10 million for the policy period February 7, 2015 to February 7, 2016.

Note 15: Fund Balance

a. Fund Balance Commitments

The City has the following committed fund balance shown on the balance sheet: Committed to emergency reserve – in June of 2015 the City established the amount of 40% of the FY Year 2015-2016 budgeted operating expenditures. The City chose to base the FY 2014-2015 year-end reserves on the adopted FY 2015-2016 budget. This amount totals $15,576,000. The funds would be drawn upon pursuant to the Municipal Code Section 2.20 which defines an emergency or disaster to mean the actual or threatened existence of conditions of disaster or of extreme peril to the safety of persons and property within this city caused by such conditions as air pollution, fire, flood, storm, epidemic, riot, earthquake or other conditions, including conditions resulting from war or imminent threat of war but other than conditions resulting from a labor controversy, which conditions are or are likely to be beyond the control of the services, regular personnel, equipment and facilities of the city and which may require the combined forces of other political jurisdictions to combat. Committed to post retirement health benefits - the City has committed a portion of fund balance for the payment in future years of their Post retirement health benefits. For the year ended June 30, 2016, the City has committed $1,523,400 for this purpose. Committed to working capital reserve: in June of 2015 the City established the amount of 10% of the FY Year 2015-2016 budgeted expenditures. The City chose to base the FY 2014-2015 year-end reserves on the adopted FY 2015-2016 budget. This amount totals $3,894,000.

Committed to Fiscal Year 2016 carryovers to Fiscal Year 2016 $4,274,046. Committed to Fiscal Year 2016 capital projects for Fiscal Year 2016 $2,302,000. These committed amounts have been approved by Council based on certain percentages and will be used only in the event of Council approval.

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CITY OF LA QUINTA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016 Note 15: Fund Balance (continued)

b. At June 30, 2016, the following funds had deficit fund balances:

Major Capital Projects Funds:

Capital Improvement 295,141$ Civic Center 7,212,007

Nonmajor Special Revenue Funds:Federal Assistance 12,914 SLEBG 26,323 Justice Assistance Grant 9,246

Nonmajor Capital Projects Funds:Library Development 1,631,001 Street Facility 1,901,551 Fire Facility 593,484

Note 16: Golf Course Management Agreement

The City entered into an agreement with Landmark Golf Management LLC (operator) to manage the golf operations at the city-owned SilverRock Golf Course. The Agreement entered into on April 6, 2004, sets forth a five-year term commencing upon the completion of the golf course. On January 14, 2005, the golf course was deemed to be complete and management was turned over to the operator. The contract has been amended and extended numerous times with the current contract expiring July 1, 2018. The contract provides that the operator will manage the day to day operations, hire employees, provide golf pro shop and food services, manage all marketing and promotional activities, prepare the annual budget report for Council consideration, and manage accounting and payroll functions. In addition to the annual payment for management services, the City has advanced the operator $250,000 to pay for golf course expenses. Twice a month the operator submits a request for reimbursement to the City to replenish the City’s advance. In addition, the agreement sets forth the establishment of a capital reserve fund of 2% of green fees. For the fiscal year ending June 30, 2016, the Golf Course had an operating loss before contributions and transfers of $528,986.

Note 17: Construction Commitments

Various construction projects were in progress at June 30, 2016. The following material construction commitments existed at June 30, 2016, with an estimated cost to complete:

Project Name Project Number

Contract Amount

Expenditures to date as of

June 30, 2016 Remaining

Commitments Dune Palms Bridge 111205 17,510,000$ $ 662,752 16,847,248$ Dune Palms Road Street Improvements 091004 2,483,000 53,837 2,429,163 HSIP Intersection Improvements 201601 1,260,400 1,123 1,259,277 HSIP Traffic Signal Interconnect Network Upgrade 201602 1,971,000 1,183 1,969,817 Madison Street Median Landscape Conversion 151604 1,300,000 196,772 1,103,228 Calle Tampico at Avenida Bermudas Drainage 151612 1,800,000 12,740 1,787,260 Washington Street Apt Rehab & Testa Property 999901 27,996,401 363,200 27,633,201

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CITY OF LA QUINTA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016 Note 18: Reimbursement Agreements

The City entered into a sales tax sharing agreement on January 30, 2006, with Costco Wholesale Corporation. Under the terms of the agreement the City shall make quarterly payments of 40% of any sales tax generated from Costco in an amount not to exceed $4,000,000 over a ten-year period. Due to the reporting of sales tax information by the State Board of Equalization to the City, the reimbursement payments by the City will lag by one quarter. The agreement terminates when either the $4,000,000 limit is reached or in 10 years whichever comes first. The Costco business opened in November 2006. As of June 30, 2016, the City made $3,304,708 in reimbursement payments to the owner leaving an outstanding balance of $695,292. On September 9, 2014, the City entered into a sales tax sharing agreement with One Eleven La Quinta LLC (“Hobby Lobby”). Under the terms of the agreement the City shall make quarterly payments of 50% of any sales tax generated from Hobby Lobby in an amount not to exceed $400,000 over an eight year period. Due to the reporting of sales tax information by the State Board of Equalization to the City, the reimbursement payments by the City will lag by one quarter. The agreement terminates when either the $400,000 limit is reached or in eight years whichever comes first. The Hobby Lobby business opened in December 2014. As of June 30, 2016, the City made $34,370 in reimbursement payments to the owner leaving an outstanding balance of $365,360.

Note 19: Successor Agency Trust for Assets of Former Redevelopment Agency

On December 29, 2011, the California Supreme Court upheld Assembly Bill 1X 26 (“the Bill”) that provides for the dissolution of all redevelopment agencies in the State of California. This action impacted the reporting entity of the City of La Quinta that previously had reported a redevelopment agency within the reporting entity of the City as a blended component unit. The Bill provides that upon dissolution of a redevelopment agency, either the city or another unit of local government will agree to serve as the “successor agency” to hold the assets until they are distributed to other units of state and local government. On January 3, 2011, the City Council elected to become the Successor Agency for the Former Redevelopment Agency (‘Former Agency”) in accordance with the Bill as part of City resolution number 2012-002. After enactment of the law, which occurred on June 28, 2011, redevelopment agencies in the State of California cannot enter into new projects, obligations or commitments. Subject to the control of a newly established oversight board, remaining assets can only be used to pay enforceable obligations in existence at the date of dissolution (including the completion of any unfinished projects that were subject to legally enforceable contractual commitments). In future fiscal years, successor agencies will only be allocated revenue in the amount that is necessary to pay the estimated annual installment payments on enforceable obligations of the Former Agency until all enforceable obligations of the prior redevelopment agency have been paid in full and all assets have been liquidated.

In accordance with the timeline set forth in the Bill (as modified by the California Supreme Court on December 29, 2011) all redevelopment agencies in the State of California were dissolved and ceased to operate as a legal entity as of February 1, 2012. The Successor Agency to the Former Agency is reported as a fiduciary fund (private purpose trust fund).

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CITY OF LA QUINTA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016 Note 19: Successor Agency Trust for Assets of Former Redevelopment Agency (Continued)

a. Cash and Investments

Cash and investments reported in the accompanying financial statements consisted of the following:

Cash and investments pooled with the City 21,895,992$ Cash and investments with fiscal agent 31,276,109

53,172,101$

b. Loans Receivable

Owner Participation Agreement – Garff Properties, LLC In July 2010, the Former Agency entered into an Owner Participation Agreement (OPA) with Garff Properties-La Quinta, LLC (“Garff”) that provides for the Former Agency to provide a rehabilitation loan to Garff of up to $2,300,000 for the construction of a new auto dealership facility and rehabilitation of an existing dealership facility. In connection with the OPA, Garff has executed a promissory note which is secured by a deed of trust, and an operating covenant. The loan will be repaid by crediting future sales and property tax increment taxes generated on the site until the cumulative taxes collected equals the loan amount. At that time, the note will be cancelled and the operating covenant will terminate. If, after ten years of operation, a shortfall exists between the revenues collected and the outstanding loan amount, the note will be cancelled and the operating covenant will terminate. Further, if at any time through no fault of the dealership certain future events outside of the dealership control occur the note will be cancelled and the operating covenant will terminate. The balance at June 30, 2016 is $1,152,538. Owner Participation Agreement – Torre Nissan In June 2011, the Former Agency entered into an Owner Participation Agreement (OPA) with an autodealer, Mega Dealer, LLC (“Torre Nissan”) that provides for the Former Agency to provide a rehabilitation loan to Torre Nissan of up to $1,500,000 for the remodeling of the existing dealership and an expansion of the dealership facility to accommodate a new line of electric and commercial vehicles. The new expansion will also include service and parts sales facilities. In connection with the OPA, Torre Nissan has executed a promissory note, which is secured by a subordinated deed of trust, and an operating covenant. The loan will be repaid by crediting future sales and property tax increment taxes generated on the site until the cumulative taxes collected equals the loan amount. If Nissan Motor Company ceases to exist, the note will be cancelled and the operating covenant will terminate. At the end of the ten-year operating covenant, the operating covenant will terminate and the note will be cancelled, and any outstanding loan balance will be forgiven. The balance at June 30, 2016 is $1,301,047.

c. Due from other Governments

La Quinta Library In April 2005, an advance of $2,490,273 was made from the Former Agency to provide funding for the construction of the public library. The advance accrues interest at the earnings rate of the City’s investment pool fund. The remaining balance of this advance at June 30, 2016, is $1,631,001.

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d. Long-Term Debt

A description of long-term debt outstanding (excluding defeased debt) of the Successor Agency as of June 30, 2016, follows:

Balance at July 1, 2015 Additions Deletions

Balance at June 30, 2016

Due within one year

Tax allocation bonds $ 185,865,000 $ - $ 6,035,000 179,830,000$ 6,630,000$ City loans 33,271,129 - 1,889,029 31,382,100 2,200,752 Revenue bonds 27,790,000 - 565,000 27,225,000 590,000 Unamortized premiums/discounts 13,247,984 - 694,017 12,553,967 -

Total $ 260,174,113 $ - $ 9,183,046 $ 250,991,067 $ 9,420,752

Tax Allocation Bonds As of June 30, 2016, the following issuances of Tax Allocation Bonds were outstanding:

Series 2011, Project Area No. 2 On June 6, 2011, the Former Agency issued subordinate taxable tax allocation bonds in the amount of $6,000,000 to finance capital projects benefiting the La Quinta Redevelopment Project Area No. 2. The 2011 tax allocation bonds were issued at a discount of $86,207 and issuance costs of $108,500. The bonds consist of $190,000 of term bonds that accrue interest at 5.375% and mature on September 1, 2016, $280,000 of term bonds that accrue interest at 7.125% and mature on September 1, 2021, $380,000 of term bonds that accrue interest at 7.600% and mature on September 1, 2026, and $5,150,000 of term bonds that accrue interest at 8.150% and mature on September 1, 2031. The interest and principal on the bonds are payable from pledged tax increment revenues.

A portion of the proceeds were used to fund the bond reserve requirement. The principal balance of outstanding bonds at June 30, 2016, is $5,850,000 with an unamortized discount of $70,800. The minimum annual requirements to amortize the bond payable as of June 30, 2016, are as follows:

Principal Interest2017 40,000$ 469,630$ 2018 50,000 466,774 2019 50,000 463,211 2020 55,000 459,471 2021 60,000 455,374

2022-2026 355,000 2,203,161 2027-2031 515,000 2,036,234 2032-2036 1,635,000 1,710,074 2037-2040 3,090,000 528,120

Totals 5,850,000$ 8,792,049$

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Series 2013A On December 17, 2013, the Successor Agency issued subordinate tax allocation refunding bonds in the amount of $97,190,000 to refinance outstanding long term obligations held by the Successor Agency. The 2013 Series A tax allocation bonds were issued at a premium of $6,056,280 and issuance costs of $480,001. Interest rates on the bonds range from 3.00% to 5.00% and are payable semi-annually on March 1 and September 1 of each year until maturity. The interest and principal of the bonds are payable solely from property tax revenue. A portion of the proceeds were used to fund the bond reserve requirement. The principal balance of outstanding bonds at June 30, 2016, is $89,095,000 with an unamortized premium of $5,147,838. The minimum annual requirements to amortize the bond payable as of June 30, 2016, are as follows:

Principal Interest2017 3,505,000$ 4,264,413$ 2018 3,645,000 4,121,413 2019 3,790,000 3,953,763 2020 3,985,000 3,759,388 2021 4,180,000 3,555,263

2022-2026 24,255,000 14,339,941 2027-2031 30,815,000 7,648,489 2032-2034 14,920,000 780,656

Totals 89,095,000$ 42,423,326$

Series 2013B On December 17, 2013, the Successor Agency issued subordinate tax allocation refunding bonds in the amount of $23,055,000 to refinance outstanding long term obligations held by the Successor Agency. The 2013 Series B tax allocation bonds were issued at a discount of $8,951 and issuance costs of $122,274. The bonds consist of $3,710,000 of term bonds that accrue interest at 5.240% and mature on September 1, 2026, $4,335,000 of term bonds that accrue interest at 5.550% and mature on September 1, 2029, and $5,115,000 of term bonds that accrue interest at 5.820% and mature on September 1, 2032. The remaining $9,895,000 matures annually with rate ranging from 0.76% to 4.89%. The interest and principal on the bonds are payable from property tax revenue.

A portion of the proceeds were used to fund the bond reserve requirement. The principal balance of outstanding bonds at June 30, 2016, is $21,010,000 with an unamortized discount of $7,607.

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The minimum annual requirements to amortize the bond payable as of June 30, 2016, are as follows:

Principal Interest2017 880,000$ 1,016,504$ 2018 900,000 996,053 2019 920,000 970,318 2020 950,000 939,623 2021 985,000 903,488

2022-2026 5,625,000 3,774,539 2027-2031 7,240,000 2,085,626 2032-2033 3,510,000 207,192

Totals 21,010,000$ 10,893,343$

2014 Series A Local Agency Tax Allocation Bonds On July 9, 2014, the Successor Agency issued tax allocation refunding bonds in the amount of $65,600,000, with a premium of $8,545,482, to refinance outstanding 2004 Series A Revenue Bonds of $72,865,000 with interest payments ranging between 3% to 5.25%. The net proceeds of $73,402,709 (after payment of $592,017 in issuance costs) plus an additional $4,012,653 of 2004 Series A sinking fund monies were used to purchase U.S. Government Securities. Those securities were deposited in an irrevocable trust with an escrow agent; and issued to pay-off $77,415,362 of remaining principal and accrued interest of 2004 Series A. As a result, the 2004 Series A bonds are considered to be defeased and the liability for those bonds has been removed from the Successor Agency’s long-term debt. The remaining unamortized bond premium at June 30, 2016 was $7,731,588. The Successor Agency in effect reduced its aggregate debt service payments over the remaining maturity period of the 2004 Series A by $11,814,531 and to obtain an economic gain (difference between the present values of the debt service payments on the old and new debt) of $7,801,878. The minimum annual requirements to amortize the 2014 Series A bonds payable as of June 30, 2016, are as follows:

Principal Interest2017 2,205,000$ 3,023,425$ 2018 2,270,000 2,956,300 2019 2,340,000 2,875,450 2020 2,435,000 2,779,950 2021 2,530,000 2,668,000

2022-2026 14,695,000 11,258,125 2027-2031 18,740,000 7,099,250 2032-2035 18,660,000 1,923,000

Totals 63,875,000$ 34,583,500$

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Revenue Bonds As of June 30, 2016, the following issuances of Revenue Bonds were outstanding:

2011 Series A Local Agency Subordinate Taxable Revenue Bonds

On June 9, 2011, the La Quinta Financing Authority issued revenue bonds in the amount of $28,850,000 to finance projects benefiting low and moderate income housing in La Quinta Redevelopment Project Area No. 1 and La Quinta Redevelopment Project Area No. 2. The 2011 local agency subordinate taxable revenue bonds were issued with issuance costs of $323,375 and a discount of $308,839. Interest is payable semi-annually on March 1 and September 1 of each year, commencing September 1, 2011. Interest payments range from 3.750% to 8.185% per annum. The interest and principal on the bonds are payable from pledged tax increment revenues.

Term bonds maturing on September 1, 2026, September 1, 2031 and September 1, 2036, are subject to mandatory redemption from minimum sinking fund payments, in part by lot, on September 1, 2022, September 1, 2027, and September 1, 2032, respectively, and on each September 1 thereafter at a redemption price equal to the principal amount thereof plus accrued interest to the redemption date.

A portion of the proceeds were used to fund the bond reserve requirement. There are certain limitations regarding the issuance of parity debt as further described in the official statement. The principal balance of outstanding bonds at June 30, 2016, is $27,225,000 with an unamortized discount of $247,052.

The minimum annual requirements to amortize the bond payable as of June 30, 2016, are as follows:

Principal Interest2017 590,000$ 2,081,067$ 2018 625,000 2,045,406 2019 665,000 2,004,653 2020 705,000 1,959,071 2021 755,000 1,908,676

2022-2026 4,685,000 8,586,497 2027-2031 6,780,000 6,399,878 2032-2036 9,930,000 3,126,280

2037 2,490,000 100,472

Totals 27,225,000$ 28,212,000$

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Loans from the City of La Quinta

The City of La Quinta loaned money to the Former Agency to cover operating and capital shortfalls. In a letter dated November 6, 2013, the California Department of Finance approved the loans as enforceable obligations to be paid through Successor Agency property tax. This loan approved split between the City’s General and the Housing Authority Funds. As of June 30, 2016, the amount due to the City of La Quinta was $31,382,100.

e. Pledged Tax Revenues

The City pledged, as security for bonds issued, either directly or through the Financing Authority, a portion of tax increment revenue (including Low and Moderate Income Housing set-aside and pass through allocations) that it receives. The bonds issued were to provide financing for various capital projects, accomplish Low and Moderate Income Housing projects and to defease previously issued bonds. Assembly Bill 1X 26 provided that upon dissolution of the Redevelopment Agency, property taxes allocated to redevelopment agencies no longer are deemed tax increment but rather property tax revenues and will be allocated first to successor agencies to make payments on the indebtedness incurred by the dissolved redevelopment agency. Total principal and interest remaining on the debt is $331,959,218 with annual debt service requirements as indicated above. For the current year, the total property tax revenue recognized by the Successor Agency for the payment of indebtedness incurred was $19,363,022 and the debt service obligation on the bonds was $17,676,972.

f. Conduit Debt Financing

2002 Series B Multifamily Housing Revenue Bonds In April 2002, the Former Agency issued $3,000,000 of 2002 Series B Multifamily Housing Revenue Bonds to provide financing for the acquisition, construction and equipping of a multifamily senior rental housing project known as Miraflores Apartments located in the City of La Quinta. The bonds mature on June 1, 2035, and bear interest at 5.5% per annum. Outstanding bonds at June 30, 2016, are $2,520,000. The bond is secured solely by the credit facility, Fannie Mae, and by a pledge of the trust estate comprised of bond proceeds and property. The bond is not an obligation of the issue, but payable solely from the security.

g. Insurance

The Successor Agency of the Former Agency is covered under the insurance policy of the City of La Quinta at June 30, 2016.

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F-1

APPENDIX F

PROJECTED TAX REVENUES REPORT


September 22, 2016


LA QUINTA REDEVELOPMENT PROJECT AREA NO. 1 AND LA QUINTA REDEVELOPMENT PROJECT AREA NO. 2

PROJECTED TAX REVENUES

Dissolution Act

On June 29, 2011, Assembly Bill No. 26 (“AB X1 26”) was enacted as Chapter 5, Statutes of 2011, together with a companion bill, Assembly Bill No. 27 (“AB X1 27”). A lawsuit was brought in the California Supreme Court, California Redevelopment Association, et al. v. Matosantos, et al., 53 Cal. 4th 231 (Cal. Dec. 29, 2011), challenging the constitutionality of AB X1 26 and AB X1 27. The California Supreme Court largely upheld AB X1 26, invalidated AB X1 27, and held that AB X1 26 may be severed from AB X1 27 and enforced independently. As a result of AB X1 26 and the decision of the California Supreme Court in the California Redevelopment Association case, as of February 1, 2012, all redevelopment agencies in the State were dissolved, and successor agencies were designated as successor entities to the former redevelopment agencies to expeditiously wind down the affairs of the former redevelopment agencies.

In accordance with the Dissolution Act, as of February 1, 2012, the La Quinta Redevelopment Agency (the “Prior Agency”) was dissolved and the City Council of the City serves as Successor Agency to the La Quinta Redevelopment Agency (the “Agency”) pursuant Section 34173 of the Dissolution Act.

AB X1 26 was amended on June 27, 2012 by Assembly Bill No. 1484 (“AB 1484”), enacted as Chapter 26, Statutes of 2012 and further amended on September 22, 2015 by Senate Bill No. 107 (“SB 107”) enacted as Chapter 325, Statutes of 2015 (as amended from time to time, the “Dissolution Act”).

Tax Allocation Financing Prior to the enactment of AB X1 26, the Community Redevelopment Law (the “Redevelopment Law”), constituting Part 1 of Division 24 (commencing with Section 33000) of the Health and Safety Code of the State of California authorized the financing of redevelopment projects through the use of tax increment revenues. First, the assessed valuation of the taxable property in a project area, as last equalized prior to adoption of the redevelopment plan, was established and became the base roll. Thereafter, except for any period during which the assessed valuation drops below the base year level, the taxing agencies, on behalf of which taxes are levied on property within the project area, receive the taxes produced by the levy of the then current tax rate upon the base roll. Taxes collected upon any increase in the assessed valuation of the taxable property in a project area over the levy upon the base roll could be pledged by a redevelopment agency to the repayment of any indebtedness incurred in financing the redevelopment project. Redevelopment agencies themselves have no authority to levy taxes on property.

2

The Dissolution Act now requires the County Auditor-Controller to determine the amount of property taxes that would have been allocated to the Prior Agency had the Prior Agency not been dissolved pursuant to the operation of AB X1 26, using current assessed values on the last equalized roll on August 20, and to deposit that amount in the Redevelopment Property Tax Trust Fund for the Agency established and held by the County Auditor-Controller (the “Redevelopment Property Tax Trust Fund” or “RPTTF”) pursuant to the Dissolution Act. The Dissolution Act provides that any bonds authorized thereunder to be issued by the Agency will be considered indebtedness incurred by the dissolved Prior Agency, with the same legal effect as if the bonds had been issued prior to effective date of AB X1 26, in full conformity with the applicable provision of the Redevelopment Law that existed prior to that date, and will be included in the Agency’s Recognized Obligation Payment Schedules.

Tax Increment Revenues As provided in each of the Redevelopment Plans for the La Quinta Redevelopment Project Area No. 1 (“Project Area No. 1”) and the La Quinta Redevelopment Project Area No. 2 (“Project Area No. 2”), and pursuant to Article 6 of Chapter 6 of the Redevelopment Law, and Section 16 of Article XVI of the Constitution of the State, taxes levied upon taxable property in the respective Project Area each year by or for the benefit of the State, for cities, counties, districts or other public corporations (collectively, the “Taxing Agencies”) for fiscal years beginning after the effective date of the respective Redevelopment Plan, will be divided as follows:

(a) To 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 the Taxing Agencies upon the total sum of the assessed value of the taxable property in the respective Redevelopment Project as shown upon the assessment roll used in connection with the taxation of such property by such Taxing Agency last equalized prior to the effective date of the ordinance adopting the Redevelopment Plan, or the respective effective dates of ordinances approving amendments to the Redevelopment Plan that added territory, as applicable (each, a “base year valuation”), will be allocated to, and when collected will be paid into, the funds of the respective Taxing Agencies as taxes by or for the Taxing Agencies on all other property are paid; and

(b) To the Prior Agency/Successor Agency: Except for that portion of the taxes in excess of the amount identified in (a) above which are attributable to a tax rate levied by a Taxing Agency for the purpose of producing revenues in an amount sufficient to make annual repayments of the principal of and the interest on, any bonded indebtedness approved by the voters of the Taxing Agency on or after January 1, 1989 for the acquisition or improvement of real property, which portion shall be allocated to, and when collected shall be paid into, the fund of that Taxing Agency, that portion of the levied taxes each year in excess of such amount, annually allocated within the Redevelopment Plan limit, when collected will be paid into a special fund of the Prior Agency/Successor Agency.

Section 34183 of the Dissolution Act effectively eliminated the January 1, 1989 date from the paragraph above. Additionally, effective September 22, 2015, debt service override revenues approved by the voters for the purpose of supporting pension programs, capital projects, or programs related to the State Water Project, that are not pledged to or needed for debt service on successor agency obligations are allocated and paid to the entity that levies the override and will not be deposited into the Redevelopment Property Tax Trust Fund. Further, also effective September 22, 2015, Redevelopment Plan limits relating to the amount of taxes that could be paid to the Prior Agency/Successor Agency and the time that such taxes could be paid was eliminated for the purpose of paying debt service on bonds of the Prior Agency or the Successor Agency.

3

That portion of the levied taxes described in paragraph (b) above, less amounts deducted pursuant to Section 34183(a) of the Dissolution Act for permitted administrative costs of the County Auditor-Controller, constitute the amounts required under the Dissolution Act to be deposited by the County Auditor-Controller into the Redevelopment Property Tax Trust Fund.

The amounts calculated in accordance with the provisions described above are referred to herein as “Tax Increment Revenues.”

Redevelopment Plans The City Council approved and adopted the Redevelopment Plan for Project Area No. 1 on November 29, 1983, pursuant to Ordinance No. 43. It was subsequently amended on December 20, 1994 pursuant to Ordinance No. 258 to add limitations prescribed by AB 1290, again on March 21, 1995 pursuant to Ordinance No. 264 to amend financial limits and time to initiate eminent domain actions, on August 19, 2003 pursuant to Ordinance No. 388 to eliminate the time limit to incur debt as authorized by SB 211 and again on March 16, 2004 pursuant to Ordinance No. 402 to extend the Redevelopment Plan duration by one year as authorized by SB 1045.

The City Council approved and adopted the Redevelopment Plan for Project Area No. 2 on May 16, 1989, pursuant to Ordinance No. 139. It was subsequently amended on December 20, 1994 pursuant to Ordinance No. 259 to add limitations prescribed by AB 1290, again on February 3, 2004 pursuant to Ordinance No. 399 to amend financial limits, on March 16, 2004 pursuant to Ordinance Nos. 403 and 404 to eliminate the time limit to incur debt as authorized by SB 211 and to extend the Redevelopment Plan duration by one year as authorized by SB 1045, and again on February 1, 2011 pursuant to Ordinance No. 485 to add territory for purposes of affordable housing.

Plan Limitations In accordance with the Redevelopment Law, redevelopment plans were required to include certain limits on the financing of redevelopment projects. These limits could include a time limit on the life of the redevelopment plan, a time limit to incur debt, a time limit on the receipt of Tax Increment Revenues and the repayment of debt, and a limit on the amount of bonded indebtedness outstanding at any time. SB 107 clarifies that the former limit on the amount of tax increment and time within which tax increment could be received by redevelopment agencies in redevelopment plans no longer apply for purposes of paying approved enforceable obligations such as the tax allocation bonds and loans incurred by the Prior Agency or refunding tax allocation bonds issued by the Successor Agency. The original time limit for receipt of tax increment in Project Area No. 1 was 2034, and for Project Area No. 2 was 2040.

Low and Moderate Income Housing Prior to the Dissolution Act, not less than 20% of Tax Increment Revenues was required to be set aside annually for the purpose of increasing and improving the community’s supply of low and moderate income housing available at affordable housing costs to persons and families of very low, low or moderate income households. Under the Redevelopment Law, the portion of Tax Increment Revenues which were required to be deposited in the Prior Agency’s Low and Moderate Income Housing Fund could be pledged to pay the portion of debt service on any obligations to the extent the proceeds thereof were expended for qualifying low- and moderate-income housing projects. A portion of the proceeds from the 2004 Loan and the 2011 Loan entered into by the Prior Agency were set aside in the Prior Agency’s Low and Moderate Income Housing Fund. The 2004 Loan was refinanced with the Agency’s 2014 Refunding Bonds.

4

Historical Assessed Value and Tax Increment Revenues Historical assessed value and gross Tax Increment Revenues for Project Area No. 1 based on the equalized tax rolls and actual Tax Increment Revenues paid to the Prior Agency, or Available to the Agency are shown below.

TABLE NO. 1 PROJECT AREA NO. 1

HISTORICAL ASSESSED VALUATIONS AND GROSS TAX INCREMENT REVENUES

2012-13 2013-14 2014-15 2015-16 2016-17 Secured Assessed Value $4,220,927,365 $4,376,573,490 $4,634,034,985 $4,835,885,419 $4,977,966,406

Unsecured Assessed Value 33,872,601 29,894,413 28,724,053 36,642,726 34,377,191

Total Assessed Valuation (1) 4,254,799,966 4,406,467,903 4,662,759,038 4,872,528,145 5,012,343,597

Base Year Valuation (199,398,233) (199,398,233) (199,398,233) (199,398,232) (199,398,232)

Incremental Valuation $4,055,401,733 $4,207,069,670 $4,463,360,805 4,673,129,913 4,812,945,365

1% Tax Rate 1.000% 1.000% 1.000% 1.000% 1.000%

Tax Increment Revenues 40,554,017 42,070,697 44,633,608 46,731,299 48,129,454

Unitary Revenue 468,931 499,528 498,721 521,106 521,000

Gross Tax Revenues $ 41,022,948 $ 42,570,225 $ 45,132,329 $ 47,252,405 $ 48,650,454

Actual Tax Revenues $ 41,220,251 $ 42,763,689 $ 45,882,054 $ 47,641,632 N/A

______________________________________ (1) Taxable Valuation as of August 20 equalized roll.

Source: Riverside County Auditor-Controller.

Actual Tax Increment Collections and deductions from Tax Increment Revenues for Project Area No. 1 are shown below:


HISTORICAL TAX REVENUES

2011-12 2012-13 2013-14 2014-15 2015-16 Actual Tax Revenues $41,157,343 $41,220,251 $42,763,689 $45,882,054 $47,641,632 Housing Obligations (1) (5,480,234) (5,555,434) (5,512,447) (5,104,641) (5,092,590) Senior Tax Sharing (1,661,527) (1,382,643) (1,463,564) (1,674,926) (2,568,952) Available for Debt Service $34,015,582 $34,282,174 $35,787,678 $39,102,487 $39,980,090 Subordinate Tax Sharing (2) (16,702,023) (16,671,443) (17,395,260) (18,640,060) (19,393,004) Net Deposit to RPTTF $17,313,559 $17,610,731 $18,392,418 $20,462,427 $20,587,086

______________________________________ (1) Prorata share of 2004 Loan (or 2014 Refunding Bonds, as applicable) and 2011 Loan based on amounts from

each Project Area that would have been required to be set aside for Low and Moderate Income Housing. (2) Available if needed to pay debt service pursuant to Section 34183(b) of the Dissolution Act.

Source: Prior Agency audited financial statements and Riverside County Auditor-Controller.

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Historical assessed value and gross Tax Increment Revenues for Project Area No. 2 based on the equalized tax rolls and actual Tax Increment Revenues paid to the Prior Agency, or Available to the Agency are shown below.


HISTORICAL ASSESSED VALUATIONS AND GROSS TAX INCREMENT REVENUES

2012-13 2013-14 2014-15 2015-16 2016-17 Secured Assessed Value $2,318,312,944 $2,426,052,754 $2,537,426,288 $2,671,084,328 $2,777,740,583 Unsecured Assessed Value 62,055,089 67,195,981 59,204,039 56,545,664 58,960,131 Total Assessed Valuation (1) 2,380,368,033 2,493,248,735 2,596,630,327 2,727,629,992 2,836,700,714 Base Year Valuation (95,182,755) (95,182,755) (95,182,755) (95,182,755) (95,182,755) Incremental Valuation $2,285,185,278 $2,398,065,980 $2,501,447,572 $2,632,447,237 $2,741,517,959 Basic Tax Rate/$100 1.000% 1.000% 1.000% 1.000% 1.000% Tax Increment Revenues 22,851,853 23,980,660 25,014,476 26,324,472 27,415,180 Unitary Revenues 174,162 188,891 190,272 199,116 199,000 Gross Tax Revenues $ 23,026,015 $ 24,169,551 $ 25,204,748 $ 26,523,588 $ 27,614,180 Actual Tax Revenues $ 22,893,004 $ 24,281,764 $ 25,548,831 $ 26,846,075 N/A

______________________________________ (1) Taxable Valuation as of August 20 equalized roll.

Source: Riverside County Auditor-Controller.

Actual Tax Increment Collections and deductions from Tax Increment Revenues for Project Area No. 2 are shown below:


HISTORICAL TAX REVENUES

2011-12 2012-13 2013-14 2014-15 2015-16 Actual Tax Revenues $23,513,859 $22,893,004 $24,281,764 $25,548,831 $26,846,075 Housing Obligations (1) (3,130,947) (3,055,747) (3,130,125) (2,850,804) (2,858,627) Senior Tax Sharing (15,854,843) (15,684,399) (16,619,279) (17,473,783) (18,097,066) Available for Debt Service $ 4,528,069 $ 4,152,858 $ 4,532,360 $ 5,224,244 $ 5,890,382

______________________________________ (1) Prorata share of 2004 Loan (or 2014 Refunding Bonds, as applicable) and 2011 Loan based on amounts from

each Project Area that would have been required to be set aside for Low and Moderate Income Housing.

Source: Prior Agency audited financial statements and Riverside County Auditor-Controller.

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Major Taxpayers The ten largest secured property taxpayers represent 6.7% of the 2016-17 secured assessed value of the Project Area No. 1.


TEN LARGEST TAXPAYERS AS A PERCENT OF 2016-17 ASSESSED VALUE

Property Owner

Land Use

Secured Value

% of Total

LQR Properties Hotel $132,940,101 2.7% LQR Golf Country Club 51,929,864 1.0 RREF II CWC LAQ Residential Properties 31,386,819 0.6 Silverhawk Apartments LP Apartments 24,091,776 0.5 Village Resort Hotel 22,859,534 0.5 Old Town La Quinta LLC(1) Commercial 18,513,878 0.4 LQ Investment(1) Commercial 15,727,770 0.3 Tradition Golf Club Country Club 14,110,451 0.3 Quarry at La Quinta Inc. Country Club 12,132,478 0.2 Beazer Homes Holdings Corp Residential Properties 9,729,198 0.2 Total $333,421,869 6.7%

______________________________________ (1) Appeals pending.

The ten largest secured property taxpayers represent 8.8% of the 2016-17 secured assessed value of the Project Area No. 2.


TEN LARGEST TAXPAYERS AS A PERCENT OF 2016-17 ASSESSED VALUE

Property Owner

Land Use

Secured Value

% of Total

Inland American La Quinta Pavilion(1) Commercial $ 46,422,245 1.7% Wal Mart Real Estate Business Trust(1) Commercial 26,561,700 1.0 Health Care REIT Inc. (1) Commercial 25,381,249 0.9 Aventine Development Apartments 25,295,268 0.9 CSRA Komar Desert Center Commercial 24,150,763 0.9 Costco Wholesale Corp. Commercial 23,842,715 0.9 La Quinta Residence Senior Apartments 20,523,563 0.7 TD Desert Development LP Country Club 19,437,517 0.7 Target Corp. (1) Commercial 17,156,040 0.6 Culver Center Partners La Quinta Commercial 16,500,000 0.6 Total $245,271,060 8.8%

______________________________________ (1) Appeals pending.

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Assessment Appeals Project Area No. 1

As of July 2016, there were a total 25 pending appeals filed in the last 5 years by property owners in the Project Area as shown below. Two of the 10 largest property owners have appeals pending. The total value of property under appeal for all years is $32.8 million. A summary of pending appeals is shown below for 2011-12 to 2015-16 tax rolls.

Pending Value of Property % of Tax Roll Tax Year Appeals Under Appeal Under Appeal 2011-12 1 $ 850,350 0.02% 2012-13 - - 0.00% 2013-14 - - 0.00% 2014-15 6 11,376,738 0.24% 2015-16 18 19,254,091 0.40% 25 $31,481,179

There has been one appeal filed for a supplemental assessment for 2016-17, with a supplemental property value of $199,000, and is not included in the table above. The owner is requesting a 49% reduction in the supplemental assessed value.

The 2014-15 tax roll value under appeal includes an appeal by LQ Investment of the $10,420,184 value of its 2 parcels of property that year. The owner is requesting a reduction in value of this property to $5,468,500, a 48% reduction. The average value reduction requested for the other 4 appeals pending for 2014-15 is 50%, and the average parcel assessed value under appeal is $3 million.

The 2015-16 tax roll value under appeal includes an appeal by Old Town La Quinta LLC of the $17,704,462 value of its 5 parcels of property that year. The owner has requested a reduction in value of this parcel to $12,099,180, a 32% reduction. The average value reduction requested for all other appeals pending for 2015-16 is 45%, and the average parcel assessed value under appeal is under $1 million.

Historically, the average value reduction when an appeal has been granted is 14%, and of those appeals that have been resolved (223 for Fiscal Years 2011-12 to 2015-16), the average percentage of appeals that are successful is 34%. If all pending appeals are granted at historical averages, the estimated loss in annual Tax Increment Revenues is not estimated to be more than $15,000 in future years (0.04% of gross Tax Increment Revenues). However, if any of these appeals are granted in the future, it will result in a refund to the taxpayer and such refunds will be deducted from Tax Increment Revenues in the year that the refund is paid.

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Project Area No. 2

As of July 2016, there were a total 69 pending appeals filed in the last 5 years by property owners in the Project Area as shown below. Four of the 10 largest property owners have appeals pending. The total value of property under appeal for all years is $333.8 million. A summary of pending appeals is shown below for 2011-12 to 2015-16 tax rolls.

Pending Value of Property % of Tax Roll Tax Year Appeals Under Appeal Under Appeal 2011-12 4 $ 10,018,268 0.41% 2012-13 8 17,166,097 0.72% 2013-14 7 23,601,250 0.95% 2014-15 18 78,196,952 3.01% 2015-16 32 204,830,854 7.51% 69 $333,813,421

There has been one appeal filed for a supplemental assessment for 2016-17, with a supplemental property value of $428,000, and is not included in the table above. The owner is requesting a reduction in the supplemental assessed value to $28,000.

None of the largest property owners have appeals pending for 2011-12, 2012-13 or 2013-14. However, the 2013-14 tax roll value under appeal includes an appeal by Kohl’s Department Store of the $13,037,166 value of its 1 parcel of property that year. The owner is requesting a reduction in value of its property to $400,000, a nearly 100% reduction. The average value reduction requested for all other 2013-14 appeals pending is 53%, and the average parcel assessed value under appeal is $1.7 million.

The 2014-15 tax roll value under appeal includes an appeal by Target Corporation of the $16,635,072 value of its 1 parcel of property that year, as well as another appeal by Kohl’s Department Store. Target Corporation is requesting a reduction in value of its property to $900,000, a nearly 100% reduction. Kohl’s Department Store is requesting a reduction in value of its property to $525,000, also a nearly 100% reduction. The average value reduction requested for the other 16 appeals pending for 2014-15 is 36%, and the average parcel assessed value under appeal is $3 million.

The 2015-16 tax roll value under appeal includes an appeal by Inland American La Quinta Pavilion, Walmart Real Estate Business Trust, and Health Care REIT Inc., as well as another appeal by both Target Corporation and Kohl’s Department Store. Inland American La Quinta Pavilion is requesting a reduction in value of 3 parcels with a value of $46.4 million to $22.7 million, a 51% reduction. Walmart Real Estate Business Trust is requesting a reduction in value of 1 parcel with a value of $2.65 million to $1.75 million, a 34% reduction. Health Care REIT Inc. is requesting a reduction in the value of its property with a value of $25 million to $13.7 million, a 45% reduction. Target Corporation and Kohl’s Department Store are again requesting a nearly 100% reduction in the $16.6 million and $13.3 million value, respectively, of their properties. The average value reduction requested for all other appeals pending for 2015-16 is 46%, and the average parcel assessed value under appeal is $4 million.

Historically, the average value reduction when an appeal has been granted is 29%, and of those appeals that have been resolved (97 for Fiscal Years 2011-12 to 2015-16), the average percentage of appeals that are successful is 27%. If all pending appeals are granted at historical averages, the estimated loss in annual Tax Increment Revenues is not estimated to be more than $82,000 in future years (0.95% of gross Tax Increment Revenues). However, if any of these appeals are granted in the future, it will result in a refund to the taxpayer and such refunds will be deducted from Tax Increment Revenues in the year that the refund is paid.

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Tax Sharing Agreements Pursuant to prior Section 33401(b) of the Redevelopment Law, a redevelopment agency could enter into an agreement to pay tax increment revenues to any taxing agency that has territory located within a redevelopment project to alleviate any financial burden or detriment caused by the redevelopment project. These agreements are commonly referred to as “tax sharing agreements” or “pass through agreements.” The following describes the agreements entered into with respect to Project Area No. 1 and Project Area No. 2.

Project Area No. 1

County General Fund, Library, and Fire Districts Pursuant to the “Replacement Cooperation Agreement Between the County of Riverside and the City of La Quinta and the La Quinta Redevelopment Agency” executed on December 21, 1993, the County General Fund, Library District, and Fire District are to receive their full 100 percent share of the gross (before housing fund deposits) tax increment. The County General Fund tax levy within the Project Area is 24.62 percent, while the Library and Fire District tax levies are 2.76 percent and 5.94 percent, respectively.

The Replacement Cooperation Agreement provides that the payment of County tax increment revenue is subordinate to debt service for existing Project bond debt, and any future bonds issued in connection with La Quinta Project No. 1. However, the Agreement required the Prior Agency to size new bond issuances in such a way that sufficient funds are projected to be available to satisfy its obligations to the County pursuant to the Agreement without subordination.

Coachella Valley Unified School District The Prior Agency’s agreement with the Coachella Valley Unified School District provided for a fixed series of payments to be made by the Prior Agency to the Coachella Valley Unified School District, with the final payment due July 1, 2012. Their obligations under this agreement have been paid in full.

Desert Sands Unified School District The Prior Agency’s agreement with the Desert Sands Unified School District ("DSUSD") requires that the Agency deposit a portion of the DSUSD's revenues into a capital fund to be used for the purpose of financing various capital projects that benefit both DSUSD and the Project Area. The payments were contingent upon the Prior Agency reaching a $300 million tax increment threshold, which occurred in 2004-05. Annually, during the first ten years following the year in which the Prior Agency's cumulative tax increment exceeded $300 million, the Agency must deposit an amount equal to 20 percent of the DSUSD’s 27.91 percent share. Beginning in the eleventh year (2015-16) and continuing for the Redevelopment Plan's duration, the Agency will deposit 25 percent of the DSUSD's share of tax increment.

The Agreement provides that payments to the DSUSD do not constitute an “express pledge” within the meaning of Redevelopment Law Section 33671.5, and therefore, payments to the District are subordinate to all bond debt service.

Desert Community College The Prior Agency’s agreement with Desert Community College District requires the Agency to pay 20 percent of the Desert Community College District's share to the District The payments were contingent upon the Prior Agency reaching a $300 million tax increment threshold. Beginning in the eleventh year following the $300 million threshold event (2015-16) and continuing thereafter, the Agency is required pay 25 percent of the Desert Community College District’s share. The Agreement provides that payments to the District do not constitute an “express pledge” within the meaning of Redevelopment Law Section 33671.5, and therefore, payments to the District are subordinate to all bond debt service.

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Coachella Valley Mosquito and Vector Control The Prior Agency’s agreement with the Coachella Valley Mosquito and Vector Control District, requires the Agency to pay the District its full 100 percent share of the gross tax increment net of the 20 percent contribution to the Housing Fund, of the District's 1.39 percent levy of the net tax increment (net of housing fund deposits). The levy shall not exceed 1.43 percent and it is currently 1.39 percent. This pass-through obligation is senior to all bond debt service payments and is excluded from the pledge of nonhousing revenues for the bond financing.

The Dissolution Act specifically allows the payments under tax sharing agreements that were calculated “net of housing fund deposits” to continue to be calculated as if the housing fund deposits continued to be made.

Coachella Valley Water District The Prior Agency’s agreement with the Coachella Valley Water District requires that the Agency pay to the Coachella Valley Water District ("CVWD") a portion of the CVWD share of the gross tax increment, equal to 1.2 percent. The Agreement includes those payments to CVWD, CVWD Improvement District, and CVWD Storm Water Unit, and provides that such payments shall not be subordinate to all debt service other than that previously issued to finance flood control improvements. Therefore, these payments are not subordinate to existing and new bond debt service payments.

Project Area No. 2

Desert Community College District (Formerly the Coachella Valley Community College District) The Prior Agency’s agreement with the Desert Community College District provides that the College District will receive 50 percent of the tax increment revenue generated by the College District’s 7.73 percent property tax levy.

Coachella Valley Mosquito and Vector Control District The Prior Agency’s agreement with the Coachella Valley Mosquito and Vector Control District provides for payment to the District of 100 percent of the tax increment revenue generated by the District’s 1.41 percent share of property tax levy.

Desert Recreation District The Prior Agency’s agreement with the Desert Recreation District provides for payment to the District of 25 percent of the tax increment revenue generated by the District’s 2.13 percent property tax levy.

Coachella Valley Water District The Prior Agency’s agreement with the Water District provides for payment to the Water District of 100 percent of the tax increment revenue generated by the Water District’s 7.67 percent property tax levy, inclusive of the Coachella Valley Water District, the CVWD Improvement District, and the CVWD Storm Water Unit.

County of Riverside The Prior Agency’s agreement with the County of Riverside provides for full payment of the tax increment revenue generated by the County General Fund (24.43%), Library District (2.80%), and Fire District (6.03%) property tax levies. Additionally, the Agency is paying the County $1.2 million over the next 5 years to reimburse the County for tax increment revenue generated by the County’s General Fund property tax levy the Agency retained during the initial years of the Redevelopment Plan.

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Riverside County Superintendent/County Office of Education This Prior Agency’s agreement with the Riverside County Superintendent/Office of Education provides that the Office shall receive 50% of the tax increment revenue generated by their 4.20% share of the property tax levy.

Desert Sands Unified School District The Prior Agency’s agreement with DSUSD provides that the Agency will retain 50 percent of the tax increment revenue generated by the DSUSD’s 37.19 percent share of the property tax levy. The remaining 50 percent is paid to DSUSD.

Tax Sharing Statutes Certain provisions were added to the Redevelopment Law by the adoption of AB 1290 in 1994. If a project area was created after 1994, or if new territory was added to a project area, under Section 33607.5 of the Redevelopment Law, any affected taxing entity would share in the Tax Increment Revenues generated by such added area pursuant to a statutory formula (“Statutory Tax Sharing”).

In addition, pursuant to Section 33333.6(e)(2) of the Redevelopment Law, if the Agency amended or deleted the time limit to incur indebtedness in a project area or increased the total amount of Tax Increment Revenues to be allocated to the project area or increased the duration of the redevelopment plan for a project area and the period for receipt of Tax Increment Revenues, Statutory Tax Sharing is also be required under Section 33607.7 of the Redevelopment Law with all affected taxing agencies not already a party to a tax sharing agreement, once the original limitations have been reached.

In general, the amounts to be paid pursuant to Statutory Tax Sharing are as follows:

(a) commencing in the first fiscal year after the limitation has been reached, an amount equal to 25% of tax increment revenues generated by the incremental increase of the current year assessed valuation over the assessed valuation in the fiscal year that the limitation had been reached, after the amount required to be deposited in the Low and Moderate Income Housing Fund has been deducted;

(b) in addition to amounts payable as described in (a) above, commencing in the 11th fiscal year after the limitation has been reached, an amount equal to 21% of tax increment revenues generated by the incremental increase of the current year assessed valuation over the assessed valuation in the preceding 10th fiscal year that the limitation had been reached, after the amount required to be deposited in the Low and Moderate Income Housing Fund has been deducted; and

(c) in addition to amounts payable as described in (a) and (b) above, commencing in the 31st fiscal year after the limitation has been reached, an amount equal to 14% of tax increment revenues generated by the incremental increase of the current year assessed valuation over the assessed valuation in the preceding 30th fiscal year that the limitation had been reached, after the amount required to be deposited in the Low and Moderate Income Housing Fund has been deducted.

(d) The City may elect to receive a portion of the tax increment generated in (a) above, after the amount required to be deposited in the Low and Moderate Income Housing Fund has been deducted.

(e) The Agency may subordinate the amount required to be paid to an affected taxing entity to any indebtedness after receiving the consent of the taxing entity.

With respect to a taxing entity that is a party to a tax sharing agreement, tax sharing payments would continue pursuant to the Tax Sharing Agreement after the original limitations in the Redevelopment Plan were passed.

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The Agency eliminated the January 1, 2004 time limit to incur debt for Project Area No. 1 and payments to certain taxing entities pursuant to Section 33607.7 commenced in fiscal year 2004-05. The Agency also eliminated the May 16, 2009 time limit to incur debt for Project Area No. 2, and payments to certain taxing entities pursuant to Section 33607.7 commenced in fiscal year 2009-10.

As noted above, with the consent of the Taxing Entity, the payments under the Tax Sharing Statutes may be subordinated to certain Agency obligations. No payments to Taxing Entities with respect to Statutory Tax Sharing have been subordinated.

Projected Tax Revenues Deposit of projected Tax Revenues in the Redevelopment Property Tax Trust Fund in the amounts and at the times projected by the Agency depends on the realization of certain assumptions relating to the Tax Increment Revenues. The projections of Tax Increment Revenues and the corresponding Tax Revenues from the Project Areas shown on the following tables were based on the assumptions shown below. The Agency believes the assumptions upon which the projections are based are reasonable; however, some assumptions may not materialize and unanticipated events and circumstances may occur.

(a) The 2016-17 secured roll was increased by 2% annually for inflation in future years.

(b) For the purposes of the projections, it was assumed that no additional assessed value would be added to the tax rolls as a result of new construction.

(c) The values of unsecured personal property and state assessed utility property and the amount of unitary revenues have been maintained throughout the projections at their 2016-17 values.

(d) No future Proposition 8 adjustments are reflected in the projections.

(e) A tax rate of $1.00 per $100 of assessed value applied to the taxable property in the Project Areas was used to determine Tax Increment Revenues.

(f) Projected Tax Revenues do not reflect delinquencies or supplemental property taxes.

(g) Projected Tax Revenues include a deduction for administrative costs charged by Riverside County. These fees, while deducted from the Redevelopment Property Tax Trust Fund (RPTTF) deposit, have been prorated between the Project Areas for purposes of the projections.

(h) Projected Tax Revenues include a deduction for payments due to taxing agencies under Tax Sharing Agreements or applicable Tax Sharing Statutes; however, any Tax Sharing Agreements that have been subordinated to debt service in Project Area No. 1 are shown as available for debt service if needed, as provided in Section 34183(b) of the Dissolution Act.

(i) The Projected Tax Revenues generated by Project Area No. 1 are shown through the original Project Area No. 1 Redevelopment Plan time limitation on the receipt of Tax Increment Revenues (2034). In accordance with changes to the Redevelopment Law as a result of SB 107, the Successor Agency may receive Tax Increment Revenues from generated by Project Area No. 1 after such date to pay enforceable obligations.

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TABLE NO. 7 SUCCESSOR AGENCY PROJECTED TAX REVENUES

(In Thousands)

Project No. 1 Project No. 2 Total Project No. 1 Fiscal Net RPTTF Net RPTTF Net RPTTF Subordinate Available Year Deposit (1)(2) Deposit Deposit Tax Sharing (3) Revenues 2017 $25,772 $ 8,635 $34,407 $20,532 $54,939 2018 26,266 8,807 35,073 20,953 56,026 2019 26,771 8,985 35,756 21,381 57,137 2020 27,287 9,160 36,447 21,818 58,265 2021 27,812 9,336 37,148 22,264 59,412 2022 28,348 9,520 37,868 22,719 60,587 2023 28,894 9,704 38,598 23,184 61,782 2024 29,452 9,841 39,293 23,656 62,949 2025 30,022 10,026 40,048 24,139 64,187 2026 30,602 10,215 40,817 24,631 65,448 2027 31,193 10,407 41,600 25,134 66,734 2028 31,798 10,601 42,399 25,645 68,044 2029 32,414 10,804 43,218 26,167 69,385 2030 33,042 11,005 44,047 26,700 70,747 2031 33,681 11,214 44,895 27,244 72,139 2032 34,336 11,425 45,761 27,799 73,560 2033 35,001 11,641 46,642 28,365 75,007 2034 35,681 11,861 47,542 28,941 76,483 2035 - 12,087 12,087 - 12,087 2036 - 12,316 12,316 - 12,316 2037 - 12,549 12,549 - 12,549 2038 - 12,788 12,788 - 12,788 2039 - 13,030 13,030 - 13,030 2040 - 13,273 13,273 - 13,273

______________________________________ (1) The Projected Tax Revenues generated by Project Area No. 1 are shown through the original Project Area No. 1 Redevelopment Plan time limitation on the receipt of Tax Increment Revenues (2034). In accordance with changes to the Redevelopment Law as a result of SB 107, the Successor Agency may receive Tax Increment Revenues from generated by Project Area No. 1 after such date to pay enforceable obligations. (2) After deductions for subordinate Tax Sharing Agreements. (3) Available if needed to pay debt service pursuant to Section 34183(b) of the Dissolution Act.

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TABLE NO. 8 PROJECT AREA NO. 1 PROJECTED TAX REVENUES

(In Thousands)

Senior Tax Sharing Agreements Subordinate Tax Sharing Agreements

County CV Mosquito CV Statutory Desert Sands Desert Net

Fiscal Gross Admin and Vector Water Tax County County County Unified Community Deposit to

Year RPTTF Fees Control District Sharing General Library Fire School College RPTTF

2017 $48,650 $(632) $(539) $(584) $ (591) $(11,978) $(1,343) $(2,890) $(3,395) $ (926) $25,772

2018 49,646 (645) (550) (596) (636) (12,224) (1,370) (2,950) (3,464) (945) 26,266

2019 50,662 (659) (562) (608) (681) (12,474) (1,398) (3,010) (3,535) (964) 26,771

2020 51,697 (672) (573) (620) (727) (12,729) (1,427) (3,071) (3,607) (984) 27,287

2021 52,754 (686) (585) (633) (774) (12,989) (1,456) (3,134) (3,681) (1,004) 27,812

2022 53,832 (700) (597) (646) (822) (13,254) (1,486) (3,198) (3,756) (1,025) 28,348

2023 54,931 (714) (609) (659) (871) (13,525) (1,516) (3,264) (3,833) (1,046) 28,894

2024 56,052 (729) (621) (673) (921) (13,801) (1,547) (3,330) (3,911) (1,067) 29,452

2025 57,196 (744) (634) (686) (971) (14,082) (1,579) (3,398) (3,991) (1,089) 30,022

2026 58,362 (759) (647) (700) (1,023) (14,370) (1,611) (3,467) (4,072) (1,111) 30,602

2027 59,552 (774) (660) (715) (1,076) (14,663) (1,644) (3,538) (4,155) (1,134) 31,193

2028 60,766 (790) (674) (729) (1,130) (14,961) (1,677) (3,610) (4,240) (1,157) 31,798

2029 62,003 (806) (687) (744) (1,185) (15,266) (1,711) (3,684) (4,326) (1,180) 32,414

2030 63,266 (822) (701) (759) (1,242) (15,577) (1,746) (3,759) (4,414) (1,204) 33,042

2031 64,554 (839) (716) (775) (1,299) (15,894) (1,782) (3,835) (4,504) (1,229) 33,681

2032 65,868 (856) (730) (790) (1,357) (16,218) (1,818) (3,913) (4,596) (1,254) 34,336

2033 67,208 (874) (745) (806) (1,417) (16,548) (1,855) (3,993) (4,690) (1,279) 35,001

2034 68,574 (891) (760) (823) (1,478) (16,884) (1,893) (4,074) (4,785) (1,305) 35,681

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TABLE NO. 9 PROJECT AREA NO. 2 PROJECTED TAX REVENUES

(In Thousands)

Tax Sharing Agreements

County Desert Sands Desert CV Mosquito County Desert CV Statutory Net

Fiscal Gross Admin County County County Unified Community and Vector Office of Recreation Water Tax Deposit to

Year RPTTF Fees General Library Fire School College Control Education District District Sharing RPTTF

2017 $27,614 $(359) $ (6,746) $ (773) $(1,665) $(5,135) $(1,067) $(389) $(580) $(147) $(2,118) $ - $ 8,635

2018 28,170 (366) (6,882) (789) (1,699) (5,238) (1,089) (397) (592) (150) (2,161) - 8,807

2019 28,736 (374) (7,020) (805) (1,733) (5,343) (1,111) (405) (603) (153) (2,204) - 8,985

2020 29,314 (381) (7,161) (821) (1,768) (5,451) (1,133) (413) (616) (156) (2,248) (6) 9,160

2021 29,904 (389) (7,306) (837) (1,803) (5,561) (1,156) (422) (628) (159) (2,294) (13) 9,336

2022 30,505 (397) (7,452) (854) (1,839) (5,672) (1,179) (430) (641) (162) (2,340) (19) 9,520

2023 31,119 (405) (7,602) (871) (1,876) (5,787) (1,203) (439) (653) (166) (2,387) (26) 9,704

2024 31,744 (413) (7,755) (889) (1,914) (5,903) (1,227) (448) (667) (169) (2,435) (83) 9,841

2025 32,382 (421) (7,911) (907) (1,953) (6,021) (1,252) (457) (680) (172) (2,484) (98) 10,026

2026 33,033 (429) (8,070) (925) (1,992) (6,142) (1,277) (466) (694) (176) (2,534) (113) 10,215

2027 33,697 (438) (8,232) (944) (2,032) (6,266) (1,302) (475) (708) (179) (2,585) (129) 10,407

2028 34,374 (447) (8,398) (962) (2,073) (6,392) (1,329) (485) (722) (183) (2,636) (146) 10,601

2029 35,065 (456) (8,566) (982) (2,114) (6,520) (1,355) (494) (736) (187) (2,689) (162) 10,804

2030 35,770 (465) (8,739) (1,002) (2,157) (6,651) (1,383) (504) (751) (190) (2,744) (179) 11,005

2031 36,488 (474) (8,914) (1,022) (2,200) (6,785) (1,410) (514) (766) (194) (2,799) (196) 11,214

2032 37,222 (484) (9,093) (1,042) (2,244) (6,921) (1,439) (525) (782) (198) (2,855) (214) 11,425

2033 37,969 (494) (9,276) (1,063) (2,290) (7,060) (1,468) (535) (797) (202) (2,912) (231) 11,641

2034 38,732 (504) (9,462) (1,084) (2,336) (7,202) (1,497) (546) (813) (206) (2,971) (250) 11,861

2035 39,510 (514) (9,652) (1,106) (2,382) (7,347) (1,527) (557) (830) (210) (3,030) (268) 12,087

2036 40,303 (524) (9,846) (1,128) (2,430) (7,494) (1,558) (568) (846) (215) (3,091) (287) 12,316

2037 41,113 (534) (10,044) (1,151) (2,479) (7,645) (1,589) (580) (863) (219) (3,153) (307) 12,549

2038 41,938 (545) (10,245) (1,174) (2,529) (7,798) (1,621) (591) (881) (223) (3,217) (326) 12,788

2039 42,780 (556) (10,451) (1,198) (2,580) (7,955) (1,653) (603) (898) (228) (3,281) (347) 13,030

2040 43,639 (567) (10,661) (1,222) (2,631) (8,115) (1,687) (615) (916) (232) (3,347) (373) 13,273


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APPENDIX G

SUPPLEMENTAL INFORMATION — THE CITY OF LA QUINTA

The following information concerning the City of La Quinta (the “City”) and surrounding areas is included only for the purpose of supplying general information regarding the community. The Bonds are not a debt of the City, the State or any of its political subdivisions, and neither the City, the State nor any of its political subdivisions is liable therefor.

General Background

For centuries before Columbus discovered America, the area which is now La Quinta was the winter home of the Cahuilla Indians. La Quinta was incorporated as a City in 1982 encompassing an area of 18.36 square miles and a population of approximately 4,500, and today encompasses an area of approximately 35.31 square miles, with a population of approximately 39,977. Surrounded by the Santa Rosa Mountains, La Quinta is home to the PGA West Golf Resort. The Coachella Valley attracts a high-end market of over 2 million tourists each year. As a year-round multi-recreational resort community, it attracts golf and tennis enthusiasts from all over the world.

Population

The following table sets forth population estimates for the City of La Quinta, the County of Riverside and the State of California for the past seven years:

CITY OF LA QUINTA ESTIMATED POPULATION

(As of January 1)

Year (January 1)

City of La Quinta

Riverside County

State of California

2010(1) 37,467 2,189,641 37,253,956

2011 37,784 2,212,874 37,536,835 2012 38,100 2,239,715 37,881,357 2013 38,156 2,266,549 38,239,207 2014 38,720 2,291,093 38,567,459 2015 39,311 2,317,924 38,907,642 2016 39,977 2,347,828 39,255,883

Source: State of California Department of Finance, 2010 Benchmark (1) As of April 1, 2010

Location

Located in the eastern portion of the County known as the Coachella Valley, La Quinta is 20 miles from Palm Springs and 127 miles from Los Angeles. The City motto is “The Gem of the Desert.”

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Climate

CITY OF LA QUINTA Climate

Average Temperature Period Min. Max. Precipitation

January 44.6 71.9 0.56 February 48.0 75.3 0.64 March 54.8 81.3 0.43 April 60.7 87.5 0.05 May 67.7 95.7 0.07 June 74.2 103.1 0.01 July 80.3 107.3 0.10 August 80.3 106.6 0.54 September 74.0 102.0 0.04 October 63.7 91.9 0.26 November 51.8 79.6 0.18 December 44.2 71.0 0.62 Annual 62.1 89.5 3.44

Source: ncdc.noaa.gov

City Government and Administration

The City of La Quinta was originally incorporated on May 1, 1982 and became a charter city in November, 1996 with a Council/Manager form of government. The City Council is comprised of a Mayor and four Council Members. The Mayor is elected for a two-year term and the Council Members are elected for four-year terms.

Budgetary Policies

The City Manager submits a preliminary budget to the City Council before each fiscal year. A public meeting is then held prior to July 1 to receive public comment. A budget is required to be adopted before the beginning of the fiscal year. Amendments to the budget or budget transfers between funds require Council approval. Budget transfers within funds require City Manager approval. The City also maintains an encumbrance system as one budget technique. All fiscal year end appropriations and encumbrances lapse at year end unless specifically approved by the Council for inclusion in the following year’s appropriations.

Each Department receives a monthly budget-to-actual expenditure report. In addition, each department can access on-line budgetary data from the financial information system available throughout the City-wide computer network.

The City Council is also given an Executive level Summary of Revenues and Expenditures on a monthly basis and also reviews the Capital Improvement Program each April.

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Economic Growth and Trends

La Quinta includes the La Quinta Resort, several world class golf resorts, quality neighborhoods of single family and multi-dwelling homes and light commercial industries. Outdoor recreation activities such as hiking and camping are also enjoyed in the area. Community and neighborhood parks offer swimming, picnicking, sports fields, tot lots, recreation programs, and community events. There are several hiking trails leading into the majestic Santa Rosa Mountains. La Quinta’s active arts community plays host to the renowned annual La Quinta Arts Festival, which was ranked number 1 in the nation for 2013, 2014, and 2015 and was ranked number 3 in 2016 by Greg Lawler’s Art Fair SourceBook.

Major retail developments continue to diversify and enhance La Quinta’s economic base. The Centre at La Quinta is a retail facility hosting the Walmart Super Center, Marshalls, PetSmart along with numerous other shops and restaurants. Washington Park, located along the Washington Street corridor is home to Target, Lowe’s, Cost Plus World Market, Trader Joe’s, Bouchee Fine Foods – who serve as the shopping center’s larger tenants, along with Chase Bank and Steinmart. The Pavilion at La Quinta is a retail outlet for Bed Bath & Beyond, Henry’s Market, Best Buy, Office Max and DSW Shoe Warehouse along with restaurants which include Coffee Bean & Tea Leaf, Panera Bread, and Chipotle. La Quinta Court is a spot for specialty shopping with fine restaurants and a gourmet food market. The La Quinta Professional Plaza, is home to Bank of Southern California as well as medical and professional offices. Jefferson Plaza is anchored by Home Depot, Smart & Final, I-Hop, Jack in the Box and the 99¢ Stores. One-Eleven Center is home to Stater Brothers, AAA, Kohl’s, Petco, Ross, and Staples. In addition to its retail outlets, the One-Eleven Center maintains restaurants and an Am/Pm service station. Point Happy Shopping Center is home to Bank of America, Fans Plus Blinds and various restaurants. Old Town La Quinta, a 140,000 square foot commercial/retail center in the Village area and once anchored by the Hog’s Breath Inn, now plays host to several locally owned dining establishments.

Centre Point, which expanded the economic diversity of the City, is a mixed-use complex, with a Homewood Suites by Hilton and Applebee’s Restaurant, the Eisenhower George and Julia Argyros Health Center and a neighborhood dog park (Pioneer Park).

Tourism

La Quinta is well known for its numerous championship golf courses. The City houses more than 20 championship courses with several in planning or development stages. In addition to quantity, La Quinta has some of the highest rated courses in the world of golf. Various golf tournaments, including the prestigious Humana Challenge in Partnership with the Clinton Foundation, show La Quinta internationally as a quality destination and golf resort area.

The City acquired 525 acres of previously undeveloped property adjacent to Jefferson Street and Avenue 52. SilverRock Resort is a 525-acre parcel of land situated at the base of the majestic Santa Rosa Mountains. Often referred to as “the last great piece of land in the Coachella Valley,” SilverRock Resort was a former working cattle ranch and vacation retreat of Home Savings and Loan founder, Howard Ahmanson. In 2002, the Prior Agency purchased the land to create a tournament golf course, which is open to the public, and a luxury resort/retail venue that would generate long-term, recurring revenue for the City. Two years of intense master planning, design, and construction resulted in the Arnold Palmer designed “Arnold Palmer Classic Course at SilverRock Resort.” The course was voted among the “The Top Ten New Golf Courses That You Can Play” by Golf Magazine, and has been a home course of the Bob Hope Classic since 2008. In May 2016, the City Council approved plans for the development of a new 140-room luxury hotel and spa, 29 residential units, and a shared services/convention center building at the SilverRock site. The new development is expected to be completed in the spring or fall of 2019.

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The nationally recognized La Quinta Arts Festival attracts many visitors from around the country each year to the City of La Quinta and the Coachella Valley.

Capital Improvements

The City plans to spend $7.3 million in capital improvements during fiscal year 2016-17. With 13 identified projects planned or taking place, the traffic signals and street maintenance projects make up the largest portion of expenditures, costing an estimated $3.4 million and $2.0 million respectively. One major project budgeted for construction in fiscal year 2018-19 includes the Dune Palms Road Bridge, which is intended to replace the existing low-water crossing at the Coachella Valley Storm Water Channel with an all-weather access. This will enable emergency vehicles, motorists, pedestrians, and bicyclists to travel the corridor on a reliable route.

The City’s Capital Improvement Program (CIP) continues to meet the demands of growth. This major commitment in infrastructure will continue to provide for both the current and future growth that the City has experienced.

Commercial Activity

The following table demonstrates the growth in the number of business permits and taxable transactions in the City of La Quinta:

CITY OF LA QUINTA TAXABLE TRANSACTIONS

(in thousands)

Retail Stores Total Outlets

Year Number of

Permits Taxable

Transactions Number of

Permits Taxable

Transactions 2002 246 309,182 531 372,039 2003 277 376,866 580 447,877 2004 336 510,913 670 584,039 2005 403 603,110 755 683,476 2006 448 667,010 862 754,063 2007 507 735,647 1,070 826,488 2008 561 644,113 1,151 731,831 2009 789 552,468 1,106 623,012 2010 831 563,456 1,161 633,545 2011 891 609,077 1,228 680,382 2012 937 638,047 1,294 710,127 2013 920 654,275 1,254 731,325 2014 933 659,883 1,274 744,038

Source: State Board of Equalization.

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Building Activity

The following presents the residential building permit valuations for the City of La Quinta for the calendar years 2011 through 2015:

RESIDENTIAL BUILDING PERMIT VALUATIONS CITY OF LA QUINTA

(Valuation in 000)

2011 2012 2013 2014 2015 Residential Single Unit $ 15,480,731 $ 21,623,018 $ 30,038,430 $ 58,222,010 $43,498,590 Multiple Units 0 11,948,060 0 6,166,376 2,710,074 Total Residential

$ 15,480,731 $ 33,571,078 $ 30,038,430 $ 64,388,386 $ 46,208,664

No. of New Dwelling Units

Single Unit 41 67 117 177 155 Multiple Units 0 176 0 103 21 Total Units 41 243 117 280 176 Source: Construction Industry Research Board (CIRB). City’s Taxable Valuation

Taxable valuation within the City is established by the Riverside County Assessor, except for utility and other unitary property, which is assessed by the State Board of Equalization. Article XIII A of the State Constitution provides that, beginning with the 1978-79 fiscal year, property taxes in California are limited to one percent of full cash value, except for taxes to pay debt service on indebtedness approved by the voters prior to July 1, 1978. Article XIII A defines full cash value as the County Assessor’s valuation of real property as shown on the 1975-76 tax bill (“base year”), except in the case of newly-constructed property or property which undergoes a change in ownership. Yearly taxable value increases following the base year are limited to the growth in the consumer price index, but may not exceed two percent annually.

For assessment and collection purposes, property is classified either as “secured” or “unsecured”, and is listed accordingly on separate parts of the assessment roll. The “secured roll” is that part of the assessment roll containing State assessed property and property the taxes on which are a lien on real property sufficient, in the opinion of the County Assessor, to secure payment of the taxes. Other property is assessed on the “unsecured roll”.

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The assessed valuation of property within the City since fiscal year 2004-05 is summarized below.

CITY OF LA QUINTA ASSESSED VALUATIONS

Fiscal Year Secured Unsecured Less:

Exemptions Taxable

Assessed Value

2004-05 5,412,382,710 40,940,877 (95,420,075) 5,357,903,512 2005-06 6,289,493,552 44,014,548 (113,037,003) 6,220,471,097 2006-07 7,856,383,375 72,554,357 (115,071,146) 7,813,866,586 2007-08 9,986,151,525 88,740,840 (99,245,721) 9,975,646,644 2008-09 11,854,669,637 101,433,002 (89,688,505) 11,866,414,134 2009-10 12,410,626,893 113,185,065 (107,777,195) 12,416,034,763 2010-11 11,742,665,902 121,272,880 (110,752,890) 11,753,185,892 2011-12 10,913,083,169 118,972,704 (161,265,140) 10,870,790,733 2012-13 10,400,897,792 107,421,771 (176,887,605) 10,331,431,958 2013-14 10,345,371,473 108,971,608 (179,344,969) 10,274,998,112 2014-15 10,796,022,466 111,330,270 (180,600,133) 10,726,752,603 2015-16 11,454,574,255 108,773,942 (194,001,905) 11,369,346,292

Source: City of La Quinta Comprehensive Annual Financial Report for Year Ended June 30, 2015.

General Plan/Zoning

The land within the City of La Quinta is approximately zoned as follows:

Industrial: 0 acresInstitutional: 120 acresCommercial: 1,240 acresResidential: 12,320 acres

Industry

La Quinta is home to the first Wal-Mart Supercenter in California. Additionally, the City’s downtown district, known as “The Village,” includes developments such as Old Town and Plaza calle Tampico. Additionally, The Village contains many professional offices, the City museum, boutique stores, and several restaurants.

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Labor Force The following listing sets forth the top employers in the City as of June 30, 2015:

CITY OF LA QUINTA Major Employers and Number of Employees

Employer Approximate

No. of Employees Type of Business Desert Sands Unified School District 1,400 School District La Quinta Resort & Club 1,233 Hotel & Golf Resort PGA West 1,214 Golf Resort Wal-Mart Super Center 360 Retail Costco 246 Retail Home Depot 181 Retail Lowe’s Home Improvement 152 Retail Imperial Irrigation District 142 Utility Company Rancho La Quinta 128 Golf Resort Stater Brothers 120 Grocery Store Source: City of La Quinta.

Employment and Industry

Employment data is not separately reported on an annual basis for the City but is compiled for the Riverside-San Bernardino-Ontario Metropolitan Statistical Area, which includes Riverside and San Bernardino Counties. Set forth in the table on the following page is the employment data for the Riverside-San Bernardino-Ontario Metropolitan Statistical Area for 2011 to 2015.

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Riverside-San Bernardino-Ontario Metropolitan Statistical Area Industry Employment & Labor Force - By Annual Average*

2011 2012 2013 2014 2015

Total Farm 14,900 15,000 14,500 14,400 15,100 Total Nonfarm 1,154,500 1,185,200 1,233,300 1,289,300 1,347,400 Total Private 927,000 960,600 1,008,100 1,060,500 1,114,000 Goods Producing 145,200 150,500 158,600 170,200 182,100 Mining, Logging, and Construction 60,100 63,800 71,200 78,900 86,600 Manufacturing 85,100 86,700 87,300 91,300 95,600 Service Providing 1,009,300 1,034,700 1,074,700 1,119,100 1,165,200 Trade, Transportation & Utilities 275,600 287,600 299,700 314,900 332,500 Transportation, Warehousing & Utilities

67,900 73,000 78,400 86,600 97,300

Information 12,200 11,700 11,500 11,300 11,300 Financial Activities 39,500 40,200 41,300 42,300 43,200 Professional & Business Services 126,000 127,500 132,400 139,300 144,400 Professional & Business Services 126,000 127,500 132,400 139,300 144,400 Educational & Health Services 165,400 173,600 187,600 194,800 205,000 Leisure & Hospitality 124,000 129,400 135,900 144,800 151,500 Other Services 39,100 40,100 41,100 43,000 44,000 Government 227,500 224,600 225,200 228,800 233,400 Total, All Industries 1,169,400 1,200,200 1,247,800 1,303,700 1,362,400 Total Civilian Labor Force 1,866,200 1,882,900 1,897,000 1,919,900 1,961,800 Total Unemployment 243,100 217,300 186,500 156,600 129,500 Unemployment Rate 13.0% 11.5% 9.8% 8.2% 6.6% ________________ *Using a March 2015 Benchmark Source: State of California Employment Development Department, Labor Market Information Division.

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Direct and Overlapping Debt

A statement of the City’s direct and overlapping debt as of June 30, 2016 is as follows:

2015-16 Assessed Valuation: $11,980,037,078 Total Debt City’s Share of OVERLAPPING TAX AND ASSESSMENT DEBT: 6/30/16 % Applicable (1) Debt 6/30/16 Desert Community College District $283,391,384 16.753% $ 47,476,559 Coachella Valley Unified School District 219,056,138 52.589 115,199,432 Desert Sands Unified School District 329,215,000 20.237 66,623,240 Desert Sands Unified School District Community Facilities District No. 1 1,215,000 88.912 1,080,281 City of La Quinta 1915 Act Bonds 130,000 100. 130,000 Coachella Valley Water District Assessment Districts 1,725,000 86.454-100. 1,531,970 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $232,041,482 DIRECT AND OVERLAPPING GENERAL FUND DEBT: Riverside County General Fund Obligations $889,831,745 5.028% $44,740,740 Riverside County Pension Obligation Bonds 304,520,000 5.028 15,311,266 Riverside County Board of Education Certificates of Participation 935,000 5.028 47,012 Coachella Valley Unified School District Certificates of Participation 41,525,000 52.589 21,837,582 Desert Sands Unified School District Certificates of Participation 55,780,000 20.237 11,288,199 Desert Recreation and Park District Certificates of Participation 1,368,228 26.484 362,362 City of La Quinta General Fund Obligations 1,850,000 100. 1,850,000 TOTAL GROSS DIRECT AND OVERLAPPING GENERAL FUND DEBT $95,437,161 Less: Riverside County supported obligations 313,593 TOTAL NET DIRECT AND OVERLAPPING GENERAL FUND DEBT $95,123,568 OVERLAPPING TAX INCREMENT DEBT (Successor Agencies): $500,513,028 14.108-100. % $314,913,700 TOTAL DIRECT DEBT $1,850,000 TOTAL GROSS OVERLAPPING DEBT $640,542,343 TOTAL NET OVERLAPPING DEBT $640,228,750 GROSS COMBINED TOTAL DEBT $642,392,343 (2) NET COMBINED TOTAL DEBT $642,078,750 (1) The percentage of overlapping debt applicable to the city is estimated using taxable assessed property value. Applicable

percentages were estimated by determining the portion of the overlapping district's assessed value that is within the boundaries of the city divided by the district's total taxable assessed value.

(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations. Ratios to 2015-16 Assessed Valuation: Total Overlapping Tax and Assessment Debt ................................... 1.94% Total Direct Debt ($1,850,000) ...................................................... 0.02% Gross Combined Total Debt ............................................................. 5.36% Net Combined Total Debt ................................................................. 5.36% Ratios to Redevelopment Successor Agencies Incremental Valuation ($9,004,132,284): Total Overlapping Tax Increment Debt ............................................ 3.50% Source: California Municipal Statistics Inc.

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Utilities

The main utility providers in the City are as follows:

Electricity: Imperial Irrigation District Gas: Sempra Energy Telephone: Verizon Water: Coachella Valley Water District Sewer Service: Coachella Valley Water District

Transportation

Access to job opportunities in Riverside County, San Bernardino County, Orange County and Los Angeles County has been one of the major factors in Riverside County’s employment and population growth. Several major freeways and highways provide access between Riverside County and all parts of Southern California. U.S. Highways 10 and 60 extend in an east-west direction through the northern portion of the County, Intrastate Highway 91 extends in an east-west direction through the central portion of the county until connecting with U.S. Highway 15, and U.S. Highways 15 and 215 extend in a north-south direction through the central portion of the County, each linking the major cities in the County to other parts of the County and to the Los Angeles, San Bernardino and Orange metropolitan areas and to San Diego County.

Local bus service is provided by Sunline Transit and by Greyhound Bus Lines. Passenger service is also provided by AMTRAK, which makes train trips daily each way through the County. Southern Pacific Railroad and Santa Fe Railway handle most of the freight movement in the County.

The County seat in the City of Riverside is within a 1-hour drive of La Quinta. It is a 1-1/2 hour drive to the Ontario Airport and a 3 hour drive to LAX and Orange County.

Numerous major truck lines serve the City of La Quinta, making available overnight delivery service to major California cities.

Education

The educational needs of La Quinta are met by four elementary schools, three middle schools, one high school, and one alternative school, all a part of the Desert Sands Unified School District. Additionally, the Coachella Valley Unified School District provides schools at all levels for other areas of La Quinta. Post-secondary education is served by College of the Desert, Chapman University, and California State University, San Bernardino Extension.

Community Services

La Quinta has two Immediate Care facilities, including the Eisenhower George and Julia Argyros Health Center and a senior citizens’ center within the City limits, with approved plans for expanding medical services to the City. Other nearby hospitals are located in Rancho Mirage, Indio and Palm Springs.

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The City is served by several churches, numerous radio stations and local TV channels, one TV cable system, and a variety of full-service banks. Recreational facilities include major resort hotels, several country clubs, several golf courses and Lake Cahuilla Regional Park. The La Quinta Arts Festival is held annually in March. The Bob Hope Classic is a nationally acclaimed golfing event which is held yearly in the City.

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