10A Action 2008 0602 Attach - Preliminary Official Statement

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Assessor could order a blanket reduction in assessed valuations based on then current economic conditions. Such a reduction of assessed valuations and the resulting decline in Tax Revenues or the resulting property tax refunds could have an adverse effect on the Agency's ability to make timely payments of principal of and interest on the 2008 Bonds. See "THE AGENCY AND THE PROJECT AREA -Appeals of Assessed Values." Reduction in Inflationary Rate As described in greater detail below, Article XIIIA of the California Constitution provides that the full cash value base of real property used in determining taxable value may be adjusted from year to year to reflect the inflationary rate, not to exceed a 2% increase for any given year, or may be reduced to reflect a reduction in the consumer price index or comparable local data. Such measure is computed on a calendar year basis. Because Article XIIIA limits inflationary assessed value adjustments to the lesser of the actual inflationary rate or 2%, there have been years in which the assessed values were adjusted by actual inflationary rates, which were less than 2%. Since Article XIIIA was approved, the annual adjustment for inflation has fallen below the 2% limitation five times: for 1993-94, 1 %; for 1995-96, 1.19%; for 1996-97, 1.11 %; for 1999- 00, 1.853°I°; and for 2004-05 1.867%. The Agency is unable to predict if any adjustments to the full cash value base of real property within the Project Area, whether an increase or a reduction, will be realized in the future. Levy and Collection The Agency does not have any independent power to levy and collect property taxes. Any reduction in the tax rate or the implementation of any constitutional or legislative property tax decrease could reduce the Tax Revenues, and accordingly, could have an adverse impact on the ability of the Agency to repay the 2008 Bonds. Likewise, delinquencies in the payment of property taxes could have an adverse effect on the Agency's ability to make timely debt service payments. Tax Increment From Unsecured Roll The Fiscal Consultant reports that the tax increment attributable to the secured, unsecured and utility rolls are calculated separately, however the increment amounts are aggregated for calculation of the amount due the Agency. For fiscal year 2007-08, the incremental assessed valuation over the base year for the unsecured and utility rolls was a negative amount and over the last four years there has been volatility in the unsecured valuation. Substantial reductions in the unsecured tax roll could result in reduced tax increment revenues to the Agency notwithstanding increases in valuation in the secured roll. Parity Debt As referenced .under the caption "Parity Debt", the Agency may issue or incur obligations payable from Tax Revenues on a parity with its pledge of Tax Revenues to payment of debt service on the 2008 Bonds. The existence of and the potential for such obligations increases the risks associated with the Agency's payment of debt service on the 2008 Bonds in the event of a decrease in the Agency's collection of Tax Revenues. State Budget Deficit The State of California faces significant budget issues for fiscal year 2007-08 and beyond. In connection with its approval of former budgets, the State Legislature enacted legislation, that among other things, reallocated a portion of funds from redevelopment agencies -31 -