10A Action 2008 0602 Attach - Preliminary Official Statement

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to school districts by shifting a portion of each agency's tax increment to school districts ("ERAF" shifts). The State is now facing a $3.3 billion revenue shortfall in the current fiscal year, which is projected to grow to a $14.5 billion shortfall in the next fiscal year, as well as a shortfall in the State's cash reserves. On January 10, 2008 the Governor submitted the proposed fiscal year 2008-09 State Budget (the "Proposed Budget"), which calls fora 10% across-the-board reduction to nearly every State General Fund program. Although the Proposed Budget does not call for any ERAF shifts or other substantive reallocation of tax increment revenues, the Proposed Budget is subject to extensive review and change by various Senate and Assembly review committees, as well as final passage by the Senate and Assembly. The Agency cannot predict whether the State Legislature will enact legislation impacting future Tax Revenues. Given the level of the State's budget deficit problems, it is possible that tax increment available for payment of the Bonds may be reduced in the future by actions of the State Legislature. Information about the State budget and State spending is available at various State- maintained websites. Text of the budget may be found at the website of the Department of Finance, www.dof.ca.gov, under the heading "California Budget." An impartial analysis of the budget is posted by the Office of the Legislative Analyst at www.lao.ca.gov. In addition, various State of California official statements for its various debt obligations, 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. All of such websites are provided for general informational purposes only and the material on such sites is in no way incorporated into this Official Statement. Earthquake Risk Earthquake faults exist in many parts of Northern California, including in areas near to San Leandro, particularly the Hayward Fault, which is within the vicinity of the Project Area. Most new construction is required to be built in accordance with the Uniform Building Code which contains standards designed to minimize structural damage caused by seismic events however, the occurrence of severe seismic activity affecting the Project Area could result in substantial damage to property located in the Project Area, and could lead to successful appeals for reduction of assessed values of such property. Such a reduction of assessed valuations could result in a reduction of the Tax Revenues that secure the 2008 Bonds. 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 Area. In general, the owners and operators of a 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 Area be affected by a hazardous substance, could be to reduce the marketability and value of the property by the costs of remedying the condition. Bankruptcy Risks The enforceability of the rights and remedies of the owners of the 2008 Bonds and the obligations of the Agency may become subject to the following: the federal bankruptcy code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or -32-