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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 Housing Tax Revenues, and accordingly, could have an adverse impact on the ability of the Agency to repay the 2010 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. There has been volatility in the unsecured valuation and the unsecured roll has declined each year since 2007-08. 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 Housing Tax Revenues on a parity with its pledge of Housing Tax Revenues to payment of debt service on the 2010 Bonds. The existence of and the potential for such obligations increases the risks associated with the Agency's payment of debt service on the 2010 Bonds in the event of a decrease in the Agency's collection of Housing Tax Revenues. Factors Relating to Sub-Prime Loans Since the end of 2002, many homeowners have financed the purchase of their homes using loans with little or no down payment and with adjustable interest rates that are subject to being reset at higher rates on a specified date or on the occurrence of specified conditions. Some homeowners who purchased their homes with "sub-prime loans" have experienced difficulty in making their loan payments due to automatic rate increases on their adjustable loans and rising interest rates in the market, which has led and could continue to lead to increased foreclosures nationwide. In addition, as a result of defaults on "sub-prime loans", credit has become more difficult and more expensive to obtain, not only in the residential market, but also in the commercial, retail and industrial sectors. Rising foreclosure levels and unavailability of loans for the purchase and development of real property in the Project Areas may adversely impact assessed values. State of California Fiscal Issues In connection with its approval of the budget for the 1992-93, 1993-94, 1994-95, 2002- 03, 2003-04, 2004-05, and 2005-06, the State Legislature enacted legislation which, among other things, reallocated funds from redevelopment agencies to school districts by shifting a portion of each agency's tax increment, net of amounts due to other taxing agencies, to school districts for such Fiscal Years for deposit in the applicable county Education Revenue Augmentation Fund ("ERAF"). These ERAF payments were paid timely by the Agency. In 2008, the State Legislature adopted, and the Governor of the State signed, legislation, Chapter 751, Statutes 2008 (AB 1389) ("AB 1389"), that among other things require -45-