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3) Credit quality. When a district is requested by a developer, the City will carefully evaluate the applicant's financial plan and ability to carry the project, including the payment of assessments and special taxes during build - out. This may include detailed background, credit and lender checks, and the preparation of independent appraisal reports and market absorption studies. For districts where one property owner accounts for more than 25% of the annual debt service obligation, a letter of credit further securing the financing may be required. 4) Reserve fund. A reserve fund should be established in the lesser amount of: the maximum annual debt service; 125% of the annual average debt service; or 10% of the bond proceeds. 5) Value -to -debt ratios. The minimum value -to -debt ratio should generally be 4:1. This means the value of the property in the district, with the public improvements, should be at least four times the amount of the assessment or special tax debt. In special circumstances, after conferring and receiving the concurrence of the City's financial advisor and bond counsel that a lower value -to -debt ratio is financially prudent under the circumstances, the City may consider allowing a value -to -debt ratio of 3:1. Special findings should be made by the Council in this case. 6) Capitalized interest during construction. Decisions to capitalize interest will be made on a case -by -case basis, with the intent that if allowed, it should improve the credit quality of the bonds and reduce borrowing costs, benefiting both current and future property owners. 7) Maximum burden. Annual assessments (or special taxes in the case of Mello - Roos or similar districts) should generally not exceed 1% of the sales price of the property; and total property taxes, special assessments and special tax payments collected on the tax roll should generally not exceed 2%. 8) Benefit apportionment. Assessments and special taxes will be apportioned according to a formula that is clear, understandable, equitable and reasonably related to the benefit received by — or burden attributed to — each parcel with respect to its financed improvement. Any annual escalation factor should generally not exceed 2%. 9) Special tax district administration. In the case of Mello -Roos or similar special tax districts, the total maximum annual tax should not exceed 11% of annual debt service. The rate and method of apportionment should include a back-up tax in the event of significant changes from the initial development plan, and should include procedures for prepayments. 10) Foreclosure covenants. In managing administrative costs, the City will establish minimum delinquency amounts per owner, and for the district as a whole, on a case -by -case basis before initiating foreclosure proceedings. 22's