55B - RESO - WARNER ASSESSMENT DISTRICT

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and ability of the property owners within the Assessment District to pay the assessments when due. See "THE ASSESSMENT DISTRICT - Direct and Overlapping Debt" herein. Moreover, in the event of a delinquency in the payment of the assessment levy, no assurance can be given that the proceeds of any foreclosure sale would be sufficient to pay the delinquent assessments and any other delinquent assessments, special taxes or taxes. See the caption "Property Values" below. Property Values The value of land within the Assessment District is a critical factor in determining the investment quality of the Bonds. If a property owner defaults in the payment of Assessment Installments, the Bondowner's only remedy is to request the City to commence foreclosure proceedings in an attempt to obtain funds to pay the delinquent assessment. See the caption `Bankruptcy and Foreclosure" above. Reductions in Assessment District property values could occur due to a downturn in the economy, occurrences such as earthquakes, landslides or flooding or other events, all of which will adversely impact the value of the security underlying the assessments. Absence of Secondary Market for the Bonds There can be no assurance that there will be a secondary market for purchase or sale of 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. From time to time, there may be no secondary market for the Bonds, depending upon prevailing market conditions, the financial condition or market position of firms (if any) who may make the secondary market in the Bonds and the financial condition of the owners of property within the Assessment District. The Bonds should therefore be considered long -tern investments in which funds are committed to maturity, subject to redemption prior to maturity as described herein. Right to Vote on Taxes Act An initiative measure commonly referred to as the "Right to Vote on Taxes Act" (the "Initiative ") was approved by the voters of the State of California at the November 5, 1996, general election. The Initiative added Article XIIIC ( "Article XIIIC") and Article XIIID ( "Article XIIID ") to the California Constitution. According to the "Title and Summary" of the Initiative prepared by the California Attorney General, the hnitiative limits "the authority of local governments to impose taxes and property- related assessments, fees and charges." The provisions of the Initiative have not yet been interpreted by the courts, although a number of lawsuits have been filed requesting the courts to interpret various aspects of the Initiative. Article XIIID requires that, beginning July 1, 1997, the proceedings for the levy of any assessment by the City under the Act (including, if applicable, any increase in such assessment or any supplemental assessment under the Act) must be conducted in conformity with the provisions of Section 4 of Article XIIID. The City has completed its proceedings for the levy of assessments in the Assessment District in accordance with the provisions of Section 4 of Article XIIID and the "Proposition 218 Omnibus Implementation Act" (Statutes of 1997, Chapter 38). Under Section 10400 of the Streets and Highways Code of the State, any challenge (including any constitutional challenge) to the proceedings or the assessment must be brought within 30 days after the date the assessment was levied. Article XIIIC removes limitations on the initiative power in matters of local taxes, assessments, fees and charges. Article XIIIC does not define the term "assessment." In the case of the unpaid assessments which are pledged as security for payment of the Bonds, the Act provides a mandatory, statutory duty of the City and the County Auditor to post installments on account of the unpaid assessments to the property tax roll of the County 31 55B -101