55B - RESO - WARNER ASSESSMENT DISTRICT

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SPECIAL RISK FACTORS The purchase of the Bonds involves certain investment risks. The following is a discussion of certain risk factors which should be carefully considered, in addition to other matters set forth herein, in evaluating the investment quality of the Bonds. The City cautions prospective investors that this discussion does not purport to be comprehensive or definitive and does not purport to be a complete statement of all factors which may be considered as risks in evaluating the credit quality of the Bonds. The occurrence of one or more of the events discussed herein could adversely affect the ability or willingness of property owners in the Assessment District to pay their assessments when due. Any such failure to pay assessments could result in the inability of the City to make full and punctual payments of debt service on the ,Bonds. In addition, the occurrence of one or more of the events discussed herein could adversely affect the value of the property in the Assessment District. General To provide for the payment of debt service on the Bonds, it is necessary that unpaid Assessment Installments be paid in a timely manner. Although the unpaid assessments constitute fixed liens on the parcels within the Assessment District, they do not constitute a personal indebtedness of the respective owners of such parcels. There is no assurance that such owners will be financially able to pay the Assessment Installments or that they will pay such installments even though financially able to do so. Failure by the owners of the parcels within the Assessment District to pay Assessment Installments when due, depletion of the Reserve Fund or the inability to sell the parcels within the Assessment District at foreclosure proceedings for amounts sufficient to cover delinquent Assessment Installments levied against such parcels would result in the inability to make full or punctual payments of debt service to the Bondowners. Assessments Are Not Personal Obligations The current and future owners of land within the Assessment District are not personally liable for the payment of the assessments. Rather, the assessments are a lien secured only by the parcels of land with unpaid Assessment Installments within the Assessment District. Risks of Real Estate Secured Investments Generally The Bondowners will be subject to the risks generally incident to an investment secured by real estate, including, without limitation, (i) adverse changes in local market conditions, such as changes in the market value of real property in the vicinity of the Assessment District, the supply of or demand for competitive properties in such area, and the market value of homes and/or sites in the event of sale or foreclosure, (ii) changes in real estate tax rate and other operating expenses, governmental rules (including, without limitation, zoning laws) and fiscal policies, and (iii) natural disasters (including, without limitation, earthquakes, fires and floods), which may result in uninsured losses. Foreclosure Shortfall Pursuant to the Act, if a parcel which is included in the Assessment District is foreclosed upon and cannot be sold at the foreclosure sale at a price equal to the amount of the judgment for delinquent Assessment Installments with costs and interest thereon, the City may petition a court to authorize the sale of such parcel at a lower price upon the consent of Bondowners owning 75% or more in principal amount of the Bonds and certain other conditions. Any such sale would produce a shortfall in the aggregate Assessment Installments payable with respect to such parcel and, ultimately, could cause a default in the payment of principal on the Bonds. Non - Availability of City Funds If a delinquency occurs in the payment of any Assessment Installment, the Fiscal Agent is required to transfer the amount of such delinquent installment from the Reserve Fund to the Redemption Fund. If the 28 55B -98