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12/03/2012 October 17, 1989 Loma Prieta earthquake with a magnitude of 7.1 on the Richter scale and an epicenter near Santa Cruz, approximately 50 miles south of the City. On January 28, 2011, the City's Engineer received a letter from the Risk Analysis Branch Chief of the Mitigation Division. of the Department of Homeland Security's Federal Emergency Management Agency ("FEMA") indicating that, based on information provided by the City regarding its levee system and other pertinent reports and studies, the Redwood Shores area of the City, which includes the Taxable Parcels in the District, is witivn a FEMA one (1) percent annual -chance (base) flood area. FEMA cautions in the letter, however, that flood risk in the area still exists, and that levee systems and the estimated level of protection provided by such systems can and do change with time, and that future FEMA flood reap updates may require that the relevant levee system be certified again at the time of update. FEMA also notes in the letter that levee systems require regular maintenance and can be overtopped or fail in large flood events. On October 17, 2012, in a letter to the Mayor of the City, FEMA revalidated the determinations made in its prior January 28, 2011 letter. An earthquake, flood or one or more of the other conditions described in the third preceding paragraph may occur and may cause damage to public and private improvements on parcels in the District of varying seriousness, and any such damage may entail significant repair or replacement costs (or such repair or replacement may never occur either because of the cost or because repair or replacement will not facilitate usability or because other considerations may preclude such repair or replacement). Consequently, the occurrence of any of these conditions could result in a significant decrease in the market value of the Taxable Parcels or in such property becoming unusable or unmarketable. Hazardous Substances The presence of hazardous substances on a parcel may result in a reduction in the value of a Taxable Parcel. In general, the owners and operators of a parcel may be required by law to remedy conditions of the parcel relating to releases or threatened releases of hazardous substances. The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as "CERCLA" or the "Superfund Act," is the most well- known and widely applicable of these laws, but California laws with regard to hazardous substances are also stringent and similar. Under many of these laws, the owner or operator is obligated 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 Taxable Parcels be affected by a hazardous substance, is to reduce the marketability and value of the applicable parcel by the costs of remedying the condition, because the purchaser, upon becoming owner, will become obligated to remedy the condition just as is the seller. The City has not independently verified, but is not aware of, the presence of any hazardous substances within the District. Disclosure to Future Purchasers The willingness or ability of an owner of a parcel to pay the Special Tax, even if the value of the property is sufficient to justify payment, may be affected by whether or not the owner was given due notice of the Special Tax authorization at the time the owner purchased the parcel, was informed of the amount of the Special Tax on the parcel should the Special Tax be levied at the maximum tax rate and, at the time of such a levy, has the ability to pay it as well. as pay other expenses and obligations. The City has caused a notice of the Special Tax to be recorded in the Office of the County Recorder. Although title companies normally refer to -36- 44 RESO. # 15237 MUFF # 505