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8.A. - Page 62 Section 3 of Article XIIIC of the California Constitution, as adopted at the November 5, 1996, general election, shall not be construed to mean that any owner or beneficill owner of a municipal security, purchased before or after that date, assumes the risk of, or in any way consents to, any action by initiative measure that constitutes an impairment of contractual rights protected by Section 10 of Article I of the United States Constitution. Accordingly, although the matter is not free from doubt, it is likely that Article XIIIC has not conferred on the voters the power to repeal or reduce the Special Taxes if such reduction would interfere with the timely retirement of the Bonds. It may be possible, however, for voters or the District or the City Council actuzg as the legislative body of the District to reduce the Specill Taxes in a manner that does not interfere with the timely repayment of the Bonds, but which does reduce the maximum amount of Special Taxes that may be levied in any year below the existing levels. Furthernlore, no assurance can be given with respect to the future levy of the Special Taxes in amounts greater than the amount necessary for the timely retirement of the Bonds. Therefore, no assurance can be given with respect to the levy of Special Taxes for Administrative Expenses (as defined in the Fiscal Agent Agreement). Nevertheless, the City has covenanted in the Fiscal Agent Agreement that it shall not initiate proceedings to reduce the maximum Special Tax rates in the District, unless, in connection therewith, (i) the City receives a certification from one or more Independent Consultants which, when taken together, concludes that, on the basis of the land and improvements existing in the District 1s of the July 1 preceding the reduction, the mlximum amount of the Special Tax which may be levied in each Bond Year for any Bonds Outstanding will equal at least 110`% of the sum of the estimated Administrative Expenses and gross debt service in each Bond Year on all Bonds to remain Outstanding after the reduction is approved, (ii) the City finds that 1ny reduction made under such conditions will not materially adversely affect the interests of the Owners of the Bonds, and (iu) the City is not delinquent in the payment of the principal of or interest on the Bonds. The City has further covenanted i�z the Fiscal Agent Agreement that in the event an ordinance is adopted by initiative pursuant to Section 3 of Article XIIIC of the California Constitution, which purports to reduce or otherwise alter the maximum Special Tax rates, it will commence and pursue legal action seeking to preserve its ability to comply with its covenant described in the preceding sentence. However, no assurance can be given as to the enforceability of the foregoing covenants. The interpretation and application of Article XIIIC and Article XIIID will ultimately be determi�zed by the courts with respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty the outcome of such determi�lation or the timeliness of any remedy afforded by the courts. See "—Enforceability of Remedies." Ballot Initiatives Articles XIIIC and XIIID of the California Constitution were adopted pursuant to measures qualified for the ballot pursuant to California's constitutional initiative process, and the State Legislature has in the past enacted legislation which has altered the spending limitations or established minimum funding provisions for particular activities. On March 6, 1995 in the case of Rossi v. Brown, the State Supreme Court held that an initiative can repeal a tax ordinance and prohibit the imposition of further such taxes and that the exemption from the referendum requirements does not apply to initiatives. From time to time, other initiative measures could be adopted by California voters or legislation enacted by the legislature. The -38-