City of Sacramento

915 I Street, Sacramento, CA 95814-2604

www.CityofSacramento.org

July 9, 2010

Subject: Notice of special taxes due on your property

Dear Property Owner:

[You currently own][Your company currently owns] property that is subject to a special
tax for the North Natomas Community Facilities District No. 4 (“CFD 4”). CFD 4 was
established in 1998 to finance the local drainage improvements in your area, including
the basin in the North Natomas Regional Park, drainage channels, and pump stations.
The current tax you pay for CFD 4 is listed as Direct Levy No. 0672 on your property tax
bill for 2009/2010.

The City of Sacramento has audited all special-tax levies for tax year 2007/2008 (July 1,
2007, to June 30, 2008) and tax year 2008/2009 (July 1, 2008, to June 30, 2009). The
City performed this audit to carry out its responsibility to see that taxes are fairly and
reasonably applied.

This notice is not a notice of delinquent taxes. It is instead a notice informing you that
the special taxes for CFD 4 during tax years 2007/2008 and 2008/2009 were either
placed on the tax roll in insufficient amounts or not properly placed on the roll at all. As a
result, you underpaid the taxes legally owed. To be sure, this underpayment is in no
way attributable to anything you did or did not do. Even so, you are still legally
obligated to pay—and the City is legally obligated to collect—these special taxes in the
correct amounts.

Importantly, the City’s collection of the underpaid special taxes (known in tax law as
“escaped taxes”) will not increase the total tax revenues from CFD 4. This is so
because collection of the escaped special taxes lowers the average special tax for all
property owners. For example, in tax year 2009/2010 the addition of escaped taxes to
the tax roll lowered the average special tax by 17%. The addition to the tax roll of the
escaped special taxes from tax years 2007/2008 and 2008/2009 will have a similar
effect on the next two tax years.

You have three options for paying the escaped special taxes:

Option 1 – You may choose to pay, in one payment, the entire amount of the escaped
special taxes.
Notice of special taxes due on your property Page 2

Option 2 – You may choose to have the entire amount of the escaped special taxes
placed on Sacramento County’s secured property-tax roll in August 2010, and payment
will be due in two equal installments on November 1, 2010, and March 1, 2011.

Option 3 – You may choose the payment plan described in Exhibit A to this notice (you
are eligible for the plan because (a) the entire amount of your escaped special taxes is
at least $400 and (b) you are not currently delinquent on your property taxes). The
amounts to be placed on your tax bills for the next two tax years are shown on Exhibit
B.

Whichever option you chose, no interest or penalties will be applied so long as you are
not delinquent on your county property-tax bill. If you become delinquent, however, then
the remaining amount due for the escaped special taxes will become subject to any
interest or penalties that apply to your regular tax bill.

Please let us know which option you prefer by completing Exhibit A to this notice and
then mailing it, with postage prepaid, to the following address postmarked no later
than July 30, 2010:

Public Improvement Finance

City of Sacramento
P.O. Box 71
Sacramento, CA 95812

[Be sure to sign Exhibit A][Be sure to have Exhibit A signed by the person or persons
duly authorized to act for your company], and please include the name, email address,
and telephone number of a contact person. In addition, if you select Option 1, then you
must include a check in the full amount owed, payable to City of Sacramento.

If you do not mail Exhibit A to the address set out above, postmarked no later
than July 30, 2010, then you will have selected Option 3 by default.

If you believe that this notice has been sent to you in error or that the computation of the
tax amount is incorrect, then you may file an appeal with the City by sending a letter to
the address shown above, attention “Appeal Process.” The letter must explain in detail
the basis of your appeal. If you want to file an appeal but do not want to lose your
right to take advantage of the payment plan, then mail Exhibit A in accordance
with Option 3 and include your letter of appeal with it.

Finally, if you have questions about the escaped taxes or the three options, then please
call the City’s Special Tax Consultant, NBS, at (800) 676-7516.

Sincerely,

David Schroeder,
NBS,
Tax Consultant for the City of Sacramento