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other revenues of whatever kind or nature from the Phase R-_ of the Project, except that <br />security deposits (until applied), interest on security deposits and required reserves, sales <br />proceeds, and the proceeds of loans, refinancings, condemnation, insurance claims, and partner <br />capital contributions, shall not be considered Annual Project Revenue. <br />As used herein, "Applicable Federal Rate" means the interest rate set by the <br />United States Treasury from time to time for the purpose of determining applicable Low Income <br />Housing Tax Credit interest rates published by the Internal Revenue Service in monthly reserve <br />rulings. <br />As used herein, "Debt Service" means regularly scheduled payments of principal <br />and interest made in a calendar year pursuant to the financing obtained for the development and <br />ownership of Phase R-_ which has been approved by the Agency pursuant to the Agreement, <br />and which is senior in lien priority to the Agency Loan, but excluding payments made pursuant <br />to the Promissory Note. <br />As used herein, "Capital Replacement Reserve" shall mean a reasonably required <br />reserve not to exceed $250 per unit per year (or such greater amount as may be required by <br />lenders or investors for Phase R--), to be used for the purpose of replacing capital items. <br />On or before one hundred twenty (120) days after the end of the Borrower's fiscal <br />year, of each year commencing in the year after the issuance of the Release of Construction <br />Covenants for Phase R-_, the Borrower shall annually provide the Agency an audited financial <br />statement for Phase R- - and a Residual Receipts Report, in the form attached to the Agreement <br />as Attachment No. 10, which shall describe in detail the Annual Project Revenue, Debt Service, <br />Operating Expenses, Capital Replacement Reserve (including deposits therein and expenditures <br />therefrom), and Residual Receipts for that year for Phase R-_. The Borrower shall also submit <br />to the Agency, on or before one hundred twenty (120) days after the end of the Borrower's fiscal <br />year, of each year commencing in the year of the issuance of the Release of Construction <br />Covenants for t Phase R-_, annual audited financial statements with respect to the Project that <br />have been reviewed by an independent certified public accountant, together with an expressed <br />written opinion of the certified public accountant that such financial statements present the <br />financial position, results of operations, and cash flows fairly and in accordance with generally <br />accepted accounting principles. <br />"Operating Budget" and "Annual Budget" shall mean the annual operating <br />budget for each Phase of the Project that sets forth the projected Operating Expenses for the <br />upcoming year that is subject to and shall be submitted for review and approval by Executive <br />Director, in his/her reasonable discretion, each year during the Affordability Period pursuant to <br />Section 401.9 of the Agreement. <br />"Operating Expenses" shall mean actual, reasonable and customary (for <br />comparable high quality rental housing developments in Orange County) costs, fees and <br />expenses directly incurred, paid, and attributable to the operation, maintenance and management <br />of each Phase of the Rental Portion of the Project in a calendar year, and which is reasonably <br />consistent with the annual Operating Budget for each Phase approved by Agency pursuant to <br />401.9 of the Agreement, including: painting, cleaning, repairs, alterations, landscaping, utilities, <br />ATTACHMENT NO. 8B-2 <br />DOCSOM 400673v 141200272-0001