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"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 of
<br />the Project in a, calendar year, and which is reasonably consistent with the annual Operating
<br />Budget for the Project approved by City pursuant to the Agreement, including: painting,
<br />cleaning, repairs, alterations, landscaping, utilities, refuse removal, certificates, permits and
<br />licenses, sewer charges, real and personal properly taxes, assessments, insurance, security,
<br />advertising and promotion, janitorial services, cleaning and building supplies, purchase, repair,
<br />servicing and installation of appliances, equipment, fixtures and furnishings, fees and expenses of
<br />property management, fees and expenses of accountants, attorneys and other professionals, the cost
<br />of social services and other housing supportive services provided at the Project consistent with
<br />Borrower's approved Tax Qedit Applications to TCAC for the Project, repayment of any
<br />completion or operating loans made to Borrower, and other actual, reasonable and customary
<br />operating costs and capital costs which are directly incurred and paid by Borrower, but which are not
<br />paid from or eligible to be paid from the Capital Replacement Reserve or any other reserve
<br />accounts for the Project. To the extent the Operating Expenses for the Project are not reasonably
<br />consistent with the annual Operating Budget for a given year, the City Manager shall reasonably
<br />review and approve to confirm such Operating Expenses are reasonable and actually incurred;
<br />provided, no approval shall be required for emergency expenditures reasonably necessary or
<br />appropriate to preserve life, limb, or property.
<br />Operating Expenses shall exclude all of the following: (i) salaries of employees of
<br />Borrower or Borrower's general overhead expenses, or expenses, costs and fees paid to an
<br />Affiliate of Borrower, to the extent any of the foregoing exceed the expenses, costs or fees that
<br />would be payable in a bona fide arms' length transaction between unrelated parties in the Orange
<br />County area for the same work or services; (ii) any amounts paid directly by a tenant of the
<br />Rental Portion of the Project to a third party in connection with expenses which, if incurred by
<br />Borrower, would be Operating Expenses; (iii) optional or elective payments with respect to
<br />financing approval pursuant to the Agreement (the "Senior Loan") (unless made with the consent of
<br />the City Manager in her reasonable discretion); (iv) expenses, expenditures, and charges of any
<br />nature whatsoever arising or incurred by Borrower prior to completion of the Project with respect to
<br />the development, maintenance and upkeep of the applicable the Project, or any portion thereof,
<br />including, without limitation, all costs and capitalized expenses incurred by Borrower in connection
<br />with the acquisition of the Site from the City (e.g. not leasing to low income tenants), all
<br />predevelopment and preoonstruction activities conducted by Borrower in connection with the
<br />Project, including, without limitation, the preparation of all plans and the performance of any
<br />tests, studies, investigations or other work, and the construction of the Project and any on -site or
<br />off-site work in connection therewith; (vi) depreciation, amortization, and accrued principal and
<br />interest expense on deferred payment debt; and (vii) any partnership related fees to the extent
<br />they are not paid as capitalized expenses.
<br />"Partnership Agreement" means the most current partnership agreement between
<br />the Borrower and the Investor Limited Partner.
<br />of:
<br />1076 \49 \1843311..2
<br />"Residual Receipts" shall mean Amoral Project Revenue for the Project less the sum
<br />II
<br />25B -14
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